Allurion Technologies, Inc 8-K, filed Aug 7, 2023
Allurion Technologies, Inc. (ALUR)
About this 8-K
Allurion Technologies, Inc filed this 8-K on August 7, 2023, reporting on events of August 1, 2023.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 2.03: New debt or off-balance-sheet obligation
- Item 3.02: Unregistered sale of equity
- Item 3.03: Change to shareholders' rights
- Item 5.01: Change in control
- Item 5.02: Director or officer change, or executive pay
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 5.05: Code of ethics change or waiver
- Item 5.06: Change in shell company status
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 7, 2023 (
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
INTRODUCTORY NOTE
Business Combination
As previously announced, Allurion Technologies, Inc. (formerly Allurion Technologies Holdings, Inc.), a Delaware corporation (the “Company”, “New Allurion”, “we” and “our”), entered into that certain business combination agreement (as the same was amended as of May 2, 2023, the “Business Combination Agreement”), dated as of February 9, 2023, by and among the Company, Compute Health Acquisition Corp. (“Compute Health”), Compute Health Corp., a Delaware corporation and a then-direct, wholly-owned subsidiary of Compute Health (“Merger Sub I”), Compute Health LLC, a Delaware limited liability company and a then-direct, wholly-owned subsidiary of Compute Health (“Merger Sub II” and, together with Merger Sub I, the “Merger Subs”), and Allurion Technologies Opco, Inc. (formerly known as Allurion Technologies, Inc.), a Delaware corporation (“Allurion”). Unless otherwise specified, capitalized terms used in this Current Report on Form 8-K (this “Report”) but not defined herein have the meanings given to such terms in the Proxy Statement/Prospectus (as defined below).
Pursuant to the Business Combination Agreement, and described in the final prospectus and definitive proxy statement, dated July 7, 2023 (as subsequently amended or supplemented, the “Proxy Statement/Prospectus”), and filed with the Securities and Exchange Commission (the “SEC”), in the section titled “Proposal No. 1 — The Business Combination Proposals,” the merger transactions were consummated in three steps: (a) Compute Health merged with and into New Allurion (the “CPUH Merger”), with New Allurion surviving the CPUH Merger as a publicly listed entity (the time at which the CPUH Merger became effective, the “CPUH Merger Effective Time”) and becoming the sole owner of the Merger Subs; (b) three hours following the consummation of the CPUH Merger, Merger Sub I merged with and into Allurion (the “Intermediate Merger” and the time at which the Intermediate Merger became effective, the “Intermediate Merger Effective Time”), with Allurion surviving the Intermediate Merger and becoming a direct, wholly-owned subsidiary of New Allurion; and (c) thereafter, Allurion merged with and into Merger Sub II (the “Final Merger” and, collectively with the CPUH Merger and the Intermediate Merger, the “Mergers”, and together with all other transactions contemplated by the Business Combination Agreement, the
“Business Combination”), with Merger Sub II surviving the Final Merger and remaining a direct, wholly-owned subsidiary of New Allurion (the time at which the Final Merger became effective, the “Final Merger Effective Time”).
On the closing date of the Mergers and immediately prior to the transactions contemplated by the Sponsor Contribution Agreement, pursuant to the terms of the Sponsor Support Agreement, dated as of February 9, 2023, by and among Compute Health, Compute Health Sponsor LLC, a Delaware limited liability company (the “Sponsor”), Allurion, New Allurion and the persons set forth on Schedule I thereto (the “Additional Class B Holders”), (a) the Sponsor recapitalized its shares of Class B common stock, par value $0.0001 per share, of Compute Health (“Compute Health Class B Common Stock”) and warrants to purchase shares of Class A common stock, par value $0.0001 per share, of Compute Health (“Compute Health Class A Common Stock”) into Compute Health Class A Common Stock, and (b) the Additional Class B Holders recapitalized their shares of Compute Health Class B Common Stock into Compute Health Class A Common Stock (clauses (a) and (b), together, the “CPUH Recapitalization”).
Immediately prior to the CPUH Merger Effective Time, each unit of Compute Health (each, a “Compute Health Unit”) that was outstanding immediately prior to the CPUH Merger Effective Time was detached and the holder thereof was deemed to hold one share of Compute Health Class A Common Stock and one quarter of one warrant to purchase Compute Health Class A Common Stock (each, a “Compute Health Public Warrant”). At the CPUH Merger Effective Time, pursuant to the CPUH Merger, (a) each then-outstanding share of New Allurion common stock, par value $0.0001 per share (“New Allurion Common Stock”), was redeemed for par value, (b) each then-outstanding share of Compute Health Class A Common Stock was canceled and extinguished and was converted into the right to receive 1.420455 shares of New Allurion Common Stock, (c) each then-outstanding Compute Health Public Warrant was assumed by New Allurion and thereafter represents a warrant to purchase 1.420455 shares of New Allurion Common Stock at an exercise price of $8.10 per share (a “New Allurion Public Warrant”) and (d) each share of treasury stock held by Compute Health or any subsidiary of Compute Health (“Compute Health Cancelled Share”) was canceled for no payment or consideration.
Immediately prior to the Intermediate Merger Effective Time, outstanding convertible notes with an aggregate principal amount together with accrued but unpaid interest of approximately $21.8 million (“Allurion Convertible Notes”) were converted into the applicable number of shares of common stock, par value $0.0001 per share, of Allurion (“Allurion Common Stock”) provided for under the terms of such Allurion Convertible Notes, immediately prior to the Intermediate Merger Effective Time (the “Allurion Convertible Notes Conversion”), and are no longer outstanding and ceased to exist.
At the Intermediate Merger Effective Time, pursuant to the Intermediate Merger: (a) each share of Allurion Common Stock (other than Allurion Dissenting Shares and Allurion Cancelled Shares, the treatment of which is described in the Business Combination Agreement), issued and outstanding as of immediately prior to the Intermediate Merger Effective Time (including shares of Allurion Common Stock issued in the Allurion Convertible Notes Conversion) was automatically cancelled and extinguished and was converted into the right to receive shares of New Allurion Common Stock equal to 0.9780 for each share of Allurion Common Stock (the “Intermediate Merger Exchange Ratio”); (b) each then-outstanding share of Allurion Preferred Stock (other than Allurion Dissenting Shares and Allurion Cancelled Shares, the treatment of which is described in the Business Combination Agreement) issued and outstanding as of immediately prior to the Intermediate Merger Effective Time was automatically cancelled and extinguished and was converted into the right to receive shares of New Allurion Common Stock equal to the number of shares of Allurion Common Stock that would be issued upon conversion of such issued and outstanding share of Allurion Preferred Stock based on the applicable conversion ratio immediately prior to the Intermediate Merger Effective Time multiplied by the Intermediate Merger Exchange Ratio; (c) each then-outstanding and unexercised Allurion Option was converted into a Rollover Option, on the same terms and conditions as were applicable to such Allurion Option, based on the Intermediate Merger Exchange Ratio; (d) each then-outstanding Allurion RSU Award was converted into a Rollover RSU Award; (e) each
then-outstanding Allurion Warrant was converted into a Rollover Warrant; and (f) the Sponsor Loan Excess, whose balance was $3.7 million at the time of the Mergers, was converted into 525,568 shares of New Allurion Common Stock (the “Sponsor Loan Equity Issuance”).
The foregoing description of the Business Combination does not purport to be complete and is qualified in its entirety by the full text of the Business Combination Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
PIPE Investment
As previously announced on February 9, 2023, concurrently with the execution of the Business Combination Agreement, Compute Health and New Allurion entered into the subscription agreements (the “PIPE Subscription Agreements”) with certain accredited investors and qualified institutional buyers (the “PIPE Investors”), pursuant to which the PIPE Investors purchased an aggregate of 5,386,695 shares of New Allurion Common Stock (the “PIPE Subscribed Shares”) at a price of $7.04 per share and an aggregate purchase price of approximately $37.9 million (the “PIPE Investment”) following the CPUH Merger Effective Time and immediately prior to the Intermediate Merger Effective Time.
The PIPE Subscription Agreements also provide that no later than 45 calendar days after the Closing Date, New Allurion will file the Resale Registration Statement covering the resale of the PIPE Subscribed Shares and to use its commercially reasonable efforts to have such Resale Registration Statement declared effective as soon as practicable after the filing thereof but no later than the earlier of (i) 90 calendar days after the Closing Date (or 120 calendar days after the Closing Date if the SEC notifies New Allurion that it will “review” such registration statement) and (ii) the 10th business day after the date New Allurion is notified (orally or in writing, whichever is earlier) by the SEC that such Resale Registration Statement will not be “reviewed” or will not be subject to further review.
Revenue Interest Financing Agreement
As previously announced, on February 9, 2023, concurrently with the execution of the Business Combination Agreement, Allurion and certain entities that have engaged RTW Investments, LP as investment manager (collectively, “RTW”) entered into a revenue interest financing agreement (the “Revenue Interest Financing Agreement”). At the closing of the Mergers, New Allurion assumed all obligations of Allurion under the Revenue Interest Financing Agreement. Pursuant to the Revenue Interest Financing Agreement, at the closing of the Mergers, RTW paid New Allurion an aggregate of $40.0 million (the “Investment Amount”). In exchange for the Investment Amount, New Allurion will remit revenue interest payments on all current and future products and digital solutions developed and to be developed by New Allurion at a rate up to 6.0% of annual net sales prior to December 31, 2026, subject to the terms and conditions of the Revenue Interest Financing Agreement. On or after January 1, 2027, New Allurion will remit revenue interest payments at a rate up to 10.0% of annual net sales, subject to the terms and conditions of the Revenue Interest Financing Agreement, and New Allurion will continue to make revenue interest payments to RTW until December 31, 2030.
Under the terms of the Revenue Interest Financing Agreement, if RTW has not received revenue interest payments equal to 100% of the Investment Amount by December 31, 2027, New Allurion will be required to make additional payments within 30 days of December 31, 2027 in an amount equal to 100% of the Investment Amount less the aggregate amount of all the payments made by New Allurion to RTW in respect of the revenue interests prior to such date. If RTW has not received revenue interest payments equal to 240% of the Investment Amount by December 31, 2030, New Allurion will be required to make additional payments within 30 days of December 31, 2030 in an amount equal to 240% of the Investment Amount less the aggregate amount of all of the payments by New Allurion to RTW in respect of the revenue interests prior to such date. New Allurion may terminate the Revenue Interest Financing Agreement by prepaying aggregate revenue interest payments equal to 165% of the Investment Amount, or $66.0 million, by March 31, 2026.
All obligations under the Revenue Interest Financing Agreement are guaranteed by New Allurion, Allurion Technologies, LLC, a Delaware limited liability company, Allurion Australia Pty Ltd, and any future material subsidiaries of New Allurion and secured by a lien on substantially all of the assets of New Allurion, Allurion Australia Pty Ltd and Allurion Technologies, LLC, which lien is subordinate in order of priority to the lien securing the obligations of the Company and its affiliates under the Credit Agreement (as defined below).
In connection with the Company entering in the Revenue Interest Financing Agreement, if, at any time beginning 12 months and ending 24 months following the closing of the Mergers, the volume weighted average price (“VWAP”) per share of New Allurion Common Stock is less than $7.04 for the average of 20 trading days within any 30-trading day period (“Stock Price Drop”); and the absolute value of the percentage decrease of such Stock Price Drop measured from a reference price of $10.00 per share of New Allurion Common Stock is greater than the absolute value of the percentage decrease in the VWAP of a iShares US Medical Devices ETF (NYSEARCA: IHI) (the “Index”) over the same time period, then RTW may elect to convert up to $7.5 million of its initial PIPE Investment into an additional revenue interest financing by forfeiting a number of shares of New Allurion Common Stock acquired in the PIPE Investment (“PIPE Conversion Option”). The additional revenue interest financing would be on the same terms, described above, except based on a different investment amount calculated from the conversion of RTW’s PIPE Subscribed Shares.
RTW Side Letter
As previously announced, on February 9, 2023, in connection with the execution of the Business Combination Agreement, the PIPE Subscription Agreements, and the Revenue Interest Financing Agreement, Compute Health, New Allurion, Allurion, and Merger Sub II entered into a letter agreement (the “Existing RTW Side Letter”) with RTW. As previously announced, on May 2, 2023, Compute Health, New Allurion, Allurion, Merger Sub II and RTW amended and restated the Existing RTW Side Letter (the “Amended and Restated RTW Side Letter”), in connection with the execution of the Backstop Agreement (as defined below). Pursuant to the Amended and Restated RTW Side Letter, among other things, New Allurion issued 250,000 shares of New Allurion Common Stock to RTW immediately prior to the Intermediate Merger Effective Time (the “RTW Shares”).
Backstop Agreement
As previously announced, on May 2, 2023, CFIP2 ALLE LLC, an affiliate of Fortress Credit Corp., and RTW (collectively, the “Backstop Purchasers”), Allurion, New Allurion, and Hunter Ventures Limited (“HVL”) entered into the backstop agreement (the “Backstop Agreement”). Pursuant to the Backstop Agreement, immediately prior to the Intermediate Merger Closing (a) each Backstop Purchaser purchased $2 million of the aggregate principal amount outstanding under HVL’s Allurion Convertible Note, (b) New Allurion canceled the existing Allurion Convertible Note held by HVL and issued a new Allurion Convertible Note to HVL for the remaining balance together with all unpaid interest accrued since the date of issuance thereof, (c) New Allurion issued new Allurion Convertible Notes to each Backstop Purchaser with an issuance date of the Closing Date and an original principal amount of $2 million each and (d) New Allurion issued 700,000 shares of New Allurion Common Stock to each Backstop Purchaser (the “Backstop Shares”).
HVL Termination Agreement
As previously announced, on May 2, 2023, HVL and Allurion entered into the HVL Termination Agreement, terminating the HVL Side Letter. Pursuant to the HVL Termination Agreement, among other things, at the closing of the Mergers, upon the terms and subject to the conditions set forth therein, New Allurion issued to HVL 387,696 shares of New Allurion Common Stock (the “HVL Additional Shares”). The issuance of the HVL Additional Shares was effective immediately following the consummation of the Business Combination.
Gaur Contribution Agreement
As previously announced, on May 2, 2023, the Gaur Trust and New Allurion entered into the Gaur Contribution Agreement, pursuant to which, among other things, upon the terms and subject to the conditions set forth therein, the Gaur Trust contributed to New Allurion, as a contribution of capital, 79,232 shares of New Allurion Common Stock (the “Gaur Trust Contributed Shares”). The Gaur Trust’s contribution of the Gaur Trust Contributed Shares was effective immediately following the consummation of the Business Combination and the issuance of New Allurion Common Stock to the Gaur Trust pursuant to the terms of the Business Combination Agreement.
Sponsor Contribution Agreement
As previously announced, on May 2, 2023, the Sponsor and Compute Health entered into the Sponsor Contribution Agreement pursuant to which, among other things, upon the terms and subject to the conditions set forth therein, the Sponsor agreed to contribute to Compute Health, as a contribution to capital, 161,379 shares of Compute Health Class A Common Stock (the “Sponsor Contributed Shares”). The Sponsor’s contribution of the Sponsor Contributed Shares was effective immediately following the Sponsor Recapitalization and immediately prior to the CPUH Merger Effective Time.
RSU Forfeiture Agreement
As previously announced, on May 2, 2023, Krishna Gupta, a member of the Allurion board of directors, entered into the RSU Forfeiture Agreement, pursuant to which, among other things, upon the terms and subject to the conditions set forth therein, Mr. Gupta agreed to forfeit to Allurion 79,232 restricted stock units of New Allurion (the “Forfeited RSUs”). The Forfeited RSUs were terminated and cancelled without consideration therefor immediately following the consummation of the transactions contemplated by the Business Combination Agreement.
Chardan Equity Facility
In connection with the Business Combination, New Allurion has committed to enter into a ChEF Purchase Agreement (the “ChEF Purchase Agreement”) with Chardan Capital Markets LLC (“Chardan”), pursuant to which Allurion will have the right to require Chardan to purchase up to $100.0 million of shares of New Allurion Common Stock at a price per share equal to 97.0% of the VWAP of New Allurion Common Stock on the New York Stock Exchange (“NYSE”). In consideration for the Chardan’s entry into the ChEF Purchase Agreement, New Allurion will agree to issue to Chardan 35,511 shares of New Allurion Common Stock. In connection with its entry into the Chardan facility, New Allurion will also enter into a registration rights agreement (the “ChEF Registration Rights Agreement”) pursuant to which it will agree to register the offer and sale of the shares of New Allurion Common Stock issuable pursuant to the ChEF Purchase Agreement on a new resale registration statement on Form S-1 (the “Registration Statement”). Upon effectiveness of the Registration Statement, New Allurion will also pay Chardan a structuring fee of $75,000 in cash. Pursuant to the ChEF Purchase Agreement, New Allurion will also agree to reimburse Chardan up to $300,000 for fees and disbursements of Chardan’s legal counsel over the term of the facility. The Chardan facility will remain outstanding for three years unless terminated by the parties pursuant to the terms of the ChEF Purchase Agreement. The purpose of New Allurion’s entry into the Chardan facility is to fund general corporate expenses of New Allurion.
Sponsor Support Agreement
As previously announced, on February 9, 2023, New Allurion entered into a Support Agreement (the “Sponsor Support Agreement”), by and among Compute Health, the Sponsor, Allurion, New Allurion and the Additional Class B Holders, pursuant to which immediately prior to the CPUH Merger Effective Time, (a) the Sponsor recapitalized each of the Sponsor’s 21,442,500 shares of Compute Health Class B common stock, par value $0.0001 per share, of Compute Health and all 12,833,333 of the Sponsor’s warrants to purchase shares of Class A common stock, par value $0.0001 per share, of Compute Health into 2,088,327 shares of Compute Health Class A Common Stock and (b) the Additional Class B Holders recapitalized his or her 30,000 shares of Compute Health Class B Common Stock into 21,120 shares of Compute Health Class A Common Stock. Subsequently, at the CPUH Merger Effective Time, each such share of Compute Health Class A Common Stock was converted into shares of New Allurion Common Stock at the CPUH Exchange Ratio.
Non-Redemption Agreement
As previously announced, on February 9, 2023, in connection with the execution of the Business Combination Agreement, Compute Health entered into the Non-Redemption Agreement with New Allurion, Allurion and Medtronic, plc (“Medtronic”). Pursuant to the Non-Redemption Agreement, upon the terms and subject to the conditions set forth therein, Medtronic agreed, for the benefit of Compute Health, New Allurion, and Allurion, not to, among other things, (a) redeem 700,000 shares of Compute Health Class A Common Stock beneficially owned by Medtronic (the “Medtronic Shares”) and (b) sell, encumber, or otherwise transfer the Medtronic Shares. In connection with these commitments from Medtronic at the CPUH Merger Effective Time the Medtronic Shares were canceled and converted into 994,318 shares of New Allurion Common Stock and were issued to Medtronic upon the consummation of the CPUH Merger.
The foregoing descriptions of the Business Combination Agreement, PIPE Subscription Agreements, Revenue Interest Financing Agreement, Amended and Restated RTW Side Letter, Backstop Agreement, HVL Termination Agreement, Gaur Contribution Agreement, Sponsor Contribution Agreement, RSU Forfeiture Agreement, Sponsor Support Agreement and Non-Redemption Agreement, and the transactions and documents contemplated thereby, is not complete and is subject to and qualified in its entirety by reference to the Business Combination Agreement, Form of PIPE Subscription Agreement, Revenue Interest Financing Agreement, Amended and Restated RTW Side Letter, Backstop Agreement, HVL Termination Agreement, Gaur Contribution Agreement, Sponsor Contribution Agreement RSU Forfeiture Agreement, Sponsor Support Agreement and Non-Redemption Agreement, which are attached as Exhibit 2.1, Exhibit 10.6, Exhibit 10.8, Exhibit 10.7, Exhibit 10.21, Exhibit 10.20, Exhibit 10.30, Exhibit 10.23, Exhibit 10.24, Exhibit 10.2 and Exhibit 10.4, respectively, and the terms of which are incorporated by reference herein.
Post-Closing Capitalization
Immediately after giving effect to the Business Combination, there were 46,502,000 shares of New Allurion Common Stock outstanding and 13,206,922 New Allurion Public Warrants outstanding exercisable for 1.420455 shares per New Allurion Public Warrant, or 18,759,838 shares of New Allurion Common Stock. Upon the consummation of the Business Combination, the shares of Compute Health Class A Common Stock, the Compute Health Public Warrants and the Compute Health Units ceased trading on the NYSE, and the New Allurion Common Stock and New Allurion Public Warrants began trading on the NYSE under the symbols “ALUR” and “ALUR WS,” respectively. Immediately upon the consummation of the Business Combination, New Allurion’s ownership was as follows (without taking into account any shares such persons may have purchased or sold in the open market prior to the consummation of the Business Combination):
| • | Allurion’s former stockholders owned 30,363,689 shares of New Allurion Common Stock or approximately 65.3% of the shares of outstanding New Allurion Common Stock (excluding, for the avoidance of doubt, shares of New Allurion Common Stock issued in connection with the PIPE Investment, the HVL Additional Shares, the Backstop Shares, the RTW Shares and the Additional Fortress Shares (as defined below), which are reflected in the bullets below); |
| • | Compute Health’s former public stockholders owned 5,075,698 shares of New Allurion Common Stock, or approximately 10.92% of the outstanding shares of New Allurion Common Stock (including the 994,319 shares of New Allurion Common Stock subject to the Non-Redemption Agreement); |
| • | the 5,386,695 shares of New Allurion Common Stock issued in the PIPE Investment represent approximately 11.58% of the outstanding shares of New Allurion Common Stock; |
| • | the Sponsor owned 3,262,711 shares of New Allurion Common Stock, or approximately 7.02% of the outstanding New Allurion Common Stock (excluding, for the avoidance of doubt, shares of New Allurion Common Stock issued in connection with the PIPE Investment, which shares are reflected in the bullets above); |
| • | each of RTW and Fortress own 950,000 shares of New Allurion Common Stock, or approximately 4.09% of the outstanding New Allurion Common Stock in the aggregate (which, for the avoidance of doubt, does not include shares of New Allurion Common Stock that were issued to RTW in connection with the PIPE Investment or Incremental Financing (as defined in the Business Combination Agreement), which shares are reflected in the bullets above); |
| • | the Additional Class B Holders owned 90,000 shares of New Allurion Common Stock, or approximately 0.19% of the oustanding New Allurion Common Stock; |
| • | Chardan will own 35,511 shares of New Allurion Common Stock, or approximately 0.08% of the oustanding New Allurion Common Stock, upon the signing of the ChEF Purchase Agreement; and |
| • | HVL owns an additional 387,696 shares of New Allurion Common Stock, or approximately 0.83% of the outstanding New Allurion Common Stock (excluding shares of New Allurion Common Stock that HVL received upon conversion of the HVL Bridge Note). |
Item 1.01. Entry into a Material Definitive Agreement.
Investor Rights and Lock-Up Agreement
Pursuant to the Business Combination Agreement, in connection with the Closings, an investor rights agreement and lock-up agreement (the “Investor Rights Agreement”) was entered into by and among New Allurion, the Sponsor, certain former equity holders of Allurion and certain other parties (each, an “Investor”) immediately prior to the Intermediate Merger Effective Time, pursuant to which New Allurion agreed to, within 30 days of the Intermediate Merger Effective Time, register for resale, pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), certain shares of New Allurion Common Stock and other equity securities of New Allurion that are held by the parties thereto from time to time. The Investor Rights Agreement also provides for certain demand rights and piggyback registration rights in favor of the equity holders and their respective permitted transferees, subject to customary underwriter cutbacks. New Allurion has agreed to pay certain fees and expenses relating to registrations pursuant to the Investor Rights Agreement.
The Investor Rights Agreement also restricts the ability of certain Investors to transfer all or a portion of their respective shares of New Allurion Common Stock (or any securities convertible into or exercisable or exchangeable for shares of New Allurion Common Stock), subject to certain permitted transfers, for a period of either 18 months or 12 months following the Closing Date, as applicable. The foregoing lock-up restrictions do not apply to: (a) any shares of New Allurion Common Stock purchased pursuant to the PIPE Subscription Agreements, (b) 100 shares of New Allurion Common Stock held by each Investor, (c) shares issued to the Sponsor in the Sponsor Loan Equity Issuance, (d) certain incremental shares of PIPE Investors who were Allurion Stockholders or holders of Allurion Convertible Notes or shares issued upon conversion of securities issued in the Incremental Financing and (e) the Backstop Shares, the Sponsor Contributed Shares, the Gaur Trust Contributed Shares or the shares of New Allurion Common Stock issued to each of HVL, RTW, Fortress and the other holders of Bridge Notes.
Additionally, pursuant to the Investor Rights Agreement, upon the terms and subject to the conditions set forth therein, the Board (as defined below) shall consist of seven directors, a majority of which shall be “independent” directors for purposes of NYSE rules, and the following persons have the following nomination rights with respect to the Board, subject to the limitations set forth in the Investor Rights Agreement: (i) one director and one independent director nominated by Shantanu Gaur; (ii) one director and one independent director nominated by Remus Group Management, LLC (“Remus Capital”); (iii) one director nominated by Sponsor; and (iv) two independent directors nominated by Allurion (one of which shall be designated by RTW).
The foregoing description of the Investor Rights Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Investor Rights Agreement, which is attached hereto as Exhibit 10.5 and is incorporated herein by reference.
Fortress Credit Agreement
At the Intermediate Merger Effective Time, a term loan facility (the “Term Loan Facility”) pursuant to a credit agreement and guaranty (the “Credit Agreement”), was entered into by and among Allurion Technologies, LLC, a Delaware limited liability company (the surviving company in the Final Merger) (the “Borrower”), New Allurion, Allurion Australia Pty Ltd, certain subsidiaries of New Allurion that may be required to provide guaranties from time to time thereunder, each lender from time to time party thereto (each, a “Lender” and collectively, the “Lenders”), and Fortress Credit Corp., as administrative agent for the Lenders (“Fortress”). Under the terms of the Term Loan Facility, at the Intermediate Merger Effective Time, the Lenders made senior secured term loans to New Allurion in an aggregate principal amount of $60.0 million with a maturity date on June 30, 2027 (the “Fortress Financing”).
All obligations under the Term Loan Facility are guaranteed by New Allurion, Allurion Australia Pty Ltd., and any future material subsidiaries of New Allurion, and are secured by a first priority lien on substantially all of the assets of New Allurion, the Borrower and Allurion Australia Pty Ltd.
The Term Loan Facility accrues interest per annum at a rate of 6.44% plus the greater of (i) the Wall Street Journal Prime Rate and (ii) 3.0%, which is payable in arrears on a monthly basis. An exit payment equal to 3.0% of the Fortress Financing is due upon prepayment or the maturity date of the Fortress Financing, in addition to any early prepayment fee. Proceeds of the Fortress Financing were used, in part, to repay all amounts outstanding under that certain Amended and Restated Loan and Security Agreement, dated as of December 30, 2021, as amended on June 9, 2022, and September 15, 2022, among Allurion, the other borrowers party thereto from time to time, the lenders party thereto from time to time and Runway Growth Finance Corp, as administrative agent and collateral agent for the lenders party thereto.
Additionally, per the terms of the Term Loan Facility and the Backstop Agreement, New Allurion issued an aggregate of 950,000 shares of New Allurion Common Stock to an affiliate of Fortress (the “Additional Fortress Shares”) pursuant to a subscription agreement between New Allurion and such affiliate. Such shares of New Allurion Common Stock are subject to the registration rights set forth in the Credit Agreement. For the avoidance of doubt, the Backstop Shares issued to Fortress are included in the aggregate issuance of 950,000 shares of New Allurion Common Stock issued to an affiliate of Fortress.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the Credit Agreement, which is attached hereto as Exhibit 10.25 and is incorporated herein by reference.
Indemnification Agreements
The Company has entered into indemnification agreements with each of its directors and executive officers.
Each indemnification agreement provides for indemnification and advancements by New Allurion of certain expenses and costs relating to claims, suits or proceedings arising from each director or executive officer’s service to New Allurion, or, at New Allurion’s request, service as directors or officers of other entities, in each case, to the maximum extent permitted by applicable law.
The foregoing description of the indemnification agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the indemnification agreements, a form of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The disclosure set forth under “Introductory Note” above is incorporated into this Item 2.01 by reference.
Cautionary Note Regarding Forward-Looking Statements
This Report includes statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations of New Allurion. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Report (including in information that is incorporated by reference into this Report), words such as “estimates,” “projected,” “expects,” “estimated,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “would,” “future,” “propose,” “target,” “goal,” “objective,” “outlook” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements constitute projections and forecasts, are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of New Allurion, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements.
Forward-looking statements include, but are not limited to, statements about the ability of New Allurion and Allurion to:
| • | realize the benefits expected from the Mergers; |
| • | successfully defend litigation that may be instituted against Allurion or New Allurion in connection with the Mergers; |
| • | manage various conflicts of interest that could arise among New Allurion our affiliates, investors, directors, and officers; |
| • | successfully deploy the proceeds from the Mergers, the Revenue Interest Financing Agreement, the Fortress Financing and the Chardan Equity Facilty; |
| • | maintain the listing of New Allurion securities on the NYSE, and the potential liquidity and trading of such securities; |
| • | address limited liquidity and trading of New Alluron’s securities; |
| • | manage costs related to being a public company; |
| • | acquire sufficient sources of funding if and when needed; |
| • | attract and retain key employees, officers, and directors; |
| • | manage the effect of the Mergers on New Allurion’s business relationships, operating results, and business generally; |
| • | manage risks that the Mergers disrupt current plans and operations of Allurion; |
| • | implement business plans, forecasts, and other expectations, and identify and realize additional opportunities; |
| • | manage risks associated with the management of New Allurion having limited experience operating as a public company; |
| • | address significant risks, assumptions, estimates and uncertainties related to Allurion’s projections; |
| • | commercialize current and future products and services and create sufficient demand among health care providers and patients; |
| • | successfully complete current and future preclinical studies and clinical trials of the Allurion Balloon and any other future product candidates; |
| • | obtain market acceptance of the Allurion Balloon as safe and effective; |
| • | cost-effectively sell existing and future products through existing distribution arrangements with distributors and/or successfully adopt a direct sales force as part of a hybrid sales model that includes both distributors and a direct sales effort; |
| • | manage anticipated average selling prices and anticipated growth in market share in existing markets; |
| • | achieve expected increases in revenue from product launches in key markets, and pending regulatory approvals in Brazil, South Korea and Taiwan in 2023; |
| • | realize improvement in gross profit margin through economies of scale; |
| • | manage expected increases in sales and marketing expense to expand brand awareness and drive procedure volume; |
| • | manage anticipated costs associated with execution of clinical trials for regulatory approvals; |
| • | supply funding of the research and development pipeline; |
| • | manage additional manufacturing expenses to support global expansion; |
| • | timely collect accounts receivable from our customers; |
| • | obtain regulatory approval or clearance in the U.S. and certain non-U.S. jurisdictions for current and future products and maintain previously obtained approvals and/or clearances in those jurisdictions where products and services are currently offered; |
| • | accurately forecast customer demand and manufacture sufficient quantities of products that patients and health care providers request; |
| • | successfully compete in the highly competitive and rapidly changing regulated industries in which the company operates, and effectively address changes in such industries, including changes in competitors’ products and services and changes in applicable laws and regulations; |
| • | successfully manage any future international expansion of New Allurion’s business and navigate business, regulatory, political, operational, financial, and economic risks associated with doing business internationally; |
| • | successfully manage any future growth in New Allurion’s business; |
| • | contract with third-party suppliers and providers and monitor their ability to perform adequately under those arrangements; |
| • | comply with applicable legal and regulatory obligations; |
| • | obtain and maintain intellectual property protection for New Allurion’s products and technologies and acquire or license (on commercially reasonable terms) intellectual property from third parties; |
| • | sell products, and use proprietary technologies, without infringing, misappropriating, or otherwise violating the proprietary rights or intellectual property of third parties; |
| • | manage the impact of any significant acquisitions, dispositions, and other similar or material transactions; |
| • | implement and maintain effective internal controls; and |
| • | manage the effects of natural disasters, terrorist attacks, the spread and/or abatement of infectious diseases (such as COVID-19) and the occurrence of other events beyond our reasonable control, including with respect to potential operational disruptions, labor disruptions, increased costs, and impacts to demand related thereto. |
These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Report and in any document incorporated by reference are more fully described under “Risk Factors” and elsewhere in the Proxy Statement/Prospectus, which is incorporated herein by reference. The risks described in the Proxy Statement/Prospectus are not exhaustive. Other sections of the Proxy Statement/Prospectus describe additional factors that could adversely affect the business, financial condition or results of operations of New Allurion. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can New Allurion assess the impact of all such risk factors on its business, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements made by New Allurion or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. New Allurion undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Business
The business of New Allurion is described in the Proxy Statement/Prospectus in the section titled “Information About Allurion” beginning on page 308, which is incorporated herein by reference.
Risk Factors
The risks associated with New Allurion’s business are described in the Proxy Statement/Prospectus in the section titled “Risk Factors” beginning on page 90 and are incorporated herein by reference. A summary of the risks associated with Allurion’s business is also included on pages 73-75 of the Proxy Statement/Prospectus under the heading “Summary of Risk Factors” and is incorporated herein by reference.
Financial Information
The (i) unaudited condensed consolidated financial statements of Allurion as of March 31, 2023 and for the periods ended March 31, 2023 and 2022 are set forth beginning on page F-2 of the Proxy Statement/Prospectus, and are incorporated herein by reference and (ii) audited consolidated financial statements of Allurion as of and for the years ended December 31, 2022 and 2021 are included in the Proxy Statement/Prospectus beginning on page F-31 of the Proxy Statement/Prospectus, which are incorporated herein by reference.
The unaudited pro forma condensed combined financial information of Compute Health and Allurion as of and for the three months ended March 31, 2023 and for the year ended December 31, 2022 is set forth in Exhibit 99.1 and is incorporated herein by reference.
The information set forth in Item 9.01 of this Report concerning the financial information of Allurion is incorporated by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Management’s Discussion and Analysis of Financial Condition and Results of Operations of Allurion for the years ended December 31, 2022 and 2021 and for the three months ended March 31, 2023 and 2022 is included in the Proxy Statement/Prospectus beginning on page 333 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
Quantitative and Qualitative Disclosures about Market Risk
The Quantitative and Qualitative Disclosures about Market Risk of Allurion is included in the Proxy Statement/Prospectus beginning on page 353 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of New Allurion Common Stock following the consummation of the Business Combination by:
| • | each person who is known to be the beneficial owner of more than 5% of outstanding shares of New Allurion Common Stock; |
| • | each of New Allurion’s current named executive officers and directors; and |
| • | all current executive officers and directors of New Allurion as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options, RSUs and warrants that are currently exercisable or exercisable or releasable within 60 days.
Unless otherwise indicated, New Allurion believes that all persons named in the table below have sole voting and investment power with respect to the voting securities beneficially owned by them.
| Name and Address of Beneficial Owner |
Number of Shares | % of Ownership | ||||||
| Directors and Executive Officers |
||||||||
| Shantanu Gaur(1) |
2,267,305 | 4.8 | % | |||||
| Krishna Gupta(2) |
5,539,377 | 11.7 | % | |||||
| Omar Ishrak(3)(9) |
3,972,939 | 8.5 | % | |||||
| Chris Geberth(4) |
279,375 | * | ||||||
| Benoit Chardon(5) |
187,779 | * | ||||||
| Larson Doug Hudson |
— | — | ||||||
| Nick Lewin |
— | — | ||||||
| Michael Davin(6) |
217,999 | * | ||||||
| All Directors and Executive Officers of New Allurion Following the Business Combination as a Group (Eight Persons) |
12,464,774 | 25.6 | % | |||||
| Five Percent Holders |
||||||||
| Romulus Growth Allurion L.P.(7) |
4,151,847 | 8.9 | % | |||||
| Omar Ishrak(3)(9) |
3,972,939 | 8.5 | % | |||||
| RTW(8) |
3,457,707 | 7.4 | % | |||||
| Compute Health Sponsor LLC(9) |
3,262,711 | 7.0 | % | |||||
| Jean Nehmé(9) |
3,262,711 | 7.0 | % | |||||
| Joshua Fink(9) |
3,262,711 | 7.0 | % | |||||
| Amarat Investments Limited(10) |
2,386,405 | 5.1 | % | |||||
| * | Less than one percent. |
| (1) | Consists of (i) 1,003,090 Allurion Shares held by The Shantanu K. Gaur Revocable Trust Of 2021, of which Shantanu K. Gaur and Neha Gaur serve as trustees, (ii) 547,679 Allurion Shares held by The Gaur Family Irrevocable Trust Of 2021, of which Steven M. Burke, Esq. and Neha Gaur serve as trustees and which Ms. Gaur has voting and dispositive control, and (iii) 716,536 Allurion Shares issuable upon exercise of option within 60 days of August 1, 2023. |
| (2) | Consists of (i) 3,124,244 Allurion Shares held by Romulus Growth Allurion L.P., (ii) 72,953 Allurion Shares held by Romulus Capital I, L.P., (iii) 73,350 Allurion Shares issuable upon exercise of a warrant held by Romulus Capital I, L.P., (iv) 881,300 Allurion Shares held by Romulus Allurion Special Opportunity L.P., (v) 538,101 Allurion Shares held by Samin Capital LLC, and (vi) 849,429 Allurion Shares issuable upon vesting of restricted stock units held by Krishna Gupta within 60 days of August 1, 2023. Krishna Gupta is the general partner of Romulus Allurion Special Opportunity L.P., Romulus Growth Allurion L.P., and Romulus Capital I, L.P., and the manager of Samin Capital LLC. |
| (3) | Consists of (i) 710,228 shares held by Omar & Helen Ishrak Living Trust and (ii) 3,262,711 shares held by Sponsor. |
| (4) | Consists of 279,375 Allurion Shares issuable upon exercise of options within 60 days of August 1, 2023. |
| (5) | Consists of 154,135 Allurion Shares issuable upon exercise of options within 60 days of August 1, 2023. |
| (6) | Consists of (i) 34,363 Allurion Shares, (ii) 152,812 Allurion Shares issuable upon exercise of options within 60 days of August 1, 2023, and (iii) 30,824 shares of New Allurion Common Stock purchased in the PIPE Investment. |
| (7) | Consists of (i) 3,124,244 Allurion Shares held by Romulus Growth Allurion L.P., (ii) 72,953 Allurion Shares held directly by Romulus Capital I, L.P. and 73,349 shares of New Allurion Common Stock issuable upon exercise of a warrant held by Romulus Capital I, L.P., and (iii) 881,300 Allurion Shares held by Romulus Allurion Special Opportunity L.P.. Krishna Gupta is the general partner of Romulus Allurion Special Opportunity L.P., Romulus Growth Allurion L.P., and Romulus Capital I, L.P. The address of each of the entities is 151 Tremont Street Suite 6F Boston, MA 02111. |
| (8) | Consists of 3,457,707 shares of New Allurion Common Stock held by RTW. The address of RTW is 40 10th Avenue, Floor 7, New York, NY 10014. |
| (9) | Consists of 3,262,711 shares of New Allurion Common Stock held by the Sponsor. The Sponsor is managed by each of, Drs. Nehmé and Ishrak and Mr. Fink. As a result of the foregoing, each of Drs. Nehmé and Ishrak and Mr. Fink may be deemed to beneficially own shares held by the Sponsor |
| (10) | Consists of 2,386,405 Allurion Shares held by Amarat Investments Limited. The address of Amarat Investments Limited is 44 Esplande, St. Helier, Jersey, JE49WG. |
Directors and Executive Officers
Upon the consummation of the Business Combination, and in accordance with the terms of the Business Combination Agreement, each executive officer of Compute Health ceased serving in such capacity, and each of Joshua Fink, Omar Ishrak, Gwendolyn A. Watanabe, Michael Harsh and Hani Barhoush ceased serving on Compute Health’s board of directors. Shantanu Gaur, Omar Ishrak, Krishna Gupta, Michael Davin, Larson Douglas Hudson and Nicholas Lewin were appointed as directors of New Allurion to serve until the end of their respective terms and until their successors are elected and qualified. Dr. Ishrak and Mr. Gupta were each appointed as Co-Chairman of the New Allurion board of directors (the “Board”). As of the Closings, the Board had one vacancy. The Board is divided into three classes, designated as Class I, Class II and Class III. The Class I directors appointed are Krishna Gupta, Shantanu Gaur, and Nicholas Lewin and their terms will expire at the annual meeting of stockholders to be held in 2024. The Class II directors appointed are Omar Ishrak and Larson Douglas Hudson and their terms will expire at the annual meeting of stockholders to be held in 2025. The Class III director appointed is Michael Davin and his term will expire at the annual meeting of stockholders to be held in 2026. After the expiration of the initial terms, each class will be elected to a subsequent three-year term.
Director Independence
Information regarding director independence is described in the Proxy Statement/Prospectus in the section titled “Management Following The Business Combination—Director Independence” on page 391 and is incorporated herein by reference.
Committees of the Board of Directors
Dr. Ishrak and Mr. Davin were appointed to New Allurion’s audit committee. Each of Dr. Ishrak and Mr. Davin can read and understand fundamental financial statements and is independent under the rules and regulations of the SEC and the listing standards of the NYSE applicable to audit committee members. Michael Davin qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the NYSE. New Allurion intends to rely on the NYSE transition rules applicable to companies completing an initial listing and New Allurion plans to have an audit committee comprised of at least three directors that are entirely independent within one year after New Allurion’s NYSE listing date.
The members appointed to New Allurion’s compensation committee are Michael Davin, Nicholas Lewin and Larson Douglas Hudson. Michael Davin was appointed the chair of the compensation committee. Each member of New Allurion’s compensation committee will be considered independent under the rules and regulations of the SEC and the listing standards of the NYSE applicable to compensation committee members.
The members appointed to New Allurion’s nominating and corporate governance committee are Larson Douglas Hudson, Omar Ishrak, Krishna Gupta and Shantanu Gaur. Larson Douglas Hudson was appointed the chair of the nominating and corporate governance committee. New Allurion intends to rely on the NYSE transition rules applicable to companies completing an initial listing and New Allurion plans to have a nominating and corporate governance committee comprised of entirely independent directors within 90 days after New Allurion’s NYSE listing date.
Shantanu Gaur was appointed as New Allurion’s Chief Executive Officer and principal executive officer, Chris Geberth was appointed as New Allurion’s Chief Financial Officer and principal financial officer and principal accounting officer, Ram Chuttani was appointed as New Allurion’s Chief Medical Officer, and Benoit Jacques Claude Chardon was appointed as New Allurion’s Chief Commercial Officer.
New Allurion’s directors and executive officers are described in the Proxy Statement/Prospectus in the section titled “Management Following the Business Combination” beginning on page 388 and that information is incorporated herein by reference.
Additionally, interlocks and insider participation information regarding New Allurion’s executive officers is described in the Proxy Statement/Prospectus in the section titled “Management Following the Business Combination —Compensation Committee Interlocks and Insider Participation” on page 392 and that information is incorporated herein by reference.
Executive Compensation
The compensation of Allurion’s executive officers and directors is described in the Proxy Statement/Prospectus in the section titled “Executive and Director Compensation” beginning on page 265 and that information is incorporated herein by reference.
Director Compensation
The compensation of Allurion’s executive officers and directors is described in the Proxy Statement/Prospectus in the section titled “Executive and Director Compensation— Allurion Executive Officer and Director Compensation” beginning on page 376 and that information is incorporated herein by reference.
Certain Relationships and Related Party Transactions
Certain relationships and related party transactions of New Allurion are described in the Proxy Statement/Prospectus in the section titled “Certain Relationships and Related Party Transactions— Allurion Related Person Transactions” beginning on page 394 and that information is incorporated herein by reference.
Legal Proceedings
Reference is made to the disclosure regarding legal proceedings in the sections of the Proxy Statement/Prospectus titled “Information about Allurion—Legal Proceedings” beginning on page 331, which is incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Shares of New Allurion Common Stock and New Allurion Public Warrants commenced trading on the NYSE under the symbols “ALUR” and “ALUR WS,” respectively, on August 2, 2023. New Allurion has not paid any cash dividends on its shares of New Allurion Common Stock to date. It is the present intention of the Board to retain all earnings, if any, for use in New Allurion’s business operations and, accordingly, the Board does not anticipate declaring any dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon New Allurion’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends is within the discretion of the Board. Further, the Credit Agreement contains restrictive covenants that limit New Allurion’s ability to declare dividends.
Description of Registrant’s Securities to Be Registered
The description of New Allurion’s securities is contained in the Proxy Statement/Prospectus in the section titled “Description of Securities” beginning on page 355 and is incorporated herein by reference.
Immediately following the consummation of the Business Combination, there were 46,502,000 shares of New Allurion Common Stock issued and outstanding, held of record by 2,925 holders; no shares of preferred stock outstanding; and 13,206,922 New Allurion Public Warrants issued and outstanding. Such amounts do not include DTC participants or beneficial owners holding shares through nominee names.
Indemnification of Directors and Officers
The information set forth under Item 1.01 of this Report is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under the heading “Credit Agreement” under Item 1.01 of this Report is incorporated herein by reference.
Item 3.02. Unregistered Sale of Equity Securities.
The disclosure set forth above in Item 1.01 of this Report is incorporated by reference herein. The securities of New Allurion issued in connection with the PIPE Subscription Agreements, HVL Termination Agreement, Backstop Agreement, Existing RTW Side Letter, Term Loan Facility and Sponsor Loan Equity Issuance were not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.
Item 3.03. Material Modification to Rights of Security Holders.
The disclosure set forth under Item 5.03 of this Report is incorporated herein by reference.
As previously announced on July 26, 2023, Compute Health Public Warrant holders approved an amendment (the “Warrant Amendment”) to the warrant agreement that governed all of Compute Health’s warrants, by and between Compute Health and Continental Stock Transfer & Trust Company, as Warrant Agent, dated as of February 9, 2021, as may be amended or supplemented (the “Warrant Agreement”). Per the terms of the Warrant Amendment, (i) upon the completion of the Business Combination, each of the outstanding Compute Health Public Warrants, which previously entitled the holder thereof to purchase one share of Class A common stock, par value $0.0001 per share, of Compute Health at an exercise price of $11.50 per share, became exercisable for 1.420455 shares of New Allurion Common Stock at an exercise price of $8.10 per share; (ii) each Compute Health Public Warrant was exchanged for 0.6125 New Allurion Public Warrants; (iii) the terms of the Compute Health Warrants were amended such that they will expire seven years after the consummation of the Business Combination, or earlier upon redemption or liquidation; (iv) and Section 4.4 of the Warrant Agreement relating to adjustments of the Warrant Price (as defined in the Warrant Agreement) if Compute Health issues additional shares or equity-linked securities for capital raising purposes in connection with the closing of the Business Combination was deleted; (v) Sections 6.1 and 6.2 of the Warrant Agreement to provide that, subject to the terms of the Warrant Agreement, not less than all of the Compute Health Public Warrants may be redeemed for cash or for shares of common stock after a date that is ninety (90) days after the date on which Compute Health completes the initial Business Combination was amended; and (vi) certain adjustments to the Reference Value (as defined in the Warrant Agreement), redemption trigger price, and the table summarizing the redemption prices for the Compute Health Public Warrants as a result of the foregoing amendments to the Warrant Agreement were made.
Item 5.01. Changes in Control of Registrant.
The disclosure set forth in the “Introductory Note” above is incorporated into this Item 5.01 by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Executive Officers and Directors
The information set forth in the sections titled “Directors and Executive Officers”, “Executive and Director Compensation” and “Certain Relationships and Related Party Transactions” in Item 2.01 of this Report is incorporated herein by reference.
Employment Agreements
Employment Agreement with Dr. Shantanu Gaur
Effective upon the closing of the Business Combination, Allurion entered into a new employment agreement with Dr. Gaur, pursuant to which Allurion will continue to employ Dr. Gaur as Chief Executive Officer on an “at will” basis. Dr. Gaur’s new employment agreement provides that his initial annual base salary will be $620,000, and is subject to periodic review by the Board or compensation committee. In addition, the new employment agreement provides that Dr. Gaur is eligible to receive annual cash bonuses, which target annual amount shall be eighty percent (80%) of his annual base salary. Dr. Gaur is also eligible to participate in the employee benefit plans generally available to our employees, subject to the terms of such plans.
In the event of a termination of Dr. Gaur’s employment by Allurion without “cause” (as defined in his new employment agreement) or by his resignation for “good reason” (as defined in his new employment agreement), subject to Dr. Gaur’s execution and non-revocation of a separation agreement containing, among other things, a release of claims in favor of Allurion and its affiliates, Dr. Gaur will be entitled to receive (i) base salary continuation for twelve months following his termination date, and (ii) subject to Dr. Gaur’s election to receive continued health benefits under COBRA, payment of the full cost of such continuation coverage plus any administration fee until the earliest of (A) twelve months following termination; (B) the date he becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the expiration of Dr. Gaur’s COBRA health continuation period.
In addition, in lieu of the payments and benefits described above, in the event that Dr. Gaur’s employment is terminated by Allurion without “cause” or by him for “good reason,” in each case, within three months prior to or twelve months following a “sale event” (as defined in the 2023 Equity Incentive Plan), and subject to Dr. Gaur’s execution and non-revocation of a separation agreement containing, among other things, a release of claims in favor of Allurion and its affiliates, Dr. Gaur will be entitled to receive (i) an amount in cash equal to 1.5 times the sum of (x) Dr. Gaur’s then-current base salary (or, his base salary in effect immediately prior to the sale event, if higher) and (y) Dr. Gaur’s target annual bonus for the then-current year (or, his target annual bonus in effect immediately prior to the sale event, if higher); (ii) full acceleration of vesting of all outstanding time-based equity awards held by Dr. Gaur; and (iii) subject to Dr. Gaur’s election to receive continued health benefits under COBRA, payment of the full cost of such continuation coverage plus any administration fee until the earliest of (A) eighteen months following termination; (B) the date he becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the expiration of Dr. Gaur’s COBRA health continuation period. The cash severance payable to Dr. Gaur upon a termination of employment is generally payable in lump sum within 60 days following the date of termination, subject to limited exceptions.
Employment Agreement with Mr. Christopher Geberth
Effective upon the closing of the Business Combination, Allurion entered into a new employment agreement with Mr. Geberth, pursuant to which Allurion will continue to employ Mr. Geberth as Chief Financial Officer on an “at will” basis. Mr. Geberth’s new employment agreement provides that his initial annual base salary will be $425,000, and is subject to periodic review by the Board or compensation committee. In addition, the new employment agreement provides that Mr. Geberth is eligible to receive annual cash bonuses, which target annual amount shall be fifty percent (50%) of his annual base salary. Mr. Geberth is also eligible to participate in the employee benefit plans generally available to our employees, subject to the terms of such plans.
In the event of a termination of Mr. Geberth’s employment by Allurion without “cause” (as defined in his new employment agreement) or by his resignation for “good reason” (as defined in his new employment agreement), subject to Mr. Geberth’s execution and non-revocation of a separation agreement containing, among other things, a release of claims in favor of Allurion and its affiliates, Mr. Geberth will be entitled to receive (i) base salary continuation for nine months following his termination date, and (ii) subject to Mr. Geberth’s election to receive continued health benefits under COBRA, payment of the full cost of such continuation coverage plus any administration fee until the earliest of (A) twelve months following termination; (B) the date he becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the expiration of Dr. Gaur’s COBRA health continuation period.
In addition, in lieu of the payments and benefits described above, in the event that Mr. Geberth’s employment is terminated by Allurion without “cause” or by him for “good reason,” in each case, within three months prior to or
twelve months following a “sale event” (as defined in the 2023 Equity Incentive Plan), and subject to Mr. Geberth’s execution and non-revocation of a separation agreement containing, among other things, a release of claims in favor of Allurion and its affiliates, Mr. Geberth will be entitled to receive (i) an amount in cash equal to 1.0 times the sum of (x) Mr. Geberth’s then-current base salary (or, his base salary in effect immediately prior to the sale event, if higher) and (y) Mr. Geberth’s target annual bonus for the then-current year (or, his target annual bonus in effect immediately prior to the sale event, if higher); (ii) full acceleration of vesting of all outstanding time-based equity awards held by Mr. Geberth; and (iii) subject to Mr. Geberth’s election to receive continued health benefits under COBRA, payment of the full cost of such continuation coverage plus any administration fee until the earliest of (A) twelve months following termination; (B) the date he becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the expiration of Mr. Geberth’s COBRA health continuation period. The cash severance payable to Mr. Geberth upon a termination of employment is generally payable in lump sum within 60 days following the date of termination, subject to limited exceptions.
Corporate Officer Agreement with Mr. Benoit Chardon
Allurion France, a French société par actions simplifiée and wholly-owned subsidiary of Allurion (“Allurion France”) entered into a new corporate officer agreement with Mr. Chardon and Benoit Chardon Consulting, a French société à responsabilité limitée which is solely owned by Mr. Chardon (“BCC”), effective as of September 1, 2023, pursuant to which BCC will serve as Managing Director of Allurion France. The new corporate officer agreement provides that BCC shall receive base consulting fees of €28,333.33 per month and additional variable compensation subject to the incentive plan terms issued annually by Allurion and conditional on meeting Allurion France and personal performance attainment defined each year by Allurion.
The corporate officer agreement may be terminated by either Allurion France or BCC at any time, with or without cause (except that BCC must provide Allurion France with one months’ prior notice). In the event of such termination by Allurion without “cause” (as defined in the corporate officer agreement), BCC is entitled to receive a lump sum termination fee equal to twelve months of the base consulting fees.
The foregoing description of the employment and corporate officer agreements do not purport to be complete and are qualified in their entirety by the terms and conditions of the employment and corporate officer agreements for Dr. Gaur, Mr. Geberth and Mr. Chardon, which are included as Exhibits 10.10, 10.11 and 10.12 to this Report on Form 8-K and are incorporated herein by reference.
New Allurion 2023 Equity Incentive Plan
In connection with the consummation of the Business Combination, the stockholders of Compute Health and New Allurion each approved the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan (the “2023 Equity Incentive Plan”) and the Board adopted the 2023 Equity Incentive Plan. The 2023 Equity Incentive Plan provides for the award of stock options (both incentive and non-qualified), stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards, and dividend equivalent rights. Employees, consultants and directors of New Allurion and its affiliates are eligible to receive awards under the 2023 Equity Incentive Plan. The 2023 Equity Incentive Plan is administered by the Board or the compensation committee of the Board, referred to herein as the “plan administrator”.
The Board (or committee thereof) may also delegate to one or more of New Allurion’s officers the authority to (1) designate employees (other than officers) to receive specified stock awards and (2) determine the number of shares subject to such stock awards. Under the 2023 Equity Incentive Plan, the Board (or an authorized delegate) has the authority to determine award recipients, grant dates, the numbers and types of awards to be granted, the applicable fair market value in a manner consistent with the Code, and the provisions of each award, including the period of exercisability, the vesting schedule applicable to a stock award and the number of shares of stock to be covered by any award.
The Board has the authority to amend, suspend, or terminate the 2023 Equity Incentive Plan at any time, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require approval of New Allurion stockholders.
Subject to adjustment for changes in New Allurion’s capitalization, the maximum number of shares of New Allurion Common Stock reserved and available for issuance under the 2023 Equity Incentive Plan is equal to the sum of (i) 7,826,606 shares of New Allurion Common Stock, and (ii) shares of New Allurion Common Stock that are subject to awards granted under Allurion’s equity plans prior to the consummation of the Business Combination but which, after the 2023 Equity Incentive Plan became effective, are forfeited, canceled, held back upon exercise of an option or settlement of an award to cover the exercise price or tax withholding, reacquired by New Allurion prior to vesting, satisfied without the issuance of stock or otherwise terminated (other than by exercise). In addition, the number of shares of New Allurion Common Stock reserved for issuance under the 2023 Equity Incentive Plan will automatically increase on January 1, 2024, and each January 1 thereafter through January 1, 2033, by 5% of the number of fully diluted outstanding shares of New Allurion Common Stock as of the immediately preceding December 31 or such lesser amount as determined by the Board or its compensation committee.
The value of all awards awarded under the 2023 Equity Incentive Plan and all other cash compensation paid by New Allurion to any non-employee director in any calendar year may not exceed $750,000 (or $1,000,000 for the year in which a non-employee director is first appointed or elected to the Board).
A more complete summary of the terms of the 2023 Equity Incentive Plan is set forth in the Proxy Statement/Prospectus, in the section titled “Proposal No. 5 — The Equity Incentive Plan Proposal.” That summary and the foregoing description of the 2023 Equity Incentive Plan are qualified in their entirety by reference to the text of the 2023 Equity Incentive Plan, which is attached as Exhibit 10.17 hereto and incorporated herein by reference.
New Allurion 2023 Employee Stock Purchase Plan
In connection with the consummation of the Business Combination, the Company adopted the 2023 Employee Stock Purchase Plan (the “2023 ESPP”), which became effective on the date immediately preceding the closing of the Business Combination.
The 2023 ESPP includes two components: a “423 Component” and a “Non-423 Component”. The 423 Component is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. The Non-423 Component will be construed in a manner that is consistent with the requirements of Section 423 of the Code, and is intended to allow non-US employees to also participate in the plan, subject to applicable requirements of foreign laws.
The maximum number of shares of New Allurion Common Stock that may be issued under the 2023 ESPP is 1,423,019 shares, subject to adjustments for changes in New Allurion’s capitalization.
In addition, the number of shares of New Allurion Common Stock reserved and available for issuance under the 2023 ESPP will automatically increase January 1, 2024 and each January thereafter by the lesser of (i) 1% of the fully diluted outstanding shares of New Allurion Common Stock as of the immediately preceding December 31, (ii) 1,600,000 shares of New Allurion Common Stock, and (iii) such lesser number of shares determined by the administrator of the 2023 ESPP.
A more complete summary of the terms of the 2023 ESPP is set forth in the Proxy Statement/Prospectus in the section titled “Executive And Director Compensation–New Allurion 2023 Employee Stock Purchase Plan” That summary and the foregoing description of the 2023 ESPP are qualified in their entirety by reference to the text of the 2023 ESPP, which is attached as Exhibit 10.19 hereto and incorporated herein by reference.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
In connection with the consummation of the Business Combination, New Allurion amended and restated its certificate of incorporation (as amended, the “Charter”) and amended and restated its bylaws (as amended, the “Bylaws”). The material terms of the Charter and the Bylaws and the general effect upon the rights of holders of the Company’s capital stock are discussed in the Proxy Statement/Prospectus in the section titled “Proposal No. 3—The Advisory Organizational Documents Proposals,” which description is incorporated herein by reference.
The Charter and Bylaws are set forth in Exhibits 3.1 and 3.2 to this Report, respectively, and are incorporated herein by reference.
Item 5.05. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.
In connection with the Business Combination, the Company’s board of directors approved and adopted a new Code of Business Conduct and Ethics applicable to all employees, officers and directors of New Allurion. A copy of the Code of Conduct can be found at investors.allurion.com.
Item 5.06. Change in Shell Company Status.
Compute Health ceased to be a shell company upon the closing of the Business Combination and, additionally, ceased to exist as it merged into New Allurion. The material terms of the Business Combination are described in the sections titled “The Merger Agreement” and “Proposal No. 1 — The Business Combination Proposals” of the Proxy Statement/Prospectus, and are incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The (i) unaudited condensed consolidated financial statements of Allurion as of March 31, 2023 and for the three month periods ended March 31, 2023 and 2022 are set forth beginning on page F-2 of the Proxy Statement/Prospectus, and are incorporated herein by reference and (ii) audited consolidated financial statements of Allurion as of and for the years ended December 31, 2022 and 2021 are included in the Proxy Statement/Prospectus beginning on page F-31 of the Proxy Statement/Prospectus, which are incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma condensed combined financial information of Compute Health and Allurion as of and for the three months ended March 31, 2023 and for the year ended December 31, 2022 is set forth in Exhibit 99.1 and is incorporated herein by reference.
(d) Exhibits.
| * | Filed herewith. |
| ** | Previously filed. |
| + | Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request. |
| ++ | Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the SEC upon its request. |
| # | Indicates a management contract or compensatory plan. |
| † | Portions of this exhibit have been redacted in accordance with Regulation S-K Item 601(a)(6). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ALLURION TECHNOLOGIES, INC. | ||
| By: | /s/ Shantanu Gaur | |
| Name: Shantanu Gaur | ||
| Title: Chief Executive Officer | ||
Date: August 7, 2023
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
Allurion Technologies Holdings, Inc.
(a Delaware corporation)
July 31, 2023
Allurion Technologies Holdings, Inc. a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:
1. The name of the Corporation is Allurion Technologies Holdings, Inc. The date of the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was January 25, 2023 (the “Original Certificate”). The name under which the Corporation filed the Original Certificate was Allurion Technologies Holdings, Inc.
2. This Amended and Restated Certificate of Incorporation of the Corporation (this “Certificate”) amends, restates and integrates the provisions of the Original Certificate and was duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware (the “DGCL”).
3. The text of the Original Certificate is hereby amended and restated in its entirety to provide as herein set forth in full.
ARTICLE I
The name of the Corporation is Allurion Technologies, Inc.
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, Wilmington, Delaware, 19801, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
Capital Stock
The total number of shares of capital stock which the Corporation shall have authority to issue is 1.1 Billion (1,100,000,000) of which (i) One Billion (1,000,000,000) shares shall be a class designated as common stock, par value $0.0001 per share (the “Common Stock”), and (ii) 100 Million (100,000,000) shares shall be a class designated as undesignated preferred stock, par value $0.0001 per share (the “Undesignated Preferred Stock”).
Except as otherwise provided in any certificate of designations of any series of Undesignated Preferred Stock, the number of authorized shares of the class of Common Stock or Undesignated Preferred Stock may be increased or decreased (but not below the number of shares of such class then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL.
The powers, preferences and rights of, and the qualifications, limitations and restrictions upon, each class or series of stock shall be determined in accordance with, or as set forth below in, this Article IV.
A. Common Stock
Subject to all the rights, powers and preferences of the Undesignated Preferred Stock and except as provided by law or in this Certificate (or in any certificate of designations of any series of Undesignated Preferred Stock):
(a) the holders of the Common Stock shall have the exclusive right to vote for the election of directors of the Corporation (the “Directors”) and on all other matters requiring stockholder action, each outstanding share entitling the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate (or on any amendment to a certificate of designations of any series of Undesignated Preferred Stock) that alters or changes the powers, preferences, rights or other terms of one or more outstanding series of Undesignated Preferred Stock if the holders of such affected series of Undesignated Preferred Stock are granted the exclusive right to vote, either separately or together with the holders of one or more other such series, on such amendment pursuant to this Certificate (or pursuant to a certificate of designations of any series of Undesignated Preferred Stock) or pursuant to the DGCL;
(b) dividends may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends, but only when and as declared by the Board of Directors of the Corporation (the “Board of Directors”) or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock.
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B. Undesignated Preferred Stock
The Board of Directors or any authorized committee thereof is expressly authorized, to the fullest extent permitted by law, to provide by resolution or resolutions for, out of the unissued shares of Undesignated Preferred Stock, the issuance of the shares of Undesignated Preferred Stock in one or more series of such stock, and by filing a certificate of designations pursuant to applicable law of the State of Delaware, to establish or change from time to time the number of shares of each such series, and to fix the designations, powers, including voting powers, full or limited, or no voting powers, preferences and the relative, participating, optional, conversion or other special rights of the shares of each series and any qualifications, limitations and restrictions thereof.
ARTICLE V
Stockholder Action
1. Action without Meeting. Any action required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders and may not be taken or effected by a written consent of stockholders in lieu thereof.
2. Special Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Chairman of the Board of Directors, the Chief Executive Officer or the Board of Directors acting pursuant to a resolution approved by the affirmative vote of a majority of the Directors then in office, and special meetings of stockholders may not be called by any other person or persons. Only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders of the Corporation.
ARTICLE VI
Directors
1. General. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided herein or required by law.
2. Election of Directors. Election of Directors need not be by written ballot unless the By-laws of the Corporation (the “By-laws”) shall so provide.
3. Number of Directors; Term of Office. Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors, the number of Directors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from time to time by the Board of Directors; provided the Board of Directors shall consist of at least one (1) member. The Directors, other than those who may be elected by the holders of any series of Undesignated Preferred Stock, unless otherwise expressly provided in the certificate of designations of such series of Undesignated Preferred Stock, shall be classified, with respect to the term for which they severally hold office, into three classes. The initial Class I Directors of the Corporation shall be
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Krishna Gupta, Shantanu Gaur and Nicholas Lewin; the initial Class II Directors of the Corporation shall be Omar Ishrak and Larson Douglas Hudson; and the initial Class III Director of the Corporation shall be Michael Davin. The initial Class I Directors shall serve for a term expiring at the first annual meeting of stockholders to be held following the initial effectiveness of this Certificate; the initial Class II Directors shall serve for a term expiring at the second annual meeting of stockholders following the initial effectiveness of this Certificate; and the initial Class III Directors shall serve for a term expiring at the third annual meeting of stockholders to be held following the initial effectiveness of this Certificate. The mailing address of each person who is to serve initially as a director is c/o Allurion Technologies, Inc., 11 Huron Drive, Natick, Massachusetts 01760. At each succeeding annual meeting of stockholders, beginning with the first annual meeting of stockholders following the initial effectiveness of this Certificate, Directors elected to succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. Notwithstanding the foregoing, the Directors elected to each class shall hold office until their successors are duly elected and qualified or until their earlier resignation, death or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of Article IV of this Certificate, the holders of any one or more series of Undesignated Preferred Stock shall have the right, voting separately as a series or together with holders of other such series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate and any certificate of designations applicable to such series.
4. Vacancies. Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors and to fill vacancies in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without limitation, by reason of an increase in the size of the Board of Directors, or the death, resignation, disqualification or removal of a Director, shall be filled solely and exclusively by the affirmative vote of a majority of the remaining Directors then in office, even if less than a quorum of the Board of Directors, or by a sole remaining Director then in office, and not by the stockholders. Any Director appointed in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director’s successor shall have been duly elected and qualified or until his or her earlier resignation, death or removal. Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors, when the number of Directors is increased or decreased, the Board of Directors shall, subject to Article VI, Section 4 hereof, determine the class or classes to which the increased or decreased number of Directors shall be apportioned; provided, however, that no decrease in the number of Directors shall shorten the term of any incumbent Director. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, shall exercise the powers of the full Board of Directors until the vacancy is filled.
5. Removal. Subject to the rights, if any, of any series of Undesignated Preferred Stock to elect Directors and to remove any Director whom the holders of any such series have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office (i) only with cause and (ii) only by the affirmative vote of the holders of not less than two thirds (2/3) of the outstanding shares of capital stock then entitled to vote at an election of Directors. At least forty-five (45) days prior to any annual or special meeting of stockholders at which it is proposed that any Director be removed from office, written notice of such proposed removal and the alleged grounds thereof shall be sent to the Director whose removal will be considered at the meeting.
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ARTICLE VII
Limitation of Liability
1. Directors. To the fullest extent permitted by the DGCL, a Director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of his or her 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 an improper personal benefit. If the DGCL is amended after the effective date of this Certificate 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.
2. Officers. To the fullest extent permitted by the DGCL, an Officer (as defined below) of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as an officer of the Corporation, except for liability (a) for any breach of the Officer’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) for any transaction from which the Officer derived an improper personal benefit, or (d) arising from any claim brought by or in the right of the Corporation. If the DGCL is amended after the effective date of this Certificate to authorize corporate action further eliminating or limiting the personal liability of Officers, then the liability of an Officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. For purposes of this Article VII, “Officer” shall mean an individual who has been duly appointed as an officer of the Corporation and who, at the time of an act or omission as to which liability is asserted, is deemed to have consented to service of process to the registered agent of the Corporation as contemplated by 10 Del. C. § 3114(b).
3. Amendment or Modification. Any amendment, repeal or modification of this Article VII by either of (i) the stockholders of the Corporation or (ii) an amendment to the DGCL, shall not adversely affect any right or protection existing at the time of such amendment, repeal or modification with respect to any acts or omissions occurring before such amendment, repeal or modification of a person serving as a Director or Officer, as applicable, at the time of such amendment, repeal or modification.
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ARTICLE VIII
Amendment of By-Laws
1. Amendment by Directors. Except as otherwise provided by law, the By-laws of the Corporation may be amended or repealed by the Board of Directors by the affirmative vote of a majority of the Directors then in office.
2. Amendment by Stockholders. Except as otherwise provided therein, the Bylaws of the Corporation may be amended or repealed at any annual meeting of stockholders, or special meeting of stockholders called for such purpose, by the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of capital stock entitled to vote on such amendment or repeal, voting together as a single class; provided, however, that if the Board of Directors recommends that stockholders approve such amendment or repeal at such meeting of stockholders, such amendment or repeal shall only require the affirmative vote of the majority of outstanding shares of capital stock entitled to vote on such amendment or repeal, voting together as a single class.
ARTICLE IX
Amendment of Certificate of Incorporation
The Corporation reserves the right to amend or repeal this Certificate in the manner now or hereafter prescribed by statute and this Certificate, and all rights conferred upon stockholders herein are granted subject to this reservation. Except as otherwise required by this Certificate or by law, whenever any vote of the holders of capital stock of the Corporation is required to amend or repeal any provision of this Certificate, such amendment or repeal shall require the affirmative vote of the majority of the outstanding shares of capital stock entitled to vote on such amendment or repeal, and the affirmative vote of the majority of the outstanding shares of each class entitled to vote thereon as a class, at a duly constituted meeting of stockholders called expressly for such purpose.
[End of Text]
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THIS AMENDED AND RESTATED CERTIFICATE OF INCORPORATION is executed as of this 31st day of July, 2023.
| ALLURION TECHNOLOGIES HOLDINGS, INC. | ||
| By: | /s/ Shantanu Gaur | |
| Name: | Shantanu Gaur | |
| Title: | Chief Executive Officer | |
[Signature Page to Certificate of Incorporation]
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
ALLURION TECHNOLOGIES, INC.
(the “Corporation”)
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of stockholders (any such meeting being referred to in these Bylaws as an “Annual Meeting”) shall be held at the hour, date and place within or without the United States that is fixed by the Board of Directors of the Corporation (the “Board of Directors”), which time, date and place may subsequently be changed at any time, before or after the notice for such meeting has been sent to the stockholders, by vote of the Board of Directors. The Board of Directors 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 General Corporation Law of the State of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office. If no Annual Meeting has been held for a period of thirteen (13) months after the Corporation’s last Annual Meeting, a special meeting in lieu thereof may be held, and such special meeting shall have, for the purposes of these Bylaws or otherwise, all the force and effect of an Annual Meeting. Any and all references hereafter in these Bylaws to an Annual Meeting or Annual Meetings also shall be deemed to refer to any special meeting(s) in lieu thereof.
SECTION 2. Notice of Stockholder Business and Nominations.
| (a) | Annual Meetings of Stockholders. |
(1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of other business to be considered by the stockholders may be brought before an Annual Meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice of the Annual Meeting provided for in this Bylaw, who is entitled to vote at the meeting, who is present (in person or by proxy) at the meeting and who complies with the notice procedures set forth in this Bylaw as to such nomination or business. For the avoidance of doubt, the foregoing clause (ii) shall be the exclusive means for a stockholder to bring nominations or business properly before an Annual Meeting (other than matters properly brought under Rule 14a-8 (or any successor rule) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), and such stockholder must comply with the notice and other procedures set forth in Article I, Section 2(a)(2), (3) and (4) of this Bylaw to bring such nominations or business properly before an Annual Meeting. In addition to the other requirements set forth in this Bylaw, for any proposal of business to be considered at an Annual Meeting, it must be a proper subject for action by stockholders of the Corporation under Delaware law.
(2) For nominations or other business to be properly brought before an Annual Meeting by a stockholder pursuant to clause (ii) of Article I, Section 2(a)(1) of this Bylaw, the stockholder must (i) have given Timely Notice (as defined below) thereof in writing to the Secretary of the Corporation, (ii) have provided any updates or supplements to such notice at the times and in the forms required by this Bylaw and (iii) together with the beneficial owner(s), if any, on whose behalf the nomination or business proposal is made, have acted in accordance with the representations set forth in the Solicitation Statement (as defined below) required by this Bylaw. To be timely, a stockholder’s written notice must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) day prior to the one-year anniversary of the preceding year’s Annual Meeting; provided, however, that in the event the Annual Meeting is first convened more than thirty (30) days before or more than sixty (60) days after such anniversary date, or if no Annual Meeting were held in the preceding year, notice by the stockholder to be timely must be received by the Secretary of the Corporation not later than the close of business on the later of the ninetieth (90th) day prior to the scheduled date of such Annual Meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made (such notice within such time periods shall be referred to as “Timely Notice”). Such stockholder’s Timely Notice shall set forth or include:
(A) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class and number of shares of capital stock of the Corporation that are held of record or are beneficially owned by the nominee or their affiliates or associates and any Synthetic Equity Interest (as defined below) held or beneficially owned by the nominee or their affiliates or associates, if any, (iv) a description of all arrangements or understandings between or among the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder or concerning the nominee’s potential service on the Board of Directors, (v) a questionnaire with respect to the background and qualifications of the nominee completed by the nominee in the form provided by the Corporation (which questionnaire shall be provided by the Secretary upon written request), (vi) a representation and agreement in the form provided by the Corporation (which form shall be provided by the Secretary upon written request) that: (a) such proposed nominee is not and will not become party to any agreement, arrangement or understanding with any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation; (b) such proposed nominee is not and will not become a party to any agreement, arrangement, or understanding with
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any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement, or indemnification in connection with service or action as a director that has not been disclosed to the Corporation; (c) such proposed nominee would, if elected as a director, comply with all applicable rules and regulations of the exchanges upon which shares of the Corporation’s capital stock trade, each of the Corporation’s corporate governance, ethics, conflict of interest, confidentiality, stock ownership and trading policies and guidelines applicable generally to the Corporation’s directors and, if elected as a director of the Corporation, such person currently would be in compliance with any such policies and guidelines that have been publicly disclosed; (d) such proposed nominee intends to serve as a director for the full term for which he or she is to stand for election; and (e) such proposed nominee will promptly provide to the Corporation such other information as it may reasonably request; and (vii) any other information relating to such proposed nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);
(B) as to any other business that the stockholder proposes to bring before the meeting: a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, the text, if any, of any resolutions or Bylaw amendment proposed for adoption, and any material interest in such business of each Proposing Person (as defined below);
(C) (i) the name and address of the stockholder giving the notice, as they appear on the Corporation’s books, and the names and addresses of the other Proposing Persons (if any) and (ii), as to each Proposing Person, the following information: (a) the class or series and number of all shares of capital stock of the Corporation that are, directly or indirectly, owned beneficially or of record by such Proposing Person or any of their affiliates or associates (as such terms are defined in Rule 12b-2 promulgated under the Exchange Act), including any shares of any class or series of capital stock of the Corporation as to which such Proposing Person or any of their affiliates or associates has a right to acquire beneficial ownership at any time in the future (whether or not such right is exercisable immediately or only after the passage of time or upon the satisfaction of any conditions or both) pursuant to any agreement, arrangement or understanding (whether or not in writing), (b) all Synthetic Equity Interests (as defined below) in which such Proposing Person or any of their affiliates or associates, directly or indirectly, holds an interest including a description of the material terms of each such Synthetic Equity Interest, including without limitation, identification of the counterparty to each such Synthetic Equity Interest and disclosure, for each such Synthetic Equity Interest, as to (1) whether or not such Synthetic Equity Interest conveys any voting rights, directly or indirectly, in such shares to such Proposing Person or any of their affiliates or associates, (2) whether or not such Synthetic Equity Interest is required to be, or is capable of being, settled through delivery of such shares and (3) whether or not such Proposing Person, any of their affiliates or associates and/or, to the extent known, the
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counterparty to such Synthetic Equity Interest has entered into other transactions that hedge or mitigate the economic effect of such Synthetic Equity Interest, (c) any proxy (other than a revocable proxy given in response to a public proxy solicitation made pursuant to, and in accordance with, the Exchange Act), agreement, arrangement, understanding or relationship pursuant to which such Proposing Person or any of their affiliates or associates has or shares a right to, directly or indirectly, vote any shares of any class or series of capital stock of the Corporation, (d) any rights to dividends or other distributions on the shares of any class or series of capital stock of the Corporation, directly or indirectly, owned beneficially by such Proposing Person or any of their affiliates or associates that are separated or separable from the underlying shares of the Corporation, (e) any performance-related fees (other than an asset-based fee) to which such Proposing Person or any of their affiliates or associates, directly or indirectly, is entitled to receive based on any increase or decrease in the value of shares of any class or series of capital stock of the Corporation, or any Synthetic Equity Interests, (f)(1) if such Proposing Person is not a natural person, the identity of the natural person or persons associated with such Proposing Person responsible for (i) the formulation of and decision to propose the director nomination or business to be brought before the meeting and (ii) making voting and investment decisions on behalf of the Proposing Person (irrespective of whether such person or persons have “beneficial ownership” for purposes of Rule 13d-3 of the Exchange Act of any securities owned of record or beneficially by the Proposing Person) (such person or persons, the “Responsible Person”), the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person and the qualifications and background of such Responsible Person or (2) if such Proposing Person is a natural person, the qualifications and background of such natural person, (g) any equity interests or any Synthetic Equity Interests in any principal competitor of the Corporation beneficially owned by such Proposing Person or any of their affiliates or associates, (h) any direct or indirect interest of such Proposing Person or any of their affiliates or associates in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, without limitation, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (i) any pending or threatened litigation in which such Proposing Person or any of their affiliates or associates is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (j) any material transaction occurring during the prior twelve months between such Proposing Person or any of their affiliates or associates, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, and (k) any other information relating to such Proposing Person or any of their affiliates or associates that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (a) through (k) are referred to, collectively, as
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“Material Ownership Interests”); provided, however, that the Material Ownership Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder of record directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner;
(D) (i) a description of all agreements, arrangements or understandings to which any Proposing Person or any of their affiliates or associates is a party (whether the counterparty or counterparties are a Proposing Person or any affiliate or associate thereof, on the one hand, or one or more other third parties, on the other hand, (including any proposed nominee(s)) (a) pertaining to the nomination(s) or other business proposed to be brought before the meeting of stockholders or (b) entered into for the purpose of acquiring, holding, disposing or voting of any shares of any class or series of capital stock of the Corporation (which description shall identify the name of each other person who is party to such an agreement, arrangement or understanding), and (ii) identification of the names and addresses of other stockholders (including beneficial owners) known by any of the Proposing Persons to support such nominations or other business proposal(s) and, to the extent known, the class and number of all shares of the Corporation’s capital stock owned beneficially or of record by such other stockholder(s) or other beneficial owner(s); and
(E) a statement (i) that the stockholder is a holder of record of capital stock of the Corporation entitled to vote at such meeting, a representation that such stockholder intends to appear in person or by proxy at the meeting to propose such business or nominees and an acknowledgement that, if such stockholder (or a qualified representative of such stockholder) does not appear to present such business or proposed nominees, as applicable, at such meeting, the Corporation need not present such business or proposed nominees for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation, (ii) whether or not the stockholder giving the notice and/or the other Proposing Person(s), if any, will (a) deliver a proxy statement and form of proxy to holders of, in the case of a business proposal, at least the percentage of voting power of all of the shares of capital stock of the Corporation required under applicable law to approve the proposal or, in the case of a nomination or nominations, at least 67 percent of the voting power of all of the shares of capital stock of the Corporation entitled to vote on the election of directors or (b) otherwise solicit proxies or votes from stockholders in support of such proposal or nomination, as applicable, (iii) providing a representation as to whether or not such Proposing Person intends to solicit proxies in support of director nominees other than the Corporation’s director nominees in accordance with Rule 14a-19 promulgated under the Exchange Act, and (iv) that the stockholder will provide any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (such statement, the “Solicitation Statement”).
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For purposes of this Article I, the term “Proposing Person” shall mean the following persons: (i) the stockholder of record providing the notice of nominations or business proposed to be brought before a stockholders’ meeting and (ii) the beneficial owner(s), if different, on whose behalf the nominations or business proposed to be brought before a stockholders’ meeting is made. For purposes of this Section 2, the term “Synthetic Equity Interest” shall mean any transaction, agreement or arrangement (or series of transactions, agreements or arrangements), including, without limitation, any derivative, swap, hedge, repurchase or so-called “stock borrowing” or securities lending agreement or arrangement, the purpose or effect of which is to, directly or indirectly: (a) give a person or entity economic benefit and/or risk similar to ownership of shares of any class or series of capital stock of the Corporation, in whole or in part, including due to the fact that such transaction, agreement or arrangement provides, directly or indirectly, the opportunity to profit, or share in any profit, or avoid a loss from any increase or decrease in the value of any shares of any class or series of capital stock of the Corporation, (b) mitigate loss to, reduce the economic risk of, or manage the risk of share price changes for, any person or entity with respect to any shares of any class or series of capital stock of the Corporation, (c) otherwise provide in any manner the opportunity to profit, or share in any profit, or avoid a loss from any decrease in the value of any shares of any class or series of capital stock of the Corporation, or (d) increase or decrease the voting power of any person or entity with respect to any shares of any class or series of capital stock of the Corporation.
(3) A stockholder providing Timely Notice of nominations or business proposed to be brought before an Annual Meeting shall further update and supplement such notice, if necessary, so that the information (including, without limitation, the Material Ownership Interests information) provided or required to be provided in such notice pursuant to this Bylaw shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days prior to such Annual Meeting, and such update and supplement shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the fifth (5th) business day after the record date for the Annual Meeting (in the case of the update and supplement required to be made as of the record date), and not later than the close of business on the eighth (8th) business day prior to the date of the Annual Meeting (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting). For the avoidance of doubt, the obligation to update as set forth in this Section 2(a)(3) shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder, or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or nomination or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the stockholders. Notwithstanding the foregoing, if a Proposing Person no longer plans to solicit proxies in accordance with its representation pursuant to Article I, Section 2(a)(2)(E), such Proposing Person shall inform the Corporation of this change by delivering a written notice to the Secretary at the principal executive offices of the Corporation no later than two (2) business days after making the determination not to proceed with a solicitation of proxies. A Proposing Person shall also update its notice so that the information required by Article I, Section 2(a)(2)(C) is current through the date of the meeting or any adjournment, postponement, or rescheduling thereof, and such update shall be delivered in writing to the secretary at the principal executive offices of the Corporation no later than two (2) business days after the occurrence of any material change to the information previously disclosed pursuant to Article I, Section 2(a)(2)(C).
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(4) Notwithstanding anything in the second sentence of Article I, Section 2(a)(2) of this Bylaw to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least ten (10) days before the last day a stockholder may deliver a notice of nomination in accordance with the second sentence of Article I, Section 2(a)(2), a stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.
| (b) | General. |
(1) Only such persons who are nominated in accordance with the provisions of this Bylaw shall be eligible for election and to serve as directors, and only such business shall be conducted at an Annual Meeting as shall have been brought before the meeting in accordance with the provisions of this Bylaw or in accordance with Rule 14a-8 under the Exchange Act. The Board of Directors or a designated committee thereof shall have the power to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the provisions of this Bylaw. If neither the Board of Directors nor such designated committee makes a determination as to whether any stockholder proposal or nomination was made in accordance with the provisions of this Bylaw, the presiding officer of the Annual Meeting shall have the power and duty to determine whether the stockholder proposal or nomination was made in accordance with the provisions of this Bylaw. If the Board of Directors or a designated committee thereof or the presiding officer, as applicable, determines that any stockholder proposal or nomination was not made in accordance with the provisions of this Bylaw, such proposal or nomination shall be disregarded and shall not be presented for action at the Annual Meeting.
(2) Except as otherwise required by law, nothing in this Article I, Section 2 shall obligate the Corporation or the Board of Directors to include in any proxy statement or other stockholder communication distributed on behalf of the Corporation or the Board of Directors information with respect to any nominee for director or any other matter of business submitted by a stockholder.
(3) Notwithstanding the foregoing provisions of this Article I, Section 2, if the nominating or proposing stockholder (or a qualified representative of the stockholder) does not appear at the Annual Meeting to present a nomination or any business, such nomination or business shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Article I, Section 2, to be considered a qualified representative of the proposing stockholder, a person must be
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authorized by a written instrument executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders, and such person must produce such written instrument or electronic transmission, or a reliable reproduction of the written instrument or electronic transmission, to the presiding officer at the meeting of stockholders.
(4) For purposes of this Bylaw, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(5) Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder, including, but not limited to, Rule 14a-19 of the Exchange Act, with respect to the matters set forth in this Bylaw. If a stockholder fails to comply with any applicable requirements of the Exchange Act, including, but not limited to, Rule 14a-19 promulgated thereunder, such stockholder’s proposed nomination or proposed business shall be deemed to have not been made in compliance with this Bylaw and shall be disregarded.
(6) Further notwithstanding the foregoing provisions of this Bylaw, unless otherwise required by law, (i) no Proposing Person shall solicit proxies in support of director nominees other than the Corporation’s nominees unless such Proposing Person has complied with Rule 14a-19 promulgated under the Exchange Act in connection with the solicitation of such proxies, including the provision to the Corporation of notices required thereunder in a timely manner, and (ii) if any Proposing Person (A) provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act, (B) subsequently fails to comply with the requirements of Rule 14a-19(a)(2) or Rule 14a-19(a)(3) promulgated under the Exchange Act, including the provision to the Corporation of notices required thereunder in a timely manner, and (C) no other Proposing Person has provided notice pursuant to, and in compliance with, Rule 14a-19 under the Exchange Act that it intends to solicit proxies in support of the election of such proposed nominee in accordance with Rule 14a-19(b) under the Exchange Act, then such proposed nominee shall be disqualified from nomination, the Corporation shall disregard the nomination of such proposed nominee and no vote on the election of such proposed nominee shall occur. Upon request by the Corporation, if any Proposing Person provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act, such Proposing Person shall deliver to the Corporation, no later than five (5) business days prior to the applicable meeting date, reasonable evidence that it has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act.
(7) The number of nominees a stockholder may nominate for election at the Annual Meeting (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at the Annual Meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such Annual Meeting.
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SECTION 3. Special Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any outstanding series of preferred stock of the Corporation, special meetings of the stockholders of the Corporation may be called only by the Chairman of the Board of Directors, the Chief Executive Officer or Board of Directors acting pursuant to a resolution approved by the affirmative vote of a majority of the Directors then in office. The Board of Directors may postpone or reschedule any previously scheduled special meeting of stockholders. Only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders of the Corporation. Nominations of persons for election to the Board of Directors and stockholder proposals of other business shall not be brought before a special meeting of stockholders to be considered by the stockholders unless such special meeting is held in lieu of an annual meeting of stockholders in accordance with Article I, Section 1 of these Bylaws, in which case such special meeting in lieu thereof shall be deemed an Annual Meeting for purposes of these Bylaws and the provisions of Article I, Section 2 of these Bylaws shall govern such special meeting.
SECTION 4. Notice of Meetings; Adjournments.
(a) A notice of each Annual Meeting stating the hour, date and place, if any, of such Annual Meeting and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given not less than ten (10) days nor more than sixty (60) days before the Annual Meeting, to each stockholder entitled to vote thereat, by delivering such notice to such stockholder or by mailing it, postage prepaid, addressed to such stockholder at the address of such stockholder as it appears on the Corporation’s stock transfer books. Without limiting the manner by which notice may otherwise be given to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the DGCL.
(b) Notice of all special meetings of stockholders shall be given in the same manner as provided for Annual Meetings, except that the notice of all special meetings shall state the purpose or purposes for which the meeting has been called.
(c) Notice of an Annual Meeting or special meeting of stockholders need not be given to a stockholder if a waiver of notice is executed, or waiver of notice by electronic transmission is provided, before or after such meeting by such stockholder or if such stockholder attends such meeting, unless such attendance is for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened.
(d) The Board of Directors may postpone and reschedule any previously scheduled Annual Meeting or special meeting of stockholders and any record date with respect thereto, regardless of whether any notice or public disclosure with respect to any such meeting has been sent or made pursuant to Section 2 of this Article I or otherwise. In no event shall the public announcement of a postponement or rescheduling, or an adjournment in accordance with subsection (e) below, of any previously scheduled meeting of stockholders commence a new time period for the giving of a stockholder’s notice under this Article I.
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(e) When any meeting is convened, the presiding officer or the stockholders present or represented by proxy at such meeting may adjourn the meeting from time to time for any reason, regardless of whether a quorum is present, to reconvene at any other time and at any place at which a meeting of stockholders may be held under these Bylaws. When any Annual Meeting or special meeting of stockholders is adjourned to another hour, date or place (including an adjournment taken to address a technical failure to convene or continue a meeting using remote communication), 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 (i) announced at the meeting at which the adjournment is taken, (ii) displayed, during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote communication or (iii) set forth in the notice of meeting given in accordance with this Section 4; provided, however, that if the adjournment is for more than thirty (30) days from the meeting date, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting shall be given to each stockholder of record entitled to vote thereat and each stockholder who, by law or under the Certificate of Incorporation of the Corporation (as the same may hereafter be amended and/or restated, the “Certificate”) or these Bylaws, is entitled to such notice.
SECTION 5. Quorum. Except as otherwise provided by law, the Certificate (as defined in Article VI, Section 7 of these Bylaws) or these Bylaws, at each meeting of stockholders, the presence in person or by remote communication, if applicable, or represented by proxy, of the holders of a majority in voting power of the issued and outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. If one or more class or series of the Corporation’s stock has the exclusive right to vote on a matter to be voted on at a meeting of stockholders, the presence in person or by remote communication, if applicable, or represented by proxy, of the holders of a majority in voting power of the outstanding shares of such class or series shall be necessary and sufficient to constitute a quorum with respect to such matter. If less than a quorum is present at a meeting, the holders of voting stock representing a majority of the voting power present at the meeting or the presiding officer may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 4 of this Article I. At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
SECTION 6. Voting and Proxies.
(a) The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Article IV, Section 5 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. Stockholders shall have one vote for each share of stock entitled to vote owned by them of record according to the stock ledger of the Corporation as of the record date, unless otherwise provided by law or by the Certificate.
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Stockholders may vote either (i) in person, (ii) by written proxy or (iii) by a transmission permitted by Section 212(c) of the DGCL. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission permitted by Section 212(c) of the DGCL may be substituted for or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. Proxies shall be filed in accordance with the procedures established for the meeting of stockholders. Except as otherwise limited therein or as otherwise provided by law, proxies authorizing a person to vote at a specific meeting shall entitle the persons authorized thereby to vote at any adjournment of such meeting, but they shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by or on behalf of any one of them unless at or prior to the exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them. In the event the Corporation receives proxies for disqualified or withdrawn nominees for the Board of Directors, such votes for such disqualified or withdrawn nominees in the proxies will be treated as abstentions.
(b) Any stockholder directly or indirectly soliciting proxies from other stockholders must use a proxy card color other than white, which shall be reserved for the exclusive use by the Board of Directors.
SECTION 7. Action at Meeting. When a quorum is present at any meeting of stockholders, any matter before any such meeting (other than an election of a director or directors) shall be decided by a majority of the votes properly cast on such matter, except where a different vote is required by law, by the Certificate or by these Bylaws. Any election of directors by stockholders shall be determined by a plurality of the votes properly cast on the election of directors.
SECTION 8. Stockholder Lists. The Corporation shall prepare, no later than the tenth (10th) day before each Annual Meeting or special 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. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of ten (10) days ending on the day before the meeting date in the manner provided by law.
SECTION 9. Conduct of Meeting. The Board of Directors may adopt by resolution such rules, regulations, and procedures for the conduct of any meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with rules, regulations, and procedures adopted by the Board of Directors, the chair of the meeting shall have the right to prescribe such rules, regulations, and procedures and to do all such acts, as, in the judgment of such chair, are necessary, appropriate, or convenient for the proper conduct of the meeting. Such rules, regulations, or procedures, whether adopted by the Board of Directors or the chair of the meeting, may include, without limitation, the following: (a) the establishment of an agenda for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present at the meeting; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies, or such
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other persons as the chair of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) the determination of the circumstances in which any person may make a statement or ask questions and limitations on the time allotted to questions or comments; (f) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (g) the exclusion or removal of any stockholders or any other individual who refuses to comply with meeting rules, regulations, or procedures; (h) restrictions on the use of audio and video recording devices, cell phones, and other electronic devices; (i) rules, regulations, and procedures for compliance with any federal, state, or local laws or regulations (including those concerning safety, health, or security); (j) procedures (if any) requiring attendees to provide the Corporation advance notice of their intent to attend the meeting; and (k) rules, regulations, or procedures regarding the participation by means of remote communication of stockholders and proxy holders not physically present at a meeting, whether such meeting is to be held at a designated place or solely by means of remote communication. Unless and to the extent determined by the Board of Directors or the chair of the meeting, the chair of the meeting shall not be obligated to adopt or follow any technical, formal, or parliamentary rules or principles of procedure.
SECTION 10. Inspectors of Elections. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the presiding officer shall appoint one or more inspectors to act at the meeting. Any inspector may, but need not, be an officer, employee or agent of the Corporation. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall perform such duties as are required by the DGCL, including the counting of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. The presiding officer may review all determinations made by the inspectors, and in so doing the presiding officer shall be entitled to exercise his or her sole judgment and discretion and he or she shall not be bound by any determinations made by the inspectors. All determinations by the inspectors and, if applicable, the presiding officer, shall be subject to further review by any court of competent jurisdiction.
ARTICLE II
Directors
SECTION 1. Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise provided by the Certificate or required by law.
SECTION 2. Number and Terms. Subject to the rights, if any, of the holders of any outstanding series of preferred stock of the Corporation to elect directors, the number of directors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from time to time by the Board of Directors, provided the Board of Directors shall consist of at least one (1) member. The directors shall hold office in the manner provided in the Certificate.
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SECTION 3. Qualification. No director need be a stockholder of the Corporation.
SECTION 4. Vacancies. Vacancies in the Board of Directors shall be filled in the manner provided in the Certificate.
SECTION 5. Removal. Directors may be removed from office only in the manner provided in the Certificate and applicable law.
SECTION 6. Resignation. A director may resign at any time by electronic transmission or by giving written notice to the Chairperson of the Board, if one is elected, the President or the Secretary. A resignation shall be effective upon receipt, unless the resignation otherwise provides.
SECTION 7. Regular Meetings. Regular meetings of the Board of Directors (including any annual meeting) may be held at such hour, date and place as the Board of Directors may by resolution from time to time determine and publicize by means of reasonable notice given to any director who is not present at the meeting at which such resolution is adopted.
SECTION 8. Special Meetings. Special meetings of the Board of Directors may be called, orally or in writing, by or at the request of a majority of the directors, the Chairperson of the Board, if one is elected, or the President. The person calling any such special meeting of the Board of Directors may fix the hour, date and place thereof.
SECTION 9. Notice of Meetings. Notice of the hour, date and place of all special meetings of the Board of Directors shall be given to each director by the Secretary or an Assistant Secretary, or in case of the death, absence, incapacity or refusal of such persons, by the Chairperson of the Board, if one is elected, or the President or such other officer designated by the Chairperson of the Board, if one is elected, or the President. Notice of any special meeting of the Board of Directors shall be given to each director in person, by telephone, or by facsimile, electronic mail or other form of electronic communication, sent to his or her business or home address, at least twenty-four (24) hours in advance of the meeting, or by written notice mailed to his or her business or home address, at least forty-eight (48) hours in advance of the meeting provided, however, that if the Chairperson of the Board or the President determines that it is otherwise necessary or advisable to hold the meeting sooner, then the Chairperson of the Board or the President, as the case may be, may prescribe a shorter time period for notice to be given personally or by telephone, facsimile, electronic mail or other similar means of communication. Such notice shall be deemed to be delivered when hand-delivered to such address; read to such director by telephone; deposited in the mail so addressed, with postage thereon prepaid, if mailed; or dispatched or transmitted if sent by facsimile transmission or by electronic mail or other form of electronic communications. A written waiver of notice signed or electronically transmitted before or after a meeting by a director and filed with the records of the meeting shall be deemed to be equivalent to notice of the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because such meeting is not lawfully called or convened. Except as otherwise required by law, the Certificate or these Bylaws, neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
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SECTION 10. Quorum. At any meeting of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction of business, except as otherwise specifically provided by law, the Certificate or these Bylaws. but if less than a quorum is present at a meeting, a majority of the directors present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice. Any business that might have been transacted at the meeting as originally noticed may be transacted at such adjourned meeting at which a quorum is present. For purposes of this Section 10, the total number of directors includes any unfilled vacancies on the Board of Directors.
SECTION 11. Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of the directors present shall constitute action by the Board of Directors, unless otherwise required by law, the Certificate or these Bylaws.
SECTION 12. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the records of the meetings of the Board of Directors. 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. Such consent shall be treated as a resolution of the Board of Directors for all purposes.
SECTION 13. Manner of Participation. Directors may participate in meetings of the Board of Directors by means of video conference, conference telephone or other communications equipment by means of which all directors participating in the meeting can hear each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting for purposes of these Bylaws.
SECTION 14. Presiding Director. The Board of Directors shall designate a representative to preside over all meetings of the Board of Directors, provided that if the Board of Directors does not so designate such a presiding director or such designated presiding director is unable to so preside or is absent, then the Chairperson of the Board, if one is elected, shall preside over all meetings of the Board of Directors. If both the designated presiding director, if one is so designated, and the Chairperson of the Board, if one is elected, are unable to preside or are absent, the Board of Directors shall designate an alternate representative to preside over a meeting of the Board of Directors.
SECTION 15. Committees. The Board of Directors, by vote of a majority of the directors then in office, may elect one or more committees, including, without limitation, a Compensation Committee, a Nominating and Corporate Governance Committee and an Audit Committee, and may delegate thereto some or all of its powers to such committee(s) except those which by law, the Certificate or these Bylaws may not be delegated. Except as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the same manner as is provided by these Bylaws for the Board of Directors. All members of such committees shall hold such offices at the pleasure of the Board of Directors. The Board of Directors may abolish any such committee at any time. Any committee to which the Board of Directors delegates any of its powers or duties shall keep records of its meetings and shall report its action to the Board of Directors. The Corporation elects to be governed by the provisions of Section 141(c)(2) of the DGCL.
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SECTION 16. Compensation of Directors. Directors shall receive such compensation for their services as shall be determined by a majority of the Board of Directors, or a designated committee thereof, provided that directors who are serving the Corporation as employees shall not receive any salary or other compensation for their services as directors of the Corporation.
ARTICLE III
Officers
SECTION 1. Enumeration. The officers of the Corporation shall consist of a President, a Treasurer, a Secretary and such other officers, including, without limitation, a Chairperson of the Board, a Chief Executive Officer and one or more Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the Board of Directors may determine. Any number of offices may be held by the same person. The salaries and other compensation of the officers of the Corporation will be fixed by or in the manner designated by the Board of Directors or a committee thereof to which the Board of Directors has delegated such responsibility.
SECTION 2. Election. The Board of Directors shall elect the President, the Treasurer and the Secretary. Other officers may be elected by the Board of Directors at such regular annual meeting of the Board of Directors or at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or these Bylaws, each of the officers of the Corporation shall hold office until the regular annual meeting of the Board of Directors following the next Annual Meeting and until his or her successor is elected and qualified or until his or her earlier resignation or removal.
SECTION 5. Resignation and Removal. Any officer may resign by delivering his or her written or electronically transmitted resignation to the Corporation addressed to the President or the Secretary, and such resignation shall be effective upon receipt, unless the resignation otherwise provides. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. Except as otherwise provided by law or by resolution of the Board of Directors, the Board of Directors may remove any officer with or without cause by the affirmative vote of a majority of the directors then in office. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his or her resignation or removal, or any right to damages on account of such removal, whether his or her compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the Corporation.
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SECTION 6. Absence or Disability. In the event of the absence or disability of any officer, the Board of Directors may designate another officer to act temporarily in place of such absent or disabled officer.
SECTION 7. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors.
SECTION 8. President. The President shall, subject to the direction of the Board of Directors, have such powers and shall perform such duties as the Board of Directors may from time to time designate.
SECTION 9. Chairperson of the Board. The Chairperson of the Board, if one is elected, shall have such powers and shall perform such duties as the Board of Directors may from time to time designate.
SECTION 10. Chief Executive Officer. The Chief Executive Officer, if one is elected, shall have such powers and shall perform such duties as the Board of Directors may from time to time designate. The Chief Executive Officer shall preside as the chair of the meeting at all meetings of the stockholders; provided that if there is no Chief Executive Officer or the Chief Executive Officer is unable to so preside or is absent, then a director or officer chosen by resolution of the Board of Directors shall act as Chairperson at all meetings of stockholders.
SECTION 11. Vice Presidents and Assistant Vice Presidents. Any Vice President (including any Executive Vice President or Senior Vice President) and any Assistant Vice President shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
SECTION 12. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors and except as the Board of Directors or the Chief Executive Officer may otherwise provide, have general charge of the financial affairs of the Corporation and shall cause to be kept accurate books of account. The Treasurer shall have custody of all funds, securities, and valuable documents of the Corporation. He or she shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. Any Assistant Treasurer shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
SECTION 13. Secretary and Assistant Secretaries. The Secretary shall record all the proceedings of the meetings of the stockholders and the Board of Directors (including committees of the Board of Directors) in books kept for that purpose. In his or her absence from any such meeting, a temporary secretary chosen at the meeting shall record the proceedings thereof. The Secretary shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the Corporation). The Secretary shall have custody of the seal of the Corporation, and the Secretary or an Assistant Secretary shall have authority to affix it to any instrument requiring it, and, when so affixed, the seal may be attested by his or her signature or that of an Assistant Secretary. The Secretary shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, any Assistant Secretary may perform his or her duties and responsibilities. Any Assistant Secretary shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
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SECTION 14. Other Powers and Duties. Subject to these Bylaws and to such limitations as the Board of Directors may from time to time prescribe, the officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors or the Chief Executive Officer.
SECTION 15. Representation of Shares of Other Corporations. The Chairperson of the Board, the President, any Vice President, the Treasurer, the Secretary or Assistant Secretary of this Corporation, or any other person authorized by the Board of Directors or the President or a Vice President, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all securities of any other entity or entities standing in the name of this Corporation. 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.
SECTION 16. Bonded Officers. The Board of Directors may require any officer to give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors upon such terms and conditions as the Board of Directors may specify, including without limitation a bond for the faithful performance of his or her duties and for the restoration to the Corporation of all property in his or her possession or under his or her control belonging to the Corporation.
ARTICLE IV
Capital Stock
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from time to time be prescribed by the Board of Directors. Such certificate shall be signed by any two authorized officers of the Corporation. The Corporation seal and the signatures by the Corporation’s officers, the transfer agent or the registrar may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law. Notwithstanding anything to the contrary provided in these Bylaws, the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares (except that the foregoing shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation), and by the approval and adoption of these Bylaws the Board of Directors has determined that all classes or series of the Corporation’s stock may be uncertificated, whether upon original issuance, re-issuance, or subsequent transfer.
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SECTION 2. Transfers. Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors, shares of stock that are represented by a certificate may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate theretofore properly endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably require. Shares of stock that are not represented by a certificate may be transferred on the books of the Corporation by submitting to the Corporation or its transfer agent such evidence of transfer and following such other procedures as the Corporation or its transfer agent may require.
SECTION 3. Stock Transfer Agreements. The Corporation 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 Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
SECTION 4. Record Holders. Except as may otherwise be required by law, the Certificate or these Bylaws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these Bylaws.
SECTION 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof 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 of Directors 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 of Directors, and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders, shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting and (b) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (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; and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
SECTION 6. Replacement of Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock of the Corporation, a duplicate certificate may be issued in place thereof, upon such terms as the Board of Directors may prescribe.
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SECTION 7. Lock-Up.
(a) Subject to Section 7(b) of this Article IV, the holders of common stock of the Corporation (“Common Stock”) issued (i) as consideration to former holders of capital stock of Allurion Technologies, Inc., a Delaware corporation (“Allurion”) in connection with the business combination (the “Business Combination”) with Compute Health Acquisition Corp., a Delaware corporation (“CPUH”) (such shares referred to in clause (i) of this Section 7(a), the “Consideration Shares”) pursuant to the Business Combination Agreement, by and among the Corporation, Allurion, CPUH, Compute Health Corp., and Compute Health LLC, dated February 9, 2023 (as amended from time to time, the “Business Combination Agreement”), or (ii) upon the settlement or exercise of Rollover Options, Rollover RSUs, Assumed Warrants or Incremental Convertible Equity Securities, as such terms are defined in the Business Combination Agreement (such shares referred to in clause (ii) of this Section 7(a), together with the Consideration Shares, the “Lock-up Shares” and such holders of Lock-up Shares, the “Lock-up Holders,” provided that any such holders that have entered into the Lock-up Agreement (as defined below) or a separate lock-up agreement with the Corporation shall not be considered a Lock-up Holder), may not Transfer (as defined below) any Lock-up Shares until the end of the Lock-up Period (the “Lock-up”). Subject to Section 7(b) of this Article IV, any Permitted Transferees (as defined below) of Lock-up Shares may not Transfer any Lock-up Shares until the end of the Lock-up Period. The foregoing restriction is expressly agreed to preclude each Lock-up Holder from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of such Lock-up Holder’s Lock-Up Shares even if such shares of Common Stock would be disposed of by someone other than the Lock-up Holder during the Lock-up Period. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Lock-up Holder’s Lock-Up Shares or with respect to any security that includes, relates to, or derives any significant part of its value from such shares of Common Stock.
(b) Notwithstanding the provisions set forth in Section 7(a) of this Article IV, the Lock-up Period and restrictions set forth in Section 7(a) of this Article IV shall not apply to Transfers made (i) pursuant to a bona fide gift or charitable contribution; (ii) by will or intestate succession upon the death of a Lock-up Holder; (iii) to any Permitted Transferee; (iv) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union; (v) in the case of any Lock-up Holder that is not a natural person, pro rata to the direct or indirect partners, members or stockholders of such Lock-up Holder or any related investment funds or vehicles controlled or managed by such persons or their respective affiliates in connection with the liquidation or dissolution thereof; (vi) to the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act; provided that such plan does not provide for any transfer of Lock-up Shares during the applicable Lock-up Period; (vii) to the transfer of Lock-up Shares or other securities convertible into or exercisable or exchangeable for Lock-up Shares acquired in open market transactions after the closing of the Business Combination; or (viii) in the event of the Corporation’s completion of a liquidation, merger, share exchange or other similar transaction which results in all of its stockholders having the right to exchange their shares of the Corporation for cash, securities or other property; provided that in the case of (i) through (v), the recipient of such Transfer must enter into a written agreement agreeing to be bound by the terms of the transfer restrictions set forth in this Section 7 in form and substance reasonably satisfactory to the Corporation.
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(c) In addition, the Lock-up Period and restrictions set forth in Section 7(a) of this Article IV shall not apply to (i) any shares of the Corporation purchased in the PIPE Financing (as defined in the Business Combination Agreement) by any Lock-up Holder, (ii) 100 shares of Common Stock held by each Lock-up Holder, (iii) with respect to the Allurion investors that purchased shares of Common Stock in the PIPE Financing (each, a “Participating Allurion Investor”) or Incremental Financing (as defined in the Business Combination Agreement), the Allurion Investor Released Shares (as defined in the Lock-up Agreement) held by such Participating Allurion Investor, (iv) with respect to Compute Health Sponsor LLC, a Delaware limited liability company, the Sponsor Released Shares (as defined in the Lock-up Agreement), (v) the Backstop Shares (as defined in the Lock-up Agreement) or shares of Common Stock issued pursuant to the Hunter Termination Agreement (as defined in the Lock-up Agreement) or (vi) shares of Common Stock contributed to the Company pursuant to the Contribution Agreements (as defined in the Lock-up Agreement).
(d) For purposes of this Section 7 of Article IV:
(1) “Lock-up Agreement” means that certain Investor Rights and Lock-up Agreement by and among Allurion and the parties listed as investors on Schedule I thereto;
(2) “Lock-up Period” means the period beginning on the closing date of the Business Combination and ending on the eighteen (18) month anniversary of the closing date of the Business Combination;
(3) “Permitted Transferees” means:
(i) the members of a Lock-up Holder’s immediate family (where “immediate family” means with respect to any natural person, any of the following: such person’s spouse, the siblings of such person and his or her spouse, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouses and siblings);
(ii) any trust or limited liability company or partnership for the direct or indirect benefit of a Lock-up Holder or the immediate family of a Lock-up Holder;
(iii) if a Lock-up Holder is a trust, to the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust;
(iv) any officer, director, general partner, limited partner, stockholder, member, or owner of similar equity interests in a Lock-up Holder; or
(v) any affiliate of the Lock-up Holder.
(4) “Person” means an individual, corporation, partnership (including a general partnership, limited partnership or limited liability partnership), limited liability company, association, trust or other entity or organization, including a government, domestic or foreign, or political subdivision thereof, or an agency or instrumentality thereof.
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(5) “Transfer” means to (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder, with respect to any Lock-up Shares or (ii) enter into any swap or hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Lock-up Shares, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction, including the filing of a registration statement specified in clause (i) or (ii), other than a registration statement filed pursuant to the Lock-up Agreement. Notwithstanding the foregoing, a Transfer shall not be deemed to include any transfer for no consideration if the donee, trustee, heir or other transferee has agreed in writing to be bound by the same terms under this Section 7 to the extent and for the duration that such terms remain in effect at the time of the Transfer.
(e) Notwithstanding the other provisions set forth in this Section 7 of Article IV, compliance with any of the provisions, covenants and conditions set forth in this Section 7 of Article IV may be waived by the Corporation.
(f) Any certificate representing the Lock-up Shares shall reflect a legend reflecting these transfer restrictions.
(g) Any attempt to Transfer any Lock-up Shares that is not in compliance with this Section 7 shall be null and void ab initio, and the Corporation shall not be obligated to, and may cause any transfer agent not to, give any effect in the Corporation’s stock records to such attempted Transfer, and the purported transferee in any such purported Transfer shall not be treated as the owner of such Lock-up Shares for any purpose.
ARTICLE V
Indemnification
SECTION 1. Definitions. For purposes of this Article V:
(a) “Corporate Status” describes the status of a person who is serving or has served (i) as a Director of the Corporation, (ii) as an Officer of the Corporation, (iii) as a Non-Officer Employee of the Corporation, or (iv) as a director, partner, trustee, officer, employee or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, foundation, association, organization or other legal entity which such person is or was serving at the request of the Corporation. For purposes of this Section 1(a), a Director, Officer or Non-Officer Employee of the Corporation who is serving or has served as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the request of the Corporation. Notwithstanding the foregoing, “Corporate Status” shall not include the status of a person who is serving or has served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation transaction with the Corporation with respect to such person’s activities prior to said transaction, unless specifically authorized by the Board of Directors or the stockholders of the Corporation;
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(b) “Director” means any person who serves or has served the Corporation as a director on the Board of Directors of the Corporation;
(c) “Disinterested Director” means, with respect to each Proceeding in respect of which indemnification is sought hereunder, a Director of the Corporation who is not and was not a party to such Proceeding;
(d) “Expenses” means all attorneys’ fees, retainers, court costs, transcript costs, fees of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses, duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone charges, postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise participating in, a Proceeding;
(e) “Liabilities” means judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement;
(f) “Non-Officer Employee” means any person who serves or has served as an employee or agent of the Corporation, but who is not or was not a Director or Officer;
(g) “Officer” means any person who serves or has served the Corporation as an officer of the Corporation appointed by the Board of Directors of the Corporation;
(h) “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative or investigative; and
(i) “Subsidiary” means any corporation, partnership, limited liability company, joint venture, trust or other entity of which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general partner, managing member or other similar interest or (ii) (A) fifty percent (50%) or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) fifty percent (50%) or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other entity.
SECTION 2. Indemnification of Directors and Officers.
(a) Subject to the operation of Section 4 of this Article V, each Director and Officer shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), and to the extent authorized in this Section 2.
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(1) Actions, Suits and Proceedings Other than By or In the Right of the Corporation. Each Director and Officer shall be indemnified and held harmless by the Corporation against any and all Expenses and Liabilities that are incurred or paid by such Director or Officer or on such Director’s or Officer’s behalf in connection with any Proceeding or any claim, issue or matter therein (other than an action by or in the right of the Corporation), which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director’s or Officer’s Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.
(2) Actions, Suits and Proceedings By or In the Right of the Corporation. Each Director and Officer shall be indemnified and held harmless by the Corporation against any and all Expenses and Liabilities that are incurred by such Director or Officer or on such Director’s or Officer’s behalf in connection with any Proceeding or any claim, issue or matter therein by or in the right of the Corporation, which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director’s or Officer’s Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made under this Section 2(a)(2) in respect of any claim, issue or matter as to which such Director or Officer shall have been finally adjudged by a court of competent jurisdiction to be liable to the Corporation, unless, and only to the extent that, the Court of Chancery of the State of Delaware or another court in which such Proceeding was brought shall determine upon application that, despite adjudication of liability, but in view of all the circumstances of the case, such Director or Officer is fairly and reasonably entitled to indemnification for such Expenses that such court deems proper.
(3) Survival of Rights. The rights of indemnification provided by this Section 2 shall continue as to a Director or Officer after he or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors, administrators and personal representatives.
(4) Actions by Directors or Officers. Notwithstanding the foregoing, the Corporation shall indemnify any Director or Officer seeking indemnification in connection with a Proceeding initiated by such Director or Officer only if such Proceeding (including any parts of such Proceeding not initiated by such Director or Officer) was authorized in advance by the Board of Directors, unless such Proceeding was brought to enforce such Officer’s or Director’s rights to indemnification or, in the case of Directors, advancement of Expenses under these Bylaws in accordance with the provisions set forth herein.
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SECTION 3. Indemnification of Non-Officer Employees. Subject to the operation of Section 4 of this Article V, each Non-Officer Employee may, in the discretion of the Board of Directors, be indemnified by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against any or all Expenses and Liabilities that are incurred by such Non-Officer Employee or on such Non-Officer Employee’s behalf in connection with any threatened, pending or completed Proceeding, or any claim, issue or matter therein, which such Non-Officer Employee is, or is threatened to be made, a party to or participant in by reason of such Non-Officer Employee’s Corporate Status, if such Non-Officer Employee acted in good faith and in a manner such Non-Officer Employee reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The rights of indemnification provided by this Section 3 shall exist as to a Non-Officer Employee after he or she has ceased to be a Non-Officer Employee and shall inure to the benefit of his or her heirs, personal representatives, executors and administrators. Notwithstanding the foregoing, the Corporation may indemnify any Non-Officer Employee seeking indemnification in connection with a Proceeding initiated by such Non- Officer Employee only if such Proceeding was authorized in advance by the Board of Directors.
SECTION 4. Determination. Unless ordered by a court, no indemnification shall be provided pursuant to this Article V to a Director, an Officer or a Non-Officer Employee unless a determination shall have been made that 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 Corporation and, with respect to any criminal Proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. Such determination shall be made by (a) a majority vote of the Disinterested Directors, even though less than a quorum of the Board of Directors, (b) a committee comprised of Disinterested Directors, such committee having been designated by a majority vote of the Disinterested Directors (even though less than a quorum), (c) if there are no such Disinterested Directors, or if a majority of Disinterested Directors so directs, by independent legal counsel in a written opinion, or (d) by the stockholders of the Corporation.
SECTION 5. Advancement of Expenses to Directors Prior to Final Disposition.
(a) The Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any Proceeding in which such Director is involved by reason of such Director’s Corporate Status within thirty (30) days after the receipt by the Corporation of a written statement from such Director requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Director and shall be preceded or accompanied by an undertaking by or on behalf of such Director to repay any Expenses so advanced if it shall ultimately be determined that such Director is not entitled to be indemnified against such Expenses. Notwithstanding the foregoing, the Corporation shall advance all Expenses incurred by or on behalf of any Director seeking advancement of expenses hereunder in connection with a Proceeding initiated by such Director only if such Proceeding (including any parts of such Proceeding not initiated by such Director) was (i) authorized by the Board of Directors, or (ii) brought to enforce such Director’s rights to indemnification or advancement of Expenses under these Bylaws.
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(b) If a claim for advancement of Expenses hereunder by a Director is not paid in full by the Corporation within thirty (30) days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, such Director shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such advancement of Expenses under this Article V shall not be a defense to an action brought by a Director for recovery of the unpaid amount of an advancement claim and shall not create a presumption that such advancement is not permissible. The burden of proving that a Director is not entitled to an advancement of expenses shall be on the Corporation.
(c) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Director has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 6. Advancement of Expenses to Officers and Non-Officer Employees Prior to Final Disposition.
(a) The Corporation may, at the discretion of the Board of Directors, advance any or all Expenses incurred by or on behalf of any Officer or Non-Officer Employee in connection with any Proceeding in which such person is involved by reason of his or her Corporate Status as an Officer or Non-Officer Employee upon the receipt by the Corporation of a statement or statements from such Officer or Non-Officer Employee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Officer or Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on behalf of such person to repay any Expenses so advanced if it shall ultimately be determined that such Officer or Non-Officer Employee is not entitled to be indemnified against such Expenses.
(b) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Officer or Non-Officer Employee has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 7. Contractual Nature of Rights.
(a) The provisions of this Article V shall be deemed to be a contract between the Corporation and each Director and Officer entitled to the benefits hereof at any time while this Article V is in effect, in consideration of such person’s past or current and any future performance of services for the Corporation. Neither amendment, repeal or modification of any provision of this Article V nor the adoption of any provision of the Certificate inconsistent with this Article V shall eliminate or reduce any right conferred by this Article V in respect of any act or omission occurring, or any cause of action or claim that accrues or arises or any state of facts existing, at the time of or before such amendment, repeal, modification or adoption of an inconsistent provision (even in the case of a proceeding based on such a state of facts that is commenced after such time), and all rights to indemnification and advancement of Expenses granted herein or arising out of any act or omission shall vest at the time of the act or omission in question, regardless of when or if any proceeding with respect to such act or omission is commenced. The rights to indemnification and to advancement of expenses provided by, or granted pursuant to, this Article V shall continue notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributes of such person.
25
(b) If a claim for indemnification hereunder by a Director or Officer is not paid in full by the Corporation within sixty (60) days after receipt by the Corporation of a written claim for indemnification, such Director or Officer may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director or Officer shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such indemnification under this Article V shall not be a defense to an action brought by a Director or Officer for recovery of the unpaid amount of an indemnification claim and shall not create a presumption that such indemnification is not permissible. The burden of proving that a Director or Officer is not entitled to indemnification shall be on the Corporation.
(c) In any suit brought by a Director or Officer to enforce a right to indemnification hereunder, it shall be a defense that such Director or Officer has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and to advancement of Expenses set forth in this Article V shall not be exclusive of any other right that any Director, Officer, or Non-Officer Employee may have or hereafter acquire under any statute, provision of the Certificate or these Bylaws, agreement, vote of stockholders or Disinterested Directors or otherwise.
SECTION 9. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer or Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any such Director, Officer or Non-Officer Employee, or arising out of any such person’s Corporate Status, whether or not the Corporation would have the power to indemnify such person against such liability under the DGCL or the provisions of this Article V.
SECTION 10. Other Indemnification. The Corporation’s obligation, if any, to indemnify or provide advancement of Expenses to any person under this Article V as a result of such person serving, at the request of the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount such person may collect as indemnification or advancement of Expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or enterprise (the “Primary Indemnitor”). Any indemnification or advancement of Expenses under this Article V owed by the Corporation as a result of a person serving, at the request of the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall only be in excess of, and shall be secondary to, the indemnification or advancement of Expenses available from the applicable Primary Indemnitor(s) and any applicable insurance policies.
26
SECTION 11. Savings Clause. If this Article V or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, as amended) and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article V that shall not have been invalidated and to the fullest extent permitted by applicable law.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors.
SECTION 2. Seal. The Board of Directors shall have power to adopt and alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation in the ordinary course of its business without director action may be executed on behalf of the Corporation by the Chairperson of the Board, if one is elected, the President or the Treasurer or any other officer, employee or agent of the Corporation as the Board of Directors or the executive committee of the Board of Directors may authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise provides, the Chairperson of the Board, if one is elected, the President or the Treasurer may waive notice of, and act on behalf of the Corporation, or appoint another person or persons to act as proxy or attorney in fact for the Corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders or stockholders of any other corporation or organization, any of whose securities are held by the Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident agent upon whom legal process may be served in any action or proceeding against the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the Certificate, Bylaws and records of all meetings of the incorporators, stockholders and the Board of Directors and the stock transfer books, which shall contain the names of all stockholders, their record addresses and the amount of stock held by each, may be kept outside the State of Delaware and shall be kept at the principal office of the Corporation, at an office of its counsel, at an office of its transfer agent or at such other place or places as may be designated from time to time by the Board of Directors.
SECTION 7. Certificate. All references in these Bylaws to the Certificate shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and/or restated and in effect from time to time.
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SECTION 8. Exclusive Jurisdiction of Delaware Courts or the United States Federal District Courts. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any current or former director, officer or other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or the Certificate or these Bylaws (including the interpretation, validity or enforceability thereof) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine; provided, however, that this sentence will not apply to any causes of action arising under the Securities Act of 1933, as amended, or the Exchange Act, or to any claim for which the federal courts have exclusive jurisdiction. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, the Exchange Act, or the respective rules and regulations promulgated thereunder. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 8.
SECTION 9. Amendment of Bylaws.
(a) Amendment by Directors. Except as provided otherwise by law, these Bylaws may be amended or repealed, and new Bylaws adopted, by the Board of Directors by the affirmative vote of a majority of the directors then in office.
(b) Amendment by Stockholders. Except as otherwise provided herein, the Bylaws of the Corporation may be amended or repealed, and new Bylaws adopted, at any annual meeting of stockholders, or special meeting of stockholders called for such purpose, by the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of capital stock entitled to vote on such adoption, amendment or repeal, voting together as a single class; provided, however, that if the Board of Directors recommends that stockholders adopt or approve such amendment or repeal at such meeting of stockholders, such adoption, amendment or repeal shall only require the affirmative vote of the majority of outstanding shares of capital stock entitled to vote on such adoption, amendment or repeal, voting together as a single class.
SECTION 10. Notices. If mailed, notice to stockholders shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. Without limiting the manner by which notice otherwise may be given to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the DGCL.
SECTION 11. Waivers. A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business to be transacted at, nor the purpose of, any meeting need be specified in such a waiver. Adopted August 1, 2023 and effective as of August 1, 2023.
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Exhibit 4.2
FIRST AMENDMENT TO WARRANT AGREEMENT
Dated as of August 1, 2023
THIS FIRST AMENDMENT TO THE WARRANT AGREEMENT (this “Amendment”), dated as of August 1, 2023, is by and between Compute Health Acquisition Corp., a Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (in such capacity, the “Warrant Agent”).
WHEREAS, the Company and the Warrant Agent entered into that certain Warrant Agreement, dated as of February 4, 2021 (the “Original Warrant Agreement”);
WHEREAS, the Company and the Warrant Agent desire to amend the Original Warrant Agreement in accordance with Section 9.8 thereof;
WHEREAS, Section 9.8 of the Original Warrant Agreement provides that the Company may amend the Original Warrant Agreement with the vote or written consent of the Registered Holders of at least 50% of each of the then outstanding Public Warrants and Sponsor Warrants; and
WHEREAS, such requisite vote has been obtained.
NOW, THEREFORE, in consideration of the agreements set forth in this Amendment and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows:
| 1. | Capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Original Warrant Agreement. |
| 2. | To add a new Section 3.4 immediately following Section 3.3, which shall read as follows: |
Business Combination. Notwithstanding any other provision in this Agreement, upon the completion by the Company of an initial Business Combination, (i) each Public Warrant will be exchanged for 0.6125 Public Warrants of the surviving or ultimate parent entity following such initial Business Combination (“Pubco”), (ii) each Public Warrant of Pubco will be exercisable for 1.420455 shares of Common Stock of Pubco at a Warrant Price of $8.10 per share, (iii) the duration of the Warrants, as set forth in Section 3.2, shall be extended to 5:00 p.m., New York City time on the date that is seven (7) years after the date on which the Company completes its initial Business Combination and (iv) the $18.00 per share redemption trigger price described in Sections 2.6, 6.1 and 6.5 hereof will be adjusted (to the nearest cent) to be equal to $12.67 and the $18.00 per share Reference Value described in Section 3.2 will be adjusted (to the nearest cent) to be equal to $12.67.
| 3. | Section 4.4 of the Original Warrant Agreement is hereby deleted in its entirety and replaced with the following: |
[Reserved]
| 4. | The first sentence of Section 4.5 of the Original Warrant Agreement is hereby deleted in its entirety and replaced with the following: |
Other than in the case of an initial Business Combination referred to in Section 3.4 hereof, in the case of any reclassification or reorganization of the issued and outstanding shares of Common Stock (other than a change under Section 4.1 or Section 4.2 hereof or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a merger or consolidation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the issued and outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the Warrants shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised his, her or its Warrant(s) immediately prior to such event (the “Alternative Issuance”); provided, however, that (i) if the holders of the shares of Common Stock were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such merger or consolidation, then the kind and amount of securities, cash or other assets constituting the Alternative Issuance for which each Warrant shall become exercisable shall be deemed to be the weighted average of the kind and amount received per share by the holders of the shares of Common Stock in such merger or consolidation that affirmatively make such election, and (ii) if a tender, exchange or redemption offer shall have been made to and accepted by the holders of the shares of Common Stock (other than a tender, exchange or redemption offer made by the Company in connection with redemption rights held by stockholders of the Company as provided for in the Company’s amended and restated certificate of incorporation or as a result of the repurchase of shares of Common Stock by the Company if a proposed initial Business Combination is presented to the stockholders of the Company for approval) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor rule)) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act (or any successor rule)) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act (or any successor rule)) more than 50% of the issued and outstanding shares of Common Stock, the holder of a Warrant shall be entitled to receive as the Alternative Issuance, the highest amount of cash, securities or
other property to which such holder would actually have been entitled as a stockholder if such Warrant holder had exercised the Warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the shares of Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in this Section 4; provided, further, that if less than 70% of the consideration receivable by the holders of the shares of Common Stock in the applicable event is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the Registered Holder properly exercises the Warrant within thirty (30) days following the public disclosure of the consummation of such applicable event by the Company pursuant to a Current Report on Form 8-K filed with the Commission, the Warrant Price shall be reduced by an amount (in dollars) equal to the difference of (i) the Warrant Price in effect prior to such reduction minus (ii) (A) the Per Share Consideration (as defined below) (but in no event less than zero) minus (B) the Black-Scholes Warrant Value (as defined below).
| 5. | Section 6.1 of the Original Warrant Agreement is hereby deleted in its entirety and replaced with the following: |
Redemption of Warrants for Cash. Subject to Section 6.5 hereof, not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time after the date that is ninety (90) days after the date on which the Company completes its initial Business Combination during the Exercise Period, at the office of the Warrant Agent, upon notice to the Registered Holders of the Warrants, as described in Section 6.3 below, at a Redemption Price of $0.01 per Warrant, provided that (a) the Reference Value equals or exceeds $12.67 per share (subject to adjustment in compliance with Section 4 hereof) and (b) there is an effective registration statement covering the issuance of the shares of Common Stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as defined in Section 6.3 below).
| 6. | Section 6.2 of the Original Warrant Agreement is hereby deleted in its entirety and replaced with the following: |
Redemption of Warrants for Shares of Common Stock. Subject to Section 6.5 hereof, not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time after the date that is ninety (90) days after the date on which the Company completes its initial Business Combination during the Exercise Period, at the office of the Warrant Agent, upon notice to the Registered Holders of the Warrants, as described in Section 6.3 below, at a Redemption Price of $0.10 per Warrant, provided that (i) the Reference Value equals or exceeds $7.04 per share (subject to adjustment in compliance with Section 4 hereof) and (ii) if the Reference Value is less than $12.67 per share (subject to adjustment in compliance with Section 4 hereof), the Sponsor Warrants are also concurrently called for redemption on the same terms as the outstanding Public Warrants. During the 30-day Redemption Period in connection with a redemption pursuant to this
Section 6.2, Registered Holders of the Warrants may elect to exercise their Warrants on a “cashless basis” pursuant to subsection 3.3.1 and receive a number of shares of Common Stock determined by reference to the table below, based on the Redemption Date (calculated for purposes of the table as the period to expiration of the Warrants) and the “Redemption Fair Market Value” (as such term is defined in this Section 6.2) (a “Make-Whole Exercise”). Solely for purposes of this Section 6.2, the “Redemption Fair Market Value” shall mean the volume weighted average price of the Common Stock for the ten (10) trading days immediately following the date on which notice of redemption pursuant to this Section 6.2 is sent to the Registered Holders. In connection with any redemption pursuant to this Section 6.2, the Company shall provide the Registered Holders with the Redemption Fair Market Value no later than one (1) Business Day after the ten (10) trading day period described above ends.
| Redemption Date (period to | Redemption Fair Market Value of shares of Common Stock | |||||||||||||||||||||||||||||||||||
| expiration of the Warrants) |
≤4.96 | $5.45 | $5.95 | $6.45 | $6.94 | $7.44 | $7.93 | $8.43 | ≥8.93 | |||||||||||||||||||||||||||
| 84 months |
0.412 | 0.432 | 0.449 | 0.464 | 0.476 | 0.487 | 0.497 | 0.506 | 0.513 | |||||||||||||||||||||||||||
| 81 months |
0.409 | 0.429 | 0.447 | 0.462 | 0.475 | 0.486 | 0.496 | 0.505 | 0.513 | |||||||||||||||||||||||||||
| 78 months |
0.405 | 0.426 | 0.444 | 0.460 | 0.473 | 0.485 | 0.496 | 0.505 | 0.513 | |||||||||||||||||||||||||||
| 75 months |
0.400 | 0.422 | 0.441 | 0.458 | 0.472 | 0.484 | 0.495 | 0.505 | 0.513 | |||||||||||||||||||||||||||
| 72 months |
0.396 | 0.419 | 0.438 | 0.455 | 0.470 | 0.483 | 0.494 | 0.504 | 0.513 | |||||||||||||||||||||||||||
| 69 months |
0.391 | 0.415 | 0.435 | 0.453 | 0.468 | 0.482 | 0.494 | 0.504 | 0.513 | |||||||||||||||||||||||||||
| 66 months |
0.386 | 0.411 | 0.432 | 0.450 | 0.466 | 0.480 | 0.493 | 0.503 | 0.513 | |||||||||||||||||||||||||||
| 63 months |
0.381 | 0.406 | 0.428 | 0.447 | 0.464 | 0.479 | 0.492 | 0.503 | 0.513 | |||||||||||||||||||||||||||
| 60 months |
0.375 | 0.401 | 0.424 | 0.444 | 0.462 | 0.477 | 0.491 | 0.503 | 0.513 | |||||||||||||||||||||||||||
| 57 months |
0.369 | 0.396 | 0.420 | 0.441 | 0.459 | 0.475 | 0.490 | 0.502 | 0.513 | |||||||||||||||||||||||||||
| 54 months |
0.362 | 0.391 | 0.415 | 0.437 | 0.457 | 0.474 | 0.488 | 0.501 | 0.513 | |||||||||||||||||||||||||||
| 51 months |
0.355 | 0.385 | 0.411 | 0.434 | 0.454 | 0.472 | 0.487 | 0.501 | 0.513 | |||||||||||||||||||||||||||
| 48 months |
0.347 | 0.378 | 0.405 | 0.429 | 0.451 | 0.469 | 0.486 | 0.500 | 0.513 | |||||||||||||||||||||||||||
| 45 months |
0.339 | 0.371 | 0.399 | 0.425 | 0.447 | 0.467 | 0.484 | 0.499 | 0.513 | |||||||||||||||||||||||||||
| 42 months |
0.330 | 0.363 | 0.393 | 0.420 | 0.443 | 0.464 | 0.482 | 0.499 | 0.513 | |||||||||||||||||||||||||||
| 39 months |
0.320 | 0.355 | 0.386 | 0.414 | 0.439 | 0.461 | 0.481 | 0.498 | 0.513 | |||||||||||||||||||||||||||
| 36 months |
0.309 | 0.345 | 0.378 | 0.408 | 0.434 | 0.458 | 0.478 | 0.497 | 0.513 | |||||||||||||||||||||||||||
| 33 months |
0.297 | 0.335 | 0.370 | 0.401 | 0.429 | 0.454 | 0.476 | 0.496 | 0.513 | |||||||||||||||||||||||||||
| 30 months |
0.284 | 0.324 | 0.360 | 0.393 | 0.423 | 0.450 | 0.473 | 0.494 | 0.513 | |||||||||||||||||||||||||||
| 27 months |
0.269 | 0.311 | 0.349 | 0.384 | 0.416 | 0.445 | 0.470 | 0.493 | 0.513 | |||||||||||||||||||||||||||
| 24 months |
0.253 | 0.296 | 0.337 | 0.374 | 0.408 | 0.439 | 0.467 | 0.491 | 0.513 | |||||||||||||||||||||||||||
| 21 months |
0.234 | 0.279 | 0.322 | 0.362 | 0.399 | 0.433 | 0.463 | 0.489 | 0.513 | |||||||||||||||||||||||||||
| 18 months |
0.214 | 0.260 | 0.306 | 0.349 | 0.389 | 0.425 | 0.458 | 0.487 | 0.513 | |||||||||||||||||||||||||||
| 15 months |
0.190 | 0.238 | 0.286 | 0.332 | 0.376 | 0.415 | 0.452 | 0.484 | 0.513 | |||||||||||||||||||||||||||
| 12 months |
0.162 | 0.212 | 0.262 | 0.312 | 0.360 | 0.404 | 0.444 | 0.481 | 0.513 | |||||||||||||||||||||||||||
| 9 months |
0.130 | 0.180 | 0.234 | 0.288 | 0.340 | 0.389 | 0.435 | 0.476 | 0.513 | |||||||||||||||||||||||||||
| 6 months |
0.092 | 0.142 | 0.197 | 0.256 | 0.315 | 0.371 | 0.423 | 0.470 | 0.513 | |||||||||||||||||||||||||||
| 3 months |
0.046 | 0.091 | 0.149 | 0.214 | 0.282 | 0.348 | 0.409 | 0.464 | 0.513 | |||||||||||||||||||||||||||
| 0 months |
— | — | 0.060 | 0.163 | 0.254 | 0.331 | 0.399 | 0.459 | 0.513 | |||||||||||||||||||||||||||
The exact Redemption Fair Market Value and Redemption Date may not be set forth in the table above, in which case, if the Redemption Fair Market Value is between two values in the table or the Redemption Date is between two redemption dates in the table, the number of shares of Common Stock to be issued for each Warrant exercised in a Make-Whole Exercise shall be determined by a straight-line interpolation between the number of shares set forth for the higher and lower Redemption Fair Market Values and the earlier and later redemption dates, as applicable, based on a 365- or 366-day year, as applicable.
The stock prices set forth in the column headings of the table above shall be adjusted as of any date on which the number of shares issuable upon exercise of a Warrant or the Warrant Price is adjusted pursuant to Section 4 hereof. If the number of shares issuable upon exercise of a Warrant is adjusted pursuant to Section 4 hereof, the adjusted share prices in the column headings shall equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of shares deliverable upon exercise of a Warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a Warrant as so adjusted. The number of shares in the table above shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a Warrant. If the Warrant Price of a warrant is adjusted pursuant to Section 4.1.2 hereof, the adjusted stock prices in the column headings shall equal the stock prices immediately prior to such adjustment less the decrease in the Warrant Price pursuant to such Warrant Price adjustment. In no event shall the number of shares issued in connection with a Make-Whole Exercise exceed 0.513 shares of Common Stock per Warrant (subject to adjustment).
| 7. | All references in the Original Warrant Agreement to “this Agreement”, “the Agreement”, “herein”, “hereof”, “hereunder” or words of similar import shall hereafter be deemed to refer to the Original Warrant Agreement as amended by this Amendment (except that references in the Original Agreement to the “date hereof” or words of similar import shall continue to mean February 4, 2021). |
| 8. | This Amendment and the Original Warrant Agreement constitute the entire agreement among the parties hereto with respect to the matters set forth herein, and there are no other agreements, understandings, warranties or representations with respect to said matters. |
| 9. | Except as expressly amended by this Amendment, the terms and provisions of the Original Agreement shall remain in full force and effect. |
| 10. | The terms and provisions of Section 9 of the Original Warrant Agreement are incorporated herein by reference as if set forth in this Amendment in their entirety and shall apply mutatis mutandis to this Amendment. |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
| COMPUTE HEALTH ACQUISITION CORP. | ||
| By: | /s/ Joshua Fink | |
| Name: Joshua Fink | ||
| Title: Co-Chief Executive Officer | ||
[Signature Page to First Amendment to Warrant Agreement]
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS WARRANT AGENT | ||
| By: | /s/ Stacy Aqui | |
| Name: STACY AQUI | ||
| Title: VICE PRESIDENT | ||
[Signature Page to First Amendment to Warrant Agreement]
Exhibit 4.3
WARRANT ASSIGNMENT, ASSUMPTION AND AMENDMENT AGREEMENT
among
COMPUTE HEALTH ACQUISITION CORP.,
ALLURION TECHNOLOGIES, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Dated August 1, 2023
THIS WARRANT ASSIGNMENT, ASSUMPTION AND AMENDMENT AGREEMENT (this “Agreement”), dated August 1, 2023, is made by and among Compute Health Acquisition Corp., a Delaware corporation (the “SPAC”), Allurion Technologies, Inc. (f/k/a Allurion Technologies Holdings, Inc.), a Delaware corporation (“New Allurion”), and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (in such capacity, the “Warrant Agent”), and amends the Warrant Agreement, dated February 4, 2021, by and between the SPAC and the Warrant Agent (as amended by that certain First Amendment to Warrant Agreement, dated August 1, 2023, the “Existing Warrant Agreement”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Existing Warrant Agreement.
WHEREAS, pursuant to the Existing Warrant Agreement, the SPAC issued (a) 12,833,333 Private Placement Warrants to the Sponsor and (b) 21,562,322 Public Warrants;
WHEREAS, on February 9, 2023, the SPAC, Compute Health Corp., a Delaware corporation and a direct, wholly-owned subsidiary of the SPAC (“Merger Sub I”), Compute Health LLC, a Delaware limited liability company and wholly-owned subsidiary of the SPAC (“Merger Sub II” and, together with Merger Sub I, the “Merger Subs”), Allurion Technologies, Inc., a Delaware corporation (“Allurion”), and New Allurion, a direct, wholly-owned subsidiary of Allurion, entered into a business combination agreement (as amended, modified or supplemented, from time to time, the “Merger Agreement”);
WHEREAS, all of the Warrants are governed by the Existing Warrant Agreement;
WHEREAS, pursuant to the Merger Agreement, (a) the SPAC will merge with and into New Allurion (the “CPUH Merger ”), with New Allurion surviving the CPUH Merger as a publicly listed entity (the time at which the CPUH Merger becomes effective, the “CPUH Merger Effective Time”) and becoming the sole owner of each Merger Sub; (b) at least three hours following the consummation of the CPUH Merger, Merger Sub I will merge with and into Allurion (the “Intermediate Merger”), with Allurion surviving the Intermediate Merger and becoming a direct, wholly-owned subsidiary of New Allurion (the time at which the Intermediate Merger becomes effective, the “Intermediate Merger Effective Time”); and (c) thereafter, Allurion will merge with and into Merger Sub II (the “Final Merger” and, collectively with the CPUH Merger and the Intermediate Merger, the “Mergers” and, together with all other transactions contemplated by the Merger Agreement, the “Business Combination”), with Merger Sub II surviving the Final Merger and remaining a direct, wholly-owned subsidiary of New Allurion (the time at which the Final Merger becomes effective, the “Final Merger Effective Time”) and as a result of the Mergers, the holders of shares of Common Stock of the SPAC shall become holders of shares of New Allurion’s common stock, par value $0.0001 per share (“New Allurion Common Stock”);
WHEREAS, upon consummation of the Mergers, as provided in Section 4.5 of the Existing Warrant Agreement and Section 2.1(a)(xii) of the Merger Agreement, the Warrants will no longer be exercisable for shares of Common Stock of the SPAC but instead will be exercisable (subject to the terms of the Existing Warrant Agreement, as amended by this Agreement) for shares of New Allurion Common Stock;
WHEREAS, in connection with the Mergers, the SPAC desires to assign all of its right, title and interest in and to the Existing Warrant Agreement to New Allurion, and New Allurion wishes to accept such assignment; and
WHEREAS, Section 9.8 of the Existing Warrant Agreement provides that the SPAC and the Warrant Agent may amend the Existing Warrant Agreement without the consent of any Registered Holders as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the rights of the Registered Holders under the Existing Warrant Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:
Section 1. Assignment and Assumption; Consent.
1.1 Assignment and Assumption. As of and with effect on and from the CPUH Merger Effective Time, (i) the SPAC assigns to New Allurion all of the SPAC’s right, title and interest in and to the Existing Warrant Agreement (as amended hereby) and (ii) New Allurion assumes, and agrees to pay, perform, satisfy and discharge in full, as the same become due, all of the SPAC’s liabilities and obligations under the Existing Warrant Agreement (as amended hereby) arising on, from and after the CPUH Merger Effective Time.
1.2 Consent. The Warrant Agent hereby consents to (i) the assignment of the Existing Warrant Agreement by the SPAC to New Allurion, and the assumption of the Existing Warrant Agreement by New Allurion from the SPAC, pursuant to this Section 1, in each case effective as of the CPUH Merger Effective Time, and (ii) the continuation of the Existing Warrant Agreement (as amended hereby), in full force and effect from and after the CPUH Merger Effective Time.
Section 2. Amendment of Existing Warrant Agreement.
2.1 Amendment. Effective as of the CPUH Merger Effective Time, the SPAC and the Warrant Agent hereby amend the Existing Warrant Agreement as provided in this Section 2, and acknowledge and agree that the amendments to the Existing Warrant Agreement set forth in this Section 2 are to provide for the delivery of Alternative Issuance pursuant to Section 4.5 of the Existing Warrant Agreement (in connection with the CPUH Merger and the transactions contemplated by the Merger Agreement).
2.2 References to the “Company”. All references to the “Company” in the Existing Warrant Agreement (including all Exhibits thereto) shall be references to New Allurion.
2.3 References to Common Stock. All references to “Common Stock” in the Existing Warrant Agreement (including all Exhibits thereto) shall be references to shares of New Allurion Common Stock.
2.4 References to Business Combination. All references to “Business Combination” in the Existing Warrant Agreement (including all Exhibits thereto) shall be references to the transactions contemplated by the Merger Agreement, and references to “the completion of its initial Business Combination,” “the completion of the Company’s initial Business Combination” and all variations thereof in the Existing Warrant Agreement (including all Exhibits thereto) shall be references to the Closings (as defined in the Merger Agreement).
2.5 Warrant Certificate. Exhibit A to the Existing Warrant Agreement is hereby amended by deleting Exhibit A in its entirety and replacing it with a new Exhibit A attached hereto.
2.6 Notice Clause. Section 9.2 of the Existing Warrant Agreement is hereby deleted and replaced with the following:
“Notices. Any notice, statement or demand authorized by this Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:
Allurion Technologies, Inc.
11 Huron Drive
Natick, MA 01760 Attn: Chief Financial Officer
with a copy (which shall not constitute notice) to:
Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
Attn: Danielle Lauzon; Paul R. Rosie
Any notice, statement or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:
Continental Stock Transfer & Trust Company
One State Street, 30th Floor
New York, NY 10004
Attention: Compliance Department”
Section 3. Miscellaneous Provisions.
3.1 Effectiveness of the Amendment. Each of the parties hereto acknowledges and agrees that the effectiveness of this Agreement shall be expressly subject to the occurrence of the CPUH Merger and substantially contemporaneous occurrence of the Closings (as defined in the Merger Agreement), and this Agreement shall automatically be terminated and shall be null and void if the Merger Agreement shall be terminated for any reason.
3.2 Successors. All the covenants and provisions of this Agreement by or for the benefit of New Allurion, the SPAC or the Warrant Agent shall bind and inure to the benefit of their respective successors and permitted assigns.
3.3 Applicable Law and Exclusive Forum. The validity, interpretation, and performance of this Agreement shall be governed in all respects by the laws of the State of New York (without giving effect to conflict of law principles that would result in the application of the substantive laws of another jurisdiction), including, without limitation, Sections 5-1401 and 5-1402 of the New York General Obligations Law and New York Civil Practice Laws and Rule 327(b)). Subject to applicable law, each of New Allurion and the SPAC hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdictions shall be the exclusive forums for any such action, proceeding or claim. The Company hereby waives any objection to such exclusive jurisdictions and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, the provisions of this Section 3.3 will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum, and the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting such causes of action. Any person or entity purchasing or otherwise acquiring any interest in the Warrants shall be deemed to have notice of and to have consented to the forum provisions in this Section 3.3. If any action, the subject matter of which is within the scope the forum provisions above, is filed in a court other than a court located within the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any warrant holder, such warrant holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of New York or the United States District Court for the Southern District of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
3.5 Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
3.6 Effect of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation thereof.
3.7 Severability. The terms and condition of this Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
(Signature Page Follows)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
| COMPUTE HEALTH ACQUISITION CORP. | ||
| By: | /s/ Joshua Fink | |
| Name: Joshua Fink | ||
| Title: Co-Chief Executive Officer | ||
[Signature Page to Warrant Assignment, Assumption and Amendment Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
| ALLURION TECHNOLOGIES, INC. | ||
| By: | /s/ Shantanu Gaur | |
| Name: Shantanu Gaur | ||
| Title: Chief Executive Officer | ||
[Signature Page to Warrant Assignment, Assumption and Amendment Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
| COMPUTE HEALTH ACQUISITION CORP. | ||
| By: |
| |
| Name: | ||
| Title: | ||
| ALLURION TECHNOLOGIES HOLDINGS, INC. | ||
| By: |
| |
| Name: | Shantanu Gaur | |
| Title: | Chief Executive Officer | |
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent | ||
| By: | /s/ Stacy Aqui | |
| Name: | STACY AQUI | |
| Title: | VICE PRESIDENT | |
[Signature Page to Warrant Assignment, Assumption and Amendment Agreement]
EXHIBIT A
FORM OF WARRANT CERTIFICATE
See attached.
[Form of Warrant Certificate]
[FACE]
Number ___
Warrants
THIS WARRANT SHALL BE NULL AND VOID IF NOT EXERCISED PRIOR TO
THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED FOR
IN THE WARRANT AGREEMENT DESCRIBED BELOW
ALLURION TECHNOLOGIES, INC.
Incorporated Under the Laws of the State of Delaware
CUSIP 02008G 110
Warrant Certificate
This warrant certificate (this “Warrant Certificate”) certifies that , or registered assigns, is the registered holder of warrant(s) evidenced hereby (the “Warrants,” and each, a “Warrant”) to purchase shares of common stock, $0.0001 par value per share (“Common Stock”), of Allurion Technologies, Inc., a Delaware corporation (the “Company”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement (as defined below), to receive from the Company that number of fully paid and non-assessable shares of Common Stock as set forth below, at the exercise price (the “Exercise Price”) as determined pursuant to the Warrant Agreement, payable in lawful money of the United States of America (or through “cashless exercise” as provided for in the Warrant Agreement) upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Each whole Warrant is initially exercisable for 1.420455 fully paid and non-assessable shares of Common Stock. Fractional shares of Common Stock shall not be issued upon exercise of any Warrant. If, upon the exercise of Warrants, a holder would be entitled to receive a fractional interest in a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number of shares of Common Stock to be issued to the warrantholder. The number of shares of Common Stock issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events as set forth in the Warrant Agreement.
The initial Exercise Price is equal to $8.10 per share. The Exercise Price is subject to adjustment upon the occurrence of certain events as set forth in the Warrant Agreement.
Subject to the conditions set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and, to the extent not exercised by the end of such Exercise Period, such Warrants shall become void. The Warrants may be redeemed, subject to certain conditions, as set forth in the Warrant Agreement.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York.
[Signature Pages Follow]
| ALLURION TECHNOLOGIES HOLDINGS, | ||
| INC. | ||
| By: |
| |
| Name: | ||
| Title: | ||
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent | ||
| By: |
| |
| Name: | ||
| Title: | ||
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common Stock and are issued or to be issued pursuant to a warrant agreement, dated as of February 4, 2021, as duly executed and delivered by Compute Health Acquisition Corp. (“SPAC”) to Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”), as amended by (i) that certain First Amendment to Warrant Agreement, datedAugust 1, 2023, by and between SPAC and Warrant Agent and (ii) the Warrant Assignment, Assumption and Amendment Agreement, dated as of August 1, 2023, by and among SPAC, the Warrant Agent and the Company (as amended by clauses (i) and (ii), the “Warrant Agreement”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties, and immunities thereunder of the Warrant Agent, the Company, and the holders (the words “holders” or “holder” meaning the Registered Holders or Registered Holder, respectively) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of Election to Purchase set forth hereon properly completed and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless exercise” as provided for in the Warrant Agreement) at the designated office(s) of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his, her, or its assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.
Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless, at the time of exercise, (i) a registration statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act and (ii) a prospectus thereunder relating to the shares of Common Stock is current, except through “cashless exercise” as provided for in the Warrant Agreement.
The Warrant Agreement provides that, upon the occurrence of certain events, the number of shares of Common Stock issuable upon exercise of the Warrants set forth on the face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would be entitled to receive a fractional interest in a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number of shares of Common Stock to be issued to the holder of the Warrant.
Warrant Certificates, when surrendered at the designated office(s) of the Warrant Agent by the Registered Holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office(s) of the Warrant Agent, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the Registered Holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to _________ shares of Common Stock and herewith tenders payment for such shares of Common Stock to the order of Allurion Technologies, Inc. (the “Company”) in the amount of $_________ in accordance with the terms hereof. The undersigned requests that a book entry for such shares of Common Stock be registered in the name of _________, whose address is _________, and that such shares of Common Stock be delivered to _________ whose address is _________. If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of _________, whose address is _________, and that such Warrant Certificate be delivered to _________, whose address is _________.
In the event that the Warrant has been called for redemption by the Company pursuant to Section 6.1 or Section 6.2 of the Warrant Agreement and the Company has required cashless exercise pursuant to Section 6.4 of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with subsection 3.3.1 and Section 6.4 of the Warrant Agreement.
In the event that the Warrant is to be exercised on a “cashless basis” pursuant to Section 7.4 of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of the Warrant Agreement.
In the event that the Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of shares of Common Stock that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement which allows for such cashless exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive shares of Common Stock. If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder (after giving effect to the cashless exercise), the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of _________, whose address is _________, and that such Warrant Certificate be delivered to _________,
whose address is _________.
[Signature Page Follows]
Date: __ ,
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Signature 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 RULE 17Ad-15 (OR ANY SUCCESSOR RULE) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED).
Exhibit 4.4
DESCRIPTION OF SECURITIES
The following summary of the material terms of Allurion Technologies, Inc.’s (“Allurion” or the “Company”) securities is not intended to be a complete summary of the rights and preferences of such securities. You are encouraged to read the applicable provisions of Delaware law, Allurion’s certificate of incorporation (“Charter”) and bylaws in their entirety for a complete description of the rights and preferences of the Allurion securities.
Authorized and Outstanding Stock
The Charter authorizes the issuance of 1.1 billion shares, consisting of 1 billion shares of common stock, $0.0001 par value per share, and 100 million shares of preferred stock, $0.0001 par value.
Common Stock
The Charter provides the following with respect to the rights, powers, preferences and privileges of the Allurion’s common stock, par value $0.0001 per share (“Common Stock”).
Voting Power
Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of Allurion Common Stock possess all voting power for the election of Allurion’s directors and all other matters requiring stockholder action. Holders of Allurion Common Stock are entitled to one vote per share on matters to be voted on by stockholders.
Dividends
Holders of Allurion Common Stock will be entitled to receive such dividends, if any, as may be declared from time to time by the Allurion board of directors (the “Board”) in its discretion out of funds legally available therefor. Allurion does not intend to pay cash dividends in the foreseeable future. Any payment of cash dividends in the future will be dependent upon Allurion’s revenues and earnings, if any, capital requirements and general financial conditions. In no event will any stock dividends or stock splits or combinations of stock be declared or made on Allurion Common Stock unless the shares of Allurion Common Stock at the time outstanding are treated equally and identically.
Liquidation, Dissolution and Winding Up
In the event of Allurion’s voluntary or involuntary liquidation, dissolution or winding-up, the net assets of Allurion will be distributed pro rata to the holders of Allurion Common Stock, subject to the rights of the holders of the preferred stock, if any.
Preemptive or Other Rights
There are no sinking fund provisions applicable to the Allurion Common Stock.
Preferred Stock
The Charter provides that shares of preferred stock may be issued from time to time in one or more series. The Board is authorized to fix designations, powers, including voting powers, full or limited, or no voting powers, preferences and the relative, participating, optional or other special rights of the shares of each series of preferred stock and any qualifications, limitations and restrictions thereof. The Board is able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the Allurion Common Stock and could have anti-takeover effects. The ability of the Board to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of Allurion or the removal of existing management.
Anti-Takeover Provisions
Charter and Bylaws
Among other things, the Charter and bylaws (as amended from time to time):
| • | permit the Board to issue up to 100 million shares of preferred stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change of control; |
| • | provide that the number of directors of Allurion may be changed only by resolution of the Allurion Board; |
| • | provide that, subject to the rights of any series of preferred stock to elect directors, directors may be removed only with cause by the holders of at least 66 2/3% of all of the Allurion’s then-outstanding shares of the capital stock entitled to vote generally at an election of directors; |
| • | provide that all vacancies, subject to the rights of any series of preferred stock, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
| • | provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice; |
| • | provide that special meetings of Allurion’s stockholders may only be called by the Board pursuant to a resolution adopted by a majority of the Board, by the chairman of the Board or by the chief executive officer of Allurion; |
| • | provide that the Board be divided into three classes of directors, with the directors serving three-year terms, therefore making it more difficult for stockholders to change the composition of the board of directors; and |
| • | not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of Allurion Common Stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose. |
The combination of these provisions make it more difficult for the existing stockholders to replace the Board as well as for another party to obtain control of Allurion by replacing the Board. Because the Board has the power to retain and discharge its officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock will make it possible for the Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change the control of Allurion.
These provisions are intended to enhance the likelihood of continued stability in the composition of the Board and its policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce Allurion’s vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for Allurion’s shares and may have the effect of delaying changes in our control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of Allurion Common Stock.
Certain Anti-Takeover Provisions of Delaware Law
Allurion is subject to the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”). This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:
| • | a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”); |
| • | an affiliate of an interested stockholder; or |
| • | an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder. |
A “business combination” includes a merger or sale of more than 10% of a corporation’s assets. However, the above provisions of Section 203 would not apply if:
| • | the relevant board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction; |
| • | after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of the corporation’s voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or |
| • | on or subsequent to the date of the transaction, the initial business combination is approved by the board of directors and authorized at a meeting of the corporation’s stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder. |
These provisions may have the effect of delaying, deferring, or preventing changes in control of Allurion.
Exclusive Forum
The Charter provides that, unless we consent in writing to the selection of an alternative forum, the Chancery Court of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) and any appellate court thereof shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (1) any derivative action, suit or proceeding brought on our behalf; (2) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, stockholders or employees of ours or our stockholders; (3) any action, suit or proceeding asserting a claim against us arising pursuant to any provision of the DGCL, the bylaws or the Charter (as either may be amended from time to time); or (4) any action, suit or proceeding asserting a claim against us or any current or former director, officer or stockholder governed by the internal affairs doctrine.
The Charter provides that the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. If any such foreign action is filed in a court other than the courts in the State of Delaware in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce such actions and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder. The Charter provides that any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this choice of forum provision. It is possible that a court of law could rule that the choice of forum provision contained in our certificate of incorporation is inapplicable or unenforceable if it is challenged in a proceeding or otherwise.
This choice of forum provision has important consequences for our stockholders. These provisions may limit or increase the difficultly of a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors and officers, or may increase the associated costs for such stockholder to bring a claim, both of which may have the effect of discouraging lawsuits against Allurion’s directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against Allurion, a court could find the choice of forum provisions contained in the bylaws to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision inapplicable or unenforceable in an action, Allurion may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, results of operations, and financial condition.
Transfer Agent and Warrant Agent
The Transfer Agent for the Allurion Common Stock and the warrant agent for the Allurion warrants is Continental Stock Transfer & Trust Company.
Listing of Allurion Common Stock and Allurion Warrants
Allurion Common Stock and Allurion warrants are listed on the NYSE under the symbols “ALUR” and “ALUR WS,” respectively.
Exhibit 10.5
INVESTOR RIGHTS AND LOCK-UP AGREEMENT
THIS INVESTOR RIGHTS AND LOCK-UP AGREEMENT (this “Agreement”) is entered into as of August 1, 2023, by and among Allurion Technologies, Inc. (f/k/a Allurion Technologies Holdings, Inc.), a Delaware corporation (the “Company”), and the parties listed as Investors on Schedule I hereto (each, including any person or entity who hereinafter becomes a party to this Agreement pursuant to Section 8.2, an “Investor” and collectively, the “Investors”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Business Combination Agreement (as defined below).
WHEREAS, Compute Health Acquisition Corp., a Delaware corporation and predecessor-by-merger to the Company (“CPUH”), Compute Health Corp., a Delaware corporation and a then-direct, wholly-owned subsidiary of CPUH (“Merger Sub I”), Compute Health LLC, a Delaware limited liability company and a then-direct, wholly-owned subsidiary of CPUH (“Merger Sub II”), the Company and Allurion Technologies, Inc. (predecessor by merger to Allurion Technologies, LLC), a Delaware corporation (“Allurion”), have consummated the transactions contemplated by that certain Business Combination Agreement, dated as of February 9, 2023 (as amended or supplemented from time to time, the “Business Combination Agreement”), pursuant to which, among other things, as part of the same overall transaction, (a) CPUH merged with and into the Company (the “CPUH Merger”), with the Company surviving as the publicly-listed company, (b) promptly, but at least three (3) hours, thereafter Merger Sub I merged with and into Allurion (the “Intermediate Merger”), with Allurion surviving as a wholly-owned subsidiary of the Company and (c) promptly thereafter Allurion merged with and into Merger Sub II, with Merger Sub II surviving as a wholly-owned subsidiary of the Company (collectively with the CPUH Merger and the Intermediate Merger, the “Mergers”), in each case on the terms and conditions set forth therein;
WHEREAS, CPUH, Compute Health Sponsor LLC, a Delaware limited liability company (“Sponsor”), Osama Alswailem, Hani Barhoush, Joshua Fink, Michael Harsh, Omar Ishrak, Jean Nehmé and Gwendolyn A. Watanabe (such persons, collectively with the Sponsor, the “CPUH Initial Stockholders”) and any person or entity who hereafter became or becomes a party to the Prior CPUH Agreement (as defined below) pursuant to Section 5.2 thereof are parties to that certain Registration Rights Agreement, dated February 4, 2021 (the “Prior CPUH Agreement”);
WHEREAS, Allurion is party to that certain Fourth Amended and Restated Investors’ Rights Agreement, dated as of July 23, 2021, by and among Allurion and certain investors listed therein (together with the Prior CPUH Agreement, the “Prior Agreements”);
WHEREAS, as of prior to the execution of this Agreement and prior to the CPUH Merger Closing, the CPUH Initial Stockholders collectively held 21,562,500 shares of Class B Common Stock of CPUH (collectively, the “Founder Shares”);
WHEREAS, immediately prior to the CPUH Merger Closing, the Founder Shares converted into Class A Common Stock in connection with the Founder Share Conversion and the Independent Director Share Conversion (each as defined in the Sponsor Support Agreement) and, in the CPUH Merger, such Class A Common Stock was cancelled in exchange for the right to receive Pubco Common Stock;
WHEREAS, the Investors of Allurion set forth on Schedule I under the heading Allurion Investors and party hereto (“Allurion Investors”) held, immediately prior to the Final Merger Closing, (a) shares of common stock, par value $0.0001 per share, of Allurion (“Allurion Common Stock”); (b) shares designated as “Series A Preferred Stock”, par value $0.0001 per share (“Allurion Series A Preferred Stock”); (c) shares designated as “Series A-1 Preferred Stock”, par value $0.0001 per share (“Allurion Series A-1 Preferred Stock”); (d) shares designated as “Series B Preferred Stock”, par value $0.0001 per share (“Allurion Series B Preferred Stock”); (e) shares designated as “Series C Preferred Stock”, par value $0.0001 per share (“Allurion Series C Preferred Stock”) (f) shares designated as “Series D-1 Preferred Stock”, par value $0.0001 per share (“Allurion Series D-1 Preferred Stock”); (g) shares designated as “Series D-2 Preferred Stock”, par value $0.0001 per share (“Allurion Series D-2 Preferred Stock”) and (h) shares designated as “Series D-3 Preferred Stock”, par value $0.0001 per share (collectively with Allurion Common Stock, Allurion Series A Preferred Stock, Allurion Series A-1 Preferred Stock, Allurion Series B Preferred Stock, Allurion Series C Preferred Stock, Allurion Series D-1 Preferred Stock and Allurion Series D-2 Preferred Stock, the “Allurion Shares”), as applicable;
WHEREAS, the Allurion Shares were exchanged for Pubco Common Stock on or about the date hereof, pursuant to the Business Combination Agreement;
WHEREAS, certain Investors have purchased shares of Pubco Common Stock in the PIPE Financing in connection with the consummation of the Mergers; and
WHEREAS, the Company and Allurion desire to terminate the Prior Agreements, effective as of the Final Merger Closing, to provide for the terms and conditions included herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. The following capitalized terms used herein have the following meanings:
“Addendum Agreement” is defined in Section 8.2.
“Adverse Disclosure” mean public disclosure of any material nonpublic information which, in the good faith reasonable determination of the Board, (i) would be required to be made in any Registration Statement filed with the Commission by the Company so that such Registration Statement, from and after its effective date, does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) would not be required to be made at such time but for the filing, effectiveness or continued use of such Registration Statement; and (iii) the Company has a bona fide business purpose for not disclosing publicly and would reasonably be likely to be detrimental to the Company and its subsidiaries.
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“Agreement” is defined in the preamble to this Agreement.
“Allurion” is defined in the recitals to this Agreement.
“Allurion Common Stock” is defined in the recitals to this Agreement.
“Allurion Investor Released Shares” means (i) the number of shares of Pubco Common Stock held by a Participating Allurion Investor set forth opposite his, her or its name on Schedule II to this Agreement under the heading “Allurion Investor Released Shares” and (ii) the number of shares of Pubco Common Stock held by a Participating Allurion Investor issued in the Intermediate Merger in exchange for shares of Allurion Common Stock issued upon conversion of Incremental Convertible Equity Securities issued in the Incremental Financing.
“Allurion Investors” is defined in the recitals to this Agreement.
“Allurion Series A Preferred Stock” is defined in the recitals to this Agreement.
“Allurion Series A-1 Preferred Stock” is defined in the recitals to this Agreement.
“Allurion Series B Preferred Stock” is defined in the recitals to this Agreement.
“Allurion Series C Preferred Stock” is defined in the recitals to this Agreement.
“Allurion Series D-1 Preferred Stock” is defined in the recitals to this Agreement.
“Allurion Series D-2 Preferred Stock” is defined in the recitals to this Agreement.
“Allurion Shares” is defined in the recitals to this Agreement.
“Backstop Agreement” is defined in the Business Combination Agreement.
“Backstop Shares” is defined in the Backstop Agreement.
“Block Trade” means any non-marketed underwritten offering taking the form of a block trade to financial institutions, QIBs or Institutional Accredited Investors, bought deals, over-night deals or similar transactions that do not include “road show” presentations to potential investors requiring marketing effort from management over multiple days.
“Board” is defined in Section 3.1.1.
“Business Combination Agreement” is defined in the preamble to this Agreement.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.
“Class A Common Stock” is defined in the Business Combination Agreement.
“Closing Date” is defined in the Business Combination Agreement.
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“Commission” means the Securities and Exchange Commission, or any other Federal agency then administering the Securities Act or the Exchange Act.
“Company” is defined in the preamble to this Agreement.
“Contribution Agreements” is defined in the Business Combination Agreement.
“CPUH” is defined in the preamble to this Agreement.
“CPUH Initial Stockholders” is defined in the preamble to this Agreement.
“CPUH Investors” shall mean the Investors listed on Schedule I hereto under the heading “CPUH Investors” and party hereto, together with any of their respective Permitted Transferees.
“CPUH Merger” is defined in the recitals to this Agreement.
“Company Independent Nominees” is defined in Section 7.1.
“Demand Registration” is defined in Section 2.2.1.
“Demanding Holder” is defined in Section 2.2.1.
“DTC” means the Depository Trust Company.
“DWAC” is defined in Section 3.5.2.
“Effectiveness Period” is defined in Section 3.1.3.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
“Form 10 Disclosure Filing Date” means the date on which the Company shall file with the Commission a Current Report on Form 8-K that includes current “Form 10 information” (within the meaning of Rule 144) reflecting the Company’s status as an entity that is no longer an issuer described in paragraph (i)(1)(i) of Rule 144.
“Form S-1” means a Registration Statement on Form S-1.
“Form S-3” means a Registration Statement on Form S-3 or any similar short-form registration that may be available at such time.
“Founder Shares” is defined in the recitals to this Agreement.
“Gaur Director Nomination Number” means one (1) Gaur Nominee so long as Shantanu Gaur, his Affiliates and any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, Shantanu Gaur or his immediate family beneficially own in the aggregate such number of shares of Pubco Common Stock equal to at least the Gaur Minimum Ownership Threshold.
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“Gaur Independent Nominee” is defined in Section 7.1.
“Gaur Minimum Ownership Threshold” means 775,385 shares of Pubco Common Stock (subject to adjustment for stock splits, reclassifications, combinations, stock dividends and similar adjustments).
“Gaur Nominee” is defined in Section 7.1.
“Incremental Convertible Equity Securities” is defined in the Business Combination Agreement.
“Incremental Financing” is defined in the Business Combination Agreement.
“Indemnified Party” is defined in Section 4.3.
“Indemnifying Party” is defined in Section 4.3.
“Independent Director” is defined in Section 7.1.
“Initiating Holder” is defined in Section 2.1.6.
“Institutional Accredited Investor” means an institutional “accredited” investor as defined in Rule 501(a) of Regulation D under the Securities Act.
“Intermediate Merger” is defined in the recitals to this Agreement.
“Investor” is defined in the preamble to this Agreement.
“Investor Indemnified Party” is defined in Section 4.1.
“Hunter Termination Agreement” means the Termination Letter Agreement, dated as of May 1, 2023, by and among Allurion, the Company and Hunter Ventures Limited.
“Lock-up Release Date” means, for purposes of this Agreement (I) (i) the eighteen (18) month anniversary of the Closing Date as indicated under the heading on Schedule II named “18-month lock-up,” with respect to those Investors listed under such heading, or (ii) the twelve (12) month anniversary of the Closing Date as indicated under the heading “12-month lock-up,” with respect to those Investors listed under such headings, or (II) the date upon completion of a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the public stockholders of the Company having the right to exchange their Pubco Common Stock for cash, securities or other property.
“Maximum Number of Shares” is defined in Section 2.2.4.
“Merger Sub I” is defined in the recitals to this Agreement.
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“Merger Sub II” is defined in the recitals to this Agreement.
“Mergers” is defined in the recitals to this Agreement.
“New Registration Statement” is defined in Section 2.1.4.
“New Securities” means all shares of Pubco Common Stock issued or issuable in connection with the Mergers, including (i) shares issuable upon exercise of any Assumed Warrant, (ii) shares issued or issuable pursuant to the Backstop Agreement, and (iii) shares issued or issuable pursuant to the Hunter Termination Agreement.
“Participating Allurion Investor” is defined in Section 6.1.
“Permitted Transferee” means (i) the members of an Investor’s immediate family (for purposes of this Agreement, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse, the siblings of such person and his or her spouse, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouses and siblings); (ii) any trust or family limited liability company or partnership for the direct or indirect benefit of an Investor or the immediate family of an Investor; (iii) if an Investor is a trust, to the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust; (iv) any officer, director, general partner, limited partner, stockholder, member, or owner of similar equity interests in an Investor; or (v) any affiliate of an Investor.
“Piggy-Back Registration” is defined in Section 2.3.1.
“Prior Agreements” is defined in the preamble to this Agreement.
“Prior CPUH Agreement” is defined in the preamble to this Agreement.
“Pro Rata” is defined in Section 2.2.4.
“Pubco Common Stock” is defined in the Business Combination Agreement.
“QIB” means “qualified institutional buyer” as defined in Rule 144A under the Securities Act.
“Registrable Securities” means (i) New Securities and shares of Pubco Common Stock issued in the PIPE Financing, and (ii) all shares of Pubco Common Stock issued to any Investor with respect to such securities referenced in clause (i) by way of any share split, share dividend or other distribution, recapitalization, reorganization, share exchange, share reconstruction, amalgamation, contractual control arrangement or similar event. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; or (c) such securities shall have ceased to be outstanding.
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“Registration” means a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
“Registration Statement” means a registration statement filed by the Company with the Commission in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).
“Remus Capital” means Remus Group Management, LLC and any Affiliate of the foregoing that holds shares of Pubco Common Stock or to whom the foregoing has transferred shares of Pubco Common Stock.
“Remus Director Nomination Number” means one (1) Remus Nominee so long as Remus Capital beneficially owns in the aggregate such number of shares of Pubco Common Stock equal to at least the Remus Minimum Ownership Threshold.
“Remus Independent Nominee” is defined in Section 7.1.
“Remus Minimum Ownership Threshold” means 269,051 shares of Pubco Common Stock (subject to adjustment for stock splits, reclassifications, combinations, stock dividends and similar adjustments).
“Remus Nominee” is defined in Section 7.1.
“Resale Shelf Registration Statement” is defined in Section 2.1.1.
“RTW Designated Director” is defined in Section 7.1.
“RTW Designation Condition” means until the later of (x) such time as all Obligations (as defined in the RTW Side Letter) under the Royalty Financing Agreement (as defined in the RTW Side Letter) have been paid by Allurion or (y) such time as all Obligations (as defined in any Additional Revenue Interest Financing Agreement, as defined in the RTW Side Letter) under the Additional Revenue Interest Financing Agreement have been paid by Allurion.
“RTW Master” has the meaning set forth in the definition of RTW Side Letter.
“RTW Innovation” has the meaning set forth in the definition of RTW Side Letter.
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“RTW Side Letter” means that certain amended and restated letter agreement, dated May 2, 2023, by and among CPUH, the Company, Merger Sub II, Allurion, RTW Master Fund, Ltd., an Exempted Company incorporated in the Cayman Islands with limited liability (“RTW Master”), RTW Innovation Master Fund, Ltd., an Exempted Company incorporated in the Cayman Islands with limited liability (“RTW Innovation”), and RTW Venture Fund Limited, an investment company limited by shares incorporated under the laws of Guernsey (“RTW Venture”, and collectively with RTW Master and RTW Innovation, “RTW”).
“RTW Venture” has the meaning set forth in the definition of RTW Side Letter.
“RTW” has the meaning set forth in the definition of RTW Side Letter.
“SEC Guidance” is defined in Section 2.1.4.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.
“Sponsor” is defined in the recitals to this Agreement.
“Sponsor Director Nomination Number” means one (1) Sponsor Nominee so long as Sponsor beneficially owns in the aggregate such number of shares of Pubco Common Stock equal to at least the Sponsor Minimum Ownership Threshold.
“Sponsor Minimum Ownership Threshold” means 1,631,355 shares of Pubco Common Stock (subject to adjustment for stock splits, reclassifications, combinations, stock dividends and similar adjustments).
“Sponsor Nominee” is defined in Section 7.1.
“Sponsor Released Shares” means the number of shares of Pubco Common Stock held by Sponsor set forth opposite its name on Schedule II to this Agreement under the heading “Sponsor Released Shares”.
“Shelf Participant” is defined in Section 2.1.6.
“Takedown Demand” is defined in Section 2.1.6.
“Termination Agreements” is defined in the Business Combination Agreement.
“Transfer” means to (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, and the rules and regulations of the Commission promulgated thereunder, with respect to any shares of Pubco Common Stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any shares of Pubco Common Stock, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction, including the filing of a registration
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statement specified in clause (i) or (ii), other than a Registration Statement filed pursuant to this Agreement. Notwithstanding the foregoing, a Transfer shall not be deemed to include any transfer for no consideration if the donee, trustee, heir or other transferee has agreed in writing to be bound by the same terms under this Agreement to the extent and for the duration that such terms remain in effect at the time of the Transfer.
“Underwriter” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.
“Underwritten Demand Registration” means an underwritten public offering of Registrable Securities pursuant to a Demand Registration, as amended or supplemented, that is a fully marketed underwritten offering that requires Company management to participate in “road show” presentations to potential investors requiring substantial marketing effort from management over multiple days, the issuance of a “comfort letter” by the Company’s auditors, and the issuance of legal opinions by the Company’s legal counsel.
“Underwritten Takedown” means an underwritten public offering of Registrable Securities pursuant to the Resale Shelf Registration Statement, as amended or supplemented, that requires the issuance of a “comfort letter” by the Company’s auditors and the issuance of legal opinions by the Company’s legal counsel.
“Unrestricted Conditions” is defined in Section 3.5.2.
| 2. | REGISTRATION RIGHTS. |
2.1 Resale Shelf Registration Rights.
2.1.1 Registration Statement Covering Resale of Registrable Securities. Provided compliance by the Investors with Section 3.4, the Company shall prepare and file or cause to be prepared and filed with the Commission, no later than forty-five (45) calendar days following the Closing Date, a Registration Statement on Form S-3 or its successor form, or, if the Company is ineligible to use Form S-3, a Registration Statement on Form S-1, for an offering to be made on a continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by Investors of all of the Registrable Securities then held by such Investors that are not covered by an effective resale registration statement (the “Resale Shelf Registration Statement”). The Company shall use commercially reasonable efforts to cause the Resale Shelf Registration Statement to be declared effective as soon as possible after filing, and in no event later than ninety (90) days after the Closing Date, and once effective, to keep the Resale Shelf Registration Statement continuously effective under the Securities Act at all times until the expiration of the Effectiveness Period (as defined below). In the event that the Company files a Form S-1 pursuant to this Section 2.1, the Company shall use its commercially reasonable efforts to convert the Form S-1 to a Form S-3 promptly after the Company is eligible to use Form S-3. The Resale Shelf Registration Statement shall provide that the Registrable Securities may be sold pursuant to any method or combination of methods legally available to, and requested by, the Investors, including the registration of the distribution to its stockholders, partners, members or other affiliates. Without limiting the foregoing, subject to any comments from the Commission, each Registration Statement filed pursuant to this Section 2.1.1 shall include a “plan of distribution” approved by Allurion Investors holding a majority of the Registrable Securities.
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2.1.2 Notification and Distribution of Materials. The Company shall promptly notify the Investors in writing of the effectiveness of the Resale Shelf Registration Statement and shall furnish to them, without charge, such number of copies of the Resale Shelf Registration Statement (including any amendments, supplements and exhibits), the prospectus contained therein (including each preliminary prospectus and all related amendments and supplements) and any documents incorporated by reference in the Resale Shelf Registration Statement or such other documents as the Investors may reasonably request in order to facilitate the sale of the Registrable Securities in the manner described in the Resale Shelf Registration Statement.
2.1.3 Amendments and Supplements. Subject to the provisions of Section 2.1.1 above, the Company shall promptly prepare and file with the Commission from time to time such amendments and supplements to the Resale Shelf Registration Statement and prospectus used in connection therewith as may be necessary to keep the Resale Shelf Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all the Registrable Securities during the Effectiveness Period (as defined below).
2.1.4 Reduction of Shelf Offering. Notwithstanding the registration obligations set forth in this Section 2.1, in the event the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the holders thereof and use its commercially reasonable efforts to file an amendment or amendments to the Resale Shelf Registration Statement as required by the Commission and/or (ii) withdraw the Resale Shelf Registration Statement and file a new registration statement (a “New Registration Statement”), in either case covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-1, Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff (the “SEC Guidance”), including, without limitation, Compliance and Disclosure Interpretation 612.09. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater number of Registrable Securities), unless otherwise directed in writing by a holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a Pro Rata basis, subject to a determination by the Commission that certain Investors must be reduced first based on the number of Registrable Securities held by such Investors. In the event the Company amends the Resale Shelf Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the
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Company or to registrants of securities in general, one or more registration statements on Form S-1, Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Resale Shelf Registration Statement, as amended, or the New Registration Statement. If the Company shall not be able to register for resale all of the Registrable Securities on the Resale Shelf Registration Statement within three (3) months following the date of the Company’s receipt of the Commission’s Notice, then, until such Resale Shelf Registration Statement is effective, each of the Allurion Investors shall be entitled to demand registration rights pursuant to Section 2.2 as long as the demand request is a proposal to sell Registrable Securities with an aggregate market price at the time of request of not less than $5,000,000 (the “Shelf Demand Right”). Shelf Demand Rights shall not be counted as Demand Registrations under Section 2.2.
No Investor shall be named as an “underwriter” in any Registration Statement filed pursuant to this Section 2 without the Investor’s prior written consent; provided that if the Commission requests that an Investor be identified as a statutory underwriter in the Registration Statement, then such Investor will have the option, in its sole and absolute discretion, to either (i) have the opportunity to withdraw from the Registration Statement upon its prompt written request to the Company, in which case the Company’s obligation to register such Investor’s Registrable Securities shall be deemed satisfied or (ii) be included as such in the Registration Statement. Each Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to (and shall be subject to the approval, which shall not be unreasonably withheld or delayed, of) the Investors prior to its filing with, or other submission to, the Commission.
2.1.5 Notice of Certain Events. The Company shall promptly notify the Investors in writing of any request by the Commission for any amendment or supplement to, or additional information in connection with, the Resale Shelf Registration Statement required to be prepared and filed hereunder (or prospectus relating thereto). The Company shall promptly notify each Investor, or their representatives, in writing of the filing of the Resale Shelf Registration Statement or any prospectus, amendment or supplement related thereto or any post-effective amendment to the Resale Shelf Registration Statement and the effectiveness of any post-effective amendment.
2.1.6 Underwritten Takedown.
(a) If the Company shall receive a request (a “Takedown Demand”) from the (i) holders of Registrable Securities with an estimated market value of at least $5,000,000 or (ii) the holders of Registrable Securities registered under the Resale Shelf Registration Statement that own in the aggregate at least 5% of the outstanding Pubco Common Stock requesting a registration of at least $5,000,000 (either, an “Initiating Holder”) that the Company effect an Underwritten Takedown of all or any portion of the requesting holder’s Registrable Securities covered under the Resale Shelf Registration Statement, then the Company shall give (x) in connection with any non-marketed underwritten takedown offering (other than a Block Trade), at least two (2) Business Days’ notice of such Takedown Demand to each holder of Registrable Securities (other than the Initiating Holder) that is a participant in the Resale Shelf Registration Statement (“Shelf Participant”), (y) in connection with any Block Trade initiated,
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notice of such Underwritten Takedown to each holder of Registrable Securities (other than the Initiating Holder(s)) that is a Shelf Participant no later than noon Eastern time on the Business Day prior to the requested Underwritten Takedown and (z) in connection with any marketed Underwritten Takedown, at least five (5) Business Days’ notice of such Underwritten Takedown to each holder of Registrable Securities (other than the Initiating Holder(s)) that is a Shelf Participant. In connection with (x) any non-marketed Underwritten Takedown initiated and (y) any marketed Underwritten Takedown, if any Shelf Participants entitled to receive a notice pursuant to the preceding sentence request inclusion of their Registrable Securities covered by the Resale Shelf Registration Statement (by written notice to the Company , which notice must be received by the Company no later than (A) in the case of a non-marketed Underwritten Takedown (other than a Block Trade), the Business Day following the date notice is given to such participant, (B) in the case of a Block Trade, by 10:00 p.m. Eastern time on the date notice is given to such participant and (C) in the case of a marketed Underwritten Takedown, three (3) Business Days following the date notice is given to such participant), the Initiating Holder(s) and the other Shelf Participants that request inclusion of their Registrable Securities shall be entitled to sell their Registrable Securities in such offering. Thereupon the Company shall use its commercially reasonable efforts to effect, as expeditiously as possible, the offering in such Underwritten Takedown of:
(i) subject to the restrictions set forth in Section 2.2.4, all Registrable Securities for which the Initiating Holder(s) has requested such offering under Section 2.1.6, and
(ii) subject to the restrictions set forth in Section 2.2.4, all other Registrable Securities that any holders of Registrable Securities covered under the Resale Registration Shelf Statement have requested the Company to offer by request received by the Company in the requisite time period, all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be offered.
(b) Promptly after the expiration of the relevant time period, the Company will promptly notify all selling holders of the identities of the other selling holders and the number of shares of Registrable Securities requested to be included therein.
(c) The Company shall only be required to effectuate, within any twelve (12) month period, one Underwritten Takedown by each of (A) the CPUH Investors, collectively, and (B) Allurion Investors, collectively.
2.1.7 Block Trade. If the Company shall receive a request from the holders of Registrable Securities with an estimated market value of at least $10,000,000 that the Company effect the sale of all or any portion of the Registrable Securities in a Block Trade, then the Company shall, as expeditiously as possible, initiate the offering in such Block Trade of the Registrable Securities for which such requesting holder has requested such offering under Section 2.1.7.
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2.1.8 Selection of Underwriters. The Initiating Holder(s) shall have the right to select an Underwriter or Underwriters in connection with such Underwritten Takedown, which Underwriter or Underwriters shall be reasonably acceptable to the Company. In connection with an Underwritten Takedown, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities in such Underwritten Takedown, including, if necessary, the engagement of a “qualified independent underwriter” in connection with the qualification of the underwriting arrangements with the Financial Industry Regulatory Authority, Inc.
2.1.9 Underwritten Takedowns effected pursuant to this Section 2.1 shall not be counted as Demand Registrations effected pursuant to Section 2.2.
2.2 Demand Registration.
2.2.1 Request for Registration. At any time and from time to time after the expiration of any lock-up to which an Investor’s shares are subject, if any, provided compliance by the Investors with Section 3.4, and provided further there is not an effective Resale Shelf Registration Statement available for the resale of all of the Registrable Securities pursuant to Section 2.1 (and subject to the right of holders to effect Underwritten Takedowns under Section 2.1), (i) CPUH Investors who hold a majority of the Registrable Securities held by all CPUH Investors or (ii) Allurion Investors who hold either a majority of the Registrable Securities held by all Allurion Investors, may make a written demand for Registration under the Securities Act of all or any portion of their Registrable Securities on Form S-1 or any similar long-form Registration or, if then available, on Form S-3. Each registration requested pursuant to this Section 2.2.1 is referred to herein as a “Demand Registration”. Any demand for a Demand Registration shall specify the number of shares of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will, within five (5) Business Days after receiving such demand, notify all Investors that are holders of Registrable Securities of the demand, and each such holder of Registrable Securities who wishes to include all or a portion of such holder’s Registrable Securities in the Demand Registration (each such holder including shares of Registrable Securities in such registration, a “Demanding Holder”) shall so notify the Company within five (5) Business Days after the receipt by the holder of the notice from the Company. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.2.4 and the provisos set forth in Section 3.1.1. The Company shall not be obligated to effect: (a) more than one (1) Demand Registration during any twelve-month period (not including any Underwritten Takedown); (b) any Demand Registration at any time there is an effective Resale Shelf Registration Statement on file with the Commission pursuant to Section 2.1 that is not subject to a reduction of registered shares under Section 2.1.4 (and subject to the obligation to effect Underwritten Takedowns as set forth in Section 2.1); or (c) more than two (2) Underwritten Demand Registrations in respect of all Registrable Securities held by Investors.
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2.2.2 Effective Registration. A Registration will not count as a Demand Registration until the Registration Statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders thereafter elect to continue the offering; provided, further, that the Company shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated.
2.2.3 Underwritten Demand Registration. If the Demanding Holders so elect and such holders so advise the Company as part of their written demand for a Demand Registration, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an Underwritten Demand Registration. In such event, the right of any holder to include its Registrable Securities in such registration shall be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s Registrable Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by the holders initiating the Demand Registration, and subject to the approval of the Company. The parties agree that, in order to be effected, any Underwritten Demand Registration must result in aggregate proceeds to the selling stockholders of at least $5,000,000.
2.2.4 Reduction of Offering. If the managing Underwriter or Underwriters for a Underwritten Demand Registration that is to be an underwritten offering advises the Company and the Demanding Holders in writing that, in such Underwriter’s or Underwriters’ opinion, the dollar amount or number of shares of Registrable Securities which the Demanding Holders desire to sell, taken together with all other shares of Pubco Common Stock or other securities which the Company desires to sell and the shares of Pubco Common Stock, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other stockholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “Maximum Number of Shares”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders (pro rata in accordance with the number of shares that each such person has requested be included in such registration, regardless of the number of shares held by each such person (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares of Pubco Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; and (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), any shares of Pubco Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons, as to which “piggy-back” registration has been requested by the holders thereof that can be sold without exceeding the Maximum Number of Shares.
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2.2.5 Withdrawal. A Demanding Holder shall have the right to withdraw all or any portion of its Registrable Securities included in an Underwritten Demand Registration pursuant to this Section 2.2 for any reason or no reason whatsoever upon written notice to the Company and the Underwriter or Underwriters of its intention to withdraw from such Underwritten Demand Registration prior to the pricing of such Underwritten Demand Registration; provided, however, that such withdrawn amount shall still be considered an Underwritten Demand Registration. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the registration expenses incurred in connection with an Underwritten Demand Registration prior to its withdrawal under this Section 2.2.5.
2.3 Piggy-Back Registration.
2.3.1 Piggy-Back Rights. If the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for stockholders of the Company for their account (or by the Company and by stockholders of the Company including, without limitation, pursuant to Section 2.2.1), other than a Registration Statement (i) filed in connection with any employee stock option, employee stock purchase, or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) for a dividend reinvestment plan, (v) effected pursuant to Section 2.1 or 2.2 (which, for the avoidance of doubt, is addressed in and subject to the rights set forth therein), then the Company shall (x) give written notice of such proposed filing to the holders of Registrable Securities with respect to shares not subject to any lock-up, as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of shares of Registrable Securities as such holders may request in writing within five (5) Business Days following receipt of such notice (a “Piggy-Back Registration”). The foregoing rights shall not be available to any Investor at such time as (i) there is an effective Resale Shelf Registration Statement available for the resale of the Registrable Securities pursuant to Section 2.1 (which, for the avoidance of doubt, is addressed in and subject to the rights set forth in, Section 2.1 and Section 2.2) and there was no reduction in registered shares as set forth in Section 2.1.4 or (ii) such Registration is solely to be used for the offering of securities by the Company for its own account. The Company shall cause such Registrable Securities to be included in such registration, provided compliance by the Investors with Section 3.4, and the Company shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance
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with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.
2.3.2 Reduction of Offering. If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the holders of Registrable Securities in writing that the dollar amount or number of shares of Pubco Common Stock which the Company desires to sell, taken together with shares of Pubco Common Stock, if any, as to which registration has been demanded pursuant to written contractual arrangements with persons other than the holders of Registrable Securities hereunder and the Registrable Securities as to which registration has been requested under this Section 2.3, exceeds the Maximum Number of Shares, then the Company shall include in any such registration:
(a) If the registration is undertaken for the Company’s account: (A) first, the shares of Pubco Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; and (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Pubco Common Stock or other securities, if any, comprised of Registrable Securities, as to which registration has been requested pursuant to the terms hereof, that can be sold without exceeding the Maximum Number of Shares, Pro Rata; and (C) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), the shares of Pubco Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual piggy-back registration rights with such persons and that can be sold without exceeding the Maximum Number of Shares; and
(b) If the registration is a “demand” registration undertaken at the demand of persons other than either the holders of Registrable Securities or the Company (other than as provided in Section 2.2 which, for the avoidance of doubt, is addressed in and subject to the rights set forth in, Section 2.2), (A) first, the shares of Pubco Common Stock or other securities for the account of the demanding persons that can be sold without exceeding the Maximum Number of Shares; (B) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Pubco Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (C) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), the shares of Pubco Common Stock or other securities, if any, comprised of Registrable Securities, Pro Rata, as to which registration has been requested pursuant to the terms hereof, that can be sold without exceeding the Maximum Number of Shares; and (D) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A), (B) and (C), the shares of Pubco Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons, that can be sold without exceeding the Maximum Number of Shares.
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2.3.3 Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement, if such offering is pursuant to a Demand Registration, or prior to the public announcement of the offering, if such offering is pursuant to an Underwritten Takedown. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 3.3.
2.3.4 Unlimited Piggyback Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.3 shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.2.
| 3. | REGISTRATION PROCEDURES. |
3.1 Filings; Information. Whenever the Company is required to effect the registration of any Registrable Securities pursuant to Section 2, the Company shall use its commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as reasonably possible, and in connection with any such request:
3.1.1 Filing Registration Statement. The Company shall use its commercially reasonable efforts to, as expeditiously as possible after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its commercially reasonable efforts to cause such Registration Statement to become effective and use its commercially reasonable efforts to keep it effective for the Effectiveness Period (as defined below); provided, however, that the Company shall have the right to defer any Demand Registration for up to forty-five (45) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any Demand Registration to which such Piggy-Back Registration relates, in each case if the Company shall furnish to the holders a certificate signed by the Company stating that, in the good faith judgment of the Board of Directors of the Company (the “Board”), it would require the Company to make an Adverse Disclosure; provided, further, however, that the Company shall not have the right to exercise the right set forth in the immediately preceding proviso twice, or for more than one hundred twenty (120) total calendar days in any three hundred sixty (360) day period.
3.1.2 Copies. The Company shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the holders of Registrable Securities included in such registration, and such holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case, including all exhibits thereto and documents incorporated
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by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as the holders of Registrable Securities included in such registration or legal counsel for any such holders may request in order to facilitate the disposition of the Registrable Securities owned by such holders.
3.1.3 Amendments and Supplements. The Company shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until the date on which all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn (the “Effectiveness Period”).
3.1.4 Notification. After the filing of a Registration Statement, the Company shall promptly, and in no event more than two (2) Business Days after such filing, notify the holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such holders promptly and confirm such advice in writing in all events within two (2) Business Days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order (and the Company shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the Commission for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to the holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the Commission a Registration Statement or prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such holders and legal counsel with a reasonable opportunity to review such documents and comment thereon.
3.1.5 Securities Laws Compliance. The Company shall use its commercially reasonable efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may reasonably request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the holders of Registrable Securities included in such Registration Statement
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to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph or subject itself to taxation in any such jurisdiction.
3.1.6 Agreements for Disposition. The Company shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities. The representations, warranties and covenants of the Company in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the holders of Registrable Securities included in such registration statement, and the representations, warranties and covenants of the holders of Registrable Securities included in such registration statement in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the Company.
3.1.7 Comfort Letter. In the event of an Underwritten Takedown or an Underwritten Demand Registration, the Company shall obtain a “cold comfort” letter from the Company’s independent registered public accountants in the event of an underwritten offering, and a customary “bring-down” thereof, in customary form and covering such matters of the type customarily covered by “cold comfort” letters, as the managing Underwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating holders. For the avoidance of doubt, this Section 3.1.7 shall not apply to any Block Trade.
3.1.8 Opinions and Negative Assurance Letters. In the event of an Underwritten Takedown or an Underwritten Demand Registration, on the date the Registrable Securities are delivered for sale pursuant to any Registration, the Company shall obtain an opinion and negative assurances letter, each dated such date, of one (1) counsel representing the Company for the purposes of such Registration, including an opinion of local counsel if applicable, addressed to the holders, the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to such Registration in respect of which such opinion is being given as the holders, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions, and reasonably satisfactory to a majority in interest of the participating holders. For the avoidance of doubt, this Section 3.1.8 shall not apply to any Block Trade.
3.1.9 Cooperation. The principal executive officer of the Company, the principal financial officer of the Company, the principal accounting officer of the Company and all other officers and members of the management of the Company shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering, the preparation of a comfort letter, if applicable, and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.
3.1.10 Transfer Agent. The Company shall provide and maintain a transfer agent and registrar for the Registrable Securities.
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3.1.11 Records. Upon execution of confidentiality agreements, the Company shall make available for inspection by the holders of Registrable Securities included in such Registration Statement, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any holder of Registrable Securities included in such Registration Statement or any Underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.
3.1.12 Earnings Statement. The Company shall comply with all applicable rules and regulations of the Commission and the Securities Act, and make available to its stockholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
3.1.13 Road Show. If an offering pursuant to this Agreement is conducted as an Underwritten Takedown or Underwritten Demand Registration and involves Registrable Securities with an aggregate offering price (before deduction of underwriting discounts) is expected to exceed $35,000,000, the Company shall use its reasonable best efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in such offering.
3.1.14 Listing. The Company shall use its commercially reasonable efforts to cause all Registrable Securities included in any Registration Statement to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated.
3.2 Obligation to Suspend Distribution. Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1.4(iv), or, upon any suspension by the Company, pursuant to a good faith reasonable determination of the Board that the offer or sale of Registrable Securities would require the Company to disclose Adverse Disclosure, each holder of Registrable Securities included in any registration shall immediately discontinue disposition of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such holder receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in the Company’s securities is removed, as applicable, and, if so directed by the Company, each such holder will deliver to the Company or destroy all copies, other than permanent file copies then in such holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. The foregoing right to delay or suspend may be exercised by the Company for no longer than one hundred twenty (120) total calendar days in any three hundred sixty (360) day period.
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3.3 Registration Expenses. The Company shall bear all costs and expenses incurred in connection with the Resale Shelf Registration Statement pursuant to Section 2.1, any Demand Registration pursuant to Section 2.2.1, any Underwritten Takedown pursuant to Section 2.1.6, any Block Trade pursuant to Section 2.1.7 (other than expenses set forth below in clause (ix) of this Section 3.3), any Piggy-Back Registration pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective, including, without limitation: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.12; (vi) Financial Industry Regulatory Authority, Inc. fees; (vii) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company; (viii) the fees and expenses of any special experts retained by the Company in connection with such registration; and (ix) the reasonable fees and expenses of one legal counsel selected by the holders of a majority-in-interest of the Registrable Securities included in such registration (not to exceed $50,000 without the consent of Company). The Company shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the holders thereof, which underwriting discounts or selling commissions shall be borne by such holders, but the Company shall pay any underwriting discounts or selling commissions attributable to the securities it sells for its own account.
3.4 Information. The holders of Registrable Securities shall promptly provide such information as may reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act and in connection with the Company’s obligation to comply with Federal and applicable state securities laws.
3.5 Other Obligations.
3.5.1 At any time and from time to time after the expiration of any lock-up to which such shares are subject, if any, in connection with a sale or transfer of Registrable Securities exempt from registration under the Securities Act or through any broker-dealer transactions described in the plan of distribution set forth within any prospectus and pursuant to the Registration Statement of which such prospectus forms a part, the Company shall, subject to the receipt of customary documentation required from the applicable holders in connection therewith, (i) promptly instruct its transfer agent to remove any restrictive legends applicable to the Registrable Securities being sold or transferred and (ii) cause its legal counsel to deliver the necessary legal opinions, if any, to the transfer agent in connection with the instruction under subclause (i). In addition, the Company shall cooperate reasonably with, and take such customary actions as may reasonably be requested by such holders in connection with the aforementioned sales or transfers.
3.5.2 The stock certificates evidencing the Registrable Securities (and/or book entries representing the Registrable Securities) held by each Investor shall not contain or be subject to any legend restricting the transfer thereof (and the Registrable Securities shall not be subject to any stop transfer or similar instructions or notations): (A) while a Registration
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Statement covering the sale or resale of such securities is effective under the Securities Act, (B) if such Investor provides customary paperwork to the effect that it has sold such shares pursuant to Rule 144, (C) if such Registrable Securities are eligible for sale under Rule 144(b)(1) as set forth in customary non-affiliate paperwork provided by such Investor, (D) if at any time on or after the date that is one year after the Form 10 Disclosure Filing Date such Investor certifies that it is not an affiliate of the Company and that such Investor’s holding period for purposes of Rule 144 in respect of such Registrable Securities is at least six (6) months, 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 Commission) as determined in good faith by counsel to the Company or set forth in a legal opinion delivered by nationally recognized counsel to the Investor (collectively, the “Unrestricted Conditions”). The Company agrees that following the date that the Resale Shelf Registration Statement has been declared effective by the Commission or at such time as any of the Unrestricted Conditions is met or such legend is otherwise no longer required it will, no later than two (2) Business Days following the delivery by an Investor to the Company or its transfer agent of a certificate representing any Registrable Securities, issued with a restrictive legend, (or, in the case of Registrable Securities represented by book entries, delivery by an Investor to the Company or its transfer agent of a legend removal request) deliver or cause to be delivered to such Investor a certificate or, at the request of such Investor, deliver or cause to be delivered such Registrable Securities to such Investor by crediting the account of such Investor’s prime broker with DTC through its Deposit/Withdrawal at Custodian (“DWAC”) system, in each case, free from all restrictive and other legends and stop transfer or similar instructions or notations. If any of the Unrestricted Conditions is met at the time of issuance of any Registrable Securities (e.g., upon exercise of warrants), then such securities shall be issued free of all legends. Each Investor shall have the right to pursue any remedies available to it hereunder, or otherwise at law or in equity, including a decree of specific performance and/or injunctive relief, with respect to the Company’s failure to timely deliver shares of Pubco Common Stock without legend as required pursuant to the terms hereof.
3.5.3 As long as Registrable Securities remain outstanding the Company shall (a) cause the Pubco Common Stock to be eligible for clearing through DTC, through its DWAC system; (b) be eligible and participating in the Direct Registration System of DTC with respect to the Pubco Common Stock; (c) ensure that the transfer agent for the Pubco Common Stock is a participant in, and that the Pubco Common Stock is eligible for transfer pursuant to, DTC’s Fast Automated Securities Transfer Program (or successor thereto); and (d) use its reasonable best efforts to cause the Pubco Common Stock to not at any time be subject to any DTC “chill,” “freeze” or similar restriction with respect to any DTC services, including the clearing of shares of Pubco Common Stock through DTC, and, in the event the Pubco Common Stock becomes subject to any DTC “chill,” “freeze” or similar restriction with respect to any DTC services, use its reasonable best efforts to cause any such “chill,” “freeze” or similar restriction to be removed at the earliest possible time.
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| 4. | INDEMNIFICATION AND CONTRIBUTION. |
4.1 Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Investor and each other holder of Registrable Securities, and each of their respective officers, employees, affiliates, directors, partners, members, attorneys and agents, and each person, if any, who controls an Investor and each other holder of Registrable Securities (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “Investor Indemnified Party”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, (including reasonable and documented costs of investigation and legal expenses and any indemnity and contribution payments made to underwriters) arising out of or based upon any untrue statement (or allegedly untrue statement) of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or 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, or any violation by the Company of the Securities Act or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration; and the Company shall promptly reimburse the Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability is finally judicially determined to have arisen out of or resulted from any untrue statement or allegedly untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by such selling holder expressly for use therein or to the extent related to any selling holder’s violation of the federal securities laws (including Regulation M) or failure to sell the Registrable Securities in accordance with the plan of distribution contained in the prospectus.
4.2 Indemnification by Holders of Registrable Securities. Each selling holder of Registrable Securities will, in the event that any Registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling holder, indemnify and hold harmless to the fullest extent permitted by law the Company, each of its directors and officers, and each other selling holder of Registrable Securities and each other person, if any, who controls such other selling holder within the meaning of the Securities Act, against any losses, claims, judgments, damages or liabilities, only insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement (or allegedly untrue statement) of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or the alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made expressly in reliance upon and in conformity with information furnished in writing to the Company by such selling holder in writing expressly for use therein, or (ii) such selling holder’s failure to sell the Registrable Securities in accordance with the plan of distribution contained in the prospectus, and shall reimburse the Company, its directors and officers, and each other selling holder or controlling person for any legal or other
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expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action. Each selling holder’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such selling holder upon the sale of Registrable Securities giving rise to such indemnification obligations.
4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Sections 4.1 or 4.2, such person (the “Indemnified Party”) shall, if a claim in respect thereof is to be made against any other person for indemnification hereunder, notify such other person (the “Indemnifying Party”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel, which counsel is reasonably acceptable to the Indemnifying Party) to represent the Indemnified Party and its controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.
4.4 Contribution.
4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection
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with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
4.4.2 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Section 4.4.1.
4.4.3 The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
| 5. | UNDERWRITING AND DISTRIBUTION. |
5.1 Rule 144. The Company covenants that it shall timely file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. Upon reasonable prior written request, the Company shall deliver to the Investors a customary written statement as to whether it has complied with such requirements.
| 6. | LOCK-UP AGREEMENTS. |
6.1 Investor Lock-Up. Without limiting the terms of any other Ancillary Document or any other contract, agreement or understanding entered into by any Investor, each Investor agrees that it shall not Transfer any shares of Pubco Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for shares of Pubco Common Stock (including New Securities) until the Lock-Up Release Date applicable to such Investor; provided, however, that the foregoing restrictions shall (i) not apply to any shares of Pubco Common Stock purchased in the PIPE Financing by any Investor, (ii) not apply to 100 shares of
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Pubco Common Stock held by each Investor, (iii) with respect to the Allurion Investors that purchased shares of Pubco Common Stock in the PIPE Financing or Incremental Financing (each, a “Participating Allurion Investor”), not apply to the Allurion Investor Released Shares, (iv) with respect to Sponsor, not apply to the Sponsor Released Shares, (v) not apply to the Backstop Shares or shares of Pubco Common Stock issued pursuant to the Hunter Termination Agreement, and (vi) not apply to shares of Pubco Common Stock contributed to the Company pursuant to the Contribution Agreements. The foregoing restriction is expressly agreed to preclude each Investor from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of such Investor’s shares of Pubco Common Stock even if such shares of Pubco Common Stock would be disposed of by someone other than the undersigned until the Lock-Up Release Date. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Investor’s shares of Pubco Common Stock or with respect to any security that includes, relates to, or derives any significant part of its value from such shares of Pubco Common Stock. The foregoing restrictions shall not apply to Transfers made: (i) pursuant to a bona fide gift or charitable contribution; (ii) by will or intestate succession upon the death of an Investor; (iii) to any Permitted Transferee; (iv) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union; (v) in the case of any Investor that is not a natural person, pro rata to the direct or indirect partners, members or stockholders of an Investor or any related investment funds or vehicles controlled or managed by such persons or their respective affiliates in connection with the liquidation or dissolution thereof; (vi) to the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act; provided that such plan does not provide for the transfer of Pubco Common Stock until the Lock-Up Release Date; (vii) to the transfer of Pubco Common Stock or other securities convertible into or exercisable or exchangeable for Pubco Common Stock acquired in open market transactions after the Closing; or (viii) in the event of the Company’s completion of a liquidation, merger, share exchange or other similar transaction which results in all of its stockholders having the right to exchange their shares of Pubco Common Stock for cash, securities or other property; provided that in the case of (i) through (v), the recipient of such Transfer must enter into a written agreement agreeing to be bound by the terms of this Agreement in form and substance reasonably satisfactory to the Company, including the transfer restrictions set forth in this Section 6.1.
6.2 Release. If, prior to the Lock-Up Release Date applicable to an Investor, the Company consents to any release or waiver of any of the restrictions set forth in Section 6.1 for such Investor (any such release, a “Triggering Release”; and, such party receiving such release, the “Triggering Release Party”), then shares of Pubco Common Stock held by each other Investor shall also be released from the restrictions set forth in Section 6.1 in the same manner and on the same terms (including with respect to any conditions or provisos that apply to such Triggering Release), such number of shares of Pubco Common Stock released for each other Investor being the total number of shares of Pubco Common Stock held by such Investor on the date of such Triggering Release multiplied by a fraction, the numerator of which shall be the number of shares of Pubco Common Stock, options, restricted stock units or warrants to purchase or receive any shares of Pubco Common Stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of Pubco Common Stock, released
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pursuant to the Triggering Release, and the denominator of which shall be the total number of shares of Pubco Common Stock, options, restricted stock units or warrants to purchase or receive any shares of Pubco Common Stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of Pubco Common Stock held by the Triggering Release Party on such date. Notwithstanding the foregoing, the provisions of this paragraph will not apply, and a release or waiver will not be deemed to be a Triggering Release: (i) if the release or waiver is effected solely to permit a transfer not involving a disposition for value, (ii) in the case of any primary and/or secondary underwritten public offering of shares of Pubco Common Stock, provided that such waiver or release shall only apply with respect to such Investor’s participation in such underwritten sale or (iii) if the release or waiver is granted to any individual party by the Company in an amount, individually or in the aggregate with other releases and waivers to other individuals, less than or equal to 1% of the total number of outstanding shares of Pubco Common Stock.
| 7. | BOARD MATTERS. |
7.1 Initial Composition. As of the Effective Time, the board of directors of the Company (the “Board”) shall consist of seven (7) directors, a majority of whom shall be “independent” directors for purposes of NYSE rules (each, an “Independent Director”), to initially consist of:
(i) One (1) director to be nominated by Shantanu Gaur (the “Gaur Nominee”);
(ii) One (1) director to be nominated by Remus Capital (the “Remus Nominee”);
(iii) One (1) director to be nominated by the Sponsor (the “Sponsor Nominee”);
(iv) One (1) Independent Director to be nominated by Shantanu Gaur (the “Gaur Independent Nominee”);
(v) One (1) Independent Director to be nominated by Remus Capital (the “Remus Independent Nominee”); and
(vi) Two (2) Independent Directors to be nominated by Allurion (the “Company Independent Nominees”), one of which is to be designated by RTW in accordance with the RTW Side Letter (the “RTW Designated Director”);
in each case, who shall serve in such capacity in accordance with the terms of this Agreement, the Business Combination Agreement, the Pubco Governing Documents (as defined in the Business Combination Agreement), applicable law and NYSE rules.
7.2 Independent Nominees.
(a) Shantanu Gaur shall have the right and ability to recommend a Gaur Independent Nominee. If the Gaur Independent Nominee (or any Replacement Gaur Independent Nominee) is unable or unwilling to serve as a director and ceases to be a director, resigns as a director, is removed as a director, or for any other reason fails to serve as a director, Shantanu Gaur shall have the ability to recommend a substitute person in accordance with this Section 7.2(a) (any such replacement nominee shall be referred to as a “Replacement Gaur Independent Nominee”).
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(b) Until such time as Remus Capital beneficially owns in the aggregate less than the Remus Minimum Ownership Threshold, then (A) Remus Capital shall have the right and ability to recommend a Remus Independent Nominee and (B) if the Remus Independent Nominee (or any Replacement Remus Independent Nominee) is unable or unwilling to serve as a director and ceases to be a director, resigns as a director, is removed as a director, or for any other reason fails to serve as a director, Remus Capital shall have the ability to recommend a substitute person in accordance with this Section 7.2(b) (any such replacement nominee shall be referred to as a “Replacement Remus Independent Nominee”).
(c) Until such time as the RTW Designation Condition is no longer satisfied, then unless the RTW Designated Director is otherwise nominated as an Independent Director, a Gaur Independent Nominee or a Remus Independent Nominee, RTW (A) shall have the right and ability to recommend the RTW Designated Director, who the Company shall cause to be nominated as a Company Independent Nominee and (B) if the RTW Designated Director (or any Replacement RTW Designated Director) is unable or unwilling to serve as a director and ceases to be a director, resigns as a director, is removed as a director, or for any other reason fails to serve as a director, RTW shall have the ability to recommend a substitute person in accordance with this Section 7.2(c) (any such replacement nominee shall be referred to as a “Replacement RTW Designated Director”) and the Company shall cause such substitute person to be nominated as a Company Independent Nominee (any such replacement nominee shall be referred to as a “Replacement Company Independent Nominee”).
(d) Any Replacement Gaur Independent Nominee, Replacement Remus Independent Nominee or Replacement Company Independent Nominee, as the case may be, must (A) qualify as “independent” pursuant to NYSE rules, (B) satisfy requirements under applicable Law and (C) be independent of Shantanu Gaur, Remus Capital or the Company, as applicable. The Nominating and Governance Committee of the Company (the “Nominating and Governance Committee”) shall make its determination and recommendation regarding whether such Replacement Gaur Independent Nominee, Replacement Remus Independent Nominee or Replacement Company Independent Nominee, as the case may be, meets the foregoing criteria within fifteen (15) business days after (1) such nominee has submitted to the Company (x) a fully completed copy of the Company’s standard director and officer questionnaire and other reasonable and customary director onboarding documentation (including an authorization form to conduct a background check, a representation agreement, consent to be named as a director in the Company’s proxy statement and certain other agreements) applicable to new directors of the Company and (y) a written representation that such nominee, if elected as a director of the Company, would be in compliance, and will comply, with all applicable Company guidelines and policies and (2) representatives of the Board have conducted customary interview(s) of such nominee, if such interviews are requested by the Board or the Nominating and Governance Committee. The Company shall use its reasonable best efforts to conduct any interview(s) contemplated by this Section 7.2(d) as promptly as reasonably practicable. In the event the Nominating and Governance Committee does not accept a person recommended by
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Shantanu Gaur as the Replacement Gaur Independent Nominee, Remus Capital as the Replacement Remus Independent Nominee or RTW as the Replacement Company Independent Nominee, as the case may be, Shantanu Gaur, Remus Capital or RTW, as applicable, shall have the right to recommend additional substitute person(s) whose appointment shall be subject to the Nominating and Governance Committee recommending such person in accordance with the procedures described above. Upon the recommendation of a Replacement Gaur Independent Nominee, Replacement Remus Independent Nominee or Replacement Company Independent Nominee, as the case may be, by the Nominating and Governance Committee, the Board shall vote on the appointment of such Replacement Gaur Independent Nominee, Replacement Remus Independent Nominee or Replacement Company Independent Nominee, as the case may be, to the Board promptly after the Nominating and Governance Committee recommendation of such Replacement Gaur Independent Nominee, Replacement Remus Independent Nominee or Replacement Company Independent Nominee, as the case may be; provided, however, that if the Board does not appoint such Replacement Gaur Independent Nominee, Replacement Remus Independent Nominee or Replacement Company Independent Nominee, as the case may be, to the Board pursuant to this Section 7.2(d), Shantanu Gaur, Remus Capital or RTW, as applicable, shall continue to follow the procedures of this Section 7.2(d) until a Replacement Gaur Independent Nominee, Replacement Remus Independent Nominee or Replacement Company Independent Nominee, as applicable, is elected to the Board.
7.2.2 Company Obligations. The Company agrees:
(a) that until such time as Remus Capital no longer meets the Remus Minimum Ownership Threshold, and provided that the Remus Independent Nominee is able and willing to continue to serve on the Board, the Company will include each applicable Remus Independent Nominee in the Company’s slate of director nominees to stand for election to the Board at any meeting of Company stockholders at which directors are to be elected;
(b) that until such time as Shantanu Gaur no longer meets the Gaur Minimum Ownership Threshold, and provided that the Gaur Independent Nominee is able and willing to continue to serve on the Board, the Company will include each applicable Gaur Independent Nominee in the Company’s slate of director nominees to stand for election to the Board at any meeting of Company stockholders at which directors are to be elected;
(c) that until such time as RTW no longer meets the RTW Designation Condition, and provided that the RTW Designated Director is able and willing to continue to serve on the Board, the Company will include each applicable RTW Designated Director as a Company Independent Nominee in the Company’s slate of director nominees to stand for election to the Board at any meeting of Company stockholders at which directors are to be elected;
(d) to recommend, support and solicit proxies for each such Gaur Independent Nominee, Remus Independent Nominee or RTW Designated Director as a Company Independent Nominee, in each such case, in substantially the same manner as it recommends, supports and solicits proxies for any other members of such slate of director nominees;
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(e) to cause to be nominated a lead Independent Director (the “Lead INED”) of the Board, who shall serve at all times as chair or co-chair of the Board, and who initially shall be Omar Ishrak. The Company shall cause the Lead INED to be nominated as the Sponsor Nominee; and
(f) from time to time and at all times on or prior to the second (2nd) anniversary of the Closings (as defined in the Business Combination Agreement), to cause Omar Ishrak to be the Lead INED; provided, that, at the time when such annual or special meeting of stockholders at which an election of directors is held or at the time when such written consent of the stockholders to elect one or more directors is entered into, Omar Ishrak (i) has not refused and continues to refuse to stand for re-election, (ii) is not unable to discharge the duties of the Lead INED due to death or incapacity or (iii) is not ineligible to serve as the Lead INED.
7.2.3 Certain Investor Obligations.
(a) Remus Capital agrees and commits solely with the Company (and not any other party) that such party will appear in person or by proxy at any meeting of Company stockholders at which directors are to be elected and vote all shares beneficially owned by such party in favor of each of the nominees on the slate of director nominees nominated by the Company and otherwise in accordance with the Board’s recommendation on any other proposal relating to the appointment, election or removal of directors. The obligation for the Remus Capital to comply with this Section 7.2.3(a) shall automatically terminate without any further action at such time as Remus Capital no longer meets the Remus Minimum Ownership Threshold.
(b) Remus Capital agrees and commits solely with the Company (and not any other party) that prior to any Remus Independent Nominee (including any Replacement Remus Independent Nominee) being appointed to the Board, the Remus Independent Nominee shall have submitted to the Board a duly executed irrevocable resignation letter pursuant to which such nominee shall resign from the Board and all applicable committees thereof automatically and effective immediately if Remus Capital fails to have the right to nominate such nominee to the Board. Remus Capital shall promptly (and in any event within five (5) business days) provide written notice to the Company if Remus Capital fails to satisfy the Remus Minimum Ownership Threshold at any time.
7.3 Other Nominees.
7.3.1 Other Nominees.
(a) Remus Capital. Until such time as the Remus Director Nomination Number is zero (0), then (A) Remus Capital shall have the right and ability to recommend a number of Remus Nominees equal to the Remus Director Nomination Number and (B) if any Remus Nominee (or any Replacement Remus Nominee) is unable or unwilling to serve as a director and ceases to be a director, resigns as a director, is removed as a director, or for any other reason fails to serve as a director, Remus Capital shall have the ability to recommend a substitute person in accordance with this Section 7.3 (any such replacement nominee shall be referred to as a “Replacement Remus Nominee”).
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(b) Sponsor.
(i) Until such time as the Sponsor Director Nomination Number is zero (0), then (A) the Sponsor shall have the right and ability to recommend a number of Sponsor Nominees equal to the Sponsor Director Nomination Number and (B) if any Sponsor Nominee (or any Replacement Sponsor Nominee) is unable or unwilling to serve as a director and ceases to be a director, resigns as a director, is removed as a director, or for any other reason fails to serve as a director, the Sponsor shall have the ability to recommend a substitute person in accordance with this Section 7.3 (any such replacement nominee shall be referred to as a “Replacement Sponsor Nominee”).
(ii) The initial Sponsor Nominee shall be Omar Ishrak.
(iii) The Sponsor agrees, from time to time and at all times on or prior to the second (2nd) anniversary of the Closings (as defined in the Business Combination Agreement), to cause Omar Ishrak to be the Sponsor Nominee; provided, that, at the time when such annual or special meeting of stockholders at which an election of directors is held or at the time when such written consent of the stockholders to elect one or more directors is entered into, Omar Ishrak (i) has not refused and continues to refuse to stand for re-election, (ii) is not unable to discharge the duties of the Sponsor Nominee due to death or incapacity or (iii) is not ineligible to serve as the Sponsor Nominee.
(c) Gaur Nominee. Until such time as the Gaur Director Nomination Number is zero (0), then (A) Shantanu Gaur shall have the right and ability to recommend a number of Gaur Nominees equal to the Gaur Director Nomination Number and (B) if any Gaur Nominee (or any Replacement Gaur Nominee) is unable or unwilling to serve as a director and ceases to be a director, resigns as a director, is removed as a director, or for any other reason fails to serve as a director, Shantanu Gaur shall have the ability to recommend a substitute person in accordance with this Section 7.3 (any such replacement nominee shall be referred to as a “Replacement Gaur Nominee”).
7.3.2 Replacement Nominees.
(a) Any Replacement Remus Nominee, Replacement Sponsor Nominee or Replacement Gaur Nominee, as the case may be, must satisfy requirements under applicable Law. The Nominating and Governance Committee of the Company shall make its determination and recommendation regarding whether such Replacement Remus Nominee, Replacement Sponsor Nominee or Replacement Gaur Nominee, as the case may be, meets the foregoing criteria within fifteen (15) business days after such nominee has submitted to the Company (x) a fully completed copy of the Company’s standard director and officer questionnaire and other reasonable and customary director onboarding documentation (including an authorization form to conduct a background check, a representation agreement, consent to be
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named as a director in the Company’s proxy statement and certain other agreements) applicable to new directors of the Company and (y) a written representation that such nominee, if elected as a director of the Company, would be in compliance, and will comply, with all applicable Company guidelines and policies. If the Nominating and Governance Committee determines that such person meets such criteria, the Board shall vote to elect such person to the Board promptly following the Nominating and Governance Committee’s determination. In the event the Nominating and Governance Committee determines that such person does not meet such criteria, Remus Capital, Sponsor or Shantanu Gaur, as applicable, shall have the right to recommend additional substitute person(s) whose appointment shall be subject to the Nominating and Governance Committee recommending such person in accordance with the procedures described above.
7.3.3 Company Obligations. The Company agrees:
(a) that until such time as the Remus Director Nomination Number is zero (0), and provided that the Remus Nominee is able and willing to continue to serve on the Board, the Company will include such Remus Nominee in the Company’s slate of director nominees to stand for election to the Board at any meeting of Company stockholders at which directors are to be elected;
(b) that until such time that the Sponsor Director Nomination Number is zero (0), and provided that the Sponsor Nominee is able and willing to continue to serve on the Board, the Company will include the Sponsor Nominee in the Company’s slate of director nominees to stand for election to the Board at any meeting of Company stockholders at which directors are to be elected;
(c) that until such time that the Gaur Director Nomination Number is zero (0), and provided that the Gaur Nominee is able and willing to continue to serve on the Board, the Company will include the Gaur Nominee in the Company’s slate of director nominees to stand for election to the Board at any meeting of Company stockholders at which directors are to be elected; and
(d) to recommend, support and solicit proxies for each such Remus Nominee, Sponsor Nominee or Gaur Nominee, in each such case, in substantially the same manner as it recommends, supports and solicits proxies for any other members of such slate of director nominees.
7.3.4 Certain Investor Obligations.
(a) Each of Remus Capital, Sponsor or Shantanu Gaur, severally and not jointly, agrees and commits solely with the Company (and not any other party) that such party will appear in person or by proxy at any meeting of Company stockholders at which directors are to be elected and vote all shares beneficially owned by such party in favor of each of the nominees on the slate of director nominees nominated by the Company and otherwise in accordance with the Board’s recommendation on any other proposal relating to the appointment, election or removal of directors. The obligation for Remus Capital to comply with this
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Section 7.3.4(a) shall automatically terminate without any further action at such time as the Remus Director Nomination Number is zero (0). The obligation for the Sponsor to comply with this Section 7.3.4(a) shall automatically terminate without any further action at such time as the Sponsor Director Nomination Number is zero (0). The obligation for Shantanu Gaur to comply with this Section 7.3.4(a) shall automatically terminate without any further action at such time as the Gaur Director Nomination Number is zero (0).
(b) Each of Remus Capital, Sponsor or Shantanu Gaur, severally and not jointly, agrees and commits solely with the Company (and not any other party) that (x) solely in the case of Remus Capital, prior to any Remus Nominees (including any Replacement Remus Nominees) being appointed to the Board, (y) solely in the case of the Sponsor, prior to any Sponsor Nominee (including any Replacement Sponsor Nominee) being appointed to the Board, or (z) solely in the case of the Gaur Nominee, prior to any Gaur Nominee (including any Replacement Gaur Nominee) being appointed to the Board, the Remus Nominee, the Sponsor Nominee and/or the Gaur Nominee, as the case may be, shall have submitted to the Board a duly executed irrevocable resignation letter pursuant to which such nominee(s) shall resign from the Board and all applicable committees thereof automatically and effective immediately if Remus Capital (solely in the case of the Remus Nominees), the Sponsor (solely in the case of the Sponsor Nominee) or Shantanu Gaur (solely in the case of the Gaur Nominee), fail(s) to have the right to nominate such nominee(s) to the Board. Remus Capital shall promptly (and in any event within five (5) business days) provide written notice to the Company if the Remus Director Nomination Number is reduced to zero (0) at any time. The Sponsor shall promptly (and in any event within five (5) business days) provide written notice to the Company if the Sponsor Director Nomination Number is reduced to zero (0) at any time. Shantanu Gaur shall promptly (and in any event within five (5) business days) provide written notice to the Company if the Gaur Director Nomination Number is reduced to zero (0) at any time.
7.4 Directors Removal.
7.4.1 Director Removal by Certain Parties.
(a) Shantanu Gaur. If Shantanu Gaur desires to elect or nominate a different individual to replace any then-existing Gaur Nominee or Gaur Independent Nominee, then, at the request of Shantanu Gaur, Shantanu Gaur and the Company (acting through the Board) shall work together in good faith to fill such vacancy or replace such nominee as promptly as reasonably practical with a Replacement Gaur Nominee or Replacement Gaur Independent Nominee (as applicable) subject to the terms and conditions hereof, and thereafter such individual shall as promptly as reasonably practical be appointed to the Board to fill such vacancy and/or be elected or nominated as a Company nominee as a “Replacement Gaur Nominee” or “Replacement Gaur Independent Nominee” pursuant to this Section 7 (as applicable).
(b) Remus Capital. If Remus Capital desires to elect or nominate a different individual to replace any then-existing Remus Nominee or Remus Independent Nominee, then, at the request of Remus Capital, Remus Capitaland the Company (acting through the Board) shall work together in good faith to fill such vacancy or replace such nominee as
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promptly as reasonably practical with a Replacement Remus Nominee or Replacement Remus Nominee (as applicable) subject to the terms and conditions hereof, and thereafter such individual shall as promptly as reasonably practical be appointed to the Board to fill such vacancy and/or be elected or nominated as a Company nominee as a “Replacement Remus Nominee” or “Replacement Remus Independent Nominee” pursuant to this Section 7.
| 8. | MISCELLANEOUS. |
8.1 Other Registration Rights and Arrangements. The Company represents and warrants that no person, other than a holder of the Registrable Securities, the investors of the PIPE Financing and Fortress pursuant to the Fortress Credit Agreement (as such terms are defined in the Business Combination Agreement) has any right to require the Company to register any of the Company’s capital stock for sale or to include the Company’s capital stock in any registration filed by the Company for the sale of capital stock for its own account or for the account of any other person. The parties hereby terminate the Prior Agreements, each of which shall be of no further force and effect and is hereby superseded and replaced in its entirety by this Agreement. The Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement and in the event of any conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.
8.2 Assignment; No Third-Party Beneficiaries. This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of the holders of Registrable Securities hereunder may be freely assigned or delegated by such holder of Registrable Securities in conjunction with and to the extent of any permitted transfer of Registrable Securities by any such holder to a Permitted Transferee. Any attempted assignment of this Agreement not in accordance with the terms of this Section 8.2 shall be void. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective successors and assigns and the holders of Registrable Securities and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or benefits on any persons that are not party hereto other than as expressly set forth in Section 4 and this Section 8.2. The rights of a holder of Registrable Securities under this Agreement may be transferred by such a holder to a transferee who acquires or holds Registrable Securities; provided, however, that such transferee has executed and delivered to the Company a properly completed agreement to be bound by the terms of this Agreement substantially in form attached hereto as Exhibit A (an “Addendum Agreement”), and the transferor shall have delivered to the Company no later than fifteen (15) days following the date of the transfer, written notification of such transfer setting forth the name of the transferor, the name and address of the transferee, and the number of Registrable Securities so transferred. The execution of an Addendum Agreement shall constitute a permitted amendment of this Agreement.
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8.3 Amendments and Modifications. Upon the written consent of the Company and the Investors holding a majority in interest of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, that (a) the provisions of Sections 7.2 and 7.3 and related definitions as it relates to the Gaur Independent Nominee or Gaur Nominee may not be amended, modified, terminated or waived without the written consent of Shantanu Gaur; (b) the provisions of Sections 7.2 and 7.3 and related definitions as it relates to the Remus Independent Nominee or Remus Nominee may not be amended, modified, terminated or waived without the written consent of Remus Capital; (c) the provisions of Section 7.3 and related definitions as it relates to the Sponsor Nominee may not be amended, modified, terminated or waived without the written consent of the Sponsor; (d) any amendment hereto or waiver hereof that adversely affects an Investor, solely in his, her or its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from other Investors (in such capacity) shall require the consent of such Investor so affected; and (e) any waiver, amendment or repeal of the restrictions set forth in Section 6.1 (or of this Section 8.3 in respect of this proviso) shall require the prior written consent of the Sponsor. This Agreement may not be modified or amended except as provided in the immediately preceding sentence and any purported amendment by any party hereto effected in a manner which does not comply with this Section 8.3 shall be void, ab initio. No course of dealing between any Investor or the Company and any other party hereto or any failure or delay on the part of an Investor or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Investor or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.
8.4 Term. This Agreement shall terminate upon the earlier of (i) the seventh anniversary of the date of this Agreement, (ii) a Change of Control (as defined in the Business Combination Agreement) or (iii) the date as of which there shall be no Registrable Securities outstanding; provided, further that with respect to any Investor, such Investor will have no rights under this Agreement and all obligations of the Company to such Investor under this Agreement shall terminate upon the earlier of (x) the date at least one year after the date hereof that such Investor ceases to hold at least 1% of the Registrable Securities outstanding on the date hereof or (y) if such Investor is a director or an executive officer of the Company, the date such Investor no longer serves as a director or an executive officer of the Company; provided, however, that such termination as to an Investor shall not apply to the following provisions until such Investor no longer holds any Registrable Securities: Sections 3.1.4, 3.1.5, 3.1.10, 3.1.12, 3.1.14, 3.2, 3.3, 3.4, 3.5, 8.3, 8.5 and Articles IV and V. Notwithstanding the foregoing, (a) the piggy-back registration rights provided for in Section 2.3 of this Agreement shall terminate no later than the third anniversary of the date of this Agreement and (b) the obligations set forth in Article VII shall survive until the earlier of a termination of this Agreement in accordance with clauses (i) or (ii) above or with respect to an Investor at such time as such Investor is no longer entitled to nominate a director to the Board.
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8.5 Notices. All notices, demands, requests, claims and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given) (i) by delivery in person, (ii) by e-mail (having obtained electronic delivery confirmation thereof, but excluding any automated reply, such as an out-of-office notification), (iii) by FedEx or other nationally recognized overnight delivery service or (iv) posting in the United States mail (having been sent registered or certified mail return receipt requested, postage prepaid) (upon receipt thereof), to the parties as follows:
If to the Company:
Allurion Technologies, Inc.
11 Huron Drive
Natick, MA 01760
Attention: Chief Executive Officer
Email: sgaur@allurion.com
with a copy to:
Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
Attention: Danielle M. Lauzon and Paul R. Rosie
E-mail: dlauzon@goodwinlaw.com, prosie@goodwinlaw.com
If to an Investor, to the address set forth under such Investor’s signature to this Agreement or to such Investor’s address as found in the Company’s books and records.
8.6 Severability. Whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable Law, but if any term or other provision of this Agreement is held to be invalid, illegal or unenforceable under applicable Law, then all other provisions of this Agreement shall remain in full force and effect. Furthermore, upon such determination that any term or other provision of this Agreement is invalid, illegal or unenforceable under applicable Law, the parties hereto shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law and, to the extent necessary, negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.
8.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement.
8.8 Entire Agreement. This Agreement (including all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, representations, undertakings, understandings and other arrangements, both oral and written, among the parties hereto with respect to the subject matter hereof, including, without limitation the Prior Agreements.
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[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Investor Rights and Lock-up Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.
| ALLURION TECHNOLOGIES, INC. | ||
| By: | /s/ Shantanu Gaur | |
| Name: Shantanu Gaur | ||
| Title: CEO | ||
SIGNATURE PAGE TO INVESTOR RIGHTS AND LOCK-UP AGREEMENT
| INVESTORS: |
SIGNATURE PAGE TO INVESTOR RIGHTS AND LOCK-UP AGREEMENT
EXHIBIT A
Addendum Agreement
This Addendum Agreement (“Addendum Agreement”) is executed on __________________, 20___, by the undersigned (the “New Holder”) pursuant to the terms of that certain Investor Rights and Lock-up Agreement dated as of August 1, 2023 (the “Agreement”), by and among the Company and the Investors identified therein, as such Agreement may be amended, supplemented or otherwise modified from time to time. Capitalized terms used but not defined in this Addendum Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Addendum Agreement, the New Holder agrees as follows:
1. Acknowledgment. New Holder acknowledges that New Holder is acquiring certain shares of common stock of the Company (the “Pubco Common Stock”) as a transferee of such shares of Pubco Common Stock from a party in such party’s capacity as a holder of Registrable Securities under the Agreement, and after such transfer, New Holder shall be considered an “Investor” and a holder of Registrable Securities for all purposes under the Agreement.
2. Agreement. New Holder hereby (a) agrees that the shares of Pubco Common Stock shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if the New Holder were originally a party thereto.
3. Notice. Any notice required or permitted by the Agreement shall be given to New Holder at the address or facsimile number listed below New Holder’s signature below.
| NEW HOLDER: | ACCEPTED AND AGREED: | |||||||
| Print Name: | ALLURION TECHNOLOGIES, INC. | |||||||
| By: | By: | |||||||
| Name: | ||||||||
| Title: |
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Exhibit 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made between Allurion Technologies, Inc., a Delaware corporation (the “Company”), and Shantanu Gaur, M.D. (the “Executive”) and is made effective as of the closing of the transactions contemplated by that certain Business Combination Agreement, dated as of February 9, 2023, by and between the Company, Compute Health Acquisition Corp (“CPUH”), Allurion Technologies Holdings, Inc. (“New Allurion”) and certain other specified parties thereto (the “Business Combination Agreement”). Except with respect to the Restrictive Covenants and the Equity Documents (each as defined below), this Agreement supersedes in all respects all prior agreements between the Executive and the Company and any of its subsidiaries regarding the subject matter herein, including, without limitation, the Employment Agreement, effective January 1, 2017, by and between the Company and the Executive (the “Prior Agreement”).
WHEREAS, effective upon the consummation of the transactions contemplated by the Business Combination Agreement (the “Effective Date”), the Company desires to continue to employ the Executive and the Executive desires to continue to be employed by the Company on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment.
(a) Term. The Company shall employ the Executive and the Executive shall be employed by the Company pursuant to this Agreement commencing as of the Effective Date and continuing until such employment is terminated in accordance with the provisions hereof (the “Term”). The Executive’s employment with the Company will be “at will,” meaning that the Executive’s employment may be terminated by the Company or the Executive at any time and for any reason, subject to the terms of this Agreement.
(b) Position and Duties. The Executive shall serve as the Chief Executive Officer of the Company and New Allurion and shall have such powers and duties as may from time to time be prescribed by the Board of Directors of New Allurion (the “Board”). The Executive shall devote his full working time and efforts to the business and affairs of the Company and New Allurion. Notwithstanding the foregoing, the Executive may serve on other boards of directors, with the approval of the Board, or engage in religious, charitable or other community activities as long as such services and activities are disclosed to the Board and do not materially interfere with the Executive’s performance of his duties to the Company as provided in this Agreement.
2. Compensation and Related Matters.
(a) Base Salary. The Executive’s initial annual base salary shall be paid at the annualized rate of $620,000 per year. The Executive’s base salary shall be subject to review at least annually by the Board or the Compensation Committee of the Board (the “Compensation Committee”). The base salary in effect at any given time is referred to herein as “Base Salary.” The Base Salary shall be payable in a manner that is consistent with the Company’s usual payroll practices for executive officers.
(b) Annual Bonus Opportunity. During the Term and subject to the Company’s Senior Executive Cash Incentive Bonus Plan, the Executive shall be eligible to receive an annual cash bonus as determined by the Board or the Compensation Committee from time to time. The Executive’s target annual bonus will be shall be eighty percent (80%) of his Base Salary. The target annual bonus in effect at any given time is referred to herein as “Target Bonus.” Except as may otherwise be provided by the Board or Compensation Committee or as may otherwise be set forth in the applicable incentive bonus plan, the Executive must be employed by the Company on the day such annual bonus is paid in order to earn or receive any annual bonus.
(c) Expenses. The Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him during the Term in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its executive officers (provided that Executive substantiates expenses within 60 days after any such expense is incurred).
(d) Other Benefits. The Executive shall be eligible to participate in or receive benefits under the Company’s employee benefit plans in effect from time to time, subject to the terms of such plans.
(e) Paid Time Off. The Executive shall be entitled to take paid time off in accordance with the Company’s applicable paid time off policy for executives, as may be in effect from time to time.
(f) Equity. The equity awards held by the Executive shall continue to be governed by the terms and conditions of the Company’s applicable equity incentive plan(s) and the applicable award agreement(s) governing the terms of such equity awards (collectively, the “Equity Documents”); provided, however, and notwithstanding anything to the contrary in the Equity Documents, Section 6(a)(ii) of this Agreement shall apply in the event of a termination by the Company without Cause or by the Executive for Good Reason in either event within the Change in Control Period (as such terms are defined below).
3. Termination. The Executive’s employment hereunder may be terminated without any breach of this Agreement under the following circumstances:
(a) Death. The Executive’s employment hereunder shall terminate upon the Executive’s death.
(b) Disability. The Company may terminate the Executive’s employment if the Executive is disabled and unable to perform or expected to be unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of 180 days (which need not be consecutive) in any 12-month period. If any question shall arise as to whether during any period the Executive is disabled so as to be unable to perform the essential functions of the Executive’s then existing position or positions with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a
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physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this Section 3(b) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.
(c) Termination by the Company for Cause. The Company may terminate the Executive’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean any of the following:
(i) conduct by the Executive constituting a material act of misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes;
(ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he were retained in his position;
(iii) continued non-performance by the Executive of his duties hereunder (other than by reason of the Executive’s physical or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the Board;
(iv) a breach by the Executive of any of the Restrictive Covenants or any of the other provisions contained in Section 8 of this Agreement;
(v) a material violation by the Executive of any of the Company’s written employment policies; or
(vi) failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.
(d) Termination Without Cause. The Company may terminate the Executive’s employment hereunder at any time without Cause. Any termination by the Company of the Executive’s employment under this Agreement which does not constitute a termination for Cause under Section 3(c) and does not result from the death or disability of the Executive under Section 3(a) or (b) shall be deemed a termination without Cause.
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(e) Termination by the Executive. The Executive may terminate his employment hereunder at any time for any reason, including but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Executive has completed all steps of the Good Reason Process (hereinafter defined) following the occurrence of any of the following events without the Executive’s consent (each, a “Good Reason Condition”):
(i) a material diminution in the Executive’s responsibilities, authority or duties;
(ii) a material diminution in the Executive’s Base Salary except for across-the-board salary reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company;
(iii) a material change in the geographic location at which the Executive provides services to the Company; or
(iv) the material breach of this Agreement by the Company.
The “Good Reason Process” consists of the following steps:
(i) the Executive reasonably determines in good faith that a Good Reason Condition has occurred;
(ii) the Executive notifies the Company in writing of the first occurrence of the Good Reason Condition within 60 days of the first occurrence of such condition;
(iii) the Executive cooperates in good faith with the Company’s efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the Good Reason Condition;
(iv) notwithstanding such efforts, the Good Reason Condition continues to exist; and
(v) the Executive terminates employment within 60 days after the end of the Cure Period.
If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.
4. Matters related to Termination.
(a) Notice of Termination. Except for termination as specified in Section 3(a), any termination of the Executive’s employment by the Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.
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(b) Date of Termination. “Date of Termination” shall mean: (i) if the Executive’s employment is terminated by death, the date of death; (ii) if the Executive’s employment is terminated on account of disability under Section 3(b) or by the Company for Cause under Section 3(c), the date on which Notice of Termination is given; (iii) if the Executive’s employment is terminated by the Company without Cause under Section 3(d), the date on which a Notice of Termination is given or the date otherwise specified by the Company in the Notice of Termination; (iv) if the Executive’s employment is terminated by the Executive under Section 3(e) other than for Good Reason, 30 days after the date on which a Notice of Termination is given, and (v) if the Executive’s employment is terminated by the Executive under Section 3(e) for Good Reason, the date on which a Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.
(c) Accrued Obligations. If the Executive’s employment with the Company is terminated for any reason, the Company shall pay or provide to the Executive (or to the Executive’s authorized representative or estate) (i) any Base Salary earned through the Date of Termination and, if applicable, any accrued but unused vacation through the Date of Termination, (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 2(c) of this Agreement); and (iii) any vested benefits the Executive may have under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Obligations”).
(d) Resignation of All Other Positions. To the extent applicable, the Executive shall be deemed to have resigned from all officer and board member positions that the Executive holds with the Company or any of its respective subsidiaries and affiliates upon the termination of the Executive’s employment for any reason. The Executive shall execute any documents in reasonable form as may be requested to confirm or effectuate any such resignations.
5. Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason. If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d), or the Executive terminates employment for Good Reason as provided in Section 3(e), then, in addition to the Accrued Obligations, and subject to the Executive signing a separation agreement and release in a form and manner satisfactory to the Company, which shall include, without limitation, a general release of claims against the Company and all related persons and entities, a reaffirmation of all of the Executive’s Continuing Obligations (as defined below), and shall provide that if the Executive breaches any of the Continuing Obligations, all payments of the Severance Amount shall immediately cease confidentiality, return of property and non-disparagement, in a form and manner satisfactory to the Company (the “Separation Agreement”), and the Separation Agreement becoming irrevocable, all within 60 days after the Date of Termination (or such shorter period as set forth in the Separation Agreement):
(a) the Company shall pay the Executive an amount equal to 12 months of the Executive’s Base Salary; and
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(b) if the Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and timely elects to receive continued health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall pay to the group health plan provider or the COBRA provider a monthly payment equal to the full cost of such continuation coverage plus any administration fee until the earliest of (A) the 12 month anniversary of the Date of Termination; (B) the date that the Executive becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health continuation rights under COBRA; provided, however, that if the Company determines that it cannot pay such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then the Company shall convert such payments to payroll payments directly to the Executive for the time period specified above. Such payments to the Executive shall be subject to tax-related deductions and withholdings and paid on the Company’s regular payroll dates.
The amounts payable under this Section 5, to the extent taxable, shall be paid out in substantially equal installments in accordance with the Company’s payroll practice over 12 months commencing within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments, to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall begin to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
6. Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason within the Change in Control Period. The provisions of this Section 6 shall apply in lieu of, and expressly supersede, the provisions of Section 5 if (i) the Executive’s employment is terminated either (a) by the Company without Cause as provided in Section 3(d), or (b) by the Executive for Good Reason as provided in Section 3(e), and (ii) the Date of Termination is within 3 months prior to the first event constituting a Change in Control or on or within 12 months after the occurrence of the first event constituting a Change in Control (such period, the “Change in Control Period”). The provisions of this Section 6 shall terminate and be of no further force or effect after the Change in Control Period. For the avoidance of doubt, in no event will the Executive be entitled to severance benefits under both Section 5 and Section 6 of this Agreement.
(a) If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d) or the Executive terminates employment for Good Reason as provided in Section 3(e) and in each case the Date of Termination occurs during the Change in Control Period, then, in addition to the Accrued Obligations, and subject to the signing of the Separation Agreement by the Executive and the Separation Agreement becoming irrevocable, all within 60 days after the Date of Termination (or such shorter period as set forth in the Separation Agreement):
(i) the Company shall pay the Executive an amount equal to 1.5 times the sum of (A) the Executive’s then-current Base Salary (or the Executive’s Base Salary in effect immediately prior to the Change in Control, if higher) plus (B) the Executive’s Target Bonus for the then-current year (or the Executive’s Target Bonus in effect immediately prior to the Change in Control, if higher). Such amounts shall generally be paid in a lump sum cash payment; provided, however, that if the Date of Termination is within 3 months prior to the first event constituting a Change in Control, then, to the extent such payments qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, the portion of such payment equal to the aggregate amount that would otherwise be payable pursuant to Section 5(a) shall be paid in substantially equal installments in accordance with the Company’s payroll practice over 12 months; and
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(ii) notwithstanding anything to the contrary in any applicable option agreement or other stock-based award agreement, all stock options and other stock-based awards held by the Executive that are subject solely to time-based vesting (the “Time-Based Equity Awards”) shall immediately accelerate and become fully vested and exercisable or nonforfeitable as of the later of (i) the Date of Termination or (ii) the date that the Separation Agreement becomes irrevocable (the “Accelerated Vesting Date”); provided that any termination or forfeiture of the unvested portion of such Time-Based Equity Awards that would otherwise occur on the Date of Termination in the absence of this Agreement will be delayed to the extent necessary to effectuate the terms of this Agreement. Notwithstanding the foregoing, (i) no additional time-based vesting of the Time-Based Equity Awards shall occur during the period between the Date of Termination and the Accelerated Vesting Date, and (ii) any unvested portion of an equity award that was not forfeited on the Date of Termination shall be forfeited if the Separation Agreement does not become effective and irrevocable within the time period set forth therein; and
(iii) if the Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and timely elects to receive continued health benefits under the COBRA, the Company shall pay to the group health plan provider or the COBRA provider a monthly payment equal to the full cost of such continuation coverage plus any administration fee until the earliest of (A) the 18 month anniversary of the Date of Termination; (B) the date that the Executive becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health continuation rights under COBRA; provided, however, that if the Company determines that it cannot pay such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then the Company shall convert such payments to payroll payments directly to the Executive for the time period specified above. Such payments to the Executive shall be subject to tax-related deductions and withholdings and paid on the Company’s regular payroll dates.
The amounts payable under this Section 6(a), to the extent taxable, shall be paid or commence to be paid within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or commence to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination.
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(b) Additional Limitation.
(i) Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “Aggregate Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Executive receiving a higher After Tax Amount (as defined below) than the Executive would receive if the Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
(ii) For purposes of this Section 6(b), the “After Tax Amount” means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on the Executive as a result of the Executive’s receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(iii) The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 6(b)(i) shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Executive. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.
(c) Definitions. For purposes of this Section 6, “Change in Control” shall mean a “Sale Event” as defined in the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan (excluding, for the avoidance of doubt, the transactions contemplated by the Business Combination Agreement).
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7. Section 409A.
(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
(b) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(c) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(d) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(e) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
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8. Continuing Obligations. For purposes of this Agreement, the obligations in this Section 8 shall collectively be referred to as the “Continuing Obligations.”
(a) Restrictive Covenants. The restrictive covenants set forth in Sections 6 through 12 of the Prior Agreement (the “Restrictive Covenants”) are expressly preserved and shall continue to remain in full force and effect. The Executive further agrees that the significantly increased compensation and benefits for which the Executive is eligible under this Agreement constitute mutually agreed-upon, fair and reasonable consideration for the Restrictive Covenants that is independent of the Executive’s employment with the Company and which the Company would not provide absent the Executive’s compliance with the Restrictive Covenants; that the Company has advised the Executive that the Executive has the right to consult with counsel prior to signing this Agreement; and that notice of this Agreement was provided to the Executive at least 10 business days before the Agreement is to be effective.
(b) Third-Party Agreements and Rights. The Executive hereby confirms that the Executive is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Executive’s use or disclosure of information, other than confidentiality restrictions (if any) or the Executive’s engagement in any business. The Executive represents to the Company that the Executive’s execution of this Agreement, the Executive’s employment with the Company and the performance of the Executive’s proposed duties for the Company will not violate any obligations the Executive may have to any such previous employer or other party. In the Executive’s work for the Company, the Executive will not disclose or make use of any information in violation of any agreements with or rights of any such previous employer or other party, and the Executive will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party.
(c) Litigation and Regulatory Cooperation. During and after the Executive’s employment, the Executive shall cooperate fully with the Company in (i) the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company, and (ii) the investigation, whether internal or external, of any matters about which the Company believes the Executive may have knowledge or information. The Executive’s full cooperation in connection with such claims, actions or investigations shall include, but not be limited to, being available to meet with counsel to answer questions or to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 8(c).
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(d) Relief. The Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Executive of the Continuing Obligations, and that in any event money damages would be an inadequate remedy for any such breach. Accordingly, the Executive agrees that if the Executive breaches, or proposes to breach, any portion of the Continuing Obligations, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the Company.
9. Arbitration of Disputes.
(a) Any controversy or dispute between the Company (including its officers, employees, directors, shareholders, agents, successors and assigns) and Executive that establishes a legal or equitable cause of action, whether based on contract, common law, or federal, state or local statute or regulation, arising out of, or relating to Executive’s employment or the termination thereof, shall be submitted to final and binding arbitration as the sole and exclusive remedy for such controversy or dispute. Notwithstanding the foregoing, this Agreement shall not require the parties hereto to arbitrate pursuant to this Agreement: (i) any claims under a Company benefit plan subject to the Employee Retirement Income Security Act, as amended; (ii) any claims as to which applicable law not preempted by the Federal Arbitration Act prohibits resolution by binding arbitration hereof; or (iii) any controversy or dispute brought by the Company pursuant to Section 8 hereof. Either party may seek provisional non-monetary remedies in a court of competent jurisdiction to the extent that such remedies are not available or not available in a timely fashion through arbitration or to the extent necessary to enforce any confidentiality or restrictive covenant obligation. It is the parties’ intent that issues of arbitrability of any dispute shall be decided by the arbitrator. This Section 9 shall be interpreted to conform to any applicable law concerning the terms and enforcement of agreements to arbitrate employment disputes.
(b) The arbitration shall take place before a single neutral arbitrator at the JAMS office in Boston, Massachusetts. Such arbitrator shall be provided through JAMS by mutual agreement of the parties to the arbitration; provided that, absent such agreement, the arbitrator shall be selected in accordance with the rules of JAMS then in effect. The arbitrator shall permit reasonable discovery. The arbitration shall be conducted in accordance with the JAMS rules applicable to employment disputes in effect at the time of the arbitration. The award or decision of the arbitrator shall be rendered in writing; shall be final and binding on the parties; and may be enforced by judgment or order of a court of competent jurisdiction. Each party shall pay his or its own attorneys’ fees and costs of suit associated with such arbitration to the extent permitted by applicable law, and the Company shall pay the administrative fees and all arbitrator fees associated with such arbitration; provided, however, that the non-prevailing party shall reimburse the prevailing party for reasonable attorneys’ fees incurred by the prevailing party in connection with such arbitration.
(c) Each of the parties hereto herby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the matters contemplated hereby, provided, however, that the parties hereto agree that such waiver shall not be deemed to constitute a waiver of adjudication by a court having appropriate jurisdiction. Executive and the Company waive any constitutional or other right to bring claims covered by this Agreement other than in their individual capacities. Except as may be prohibited by law, this waiver includes the ability to assert claims as a plaintiff or class member in any purported class or representative proceeding.
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10. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 9 of this Agreement, the parties hereby consent to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
11. Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter, provided that the Restrictive Covenants and the Equity Documents remain in full force and effect.
12. Withholding; Tax Effect. All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law. Nothing in this Agreement shall be construed to require the Company to make any payments to compensate the Executive for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any payment or benefit.
13. Successor to the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive’s death after his termination of employment but prior to the completion by the Company of all payments due him under this Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).
14. Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15. Survival. The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of the Executive’s employment to the extent necessary to effectuate the terms contained herein.
16. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
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17. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Board.
18. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.
19. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles thereof.
20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.
21. Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a material breach of this Agreement.
22. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Effective Date.
| ALLURION TECHNOLOGIES, INC. | ||
| By: |
| |
| Its: | Chief Financial Officer | |
| EXECUTIVE | ||
|
| ||
| Shantanu Gaur, M.D. | ||
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Exhibit 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made between Allurion Technologies, Inc., a Delaware corporation (the “Company”), and Chris Geberth (the “Executive”) and is made effective as of the closing of the transactions contemplated by that certain Business Combination Agreement, dated as of February 9, 2023, by and between the Company, Compute Health Acquisition Corp (“CPUH”), Allurion Technologies Holdings, Inc. (“New Allurion”) and certain other specified parties thereto (the “Business Combination Agreement”). Except with respect to the Restrictive Covenants Agreement and the Equity Documents (each as defined below), this Agreement supersedes in all respects all prior agreements between the Executive and the Company and any of its subsidiaries regarding the subject matter herein, including, without limitation, the Offer Letter, dated October 23, 2020, by and between the Company and the Executive (the “Prior Agreement”).
WHEREAS, effective upon the consummation of the transactions contemplated by the Business Combination Agreement (the “Effective Date”), the Company desires to continue to employ the Executive and the Executive desires to continue to be employed by the Company on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment.
(a) Term. The Company shall employ the Executive and the Executive shall be employed by the Company pursuant to this Agreement commencing as of the Effective Date and continuing until such employment is terminated in accordance with the provisions hereof (the “Term”). The Executive’s employment with the Company will be “at will,” meaning that the Executive’s employment may be terminated by the Company or the Executive at any time and for any reason, subject to the terms of this Agreement.
(b) Position and Duties. The Executive shall serve as the Chief Financial Officer of the Company and New Allurion and shall have such powers and duties as may from time to time be prescribed by the Chief Executive Officer of New Allurion (the “CEO”). The Executive shall devote his full working time and efforts to the business and affairs of the Company and New Allurion. Notwithstanding the foregoing, the Executive may serve on other boards of directors, with the approval of the Board of Directors of New Allurion (the “Board”), or engage in religious, charitable or other community activities as long as such services and activities are disclosed to the Board and do not materially interfere with the Executive’s performance of his duties to the Company as provided in this Agreement.
2. Compensation and Related Matters.
(a) Base Salary. The Executive’s initial annual base salary shall be paid at the annualized rate of $425,000 per year. The Executive’s base salary shall be subject to review at least annually by the Board or the Compensation Committee of the Board (the “Compensation Committee”). The base salary in effect at any given time is referred to herein as “Base Salary.” The Base Salary shall be payable in a manner that is consistent with the Company’s usual payroll practices for executive officers.
(b) Annual Bonus Opportunity. During the Term and subject to the Company’s Senior Executive Cash Incentive Bonus Plan, the Executive shall be eligible to receive an annual cash bonus as determined by the Board or the Compensation Committee from time to time. The Executive’s target annual bonus will be shall be fifty percent (50%) of his Base Salary. The target annual bonus in effect at any given time is referred to herein as “Target Bonus.” Except as may otherwise be provided by the Board or Compensation Committee or as may otherwise be set forth in the applicable incentive bonus plan, the Executive must be employed by the Company on the day such annual bonus is paid in order to earn or receive any annual bonus.
(c) Expenses. The Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him during the Term in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its executive officers (provided that Executive substantiates expenses within 60 days after any such expense is incurred).
(d) Other Benefits. The Executive shall be eligible to participate in or receive benefits under the Company’s employee benefit plans in effect from time to time, subject to the terms of such plans.
(e) Paid Time Off. The Executive shall be entitled to take paid time off in accordance with the Company’s applicable paid time off policy for executives, as may be in effect from time to time.
(f) Equity. The equity awards held by the Executive shall continue to be governed by the terms and conditions of the Company’s applicable equity incentive plan(s) and the applicable award agreement(s) governing the terms of such equity awards (collectively, the “Equity Documents”); provided, however, and notwithstanding anything to the contrary in the Equity Documents, Section 6(a)(ii) of this Agreement shall apply in the event of a termination by the Company without Cause or by the Executive for Good Reason in either event within the Change in Control Period (as such terms are defined below).
3. Termination. The Executive’s employment hereunder may be terminated without any breach of this Agreement under the following circumstances:
(a) Death. The Executive’s employment hereunder shall terminate upon the Executive’s death.
(b) Disability. The Company may terminate the Executive’s employment if the Executive is disabled and unable to perform or expected to be unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of 180 days (which need not be consecutive) in any 12-month period. If any question shall arise as to whether during any period the Executive is disabled so as to be unable to perform the essential functions of the Executive’s then existing position or positions with or without reasonable accommodation, the Executive may, and at the
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request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this Section 3(b) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.
(c) Termination by the Company for Cause. The Company may terminate the Executive’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean any of the following:
(i) conduct by the Executive constituting a material act of misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes;
(ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he were retained in his position;
(iii) continued non-performance by the Executive of his duties hereunder (other than by reason of the Executive’s physical or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the CEO;
(iv) a breach by the Executive of any of the provisions of the Restrictive Covenants Agreement or any of the other provisions contained in Section 8 of this Agreement;
(v) a material violation by the Executive of any of the Company’s written employment policies; or
(vi) failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.
(d) Termination Without Cause. The Company may terminate the Executive’s employment hereunder at any time without Cause. Any termination by the Company of the Executive’s employment under this Agreement which does not constitute a termination for Cause under Section 3(c) and does not result from the death or disability of the Executive under Section 3(a) or (b) shall be deemed a termination without Cause.
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(e) Termination by the Executive. The Executive may terminate his employment hereunder at any time for any reason, including but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Executive has completed all steps of the Good Reason Process (hereinafter defined) following the occurrence of any of the following events without the Executive’s consent (each, a “Good Reason Condition”):
(i) a material diminution in the Executive’s responsibilities, authority or duties;
(ii) a material diminution in the Executive’s Base Salary except for across-the-board salary reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company;
(iii) a material change in the geographic location at which the Executive provides services to the Company; or
(iv) the material breach of this Agreement by the Company.
The “Good Reason Process” consists of the following steps:
(i) the Executive reasonably determines in good faith that a Good Reason Condition has occurred;
(ii) the Executive notifies the Company in writing of the first occurrence of the Good Reason Condition within 60 days of the first occurrence of such condition;
(iii) the Executive cooperates in good faith with the Company’s efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the Good Reason Condition;
(iv) notwithstanding such efforts, the Good Reason Condition continues to exist; and
(v) the Executive terminates employment within 60 days after the end of the Cure Period.
If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.
4. Matters related to Termination.
(a) Notice of Termination. Except for termination as specified in Section 3(a), any termination of the Executive’s employment by the Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.
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(b) Date of Termination. “Date of Termination” shall mean: (i) if the Executive’s employment is terminated by death, the date of death; (ii) if the Executive’s employment is terminated on account of disability under Section 3(b) or by the Company for Cause under Section 3(c), the date on which Notice of Termination is given; (iii) if the Executive’s employment is terminated by the Company without Cause under Section 3(d), the date on which a Notice of Termination is given or the date otherwise specified by the Company in the Notice of Termination; (iv) if the Executive’s employment is terminated by the Executive under Section 3(e) other than for Good Reason, 30 days after the date on which a Notice of Termination is given, and (v) if the Executive’s employment is terminated by the Executive under Section 3(e) for Good Reason, the date on which a Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.
(c) Accrued Obligations. If the Executive’s employment with the Company is terminated for any reason, the Company shall pay or provide to the Executive (or to the Executive’s authorized representative or estate) (i) any Base Salary earned through the Date of Termination and, if applicable, any accrued but unused vacation through the Date of Termination, (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 2(c) of this Agreement); and (iii) any vested benefits the Executive may have under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Obligations”).
(d) Resignation of All Other Positions. To the extent applicable, the Executive shall be deemed to have resigned from all officer and board member positions that the Executive holds with the Company or any of its respective subsidiaries and affiliates upon the termination of the Executive’s employment for any reason. The Executive shall execute any documents in reasonable form as may be requested to confirm or effectuate any such resignations.
5. Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason. If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d), or the Executive terminates employment for Good Reason as provided in Section 3(e), then, in addition to the Accrued Obligations, and subject to the Executive signing a separation agreement and release in a form and manner satisfactory to the Company, which shall include, without limitation, a general release of claims against the Company and all related persons and entities, a non-disparagement obligation, a seven-business day revocation period, a reaffirmation of all of the Executive’s Continuing Obligations (as defined below), and the Executive’s agreement that the Executive shall not be eligible for any garden leave pay in connection with the Executive’s noncompetition obligations, and which shall provide that if the Executive breaches any of the Continuing Obligations, all payments of the Severance Amount shall immediately cease (the “Separation Agreement”), and the Separation Agreement becoming irrevocable, all within 60 days after the Date of Termination (or such shorter period as set forth in the Separation Agreement):
(a) the Company shall pay the Executive an amount equal to 9 months of the Executive’s Base Salary; and
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(b) if the Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and timely elects to receive continued health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall pay to the group health plan provider or the COBRA provider a monthly payment equal to the full cost of such continuation coverage plus any administration fee until the earliest of (A) the 12 month anniversary of the Date of Termination; (B) the date that the Executive becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health continuation rights under COBRA; provided, however, that if the Company determines that it cannot pay such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then the Company shall convert such payments to payroll payments directly to the Executive for the time period specified above. Such payments to the Executive shall be subject to tax-related deductions and withholdings and paid on the Company’s regular payroll dates.
The amounts payable under this Section 5, to the extent taxable, shall be paid out in substantially equal installments in accordance with the Company’s payroll practice over 9 months (or, with respect to amounts under Section 5(b), 12 months) commencing within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments, to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall begin to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
6. Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason within the Change in Control Period. The provisions of this Section 6 shall apply in lieu of, and expressly supersede, the provisions of Section 5 if (i) the Executive’s employment is terminated either (a) by the Company without Cause as provided in Section 3(d), or (b) by the Executive for Good Reason as provided in Section 3(e), and (ii) the Date of Termination is within 3 months prior to the first event constituting a Change in Control or on or within 12 months after the occurrence of the first event constituting a Change in Control (such period, the “Change in Control Period”). The provisions of this Section 6 shall terminate and be of no further force or effect after the Change in Control Period. For the avoidance of doubt, in no event will the Executive be entitled to severance benefits under both Section 5 and Section 6 of this Agreement.
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(a) If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d) or the Executive terminates employment for Good Reason as provided in Section 3(e) and in each case the Date of Termination occurs during the Change in Control Period, then, in addition to the Accrued Obligations, and subject to the signing of the Separation Agreement by the Executive and the Separation Agreement becoming irrevocable, all within 60 days after the Date of Termination (or such shorter period as set forth in the Separation Agreement):
(i) the Company shall pay the Executive an amount equal to 1.0 times the sum of (A) the Executive’s then-current Base Salary (or the Executive’s Base Salary in effect immediately prior to the Change in Control, if higher) plus (B) the Executive’s Target Bonus for the then-current year (or the Executive’s Target Bonus in effect immediately prior to the Change in Control, if higher). Such amounts shall generally be paid in a lump sum cash payment; provided, however, that if the Date of Termination is within 3 months prior to the first event constituting a Change in Control, then, to the extent such payments qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, the portion of such payment equal to the aggregate amount that would otherwise be payable pursuant to Section 5(a) shall be paid in substantially equal installments in accordance with the Company’s payroll practice over 9 months; and
(ii) notwithstanding anything to the contrary in any applicable option agreement or other stock-based award agreement, all stock options and other stock-based awards held by the Executive that are subject solely to time-based vesting (the “Time-Based Equity Awards”) shall immediately accelerate and become fully vested and exercisable or nonforfeitable as of the later of (i) the Date of Termination or (ii) the date that the Separation Agreement becomes irrevocable (the “Accelerated Vesting Date”); provided that any termination or forfeiture of the unvested portion of such Time-Based Equity Awards that would otherwise occur on the Date of Termination in the absence of this Agreement will be delayed to the extent necessary to effectuate the terms of this Agreement. Notwithstanding the foregoing, (i) no additional time-based vesting of the Time-Based Equity Awards shall occur during the period between the Date of Termination and the Accelerated Vesting Date, and (ii) any unvested portion of an equity award that was not forfeited on the Date of Termination shall be forfeited if the Separation Agreement does not become effective and irrevocable within the time period set forth therein; and
(iii) if the Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and timely elects to receive continued health benefits under the COBRA, the Company shall pay to the group health plan provider or the COBRA provider a monthly payment equal to the full cost of such continuation coverage plus any administration fee until the earliest of (A) the 12 month anniversary of the Date of Termination; (B) the date that the Executive becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health continuation rights under COBRA; provided, however, that if the Company determines that it cannot pay such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then the Company shall convert such payments to payroll payments directly to the Executive for the time period specified above. Such payments to the Executive shall be subject to tax-related deductions and withholdings and paid on the Company’s regular payroll dates.
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The amounts payable under this Section 6(a), to the extent taxable, shall be paid or commence to be paid within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or commence to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination.
(b) Additional Limitation.
(i) Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “Aggregate Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Executive receiving a higher After Tax Amount (as defined below) than the Executive would receive if the Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
(ii) For purposes of this Section 6(b), the “After Tax Amount” means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on the Executive as a result of the Executive’s receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(iii) The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 6(b)(i) shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Executive. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.
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(c) Definitions. For purposes of this Section 6, “Change in Control” shall mean a “Sale Event” as defined in the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan (excluding, for the avoidance of doubt, the transactions contemplated by the Business Combination Agreement).
7. Section 409A.
(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
(b) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(c) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(d) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
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(e) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
8. Continuing Obligations. For purposes of this Agreement, the obligations in this Section 8 shall collectively be referred to as the “Continuing Obligations.”
(a) Restrictive Covenants. The Executive has previously entered into the Nondisclosure, Intellectual Property, and Nonsolicitation Agreement, dated November 1, 2020, attached hereto as Exhibit A (the “Restrictive Covenants Agreement”). The terms of the Restrictive Covenants Agreement continue to remain in full force and effect. The Executive acknowledges and agrees that for purposes of the Restrictive Covenants Agreement, the term “Company” means each of Allurion Technologies, Inc., including its subsidiaries and other affiliates and its and their successors and assigns.
(b) Non-Competition. This subsection is entered into in consideration for the Executive’s eligibility for increased compensation and benefits under this Agreement, which eligibility constitutes mutually agreed upon, fair and reasonable consideration for this subsection that is independent of the Executive’s employment with the Company. The Executive agrees during the Restricted Period (as defined below) not to directly or indirectly, whether as owner, partner, shareholder, director, manager, consultant, agent, employee, co-venturer or otherwise, anywhere in the United States or in any other country in the world, engage or otherwise participate in any business that is, in whole or in part, engaged in, or actively preparing to be engaged in, the Business. For purposes of this Agreement, “Restricted Period” shall mean the period of: (i) one (1) year following the Date of Termination; or (ii) two (2) years following the Date of Termination if Executive breaches Executive’s fiduciary duty to the Company or if Executive has unlawfully taken, physically or electronically, property belonging to the Company. For purposes of this Agreement, “Business” shall mean, as of the Date of Termination, the business of the Company as previously or currently conducted, or as planned to be conducted in the future. Notwithstanding the foregoing, Executive shall not be subject to the restrictions of this Section 8(b) after Executive’s employment with the Company ends (nor entitled to the Noncompetition Consideration set forth below) if the Company terminates Executive’s employment without Noncompete Cause or lays Executive off. For its part, the Company agrees to provide the Noncompetition Consideration to Executive in exchange for Executive’s post-employment obligations under this Section 8(b); provided that the Company may waive its rights under this Section 8(b) and in such event, the Company shall not be obligated to provide the Noncompetition Consideration. The “Noncompetition Consideration” consists of payments to Executive for the post-employment portion of the Restricted Period (but for not more than twelve (12) months following the end of Executive’s employment) at the rate of 50% of the highest annualized Base Salary paid to Executive by the Company within the two-year period preceding the Date of Termination. “Noncompete Cause” means a reasonable and good faith basis for the Company to be dissatisfied with the Executive’s job performance, conduct or behavior. Executive acknowledges that this covenant is necessary because the Company’s legitimate business interests
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cannot be adequately protected solely by the other covenants in the Restrictive Covenants Agreement. Executive further acknowledges and agrees that any payments Executive receives pursuant to this Section 8(b) shall reduce (and shall not be in addition to) any severance or separation pay that Executive is otherwise entitled to receive from the Company pursuant to this Agreement, any plan or otherwise. Executive acknowledges and agrees that (i) Executive has the right to consult with counsel prior to signing this Agreement; (ii) the restrictions in this Section 8(b) shall not be effective until ten (10) days after the Effective Date; and (iii) notwithstanding anything to the contrary in Section 9 below, all civil actions relating to this Section 8(b) shall be brought in the county of Suffolk, Massachusetts and that the superior court or the business litigation session of the superior court located in Suffolk County, Massachusetts shall have exclusive jurisdiction over all such civil actions.
(c) Third-Party Agreements and Rights. The Executive hereby confirms that the Executive is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Executive’s use or disclosure of information, other than confidentiality restrictions (if any) or the Executive’s engagement in any business. The Executive represents to the Company that the Executive’s execution of this Agreement, the Executive’s employment with the Company and the performance of the Executive’s proposed duties for the Company will not violate any obligations the Executive may have to any such previous employer or other party. In the Executive’s work for the Company, the Executive will not disclose or make use of any information in violation of any agreements with or rights of any such previous employer or other party, and the Executive will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party.
(d) Litigation and Regulatory Cooperation. During and after the Executive’s employment, the Executive shall cooperate fully with the Company in (i) the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company, and (ii) the investigation, whether internal or external, of any matters about which the Company believes the Executive may have knowledge or information. The Executive’s full cooperation in connection with such claims, actions or investigations shall include, but not be limited to, being available to meet with counsel to answer questions or to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 8(c).
(e) Relief. The Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Executive of the Continuing Obligations, and that in any event money damages would be an inadequate remedy for any such breach. Accordingly, the Executive agrees that if the Executive breaches, or proposes to breach, any portion of the Continuing Obligations, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the Company.
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9. Arbitration of Disputes.
(a) Any controversy or dispute between the Company (including its officers, employees, directors, shareholders, agents, successors and assigns) and Executive that establishes a legal or equitable cause of action, whether based on contract, common law, or federal, state or local statute or regulation, arising out of, or relating to Executive’s employment or the termination thereof, shall be submitted to final and binding arbitration as the sole and exclusive remedy for such controversy or dispute. Notwithstanding the foregoing, this Agreement shall not require the parties hereto to arbitrate pursuant to this Agreement: (i) any claims under a Company benefit plan subject to the Employee Retirement Income Security Act, as amended; (ii) any claims as to which applicable law not preempted by the Federal Arbitration Act prohibits resolution by binding arbitration hereof; or (iii) any controversy or dispute brought by the Company pursuant to Section 8 hereof. Either party may seek provisional non-monetary remedies in a court of competent jurisdiction to the extent that such remedies are not available or not available in a timely fashion through arbitration or to the extent necessary to enforce any confidentiality or restrictive covenant obligation. It is the parties’ intent that issues of arbitrability of any dispute shall be decided by the arbitrator. This Section 9 shall be interpreted to conform to any applicable law concerning the terms and enforcement of agreements to arbitrate employment disputes.
(b) The arbitration shall take place before a single neutral arbitrator at the JAMS office in Boston, Massachusetts. Such arbitrator shall be provided through JAMS by mutual agreement of the parties to the arbitration; provided that, absent such agreement, the arbitrator shall be selected in accordance with the rules of JAMS then in effect. The arbitrator shall permit reasonable discovery. The arbitration shall be conducted in accordance with the JAMS rules applicable to employment disputes in effect at the time of the arbitration. The award or decision of the arbitrator shall be rendered in writing; shall be final and binding on the parties; and may be enforced by judgment or order of a court of competent jurisdiction. Each party shall pay his or its own attorneys’ fees and costs of suit associated with such arbitration to the extent permitted by applicable law, and the Company shall pay the administrative fees and all arbitrator fees associated with such arbitration; provided, however, that the non-prevailing party shall reimburse the prevailing party for reasonable attorneys’ fees incurred by the prevailing party in connection with such arbitration.
(c) Each of the parties hereto herby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the matters contemplated hereby, provided, however, that the parties hereto agree that such waiver shall not be deemed to constitute a waiver of adjudication by a court having appropriate jurisdiction. Executive and the Company waive any constitutional or other right to bring claims covered by this Agreement other than in their individual capacities. Except as may be prohibited by law, this waiver includes the ability to assert claims as a plaintiff or class member in any purported class or representative proceeding.
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10. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 9 of this Agreement, the parties hereby consent to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
11. Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter, provided that the Restrictive Covenants Agreement and the Equity Documents remain in full force and effect.
12. Withholding; Tax Effect. All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law. Nothing in this Agreement shall be construed to require the Company to make any payments to compensate the Executive for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any payment or benefit.
13. Successor to the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive’s death after his termination of employment but prior to the completion by the Company of all payments due him under this Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).
14. Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15. Survival. The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of the Executive’s employment to the extent necessary to effectuate the terms contained herein.
16. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
17. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Board.
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18. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.
19. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles thereof.
20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.
21. Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a material breach of this Agreement.
22. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Effective Date.
| ALLURION TECHNOLOGIES, INC. | ||
| By: |
| |
| Its: | CEO | |
| EXECUTIVE | ||
| ||
| Chris Geberth | ||
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Exhibit 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is made between Allurion Technologies, Inc., a Delaware corporation (the “Company”), and Ram Chuttani, M.D. (the “Executive”) and is made effective as of the closing of the transactions contemplated by that certain Business Combination Agreement, dated as of February 9, 2023, by and between the Company, Compute Health Acquisition Corp (“CPUH”), Allurion Technologies Holdings, Inc. (“New Allurion”) and certain other specified parties thereto (the “Business Combination Agreement”). Except with respect to the Restrictive Covenants and the Equity Documents (each as defined below), this Agreement supersedes in all respects all prior agreements between the Executive and the Company and any of its subsidiaries regarding the subject matter herein, including, without limitation, the Employment Agreement, effective November 1, 2017, by and between the Company and the Executive (the “Prior Agreement”).
WHEREAS, effective upon the consummation of the transactions contemplated by the Business Combination Agreement (the “Effective Date”), the Company desires to continue to employ the Executive and the Executive desires to continue to be employed by the Company on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment.
(a) Term. The Company shall employ the Executive and the Executive shall be employed by the Company pursuant to this Agreement commencing as of the Effective Date and continuing until such employment is terminated in accordance with the provisions hereof (the “Term”). The Executive’s employment with the Company will be “at will,” meaning that the Executive’s employment may be terminated by the Company or the Executive at any time and for any reason, subject to the terms of this Agreement.
(b) Position and Duties. The Executive shall serve as the Chief Medical Officer of the Company and New Allurion and shall have such powers and duties as may from time to time be prescribed by the Chief Executive Officer of New Allurion (the “CEO”). The Executive shall devote his full working time and efforts to the business and affairs of the Company and New Allurion. Notwithstanding the foregoing, the Executive may serve on other boards of directors, with the approval of the Board of Directors of New Allurion (the “Board”), or engage in religious, charitable or other community activities as long as such services and activities are disclosed to the Board and do not materially interfere with the Executive’s performance of his duties to the Company as provided in this Agreement.
2. Compensation and Related Matters.
(a) Base Salary. The Executive’s initial annual base salary shall be paid at the annualized rate of $410,000 per year. The Executive’s base salary shall be subject to review at least annually by the Board or the Compensation Committee of the Board (the “Compensation Committee”). The base salary in effect at any given time is referred to herein as “Base Salary.” The Base Salary shall be payable in a manner that is consistent with the Company’s usual payroll practices for executive officers.
(b) Annual Bonus Opportunity. During the Term and subject to the Company’s Senior Executive Cash Incentive Bonus Plan, the Executive shall be eligible to receive an annual cash bonus as determined by the Board or the Compensation Committee from time to time. The Executive’s target annual bonus will be shall be thirty-five percent (35%) of his Base Salary. The target annual bonus in effect at any given time is referred to herein as “Target Bonus.” Except as may otherwise be provided by the Board or Compensation Committee or as may otherwise be set forth in the applicable incentive bonus plan, the Executive must be employed by the Company on the day such annual bonus is paid in order to earn or receive any annual bonus.
(c) Expenses. The Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him during the Term in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its executive officers (provided that Executive substantiates expenses within 60 days after any such expense is incurred).
(d) Other Benefits. The Executive shall be eligible to participate in or receive benefits under the Company’s employee benefit plans in effect from time to time, subject to the terms of such plans.
(e) Paid Time Off. The Executive shall be entitled to take paid time off in accordance with the Company’s applicable paid time off policy for executives, as may be in effect from time to time.
(f) Equity. The equity awards held by the Executive shall continue to be governed by the terms and conditions of the Company’s applicable equity incentive plan(s) and the applicable award agreement(s) governing the terms of such equity awards (collectively, the “Equity Documents”); provided, however, and notwithstanding anything to the contrary in the Equity Documents, Section 6(a)(ii) of this Agreement shall apply in the event of a termination by the Company without Cause or by the Executive for Good Reason in either event within the Change in Control Period (as such terms are defined below).
3. Termination. The Executive’s employment hereunder may be terminated without any breach of this Agreement under the following circumstances:
(a) Death. The Executive’s employment hereunder shall terminate upon the Executive’s death.
(b) Disability. The Company may terminate the Executive’s employment if the Executive is disabled and unable to perform or expected to be unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of 180 days (which need not be consecutive) in any 12-month period. If any question shall arise as to whether during any period the Executive is disabled so as to be unable to perform the essential functions of the Executive’s then existing position or positions with or without reasonable accommodation, the Executive may, and at the
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request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall arise and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this Section 3(b) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.
(c) Termination by the Company for Cause. The Company may terminate the Executive’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean any of the following:
(i) conduct by the Executive constituting a material act of misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes;
(ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he were retained in his position;
(iii) continued non-performance by the Executive of his duties hereunder (other than by reason of the Executive’s physical or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the CEO;
(iv) a breach by the Executive of any of the Restrictive Covenants or any of the other provisions contained in Section 8 of this Agreement;
(v) a material violation by the Executive of any of the Company’s written employment policies; or
(vi) failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.
(d) Termination Without Cause. The Company may terminate the Executive’s employment hereunder at any time without Cause. Any termination by the Company of the Executive’s employment under this Agreement which does not constitute a termination for Cause under Section 3(c) and does not result from the death or disability of the Executive under Section 3(a) or (b) shall be deemed a termination without Cause.
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(e) Termination by the Executive. The Executive may terminate his employment hereunder at any time for any reason, including but not limited to, Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Executive has completed all steps of the Good Reason Process (hereinafter defined) following the occurrence of any of the following events without the Executive’s consent (each, a “Good Reason Condition”):
(i) a material diminution in the Executive’s responsibilities, authority or duties;
(ii) a material diminution in the Executive’s Base Salary except for across-the-board salary reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company;
(iii) a material change in the geographic location at which the Executive provides services to the Company; or
(iv) the material breach of this Agreement by the Company.
The “Good Reason Process” consists of the following steps:
(i) the Executive reasonably determines in good faith that a Good Reason Condition has occurred;
(ii) the Executive notifies the Company in writing of the first occurrence of the Good Reason Condition within 60 days of the first occurrence of such condition;
(iii) the Executive cooperates in good faith with the Company’s efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the Good Reason Condition;
(iv) notwithstanding such efforts, the Good Reason Condition continues to exist; and
(v) the Executive terminates employment within 60 days after the end of the Cure Period.
If the Company cures the Good Reason Condition during the Cure Period, Good Reason shall be deemed not to have occurred.
4. Matters related to Termination.
(a) Notice of Termination. Except for termination as specified in Section 3(a), any termination of the Executive’s employment by the Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.
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(b) Date of Termination. “Date of Termination” shall mean: (i) if the Executive’s employment is terminated by death, the date of death; (ii) if the Executive’s employment is terminated on account of disability under Section 3(b) or by the Company for Cause under Section 3(c), the date on which Notice of Termination is given; (iii) if the Executive’s employment is terminated by the Company without Cause under Section 3(d), the date on which a Notice of Termination is given or the date otherwise specified by the Company in the Notice of Termination; (iv) if the Executive’s employment is terminated by the Executive under Section 3(e) other than for Good Reason, 30 days after the date on which a Notice of Termination is given, and (v) if the Executive’s employment is terminated by the Executive under Section 3(e) for Good Reason, the date on which a Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.
(c) Accrued Obligations. If the Executive’s employment with the Company is terminated for any reason, the Company shall pay or provide to the Executive (or to the Executive’s authorized representative or estate) (i) any Base Salary earned through the Date of Termination and, if applicable, any accrued but unused vacation through the Date of Termination, (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 2(c) of this Agreement); and (iii) any vested benefits the Executive may have under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Obligations”).
(d) Resignation of All Other Positions. To the extent applicable, the Executive shall be deemed to have resigned from all officer and board member positions that the Executive holds with the Company or any of its respective subsidiaries and affiliates upon the termination of the Executive’s employment for any reason. The Executive shall execute any documents in reasonable form as may be requested to confirm or effectuate any such resignations.
5. Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason. If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d), or the Executive terminates employment for Good Reason as provided in Section 3(e), then, in addition to the Accrued Obligations, and subject to the Executive signing a separation agreement and release in a form and manner satisfactory to the Company, which shall include, without limitation, a general release of claims against the Company and all related persons and entities, a reaffirmation of all of the Executive’s Continuing Obligations (as defined below), and shall provide that if the Executive breaches any of the Continuing Obligations, all payments of the Severance Amount shall immediately cease confidentiality, return of property and non-disparagement, in a form and manner satisfactory to the Company (the “Separation Agreement”), and the Separation Agreement becoming irrevocable, all within 60 days after the Date of Termination (or such shorter period as set forth in the Separation Agreement):
(a) the Company shall pay the Executive an amount equal to 9 months of the Executive’s Base Salary; and
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(b) if the Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and timely elects to receive continued health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall pay to the group health plan provider or the COBRA provider a monthly payment equal to the full cost of such continuation coverage plus any administration fee until the earliest of (A) the 12 month anniversary of the Date of Termination; (B) the date that the Executive becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health continuation rights under COBRA; provided, however, that if the Company determines that it cannot pay such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then the Company shall convert such payments to payroll payments directly to the Executive for the time period specified above. Such payments to the Executive shall be subject to tax-related deductions and withholdings and paid on the Company’s regular payroll dates.
The amounts payable under this Section 5, to the extent taxable, shall be paid out in substantially equal installments in accordance with the Company’s payroll practice over 9 months (or, with respect to amounts under Section 5(b), 12 months) commencing within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments, to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), shall begin to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
6. Severance Pay and Benefits Upon Termination by the Company without Cause or by the Executive for Good Reason within the Change in Control Period. The provisions of this Section 6 shall apply in lieu of, and expressly supersede, the provisions of Section 5 if (i) the Executive’s employment is terminated either (a) by the Company without Cause as provided in Section 3(d), or (b) by the Executive for Good Reason as provided in Section 3(e), and (ii) the Date of Termination is within 3 months prior to the first event constituting a Change in Control or on or within 12 months after the occurrence of the first event constituting a Change in Control (such period, the “Change in Control Period”). The provisions of this Section 6 shall terminate and be of no further force or effect after the Change in Control Period. For the avoidance of doubt, in no event will the Executive be entitled to severance benefits under both Section 5 and Section 6 of this Agreement.
(a) If the Executive’s employment is terminated by the Company without Cause as provided in Section 3(d) or the Executive terminates employment for Good Reason as provided in Section 3(e) and in each case the Date of Termination occurs during the Change in Control Period, then, in addition to the Accrued Obligations, and subject to the signing of the Separation Agreement by the Executive and the Separation Agreement becoming irrevocable, all within 60 days after the Date of Termination (or such shorter period as set forth in the Separation Agreement):
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(i) the Company shall pay the Executive an amount equal to 1.0 times the sum of (A) the Executive’s then-current Base Salary (or the Executive’s Base Salary in effect immediately prior to the Change in Control, if higher) plus (B) the Executive’s Target Bonus for the then-current year (or the Executive’s Target Bonus in effect immediately prior to the Change in Control, if higher). Such amounts shall generally be paid in a lump sum cash payment; provided, however, that if the Date of Termination is within 3 months prior to the first event constituting a Change in Control, then, to the extent such payments qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, the portion of such payment equal to the aggregate amount that would otherwise be payable pursuant to Section 5(a) shall be paid in substantially equal installments in accordance with the Company’s payroll practice over 9 months; and
(ii) notwithstanding anything to the contrary in any applicable option agreement or other stock-based award agreement, all stock options and other stock-based awards held by the Executive that are subject solely to time-based vesting (the “Time-Based Equity Awards”) shall immediately accelerate and become fully vested and exercisable or nonforfeitable as of the later of (i) the Date of Termination or (ii) the date that the Separation Agreement becomes irrevocable (the “Accelerated Vesting Date”); provided that any termination or forfeiture of the unvested portion of such Time-Based Equity Awards that would otherwise occur on the Date of Termination in the absence of this Agreement will be delayed to the extent necessary to effectuate the terms of this Agreement. Notwithstanding the foregoing, (i) no additional time-based vesting of the Time-Based Equity Awards shall occur during the period between the Date of Termination and the Accelerated Vesting Date, and (ii) any unvested portion of an equity award that was not forfeited on the Date of Termination shall be forfeited if the Separation Agreement does not become effective and irrevocable within the time period set forth therein; and
(iii) if the Executive was participating in the Company’s group health plan immediately prior to the Date of Termination and timely elects to receive continued health benefits under the COBRA, the Company shall pay to the group health plan provider or the COBRA provider a monthly payment equal to the full cost of such continuation coverage plus any administration fee until the earliest of (A) the 12 month anniversary of the Date of Termination; (B) the date that the Executive becomes eligible for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of the Executive’s health continuation rights under COBRA; provided, however, that if the Company determines that it cannot pay such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then the Company shall convert such payments to payroll payments directly to the Executive for the time period specified above. Such payments to the Executive shall be subject to tax-related deductions and withholdings and paid on the Company’s regular payroll dates.
The amounts payable under this Section 6(a), to the extent taxable, shall be paid or commence to be paid within 60 days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or commence to be paid in the second calendar year by the last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination.
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(b) Additional Limitation.
(i) Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the “Aggregate Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Executive receiving a higher After Tax Amount (as defined below) than the Executive would receive if the Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
(ii) For purposes of this Section 6(b), the “After Tax Amount” means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on the Executive as a result of the Executive’s receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(iii) The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 6(b)(i) shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Executive. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.
(c) Definitions. For purposes of this Section 6, “Change in Control” shall mean a “Sale Event” as defined in the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan (excluding, for the avoidance of doubt, the transactions contemplated by the Business Combination Agreement).
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7. Section 409A.
(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
(b) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(c) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(d) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
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(e) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
8. Continuing Obligations. For purposes of this Agreement, the obligations in this Section 8 shall collectively be referred to as the “Continuing Obligations.”
(a) Restrictive Covenants. The restrictive covenants set forth in Sections 6 through 12 of the Prior Agreement (the “Restrictive Covenants”) are expressly preserved and shall continue to remain in full force and effect. The Executive further agrees that the significantly increased compensation and benefits for which the Executive is eligible under this Agreement constitute mutually agreed-upon, fair and reasonable consideration for the Restrictive Covenants that is independent of the Executive’s employment with the Company and which the Company would not provide absent the Executive’s compliance with the Restrictive Covenants; that the Company has advised the Executive that the Executive has the right to consult with counsel prior to signing this Agreement; and that notice of this Agreement was provided to the Executive at least 10 business days before the Agreement is to be effective.
(b) Third-Party Agreements and Rights. The Executive hereby confirms that the Executive is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Executive’s use or disclosure of information, other than confidentiality restrictions (if any) or the Executive’s engagement in any business. The Executive represents to the Company that the Executive’s execution of this Agreement, the Executive’s employment with the Company and the performance of the Executive’s proposed duties for the Company will not violate any obligations the Executive may have to any such previous employer or other party. In the Executive’s work for the Company, the Executive will not disclose or make use of any information in violation of any agreements with or rights of any such previous employer or other party, and the Executive will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party.
(c) Litigation and Regulatory Cooperation. During and after the Executive’s employment, the Executive shall cooperate fully with the Company in (i) the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company, and (ii) the investigation, whether internal or external, of any matters about which the Company believes the Executive may have knowledge or information. The Executive’s full cooperation in connection with such claims, actions or investigations shall include, but not be limited to, being available to meet with counsel to answer questions or to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 8(c).
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(d) Relief. The Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Executive of the Continuing Obligations, and that in any event money damages would be an inadequate remedy for any such breach. Accordingly, the Executive agrees that if the Executive breaches, or proposes to breach, any portion of the Continuing Obligations, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the Company.
9. Arbitration of Disputes.
(a) Any controversy or dispute between the Company (including its officers, employees, directors, shareholders, agents, successors and assigns) and Executive that establishes a legal or equitable cause of action, whether based on contract, common law, or federal, state or local statute or regulation, arising out of, or relating to Executive’s employment or the termination thereof, shall be submitted to final and binding arbitration as the sole and exclusive remedy for such controversy or dispute. Notwithstanding the foregoing, this Agreement shall not require the parties hereto to arbitrate pursuant to this Agreement: (i) any claims under a Company benefit plan subject to the Employee Retirement Income Security Act, as amended; (ii) any claims as to which applicable law not preempted by the Federal Arbitration Act prohibits resolution by binding arbitration hereof; or (iii) any controversy or dispute brought by the Company pursuant to Section 8 hereof. Either party may seek provisional non-monetary remedies in a court of competent jurisdiction to the extent that such remedies are not available or not available in a timely fashion through arbitration or to the extent necessary to enforce any confidentiality or restrictive covenant obligation. It is the parties’ intent that issues of arbitrability of any dispute shall be decided by the arbitrator. This Section 9 shall be interpreted to conform to any applicable law concerning the terms and enforcement of agreements to arbitrate employment disputes.
(b) The arbitration shall take place before a single neutral arbitrator at the JAMS office in Boston, Massachusetts. Such arbitrator shall be provided through JAMS by mutual agreement of the parties to the arbitration; provided that, absent such agreement, the arbitrator shall be selected in accordance with the rules of JAMS then in effect. The arbitrator shall permit reasonable discovery. The arbitration shall be conducted in accordance with the JAMS rules applicable to employment disputes in effect at the time of the arbitration. The award or decision of the arbitrator shall be rendered in writing; shall be final and binding on the parties; and may be enforced by judgment or order of a court of competent jurisdiction. Each party shall pay his or its own attorneys’ fees and costs of suit associated with such arbitration to the extent permitted by applicable law, and the Company shall pay the administrative fees and all arbitrator fees associated with such arbitration; provided, however, that the non-prevailing party shall reimburse the prevailing party for reasonable attorneys’ fees incurred by the prevailing party in connection with such arbitration.
(c) Each of the parties hereto herby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the matters contemplated hereby, provided, however, that the parties hereto agree that such waiver shall not be deemed to constitute a waiver of adjudication by a court having appropriate jurisdiction. Executive and the Company waive any constitutional or other right to bring claims covered by this Agreement other than in their individual capacities. Except as may be prohibited by law, this waiver includes the ability to assert claims as a plaintiff or class member in any purported class or representative proceeding.
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10. Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 9 of this Agreement, the parties hereby consent to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.
11. Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter, provided that the Restrictive Covenants and the Equity Documents remain in full force and effect.
12. Withholding; Tax Effect. All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law. Nothing in this Agreement shall be construed to require the Company to make any payments to compensate the Executive for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any payment or benefit.
13. Successor to the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive’s death after his termination of employment but prior to the completion by the Company of all payments due him under this Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).
14. Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
15. Survival. The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of the Executive’s employment to the extent necessary to effectuate the terms contained herein.
16. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
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17. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Board.
18. Amendment. This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.
19. Governing Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the Commonwealth of Massachusetts, without giving effect to the conflict of laws principles thereof.
20. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.
21. Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a material breach of this Agreement.
22. Gender Neutral. Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Effective Date.
| ALLURION TECHNOLOGIES, INC. | ||
| By: |
| |
| Its: | CEO | |
| EXECUTIVE | ||
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| Ram Chuttani, M.D. | ||
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Exhibit 10.18
RESTRICTED STOCK UNIT AWARD AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER THE ALLURION TECHNOLOGIES, INC.
2023 STOCK OPTION AND INCENTIVE PLAN
| Name of Grantee: | ||
| No. of Restricted Stock Units: | ||
| Grant Date: | ||
Pursuant to the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), Allurion Technologies, Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.0001 per share (the “Stock”), of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee remains in service as a member of the Board on such Vesting Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.
| Incremental Number of |
Vesting Date | |
| _____________ (___%) | ||
| _____________ (___%) | ||
| _____________ (___%) |
Notwithstanding anything to the contrary herein or in the Plan, all outstanding Restricted Stock Units shall become fully vested upon a Sale Event. The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service as a Non-Employee Director. If the Grantee’s service with the Company as a member of the Board terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.
4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
7. No Obligation to Continue as a Non-Employee Director. Neither the Plan nor this Award confers upon the Grantee any rights with respect to continuance as a Non-Employee Director.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
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10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| ALLURION TECHNOLOGIES, INC. | ||
| By: |
| |
| Title: | ||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
| Dated: |
|
| ||||
|
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Grantee’s Signature | |||||
| Grantee’s name and address: | ||||||
|
| ||||||
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| ||||||
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| ||||||
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Exhibit 10.25
CREDIT AGREEMENT AND GUARANTY
dated as of
August 1, 2023
by and among
ALLURION TECHNOLOGIES, LLC,
as the Borrower,
ALLURION TECHNOLOGIES, INC.,
as Parent,
THE SUBSIDIARY GUARANTORS FROM TIME TO TIME PARTY HERETO,
as the Subsidiary Guarantors,
THE LENDERS FROM TIME TO TIME PARTIES HERETO,
as the Lenders,
and
FORTRESS CREDIT CORP.
as the Administrative Agent
U.S. $60,000,000
TABLE OF CONTENTS
| Page | ||||||
| SECTION 1 DEFINITIONS |
1 | |||||
| 1.01 |
Certain Defined Terms | 1 | ||||
| 1.02 |
Accounting Terms and Principles | 36 | ||||
| 1.03 |
Interpretation | 37 | ||||
| 1.04 |
Divisions | 38 | ||||
| 1.05 |
Times of Day; Times of Performance | 38 | ||||
| SECTION 2 THE COMMITMENTS AND THE LOANS |
38 | |||||
| 2.01 |
Loans | 38 | ||||
| 2.02 |
Borrowing Procedures | 39 | ||||
| 2.03 |
Notes | 39 | ||||
| 2.04 |
Use of Proceeds | 39 | ||||
| SECTION 3 PAYMENTS OF PRINCIPAL AND INTEREST |
39 | |||||
| 3.01 |
Repayments Generally; Application | 39 | ||||
| 3.02 |
Interest | 39 | ||||
| 3.03 |
Prepayments; Prepayment Fees | 40 | ||||
| 3.04 |
Exit Fee | 42 | ||||
| SECTION 4 PAYMENTS, ETC. |
43 | |||||
| 4.01 |
Payments | 43 | ||||
| 4.02 |
Computations | 43 | ||||
| 4.03 |
Set-Off | 43 | ||||
| SECTION 5 YIELD PROTECTION, ETC. |
44 | |||||
| 5.01 |
Additional Costs | 44 | ||||
| 5.02 |
Illegality | 46 | ||||
| 5.03 |
Taxes | 46 | ||||
| 5.04 |
Mitigation Obligations. | 50 | ||||
| SECTION 6 CONDITIONS PRECEDENT |
50 | |||||
| 6.01 |
Conditions to the Borrowing of the Loan | 50 | ||||
| SECTION 7 REPRESENTATIONS AND WARRANTIES |
56 | |||||
| 7.01 |
Power and Authority | 56 | ||||
| 7.02 |
Authorization; Enforceability | 56 | ||||
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TABLE OF CONTENTS
(continued)
| Page | ||||||
| 7.03 |
Governmental and Other Approvals; No Conflicts | 56 | ||||
| 7.04 |
Financial Statements; Material Adverse Change | 57 | ||||
| 7.05 |
Properties | 57 | ||||
| 7.06 |
No Actions or Proceedings | 61 | ||||
| 7.07 |
Compliance with Laws and Agreements | 61 | ||||
| 7.08 |
Taxes | 63 | ||||
| 7.09 |
Full Disclosure | 63 | ||||
| 7.10 |
Investment Company Act and Margin Stock Regulation | 63 | ||||
| 7.11 |
Solvency | 63 | ||||
| 7.12 |
Equity Holders, Subsidiaries and Other Investments | 63 | ||||
| 7.13 |
Secured Indebtedness | 64 | ||||
| 7.14 |
Material Agreements | 64 | ||||
| 7.15 |
Restrictive Agreements | 64 | ||||
| 7.16 |
Real Property | 64 | ||||
| 7.17 |
Pension Matters | 64 | ||||
| 7.18 |
Priority of Obligations | 65 | ||||
| 7.19 |
Regulatory Approvals | 65 | ||||
| 7.20 |
Transactions with Affiliates | 66 | ||||
| 7.21 |
Sanctions | 66 | ||||
| 7.22 |
Anti-Corruption | 66 | ||||
| 7.23 |
Deposit and Disbursement Accounts | 66 | ||||
| 7.24 |
Royalties and Other Payments | 66 | ||||
| 7.25 |
Non-Competes | 66 | ||||
| 7.26 |
Internal Controls | 66 | ||||
| SECTION 8 AFFIRMATIVE COVENANTS |
67 | |||||
| 8.01 |
Financial Statements and Other Information | 67 | ||||
| 8.02 |
Notices of Material Events | 69 | ||||
| 8.03 |
Existence; Conduct of Business | 72 | ||||
| 8.04 |
Payment of Obligations | 72 | ||||
| 8.05 |
Insurance | 72 | ||||
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TABLE OF CONTENTS
(continued)
| Page | ||||||
| 8.06 |
Books and Records; Inspection Rights | 72 | ||||
| 8.07 |
Compliance with Laws and Other Obligations | 73 | ||||
| 8.08 |
Maintenance of Properties, Etc. | 73 | ||||
| 8.09 |
Licenses | 73 | ||||
| 8.10 |
Action under Environmental Laws | 73 | ||||
| 8.11 |
Use of Proceeds | 73 | ||||
| 8.12 |
Certain Obligations Respecting Subsidiaries; Further Assurances | 73 | ||||
| 8.13 |
Patent Prosecution Workplan | 76 | ||||
| 8.14 |
Intellectual Property | 76 | ||||
| 8.15 |
Maintenance of Regulatory Approvals, Contracts, Intellectual Property, Etc. | 76 | ||||
| 8.16 |
ERISA and Foreign Pension Plan Compliance | 76 | ||||
| 8.17 |
Cash Management | 76 | ||||
| 8.18 |
Conference Calls | 77 | ||||
| 8.19 |
Board Observation Rights | 77 | ||||
| 8.20 |
Litigation Cooperation | 78 | ||||
| 8.21 |
Post-Closing Covenants | 78 | ||||
| 8.22 |
Registration of Closing Shares | 78 | ||||
| SECTION 9 NEGATIVE COVENANTS |
84 | |||||
| 9.01 |
Indebtedness | 84 | ||||
| 9.02 |
Liens | 86 | ||||
| 9.03 |
Fundamental Changes, Acquisitions, Etc. | 88 | ||||
| 9.04 |
Lines of Business | 88 | ||||
| 9.05 |
Investments | 89 | ||||
| 9.06 |
Restricted Payments | 90 | ||||
| 9.07 |
Payments of Indebtedness | 91 | ||||
| 9.08 |
Change in Fiscal Year | 91 | ||||
| 9.09 |
Sales of Assets, Etc. | 92 | ||||
| 9.10 |
Transactions with Affiliates | 93 | ||||
| 9.11 |
Restrictive Agreements | 93 | ||||
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TABLE OF CONTENTS
(continued)
| Page | ||||||
| 9.12 |
Modifications and Terminations of Material Agreements and Organic Documents | 94 | ||||
| 9.13 |
Sales and Leasebacks | 94 | ||||
| 9.14 |
Hazardous Material | 94 | ||||
| 9.15 |
Accounting Changes | 94 | ||||
| 9.16 |
[Reserved] | 94 | ||||
| 9.17 |
Sanctions; Anti-Corruption Use of Proceeds | 94 | ||||
| 9.18 |
Inbound and Outbound Licenses. | 95 | ||||
| 9.19 |
Take-Or-Pay Agreements | 95 | ||||
| 9.20 |
Passive Holding Company | 95 | ||||
| SECTION 10 FINANCIAL COVENANTS |
96 | |||||
| 10.01 |
Minimum Liquidity | 96 | ||||
| 10.02 |
Minimum Revenue | 96 | ||||
| SECTION 11 EVENTS OF DEFAULT |
96 | |||||
| 11.01 |
Events of Default | 96 | ||||
| 11.02 |
Remedies | 99 | ||||
| 11.03 |
Additional Remedies | 99 | ||||
| SECTION 12 THE AGENT |
100 | |||||
| 12.01 |
Appointment and Duties | 100 | ||||
| 12.02 |
Binding Effect | 101 | ||||
| 12.03 |
Use of Discretion | 101 | ||||
| 12.04 |
Delegation of Rights and Duties | 102 | ||||
| 12.05 |
Reliance and Liability | 102 | ||||
| 12.06 |
Agent Individually | 103 | ||||
| 12.07 |
Lender Credit Decision | 103 | ||||
| 12.08 |
Expenses; Indemnities | 103 | ||||
| 12.09 |
Resignation of the Agent | 104 | ||||
| 12.10 |
Release of Collateral or Guarantors | 104 | ||||
| 12.11 |
Additional Secured Parties | 105 | ||||
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TABLE OF CONTENTS
(continued)
| Page | ||||||
| SECTION 13 GUARANTEE |
105 | |||||
| 13.01 |
The Guarantee | 105 | ||||
| 13.02 |
Obligations Unconditional | 106 | ||||
| 13.03 |
Reinstatement | 107 | ||||
| 13.04 |
Subrogation | 107 | ||||
| 13.05 |
Remedies | 107 | ||||
| 13.06 |
Instrument for the Payment of Money | 107 | ||||
| 13.07 |
Continuing Guarantee | 107 | ||||
| 13.08 |
General Limitation on Guarantee Obligations | 107 | ||||
| SECTION 14 MISCELLANEOUS |
108 | |||||
| 14.01 |
No Waiver | 108 | ||||
| 14.02 |
Notices | 108 | ||||
| 14.03 |
Expenses, Indemnification, Etc. | 108 | ||||
| 14.04 |
Amendments, Etc. | 110 | ||||
| 14.05 |
Successors and Assigns. | 111 | ||||
| 14.06 |
Survival | 113 | ||||
| 14.07 |
Captions | 113 | ||||
| 14.08 |
Counterparts | 113 | ||||
| 14.09 |
Governing Law | 114 | ||||
| 14.10 |
Jurisdiction, Service of Process and Venue | 114 | ||||
| 14.11 |
Waiver of Jury Trial | 114 | ||||
| 14.12 |
Waiver of Immunity | 114 | ||||
| 14.13 |
Entire Agreement | 115 | ||||
| 14.14 |
Severability | 115 | ||||
| 14.15 |
Confidentiality | 115 | ||||
| 14.16 |
No Fiduciary Relationship | 116 | ||||
| 14.17 |
Interest Rate Limitation | 116 | ||||
| 14.18 |
Early Prepayment Fee; Exit Fee | 116 | ||||
| 14.19 |
Judgment Currency | 117 | ||||
| 14.20 |
USA PATRIOT Act | 117 | ||||
| 14.21 |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions | 118 | ||||
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TABLE OF CONTENTS
SCHEDULES AND EXHIBITS
| Schedule 1 | - | Commitments | ||
| Schedule 6.01(e) | - | Excluded Expenses | ||
| Schedule 7.05(b) | - | Products | ||
| Schedule 7.05(c) | - | Material Intellectual Property | ||
| Schedule 7.06(a) | - | Certain Litigation | ||
| Schedule 7.06(c) | - | Labor Matters | ||
| Schedule 7.12(a) | - | Subsidiaries of Parent | ||
| Schedule 7.12(b) | - | Other Equity Interests Owned by Parent or its Subsidiaries | ||
| Schedule 7.13 | - | Existing Secured Indebtedness | ||
| Schedule 7.14 | - | Material Agreements | ||
| Schedule 7.15 | - | Restrictive Agreements | ||
| Schedule 7.16 | - | Real Property | ||
| Schedule 7.17 | - | Pension Matters | ||
| Schedule 7.19(b) | - | Regulatory Approvals | ||
| Schedule 7.20 | - | Transactions with Affiliates | ||
| Schedule 7.23 | - | Deposit and Disbursement Accounts | ||
| Schedule 7.24 | - | Royalties and Other Payments | ||
| Schedule 8.20 | - | Post-Closing Covenants | ||
| Schedule 9.01 | - | Existing Indebtedness | ||
| Schedule 9.05 | - | Existing Investments | ||
| Schedule 9.13 | - | Permitted Sales and Leasebacks | ||
| Exhibit A | - | Form of Note | ||
| Exhibit B | - | Form of Borrowing Notice | ||
| Exhibit C | - | Form of Guaranty Assumption Agreement | ||
| Exhibit D-1 | - | Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships for U.S. Federal Income Tax Purposes) | ||
| Exhibit D-2 | - | Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships for U.S. Federal Income Tax Purposes) | ||
| Exhibit D-3 | - | Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships for U.S. Federal Income Tax Purposes) | ||
| Exhibit D-4 | - | Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships for U.S. Federal Income Tax Purposes) | ||
| Exhibit E | - | Form of Compliance Certificate | ||
| Exhibit F | - | Form of Assignment and Assumption | ||
| Exhibit G | - | Form of Information Certificate | ||
| Exhibit H | - | Form of Intercompany Subordination Agreement | ||
| Exhibit I | - | Form of Solvency Certificate | ||
| Exhibit J | - | Form of Security Agreement | ||
| Exhibit K | - | Form of Intercreditor Agreement | ||
| Exhibit L | - | Form of Projections | ||
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CREDIT AGREEMENT AND GUARANTY
CREDIT AGREEMENT AND GUARANTY, dated as of August 1, 2023 (this “Agreement”), by and among Allurion Technologies, LLC, a Delaware limited liability company (the “Borrower”), Allurion Technologies, Inc., a Delaware corporation (“Parent”), certain Subsidiaries of Parent that may be required to provide Guaranties from time to time hereunder, each lender from time to time party hereto (each, a “Lender” and collectively, the “Lenders”), and Fortress Credit Corp., as administrative agent for the Lenders (in such capacity, the “Agent”).
WITNESSETH:
WHEREAS, the Borrower has requested that the Lenders provide a senior secured term loan facility to the Borrower in an aggregate principal amount of $60,000,000, to be available on the Closing Date, subject to the terms and conditions set forth herein, including the applicable terms and conditions set forth in Section 6 hereof; and
WHEREAS, the Lenders are willing, on the terms and subject to the conditions set forth herein, to provide such senior secured term loan facility.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.01 Certain Defined Terms. As used herein (including the preamble and recitals), the following terms have the following respective meanings:
“510(k)” means (i) any premarket notification and corresponding FDA order of substantial equivalence, or 510(k) clearance, for a Device pursuant to the FD&C Act, and FDA regulations, (ii) all substantially equivalent or similar notifications, applications, marketing authorizations and clearances, including CE Mark, with respect to any other non-U.S. Regulatory Authority, including Competent Authorities in Europe, and (iii) all amendments, supplements, letters to file and other additions and modifications thereto, and all documents, data and other information concerning any applicable Device which are necessary for, filed with, incorporated by reference in or otherwise support any of the foregoing.
“Acquisition” means any transaction, or any series of related transactions, by which any Person directly or indirectly, by means of an amalgamation, consolidation, merger, purchase of Equity Interests or other assets, tender offer, or similar transaction having the same effect as any of the foregoing, (i) acquires all or substantially all of the assets of any other Person, (ii) acquires all or substantially all of a business line or unit or division of any other Person, (iii) with respect to any other Person that is managed or governed by a Board, acquires control of Equity Interests of such other Person representing more than fifty percent (50%) of the ordinary voting power for the control of such Board, determined on a fully-diluted, as-if-converted or exercised basis, or (iv) acquires control of more than fifty percent (50%) of the Equity Interests in any other Person engaged in any business that is not managed by a Board, determined on a fully-diluted, as-if-converted or exercised basis.
“Additional Effectiveness Deadline” has the meaning set forth in Section 8.22(a).
“Additional RTW Royalty Financing Agreement” means that certain Revenue Interest Financing Agreement, between the Borrower and RTW, in the form attached as Annex A to the Side Letter, as amended or otherwise modified in accordance with the Intercreditor Agreement.
“Adverse Regulatory Event” means the occurrence of any of the following events or circumstances:
(a) the failure of Parent or any of its Subsidiaries to hold, directly or through licensees or agents, in full force and effect, all Regulatory Approvals necessary or required for Parent or any such Subsidiary to conduct its respective operations and businesses;
(b) if required by any applicable Law, the failure of Parent or any of its Subsidiaries to make or file with the FDA or any other applicable Regulatory Authority, in compliance with such applicable Law, any required notice, registration, listing, supplemental application or notification or report;
(c) in connection with any clinical, preclinical, safety or other studies or tests being conducted by (or on behalf of) Parent or any of its Subsidiaries for purposes of obtaining regulatory clearance of, or any Regulatory Approval for, any Product or any Product Commercialization and Development Activities (i) the failure of any clinical, pre-clinical, safety or other required trial, study or test to be conducted in material compliance with any applicable Law or Regulatory Approval; (ii) the failure of any related clinical trial site to be monitored in material compliance with all applicable Laws and Regulatory Approvals; or (iii) the receipt by Parent or any of its Subsidiaries of written notice from the FDA or any other Regulatory Authority requiring the termination or suspension of any such clinical, preclinical, safety or other study or test;
(d) the Parent or any of its Subsidiaries or, to the knowledge of the Parent, any agent, supplier, licensor or licensee of the Parent or any of its Subsidiaries, receives any written notice with respect to any Product or any Product Commercialization and Development Activities with respect thereto from the FDA or any other Regulatory Authority asserting (i) that such Person lacks a required Regulatory Approval with respect to any Product or Product Commercialization and Development Activity, (ii) a material breach of applicable Laws or Regulatory Approvals (or any similar order, injunction or decree) or (iii) that such Regulatory Authority has commenced any regulatory enforcement action, investigation or inquiry (other than routine or periodic inspections or post-marketing reviews), or has issued a warning letter, with respect to any Product or any Product Commercialization and Development Activities with respect thereto, including, without limitation, any such notice that requires (or is reasonably likely to require or cause) the Parent or any of its Subsidiaries to discontinue, withdraw or recall the marketing or sale of any Product, or requires or causes (or is reasonably likely to require or cause) a cessation or delay in the manufacture or sale of any Product, which discontinuance, withdrawal, recall, cessation or delay will last (or is reasonably expected to last) in excess of sixty (60) days; or
2
(e) with respect to any Product or Product Commercialization and Development Activity of Parent or any Subsidiary, (i) any Regulatory Authority commences any criminal, injunctive, seizure, detention or civil penalty action or (ii) Parent or any Subsidiary enters into any consent decree, plea agreement or other settlement with any Regulatory Authority with respect to any of the foregoing.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified; provided that with respect to any Lender, an Affiliate of such Lender shall include, without limitation, all of such Lender’s Related Funds. Notwithstanding anything to the contrary contained herein, neither SoftBank Group Corp., nor any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with SoftBank Group Corp., nor any other direct or indirect owners of Fortress Investment Group LLC, shall be considered an Affiliate of Fortress Credit Corp. or of any of its Affiliates.
“Agent” has the meaning set forth in the preamble hereto.
“Agreement” has the meaning set forth in the preamble hereto.
“Allurion Australia” Allurion Australia Pty Ltd, with Australian Company Number 658 546 117, a wholly-owned Subsidiary of the Borrower.
“Allurion France” means Allurion France SAS, a wholly-owned Subsidiary of the Borrower.
“Applicable Margin” means 6.44% per annum, as such percentage may be increased pursuant to Section 3.02(b).
“Asset Sale” has the meaning set forth in Section 9.09.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee of such Lender in substantially the form of Exhibit F.
“Australian Security Documents” means the Australian law governed general security agreement executed by Allurion Australia in favor of the Agent dated as of the Closing Date and the Australian law governed specific security agreement executed by Allurion Technologies, LLC in favor of the Agent as of the Closing Date, in each case, together with any document required to be delivered thereunder or related thereto.
“Backstop Agreement” means the Backstop Agreement entered into as of May 2, 2023, by and among the Parent, the Borrower, the Fortress Investor, RTW and Hunter Ventures Limited.
3
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy.”
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA (whether governed by the laws of the United States or otherwise) to which any Obligor or Subsidiary thereof incurs or otherwise has any obligation or liability, contingent or otherwise.
“Board” means, with respect to any Person, the board of directors (or equivalent management or oversight body) of such Person.
“Board Observer” has the meaning set forth in Section 8.19.
“Borrower” has the meaning set forth in the preamble hereto.
“Borrowing” means the borrowing of the Loans on the Closing Date.
“Borrowing Notice” means a written notice substantially in the form of Exhibit B.
“Bridging Agreement” means that certain Bridging Agreement between Fortress Credit Corp. and Allurion Technologies, Inc. (predecessor to the Borrower) dated as of February 9, 2023.
“Business Day” means a day (other than a Saturday or Sunday) on which commercial banks are not authorized or required to close in New York, New York.
“Capital Lease Obligation” means, as to any Person, any obligation of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligation is required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP and, for purposes of this Agreement, the amount of any such obligation shall be the capitalized amount thereof, determined in accordance with GAAP.
“Casualty Event” means the damage, destruction, condemnation, confiscation, requisition, seizure or forfeiture, as the case may be, of any property of any Person.
4
“Change of Control” means an event or series of events (including any Acquisition) that occurs after the Closing Date and causes or results in any of the following:
(i) any Person or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than forty percent (40%) of the Equity Interests of Parent entitled to vote for members of the board of directors or equivalent governing body of Parent on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right);
(ii) during any period of twelve (12) consecutive months, a majority of the members of the Board of Parent cease to be composed of individuals (a) who were members of such Board on the first day of such period, (b) whose election or nomination to such Board was approved by individuals referred to in clause (a) above constituting at the time of such election or nomination at least a majority of such Board or (c) whose election or nomination to such Board was approved by individuals referred to in clauses (a) and (b) above constituting at the time of such election or nomination at least a majority of such Board;
(iii) Parent shall cease to own (a) directly, beneficially and of record or legally, one hundred percent (100%) of the issued and outstanding Equity Interests of the Borrower and (b) directly or indirectly, beneficially and of record or legally, one hundred percent (100%) of the issued and outstanding Equity Interests of each of its other Subsidiaries (other than minority holdings in Subsidiaries that are not U.S. Persons solely in accordance with applicable Law), free and clear of all Liens (other than Permitted Liens) (other than transactions resulting from Asset Sales permitted by Section 9.9);
(iv) the sale of all or substantially all of the property or business of Parent and its Subsidiaries, taken as a whole;
(v) the occurrence of a “Change of Control” under and as defined in the RTW Royalty Financing Agreement.
“Claim” means any claim, demand, complaint, grievance, action, application, suit, cause of action, order, charge, indictment, prosecution, judgment or other similar process, assessment or reassessment, whether made, converted or assessed in connection with a debt, liability, dispute, breach, failure or otherwise.
“Closing Date” means August 1, 2023.
“Closing Shares” has the meaning set forth in Section 6.01(t).
“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.
5
“Collateral” means any asset or property in which a Lien is purported to be granted under any Loan Document, including future acquired or created assets or properties (or all such assets or properties, as the context may require), in each case, to secure payment of the Obligations, it being understood and agreed the Collateral is intended to include all collateral granted to RTW to secure obligations of the Borrower under the RTW Royalty Financing Agreement and, to the extent that the Additional RTW Royalty Financing Agreement has been executed by, among others, RTW and Allurion Technologies, LLC pursuant to the terms of the Side Letter, the Additional RTW Royalty Financing Agreement.
“Collateral Triggering Event” means either (i) the occurrence and continuance of an Event of Default or, (ii) subject to Section 8.21, the failure of the Parent and its Subsidiaries to hold in excess of $15,000,000 in cash in one or more Controlled Accounts (or equivalent in non-U.S. jurisdictions) maintained with one or more commercial banks or similar deposit-taking institutions that are free and clear of all Liens, other than Liens granted under the Loan Documents in favor of the Secured Parties.
“Commission” means the U.S. Securities and Exchange Commission.
“Commitment” means, with respect to each Lender, the obligation of such Lender to make Loans to the Borrower on the Closing Date subject to satisfaction of the conditions set forth in, and in accordance with the terms and provisions of, this Agreement, which commitments are in the amounts set forth opposite such Lender’s name on Schedule 1 hereto, as such Schedule may be amended from time to time pursuant to an Assignment and Assumption or otherwise; provided that the aggregate Commitments of all Lenders on the Closing Date equal $60,000,000.
“Competitor” means, at any time of determination, any Person that is an operating company directly and primarily engaged in the sale of medical Devices that are the same or substantially the same as the medical Devices being sold by the Borrower as of such time, including, without limitation, any Person that is listed as a competitor in the Parent’s filings with the SEC.
“Commodity Account” means any commodity account, as such term is defined in Section 9-102 of the NY UCC.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Contract” means any contract, license, lease, agreement, obligation, promise, undertaking, understanding, arrangement, document, commitment, entitlement, indenture, instrument, or engagement under which a Person has, or will have, any liability or contingent liability (in each case, whether written or oral, express or implied, and whether in respect of monetary or payment obligations, performance obligations or otherwise), in each case, other than the Loan Documents.
“Control” means, in respect of a particular Person, the possession, by one or more other Persons, directly or indirectly, of the power to direct or cause the direction of the management or policies of such particular Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” (and similar derivatives) have meanings correlative thereto.
6
“Controlled Account” has the meaning set forth in Section 8.17(a).
“Convertible Notes” means the Convertible Unsecured Promissory Notes issued by Allurion Technologies, Inc., a Delaware corporation (and predecessor to the Borrower) (the “Issuer”), from time to time pursuant to that certain Convertible Note Purchase Agreement, dated as of December 22, 2021, among the Issuer and the Investors party thereto, as amended, restated, supplemented or otherwise modified from time to time.
“Copyright” means all copyrights, copyright registrations and applications for copyright registrations, including all renewals and extensions thereof, all rights to recover for past, present or future infringements thereof, and all other rights whatsoever accruing thereunder or pertaining thereto throughout the world.
“Credit Agreement Shares” has the meaning set forth in 6.01(t).
“De-SPAC Transaction” means the Mergers (as defined in the De-SPAC Combination Agreement) and each other transaction contemplated by the De-SPAC Combination Agreement.
“De-SPAC Combination Agreement” means that certain Business Combination Agreement dated as of February 9, 2023, among Compute Health Acquisition Corp., a Delaware corporation, Compute Health Corp., a Delaware corporation, Compute Health LLC, a Delaware limited liability company, Allurion Technologies, Inc., a Delaware corporation (and predecessor to the Borrower), and Allurion Technologies Holdings, Inc., a Delaware corporation (and predecessor to the Parent), as amended, restated, supplemented or otherwise modified from time to time not in contravention with the terms hereof.
“Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
“Default” means any Event of Default and any event that, upon the giving of notice, the lapse of time or both, would constitute an Event of Default.
“Default Rate” has the meaning set forth in Section 3.02(b).
“Deposit Account” means any deposit account, as such term is defined in Section 9-102 of the NY UCC.
“Designated Jurisdiction” means any country or territory to the extent that such country or territory is the subject of any Sanction.
7
“Device” means any medical instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related item, including any component, part or accessory, that (i) is intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment or prevention of disease, in man or other animals, or is intended to affect the structure or any function of the body of man or other animals, (ii) does not achieve its primary intended purpose or purposes through chemical action within or on the body of man or other animals and (iii) is not dependent upon being metabolized for the achievement of its primary intended purpose or purposes.
“Device Clearance Application” means any premarket approval application submitted under Section 515 of the FD&C Act (21 U.S.C. § 360e) (a “PMA”), any de novo request submitted under Section 513(f) of the FD&C Act (21 U.S.C. § 360c(f)), or any 510(k) submitted under Section 510(k) of the FD&C Act (21 U.S.C. § 360(k)) seeking approval, authorization or clearance from the FDA for a Device, or any corresponding non-U.S. application in any other non-U.S. jurisdiction, including, with respect to the European Union, any equivalent submission to a Standards Body pursuant to an applicable directive of the European Council with respect to CE marking (or, if applicable, a self-certification of conformity with respect to any such directive through a “declaration of conformity”).
“Disqualified Equity Interests” means, with respect to any Person, any Equity Interest of such Person that, by its terms (or by the terms of any security or other Equity Interest into which it is convertible or for which it is exchangeable upon exercise or otherwise), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests of Parent), including pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests of Parent), in whole or in part, (iii) provides for the scheduled payments of dividends or other distributions in cash or other securities that would constitute Disqualified Equity Interests, or (iv) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is one hundred and eighty (180) days after the Maturity Date; provided that Equity Interests issued pursuant to any plan for the benefit of directors, officers, employees or consultants of such Person, or by any such plan to such directors, officers, employees or consultants, shall not constitute Disqualified Equity Interests solely because such Equity Interests may be required to be repurchased by such Person upon the death, disability, retirement or termination of employment or service of such director, officer, employee or consultant. Notwithstanding the preceding sentence, any Equity Interests that would constitute Disqualified Equity Interests solely because the holders thereof have the right to require the redemption or repurchase of such Equity Interests upon the occurrence of a Change of Control, fundamental change, delisting or an asset sale will not constitute Disqualified Equity Interests if the “asset sale,” “fundamental change”, “delisting” or “Change of Control” provisions applicable to such Equity Interests provide that the issuer thereof will not redeem or repurchase any such Equity Interests pursuant to such provisions prior to all other Obligations (other than contingent indemnification obligations for which no claim has been asserted) having been irrevocably paid in full in cash.
“Disqualified Institution” means (a) any hedge fund or private equity fund that principally invests in distressed debt for the purpose of owning equity in the applicable borrower (but may include any Affiliated fund or Person that does not principally invest in distressed debt), and (b) any Persons identified in writing to the Agent prior to the Closing Date and supplemented from time to time after the Closing Date subject to the consent of the Agent (not to be unreasonably withheld); provided that no Lender, Agent or any Affiliate of the foregoing shall constitute a “Disqualified Institution”.
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“Dollars” and “$” means lawful money of the United States of America.
“Domestic Subsidiary” means any direct or indirect Subsidiary of an Obligor that is a U.S. Person.
“Early Prepayment Fee” means, with respect to any repayment or prepayment (or other payment made prior to the Maturity Date) of all or any portion of the outstanding principal amount of the Loans on any Prepayment Date, whether pursuant to clause (a) or (b) of Section 3.03 or otherwise (including as a result of acceleration, an Insolvency Proceeding or other Event of Default), an amount equal to (i) for any Prepayment Date that occurs during the Non-Call Period, the applicable Make-Whole Amount and (ii) for any Prepayment Date that occurs after the first anniversary of the Closing Date but on or prior to the Maturity Date: the product of (x) the amount of any principal so prepaid, multiplied by (y) for any Prepayment Date that occurs (A) after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date, two percent (2.0%), (B) after the second anniversary of the Closing Date and on or prior to the third anniversary of the Closing Date, one percent (1.0%) and (C) after the third anniversary of the Closing Date, one-half percent (0.5%).
“EBITDA” means, with respect to any Person (or business), the consolidated earnings of such Person and its consolidated Subsidiaries (or such business) before interest, taxes and non-cash items such as depreciation, depletion and amortization, in each case as determined in accordance with GAAP consistently applied.
“EBITDA Adjustment” means, as of any time of determination, with respect to any Person or business that (i) has been acquired by the Parent or any of its Subsidiaries pursuant to a Permitted Acquisition and (ii) at the time of consummation of such Permitted Acquisition, had negative EBITDA for the twelve consecutive month period ended on the last day of the most recently ended calendar month prior to the date of such Permitted Acquisition, the product of (x) the amount of such negative EBITDA (expressed as a positive number) multiplied by (y) a fraction having a numerator equal to the number of whole months remaining until the scheduled Maturity Date (determined as of any time of determination) and a denominator equal to twelve (12).
“EEA Financial Institution” means (i) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (ii) any entity established in an EEA Member Country which is a parent of an institution described in clause (i) of this definition, or (iii) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (i) or (ii) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
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“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effectiveness Deadline” has the meaning set forth in Section 8.22(a).
“Eligible Transferee” means (i) any commercial bank, (ii) any insurance company, (iii) any finance company, (iv) any financial institution, (v) any investment fund that invests in loans or other obligations for borrowed money, (vi) with respect to any Lender, any other Lender and/or such Lender’s Affiliates, and (vii) any other “accredited investor” (as defined in Regulation D of the Securities Act) that is principally in the business of managing investments or holding assets for investment purposes.
“End Date” has the meaning set forth in Section 8.22(b).
“Environmental Law” means any Law or Governmental Approval relating to pollution or protection of the environment or the treatment, storage, disposal, release, threatened release or handling of hazardous materials, and all local laws and regulations, whether U.S. or non-U.S., related to environmental matters and any specific agreements entered into with any competent authorities which include commitments related to environmental matters.
“Equity Interests” means, with respect to any Person (for purposes of this defined term, an “issuer”), all shares of, interests or participations in, or other equivalents in respect of such issuer’s capital stock, including all membership interests, partnership interests or equivalent, and all debt or other securities (including warrants, options and similar rights) directly or indirectly exchangeable, exercisable or otherwise convertible into, such issuer’s capital stock, whether now outstanding or issued after the Closing Date, and in each case, however classified or designated and whether voting or non-voting.
“Equivalent Amount” means, with respect to an amount denominated in a single currency, the amount in another currency that could be purchased by the amount in the former currency determined by reference to the Exchange Rate at the time of determination.
“ERISA” means the United States Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means, collectively, any Obligor, Subsidiary thereof, and any Person under common control, or treated as a single employer, with any Obligor or Subsidiary thereof, within the meaning of Section 414(b), (c), (m) or (o) of the Code.
“ERISA Event” means (i) a reportable event as defined in Section 4043 of ERISA with respect to a Title IV Plan, excluding, however, such events as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event; (ii) the applicability of the requirements of Section 4043(b) of ERISA with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, to any Title IV Plan where an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such plan within the following thirty (30) days; (iii) a withdrawal by any Obligor or any ERISA Affiliate thereof from a Title IV
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Plan or the termination of any Title IV Plan resulting in liability under Sections 4063 or 4064 of ERISA; (iv) the withdrawal of any Obligor or any ERISA Affiliate thereof in a complete or partial withdrawal (within the meaning of Section 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by any Obligor or any ERISA Affiliate thereof of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA; (v) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Title IV Plan or Multiemployer Plan; (vi) the imposition of liability on any Obligor or any ERISA Affiliate thereof pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the failure by any Obligor or any ERISA Affiliate thereof to make any required contribution to a Plan, or the failure to meet the minimum funding standard of Section 412 of the Code with respect to any Title IV Plan (whether or not waived in accordance with Section 412(c) of the Code) or the failure to make by its due date a required installment under Section 430 of the Code with respect to any Title IV Plan or the failure to make any required contribution to a Multiemployer Plan; (viii) the determination that any Title IV Plan is considered an at-risk plan or a plan in endangered to critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; (ix) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan; (x) the imposition of any liability under Title I or Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Obligor or any ERISA Affiliate thereof; (xi) an application for a funding waiver under Section 303 of ERISA or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Title IV Plan; (xii) the occurrence of a non-exempt prohibited transaction under Sections 406 or 407 of ERISA for which any Obligor or any Subsidiary thereof may be directly or indirectly liable and which is reasonably expected to result in material liability to any Obligor or any Subsidiary; (xiii) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary or disqualified person for which any Obligor or any ERISA Affiliate thereof may be directly or indirectly liable and which is reasonably expected to result in material liability to any Obligor or any Subsidiary; (xiv) the occurrence of an act or omission which could reasonably be expected to give rise to the imposition on any Obligor or any ERISA Affiliate thereof of material fines, penalties, taxes or related charges under Chapter 43 of the Code or under Sections 409, 502(c), (i) or (1) or 4071 of ERISA; (xv) the assertion of a material claim (other than routine claims for benefits) against any Plan or the assets thereof, or against any Obligor or any Subsidiary thereof in connection with any such Plan; (xvi) receipt from the IRS of notice of the failure of any Qualified Plan to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Qualified Plan to fail to qualify for exemption from taxation under Section 501(a) of the Code; (xvii) the imposition of any Lien (or the fulfillment of the conditions for the imposition of any Lien) on any of the rights, properties or assets of any Obligor or any ERISA Affiliate thereof, in either case pursuant to Title I or Title IV of ERISA, including Section 302(f) or 303(k) of ERISA or to Section 401(a)(29) or 430(k) of the Code; (xviii) the establishment or amendment by any Obligor or any Subsidiary thereof of any “welfare plan”, as such term is defined in Section 3(1) of ERISA, that provides post-employment welfare benefits in a manner that would materially increase the liability of any Obligor (excluding, for the avoidance of doubt, continued welfare benefits for a limited time of up to 2 years after the termination of employment); or (xix) any Foreign Benefit Event.
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“ERISA Funding Rules” means the rules regarding minimum required contributions (including any installment payment thereof) to Title IV Plans, as set forth in Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Event of Default” has the meaning set forth in Section 11.01.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Rate” means, as of any date of determination, the rate at which any currency may be exchanged into another currency, as set forth on the relevant Bloomberg screen at or about 11:00 a.m. (New York City time) on such date. In the event that such rate does not appear on the Bloomberg screen, the “Exchange Rate” shall be determined by reference to such other publicly available service for displaying exchange rates as may be reasonably designated by the Agent.
“Excluded Account” means, collectively, (i) accounts used exclusively for payroll, the withheld employee portion of payroll taxes and other employee wage and benefit payments, (ii) accounts used exclusively for escrow, trust, or other fiduciary arrangements established in the ordinary course and not in contemplation of this Agreement, (iii) accounts constituting cash collateral accounts subject to Permitted Liens and (iv) de minimis accounts with balances not exceeding $2,000,000 individually at any time or $3,000,000 in the aggregate at any time; provided that no account used for collecting payments from customers, suppliers or clients of any Obligor or any of their Subsidiaries shall constitute an Excluded Account.
“Excluded Assets” has the meaning set forth in the Security Agreement.
“Excluded Subsidiary” means, collectively, (i) Immaterial Subsidiaries and (ii) any Subsidiary for which the requirement to provide a Lien, security interest or Guaranty, as the case may be, has been waived by the Agent in accordance with Section 8.12(c), but only for so long as such waiver remains in effect.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (i) Taxes imposed on or measured by net income (however denominated), franchise Taxes and branch profits Taxes, in each case, (x) imposed by the United States as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivisions thereof) or (y) that are Other Connection Taxes, (ii) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the
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date on which (1) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 5.03(h)) or (2) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 5.03, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (iii) Taxes attributable to such Recipient’s failure to comply with Section 5.03(f), and (iv) any withholding Taxes imposed under FATCA.
“Exclusive License” (and its derivatives) means and refers to any outbound license of Intellectual Property that is exclusive (whether as to use, geography or otherwise) and is not terminable by the licensor at any time upon ninety (90) days’ (or less) prior written notice.
“Exculpated Party” has the meaning set forth in Section 14.03(b)(ii).
“FATCA” means Sections 1471 through 1474 of the Code, as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“FD&C Act” means the U.S. Federal Food, Drug, and Cosmetic Act of 1938 (or any successor thereto), as amended from time to time, and the rules and regulations issued or promulgated thereunder.
“FDA” means the U.S. Food and Drug Administration and any successor entity.
“Federal Funds Effective Rate” means, for any day, the greater of (i) the rate calculated by the Federal Reserve Bank of New York based on such day’s federal funds transactions by depositary institutions (as determined in such manner as the Federal Reserve Bank of New York sets forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate and (ii) zero percent (0%).
“Foreign Benefit Event” means, with respect to any Foreign Pension Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable Law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (b) the failure to make the required contributions or payments, under any applicable Law, on or before the due date for such contributions or payments, (c) the receipt of a notice by a Governmental Authority relating to the intention to terminate any such Foreign Pension Plan or to appoint a trustee or similar official to administer any such Foreign Pension Plan, or alleging the insolvency of any such Foreign Pension Plan, (d) the incurrence of any liability in excess of $1,500,000 by Parent or any of its Subsidiaries under applicable Law on account of the complete or partial termination of such Foreign Pension Plan or the complete or partial withdrawal of any participating employer therein, or (e) the occurrence of any transaction that is prohibited under any applicable Law and that could reasonably be expected to result in the incurrence of any liability by Parent or any of its Subsidiaries, or the imposition on Parent or any of its Subsidiaries of any fine, excise tax or penalty resulting from any noncompliance with any applicable Law, in each case in excess of $1,500,000.
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“Foreign Lender” means a Lender that is not a U.S. Person.
“Foreign Pension Plan” means any benefit plan that under applicable Law, other than the Laws of the United States or any political subdivision thereof, is required to be funded through a trust or other funding vehicle other than a trust or funding vehicle maintained exclusively by a Governmental Authority.
“Foreign Security Documents” means any pledge, security or other collateral agreement pursuant to which the assets owned by a Foreign Subsidiary or the Equity Interests in such Foreign Subsidiary are made subject to a Lien in favor of the Agent, including but not limited to the French Security Documents and the Australian Security Documents, and which is governed by the laws of the jurisdiction in which such Foreign Subsidiary is formed, in each case in form and substance reasonably satisfactory to the Agent and in each case as amended, restated, supplemented or otherwise modified from time to time.
“Foreign Subsidiary” means any direct or indirect Subsidiary of any Obligor that is not a Domestic Subsidiary of such Obligor.
“Fortress Investor” means CFIP2 ALLE LLC, an Affiliate of the Agent, in its capacity as an Investor under and as defined in the Backstop Agreement.
“French Securities Account Pledge Agreement” means the pledge of securities account agreement and any document relating thereto governed by French law (including but not limited to the statement of pledge and the pledge certificate) to be entered into on or about the date hereof between, among others, the Borrower as pledgor, the Agent, the Lenders as secured parties and Allurion France as securities account holder.
“French Security Documents” means the French Securities Account Pledge Agreement and any document required to be delivered thereunder or relating thereto.
“GAAP” means generally accepted accounting principles in the United States, as in effect from time to time, set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, in the statements and pronouncements of the Financial Accounting Standards Board and in such other statements by such other entity as may be in general use by significant segments of the accounting profession that are applicable to the circumstances as of the date of determination. All references to “GAAP” used herein shall be to GAAP applied consistently with the principles used in the preparation of the financial statements delivered pursuant to Section 6.01(d)(i).
“Governmental Approval” means any consent, authorization, approval, order, license, franchise, permit, certification, accreditation, registration, clearance, exemption, filing or notice that is issued or granted by or from (or pursuant to any act of) any Governmental Authority, including any application or submission related to any of the foregoing.
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“Governmental Authority” means any nation, government, branch of power (whether executive, legislative or judicial), state, province or municipality or other political subdivision thereof and any entity exercising executive, legislative, judicial, monetary, regulatory or administrative functions of or pertaining to government, including without limitation regulatory authorities, governmental departments, agencies, commissions, bureaus, officials, ministers, courts, bodies, boards, tribunals and dispute settlement panels, and other law-, rule- or regulation-making organizations or entities of any state, territory, county, city or other political subdivision of any country, including the FDA and any other agency, branch or other governmental body, whether U.S. or non-U.S., that has regulatory, supervisory or administrative authority or oversight over, or is charged with the responsibility or vested with the authority to administer or enforce, any Healthcare Laws.
“Guaranty” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other monetary obligation of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation or (iv) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or monetary obligation; provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business.
“Guaranty Assumption Agreement” means a Guaranty Assumption Agreement substantially in the form of Exhibit C, executed by any entity that, pursuant to Section 8.12 is required to become a “Subsidiary Guarantor”.
“Guaranteed Obligations” has the meaning set forth in Section 13.01.
“Hazardous Material” means any substance, element, chemical, compound, product, solid, gas, liquid, waste, by-product, pollutant, contaminant or material which is hazardous or toxic, and includes, without limitation, (i) asbestos, polychlorinated biphenyls and petroleum (including crude oil or any fraction thereof) and (ii) any material classified or regulated as “hazardous” or “toxic” or words of like import pursuant to an Environmental Law.
“Healthcare Laws” means, collectively, all applicable Laws, Governmental Approvals, Regulatory Approvals or binding Contracts with any Regulatory Authority applicable to any Product, the ownership or use of any Product or the regulation of any Product Commercialization and Development Activities conducted by or on behalf of Parent or any of its Subsidiaries, whether U.S. or non-U.S., federal, state, local or equivalent, relating to the provision of medical or other professional healthcare services or supplies, billing and collection practices relating to the payment for healthcare services or supplies, insurance laws (including law related to payment for “no-fault” claims) and workers compensation laws as they relate to the provision of, and
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billing and payment for, the sale or distribution of any such Products, healthcare services, patient healthcare, patient healthcare information, patient abuse, the quality and adequacy of medical care, equipment, personnel, operating policies, fee splitting, including, without limitation, the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)) (the “Federal Anti-Kickback Statute”), the Physician Self-Referral Statute (42 U.S.C. § 1395nn) (the “Stark Law”), the Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), criminal False Claims Act (42 U.S.C. § 1320a-7b(a)), all criminal laws relating to health care fraud and abuse, including but not limited to 18 U.S.C. Sections 286, 287, 1035, 1347 and 1349, and the health care fraud criminal provisions under the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §§ 1320d et seq.), the exclusion law (42 U.S.C. § 1320a-7), the civil monetary penalties law (42 U.S.C. § 1320a-7a), HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. §§ 17921 et seq.), the Federal Food, Drug & Cosmetic Act (FD&C Act) (21 U.S.C. § 321 et seq.), the Public Health Service Act (PHS Act) (42 U.S.C. § 201 et seq.), all applicable Good Manufacturing Practice requirements addressed in the FDA’s Quality System Regulation (21 C.F.R. Part 820), the Investigational Device Exemption regulation and regulations related to clinical trials (21 C.F.R. Part 812, and Parts 50, 54, and 56), all applicable labeling requirements addressed in FDA’s Device Labeling Regulation (21 C.F.R. Part 801), all statutes, regulations and binding directives of applicable federal healthcare programs, including but not limited to Medicare (Title XVIII of the Social Security Act) and Medicaid (Title XIX of the Social Security Act), any binding collection and reporting requirements relating to applicable federal health care programs and any successor government programs, any rules and regulations promulgated pursuant to the statutes listed herein, and any and all comparable U.S. and non-U.S. Laws and other applicable healthcare laws and regulations.
“Healthcare Permit” means, with respect to any Person and its ordinary course business activities, any Regulatory Approval (i) issued or required under any Healthcare Laws applicable to such activities of such Person, including activities related to the provision of billing or invoicing for the sale of goods or services regulated or administered under any Healthcare Laws, or (ii) issued to such Person or required to be held by such Person under any Healthcare Laws.
“Hedging Agreement” means any interest rate exchange agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.
“Immaterial Subsidiary” means, as of any date of determination, any Foreign Subsidiary of an Obligor (i) the unconsolidated assets of which does not exceed two and a half percent (2.5%) of the consolidated assets of Parent and its consolidated Subsidiaries as set forth in the financial statements most recently delivered pursuant to Sections 6.01, 8.01(b) or 8.01(c), as applicable, and (ii) the unconsolidated revenues of which does not exceed two and a half percent (2.5%) of the consolidated revenues of Parent and its consolidated Subsidiaries as set forth in the financial statements most recently delivered pursuant to Sections 6.01, 8.01(b) or 8.01(c), as applicable; provided that no Subsidiary of the Obligors shall qualify as an Immaterial Subsidiary if (x) the assets or revenue of such Subsidiary taken together with the assets or revenue of all then existing Immaterial Subsidiaries exceeds seven and a half percent (7.5%) of the consolidated assets or revenue, as applicable, of Parent and its consolidated Subsidiaries or (y) such Subsidiary holds or maintains any Regulatory Approval necessary or required for any Product Commercialization and Development Activities, owns or operates any manufacturing or similar facility involved in Product Commercialization and Development Activities, owns or licenses any Material Intellectual Property holds inventory or receivables, books revenue, or has more than ten (10) employees.
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“IDE” means an application, including an application filed with any Regulatory Authority, for authorization to commence human clinical studies with respect to any Device, including (i) an Investigational Device Exemption as defined in the FD&C Act or any successor application or procedure filed with the FDA, (ii) an Investigational Device Exemption for a non-significant risk device as specified in 21 C.F.R. § 812.2(b), (iii) any equivalent of any of the foregoing pursuant to or under any non-U.S. country or regulatory jurisdiction, (iv) all amendments, variations, extensions and renewals of any of the foregoing that may be filed with respect thereto, and (v) all related documents and correspondence thereto, including documents and correspondence with Institutional Review Boards, whether U.S. or non-U.S., or equivalent (an “IRB”).
“Indebtedness” of any Person means, without duplication:
(i) all obligations of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or similar instruments;
(iii) [reserved];
(iv) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person;
(v) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable (a) not overdue by more than one hundred twenty (120) days or (b) disputed in good faith pursuant and for which appropriate reserves are being maintained);
(vi) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed;
(vii) all Guaranties by such Person of Indebtedness of others;
(viii) all Capital Lease Obligations of such Person;
(ix) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty;
(x) net obligations under any Hedging Agreement, currency swaps, forwards, futures or derivatives transactions;
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(xi) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances;
(xii) all obligations of such Person in respect of Disqualified Equity Interests; and
(xiii) all other obligations required to be classified as indebtedness of such Person under GAAP.
The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.
“Indemnified Party” has the meaning set forth in Section 14.03(b)(ii).
“Indemnified Taxes” means (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any Obligation and (ii) to the extent not otherwise described in clause (i), Other Taxes.
“Information Certificate” means an Information and Collateral Certificate, in substantially the form set forth in Exhibit G.
“Insolvency Proceeding” means (i) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors (other than Permitted Fundamental Changes), or (ii) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of any Person’s creditors generally or any substantial portion of such Person’s creditors, in each case, undertaken under any Debtor Relief Law.
“Intellectual Property” means all Patents, Trademarks, Copyrights, and Technical Information, whether registered or not, U.S. or non-U.S., including (without limitation) all of the following:
(i) applications, registrations, amendments and extensions relating to such Intellectual Property;
(ii) rights and privileges arising under any applicable Laws with respect to such Intellectual Property;
(iii) rights to sue for or collect any damages for any past, present or future infringements of such Intellectual Property; and
(iv) rights of the same or similar effect or nature in any jurisdiction corresponding to such Intellectual Property throughout the world.
“Intercompany Subordination Agreement” means a subordination agreement to be executed and delivered by Parent and each of its Subsidiaries, pursuant to which all obligations in respect of any Indebtedness owing to any such Person by Parent or any of its Subsidiaries shall be subordinated to the prior payment in full in cash of all Obligations, such agreement to be substantially in the form attached hereto as Exhibit H.
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“Intercreditor Agreement” means that certain Intercreditor Agreement, in substantially the form attached hereto as Exhibit K by and between the Agent and RTW and acknowledged and agreed to by the Borrower, as amended or otherwise modified from time to time.
“Interest Rate” means the sum of (i) the Applicable Margin plus (ii) the greater of (x) the Wall Street Journal Prime Rate as of any day and (y) three percent (3.00%) per annum.
“Invention” means any novel, non-obvious (or inventive) and useful art, apparatus, method, process, machine (including any article or Device), manufacture or composition of matter, or any novel, non-obvious (or inventive) and useful improvement in any art, method, process, machine (including article or Device), manufacture or composition of matter.
“Investment” means, for any Person: (i) the acquisition (whether for cash, property, services or securities or otherwise) of Equity Interests, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or entry into any agreement to make any such acquisition (other than if (x) closing thereunder is contingent upon consent of the Agent or the Majority Lenders or payoff of the Obligations or (y) such agreement is generally cancelable without penalty) (including any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (ii) the making of any deposit with, or advance, loan, assumption of debt, or other extension of credit to, or capital contribution in any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person), but excluding any such advance, loan or extension of credit having a term not exceeding one hundred twenty (120) days arising in connection with the sale of services, inventory or supplies by such Person in the ordinary course of business; (iii) the entering into of any Guaranty of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (iv) the entering into of any Hedging Agreement. The amount of an Investment will be determined at the time the Investment is made without giving effect to any subsequent changes in value.
“IRS” means the U.S. Internal Revenue Service or any successor agency and to the extent relevant, the U.S. Department of the Treasury.
“Law” means any U.S. or non-U.S. federal, state, provincial, territorial, municipal or local statute, treaty, rule, guideline, regulation, ordinance, code, administrative or judicial precedent or authority, or (solely with respect to Patents) arising under an international convention, including any interpretation or administration thereof by any Governmental Authority or (solely with respect to Patents) international body charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority or (solely with respect to Patents) international body, in each case whether or not having the force of law.
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“Lenders” has the meaning set forth in the preamble hereto.
“Lien” means any mortgage, lien, pledge, charge or other security interest, or any lease, title retention agreement, mortgage, restriction, easement, right-of-way, option or adverse claim (of ownership or possession) or other similar encumbrance of any kind or character whatsoever or any preferential arrangement that has the practical effect of creating a security interest.
“Loan” means the Loans to be made by the Lenders to the Borrower on the Closing Date.
“Loan Documents” means, collectively, this Agreement, the Notes, the Security Documents, any Guaranty Assumption Agreement, any Information Certificate, the Intercompany Subordination Agreement, the Intercreditor Agreement, the Bridging Agreement and any other guaranty, security agreement, subordination agreement, intercreditor agreement or other present or future document, instrument, agreement or certificate identified as a “Loan Document” or otherwise expressly required to be delivered pursuant to a Loan Document or other amendment, waiver or modification of the foregoing, delivered to the Agent or any Lender by or on behalf of (and at the direction or request of) an Obligor in connection with this Agreement (including, without limitation, in connection with Section 8.12) or any of the other Loan Documents, in each case, as amended or otherwise modified from time to time.
“Loss” means judgments, debts, liabilities, expenses, costs, damages or losses, contingent or otherwise, whether liquidated or unliquidated, matured or unmatured, disputed or undisputed, contractual, legal or equitable, including loss of value, reasonable and documented (in reasonable detail) out-of-pocket professional fees, including reasonable and documented (in reasonable detail) out-of-pocket fees and disbursements of legal counsel on a full indemnity basis, and all reasonable and documented (in reasonable detail) out-of-pocket costs incurred in investigating or pursuing any Claim or any proceeding relating to any Claim.
“Majority Lenders” means, at any time, Lenders having at such time in excess of fifty percent (50%) of the aggregate Commitments (or, if such Commitments are terminated, the outstanding principal amount of the Loans) then in effect.
“Make-Whole Amount” means, as of any date of repayment or prepayment (or the date on which such repayment or prepayment was required to be made hereunder) of all or any portion of the outstanding principal amount of the Loans at any time during the Non-Call Period (for purposes of this defined term any such date being an “applicable date”), an amount, determined (without duplication) by the Agent, equal to the greater of (i) 2.00% of the outstanding principal amount of the Loans being so repaid or prepaid on any such applicable date and (ii) the present value as of such applicable date of the sum of (x) 2.00% of the principal amount of the Loans to be so repaid or prepaid on such applicable date as if such amount would otherwise be repaid or prepaid on the last day of the Non-Call Period, plus (y) the amount of all interest that would otherwise have accrued hereunder on the principal amount of the Loans being so repaid or prepaid for the period from such applicable date to the expiration of the Non-Call Period, assuming an interest rate for such period equal to the Interest Rate in effect as of such applicable date for the Loans, computed using a discount rate equal to the Treasury Rate as of such applicable date plus 50 basis points.
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“Margin Stock” means “margin stock” within the meaning of Regulation U and Regulation X.
“Material Adverse Change” and “Material Adverse Effect” mean any event, occurrence, fact, development or circumstance that has had, or could reasonably be expected to have, a material adverse change in or effect on (i) the business condition (financial or otherwise), operations, performance or property of Parent and its Subsidiaries taken as a whole, (ii) the ability of any Obligor to perform its obligations under the Loan Documents, as and when due, or (iii) the legality, validity, binding effect or enforceability against any Obligor of any material portion of the Loan Documents to which it is a party, or the rights and remedies available to or conferred upon the Agent or the Lenders under any Loan Document other than, in the case of this clause (iii), solely as a result of any action on the part of the Agent and/or any Lender that is within such Person’s control and does not arise as a result of a breach of any Loan Document by an Obligor.
“Material Agreement” means (i) each Contract listed on Schedule 7.14, (ii) the RTW Royalty Financing Agreement, (iii) the Additional RTW Royalty Financing Agreement (once entered into), (iv) any Contract providing for the inbound or outbound license of Material Intellectual Property, and (v) any other Contract to which Parent or any of its Subsidiaries is a party or a beneficiary from time to time, or to which any assets or properties of Parent or any of its Subsidiaries are bound (a) the absence or termination of which could reasonably be expected to result in a Material Adverse Effect or (b) without duplication during any period of twelve (12) consecutive months is reasonably expected to, directly or indirectly, (x) result in payments or receipts (including royalty, licensing or similar payments) made to Parent or any of its Subsidiaries in an aggregate amount in excess of $3,000,000, or (y) require payments or expenditures (including royalty, licensing or similar payments) to be made by Parent or any of its Subsidiaries in an aggregate amount in excess of $3,000,000, in each case, as amended, supplemented or otherwise modified from time to time.
“Material Indebtedness” means (i) Indebtedness pursuant to the RTW Royalty Financing Agreement, (ii) to the extent that the Additional RTW Royalty Financing Agreement has been executed by RTW and the Borrower pursuant to the terms of the Side Letter, Indebtedness pursuant to the Additional RTW Royalty Financing Agreement, and (iii) any other Indebtedness of Parent or any of its Subsidiaries, the outstanding principal amount of which, individually or in the aggregate, exceeds $1,000,000 (or the Equivalent Amount in other currencies).
“Material Intellectual Property” means, all Intellectual Property owned by, licensed to or otherwise held by any Obligor (i) necessary for the operation of the business of Parent and its Subsidiaries as currently conducted or as currently anticipated to be conducted, including all current and contemplated Product Commercialization and Development Activities relating to the Products, (ii) the loss of which could reasonably be expected to result in a Material Adverse Effect, or (iii) that has a fair market value in excess of $1,000,000, as determined by the Agent acting reasonably.
“Material Regulatory Event” means an Adverse Regulatory Event that, individually or when taken together with each other Adverse Regulatory Event that has occurred since the Closing Date, (i) has resulted in or could reasonably be expected to result in a Material Adverse Effect or (ii) has, or could reasonably be expected to, result in fines, penalties and Losses (including loss of revenue) in excess of $1,500,000.
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“Maturity Date” means June 30, 2027.
“Medicaid” means that government-sponsored entitlement program under Title XIX, P.L. 89-97 of the Social Security Act, which provides federal grants to states for medical assistance based on specific eligibility criteria, as set forth on Section 1396, et seq. of Title 42 of the United States Code.
“Medicare” means that government-sponsored insurance program under Title XVIII, P.L. 89-97, of the Social Security Act, which provides for a health insurance system for eligible elderly and disabled individuals, as set forth at Section 1395, et seq. of Title 42 of the United States Code.
“Minimum Cash Closing Amount” has the meaning set forth in Section 6.01(e).
“Monthly Amortization Payment” has the meaning set forth in Section 3.01(a).
“Multiemployer Plan” means any multiemployer plan, as defined in Section 400l(a)(3) of ERISA, to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent or otherwise.
“Net Cash Proceeds”, means, (i) with respect to any Casualty Event experienced or suffered by Parent or any of its Subsidiaries, the amount of cash proceeds received (directly or indirectly) including, without limitation, in the form of insurance proceeds or condemnation awards in respect of such Casualty Event, from time to time by or on behalf of such Person after deducting therefrom only (a) reasonable costs and expenses related thereto incurred by Parent or such Subsidiary in connection therewith, (b) amounts required to be repaid on account of any Permitted Indebtedness (other than the Obligations) secured by a Permitted Lien that is required to be repaid as a result of such Casualty Event, (c) amounts required to be reserved in accordance with GAAP for indemnities and against liabilities associated with the property damaged, destructed or condemned in such Casualty Event, and (d) Taxes (including transfer Taxes or net income Taxes) paid or payable in connection therewith; and (ii) with respect to any Asset Sale by Parent or any of its Subsidiaries, the amount of cash proceeds received (directly or indirectly) from time to time by or on behalf of such Person after deducting therefrom only (a) reasonable costs and expenses related thereto incurred by Parent or such Subsidiary in connection therewith, (b) amounts required to be repaid on account of any Permitted Indebtedness (other than the Obligations) secured by a Permitted Lien that is required to be repaid as a result of such Asset Sale, and (c) Taxes (including transfer Taxes or net income Taxes) paid or payable in connection therewith; provided that, in each case of clauses (i) and (ii), costs and expenses shall only be deducted to the extent, that the amounts so deducted are (X) actually paid or payable to a Person that is not an Affiliate of Parent or any of its Subsidiaries and (Y) properly attributable to such Casualty Event or Asset Sale, as the case may be.
“Non-Call Period” means the period from the Closing Date up to and including the first anniversary of the Closing Date.
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“Note” means a promissory note, in substantially the form of Exhibit A hereto, executed and delivered by the Borrower to any Lender in accordance with Section 2.03.
“NY UCC” means the UCC as in effect from time to time in New York.
“Obligations” means, all amounts, obligations, liabilities, covenants and duties of every type and description (including all Guaranteed Obligations) owing by any Obligor to any Secured Party, any indemnitee hereunder or any participant, arising out of, under, or in connection with, any Loan Document, whether direct or indirect (regardless of whether acquired by assignment), absolute or contingent, due or to become due, whether liquidated or not, now existing or hereafter arising and however acquired, and whether or not evidenced by any instrument or for the payment of money, including, without duplication, (i) all Loans, (ii) all interest, whether or not accruing after the filing of any petition in bankruptcy or after the commencement of any insolvency, reorganization or similar proceeding, and whether or not a claim for post-filing or post-petition interest is allowed in any such proceeding, and (iii) all other fees, expenses (including, subject to the limitations contained herein and in the other Loan Documents, fees, charges and disbursement of counsel), interest, commissions, charges, costs, disbursements, indemnities and reimbursement of amounts paid and other sums chargeable to such Obligor under any Loan Document.
“Obligors” means, collectively, Parent, the Borrower and the Subsidiary Guarantors (including any Subsidiary of Parent that becomes a Subsidiary Guarantor after the Closing Date pursuant to Section 8.12), together with their respective successors and permitted assigns.
“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.
“Organic Document” means, for any Person, such Person’s formation documents, including, as applicable its certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation, limited liability agreement, operating agreement and all shareholder agreements, voting trusts and similar agreements and arrangements applicable to such Person’s Equity Interests, or any equivalent document of any of the foregoing.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Resale RS” has the meaning set forth in Section 8.22(k).
“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 Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 5.03(h)).
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“Participant” has the meaning set forth in Section 14.05(e).
“Participant Register” has the meaning set forth in Section 14.05(g).
“Patents” means all patents and patent applications, including (i) the Inventions and improvements described and claimed therein, (ii) patents and patent applications in any form in any worldwide jurisdiction, including but not limited to industrial designs, provisional applications, design patent rights, reissues, reexaminations, substitutions, supplementary protection certificates, divisionals, continuations, continuations-in-part, renewals, extensions, statutory invention registrations, rulings from any governmental authority regarding including ones arising from any proceeding such as Inter Partes review and oppositions, and (iii) all income, royalties, damages and payment now, previously or hereafter due and payable with respect thereto, (iv) all damages and payment for past or future infringements thereof, and rights to sue thereof, and (v) all rights whatsoever pertaining to patents and patent applications accruing thereunder or pertaining thereto throughout the world.
“Patent Prosecution Allotment” means an amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) during the period from the Closing Date through the Maturity Date designated for the Patent Prosecution Workplan, which Patent Prosecution Allotment shall be funded solely with the proceeds of the Loans.
“Patent Prosecution Workplan” means a reasonable, business work plan to be jointly developed by the Borrower and the Agent in good faith, such plan to be finalized on or before the first anniversary of the Closing Date, regarding the improvement, development, enhancement and prosecution of the Obligors’ Intellectual Property (including the Material Intellectual Property), which plan shall give consideration to the patent prosecution strategy of the Borrower as in effect on the Closing Date and shall be in the best interests of Parent and its Subsidiaries, taken as a whole (in the joint and reasonable determination of the Borrower and the Agent), as the same may be modified from time to time in writing by mutual agreement of Agent and the Borrower.
“Patriot Act” has the meaning set forth in Section 14.20.
“Payment Date” means (i) the last day of each calendar month (provided that if such last day of any calendar month is not a Business Day, then the Payment Date shall be the next succeeding Business Day) and (ii) the Maturity Date.
“PBGC” means the United States Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Permitted Acquisition” means any Acquisition by an Obligor; provided that:
(a) immediately prior to, and after giving effect to such Acquisition, (i) all representations and warranties contained in this Agreement and the other Loan Documents that are qualified by materiality, Material Adverse Effect or the like are, in each case, true and correct, (ii) all representations and warranties contained in this Agreement and the other Loan Documents that are not qualified by materiality, Material Adverse Effect or the like are, in each case, true and correct in all material respects, and (iii) no Event of Default shall have occurred and be continuing or could reasonably be expected to result therefrom;
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(b) all transactions in connection therewith shall be consummated in all material respects in accordance with all applicable Laws;
(c) in the case of an Acquisition of Equity Interests of any Person, all of such Equity Interests (except for any such securities in the nature of directors’ qualifying shares required pursuant to any applicable Law) shall be owned by Parent or a wholly-owned, direct or indirect Subsidiary of Parent that is an Obligor, and, in the event of an Acquisition that results in the creation or acquisition of a new Subsidiary of Parent (regardless if such Subsidiary otherwise constitutes an Excluded Subsidiary), unless the Agent otherwise agrees in writing, Parent shall have taken, or caused to be taken, as of the date such Person becomes a Subsidiary of Parent, each of the actions set forth in Section 8.12(a);
(d) such Person (in the case of an Acquisition of Equity Interests of such Person) or assets (in the case of an Acquisition of assets or a division of such Person) shall be engaged or used, as the case may be, in businesses or lines of business that would be permitted pursuant to Section 9.04;
(e) on a pro forma basis after giving effect to such Acquisition, Parent and its Subsidiaries shall be in compliance with the financial covenants set forth in Section 10;
(f) to the extent that the purchase price for any such Acquisition is paid in cash (excluding any cash proceeds received in respect the issuance of any Equity Interests by the Parent or any of its Subsidiaries), the amount thereof, when taken together with the purchase price paid in cash for all other Acquisitions consummated or effected since the Closing Date, does not exceed $5,000,000 in the aggregate (or the Equivalent Amount thereof);
(g) the fair market value of all consideration paid in such Acquisition (including any cash proceeds received in respect the issuance of any Equity Interests by the Parent or any of its Subsidiaries), when taken together with the fair market value of all consideration paid in connection with all other Permitted Acquisitions consummated or effected since the Closing Date, shall not exceed the excess of (i) $10,000,000 in the aggregate less (ii) the aggregate amount of all EBITDA Adjustments, provided that for purposes of this clause (g) the determination of fair market value of the consideration paid for any Acquisition shall be inclusive of all Indebtedness assumed in connection therewith, all payments made in connection therewith, whether in the form of Equity Interests, cash or other property or assets, and all deferred purchase price payments, whether in respect of earn-out payments, post-closing adjustments, payments on “seller notes” or otherwise related thereto, in each case to the extent actually paid or reasonably expected to be paid;
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(h) to the extent that all or any portion of the purchase price for any such Acquisition is paid in Equity Interests, all such Equity Interests shall be Qualified Equity Interests of Parent;
(i) in the case of any Acquisition that has a purchase price in excess of $500,000, Parent shall have provided the Agent with at least ten (10) Business Days’ prior written notice of any such Acquisition, together with (i) a copy of the draft purchase agreement related to the proposed Acquisition (and any related documents reasonably requested by the Agent), (ii) to the extent available, quarterly and annual financial statements of the Person whose Equity Interests or assets are being acquired for the twelve (12) month period ending thirty (30) days immediately prior to such Acquisition, including any audited financial statements that are available, (iii) to the extent available, all due diligence conducted by or on behalf of Parent or its applicable Subsidiary, as applicable, prior to such Acquisition; provided that, Agent shall deliver any customary non-reliance letters with respect to the receipt of such diligence, (iv) information regarding any contingent liabilities or prospective research and development costs associated with the Person, business or assets being acquired, and (v) any other information reasonably requested by the Agent and available to the Obligors; and
(j) neither Parent nor any of its Subsidiaries shall, in connection with (and upon giving effect to) any such Acquisition, assume or remain liable with respect to, or be subject to (x) any Indebtedness of the related seller or the business, Person or properties acquired, except to the extent permitted pursuant to Section 9.01(g), (y) any Lien on any business, Person or assets acquired, except to the extent permitted pursuant to Section 9.02, or (z) any other liability (including Tax, ERISA and environmental liabilities, but excluding Indebtedness or Liens) in excess of $500,000 in the aggregate since the Closing Date.
On or prior to the proposed date of any such Acquisition, the Agent shall have received a certificate of a Responsible Officer of Parent (prepared in reasonable detail), certifying that the Acquisition complies with the requirements of this definition, and which certificate shall include a summary (prepared in reasonable detail), certifying as to any contingent liabilities and prospective research and development costs associated with the Person, business or assets being acquired. In addition, to the extent the Person or business being acquired had negative EBITDA for the twelve consecutive month period ended on the last day of the most recently ended calendar month prior to the date of such Acquisition, the Parent shall provide the Agent with projections and a business plan, each prepared in reasonable detail satisfactory to the Agent, describing the Parent’s plan for making such acquired Person or business EBITDA positive.
“Permitted Cash Equivalent Investments” means (i) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any state thereof having maturities of not more than one year from the date of acquisition, (ii) commercial paper maturing no more than two hundred and seventy (270) days after the date of its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., (iii) certificates of deposit maturing no more than 180 days after issued or guaranteed by or placed with any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided
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profits of not less than $500,000,000, provided that the account in which any such certificate of deposit is maintained is subject to a control agreement in favor of the Agent, (iv) money market funds that (A) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (B) are rated AAA and Aaa (or equivalent rating) by at least two credit rating agencies and (C) have portfolio assets of at least $5,000,000, and (v) registered money market funds at least ninety-five percent (95.0%) of the assets of which constitute Permitted Cash Equivalent Investments of the kinds described in clauses (i) through (iv) above.
“Permitted Fundamental Changes” means transactions permitted under Section 9.03 or other transactions as may be expressly permitted or consented to from time to time in accordance with Section 14.04.
“Permitted Indebtedness” means any Indebtedness permitted under Section 9.01 or other Indebtedness as may be expressly permitted or consented to from time to time in accordance with Section 14.04.
“Permitted Licenses” means (A) inbound licenses of over-the-counter software that is commercially available to the public and are used by Parent or any of its Subsidiaries in the ordinary course of business, and (B) outbound non-exclusive and exclusive licenses for the use of the Intellectual Property of Parent or any of its Subsidiaries for Product Commercialization and Development Activities outside the United States and it territories entered into in the ordinary course of business; provided, that, with respect to each such license described in clause (B), (i) such license has been entered into pursuant to or in accordance with, and the terms of such license do not otherwise conflict with, the Patent Prosecution Workplan, (ii) it has been entered into on an arm’s-length basis, on commercially reasonable terms and in the ordinary course of business, (iii) to the extent such Intellectual Property constitutes Collateral, does not prevent or impair the ability of the Agent or the Lenders from fully exercising their rights under any of the Loan Documents in the event of a disposition or liquidation (including in connection with a foreclosure) of the rights, assets or properties that are the subject of such license, (iv) Parent shall provide ten (10) Business Days’ prior written notice and a reasonably detailed summary of the terms of the proposed license to the Agent and shall deliver to the Agent copies of the final executed licensing documents in connection with the exclusive license promptly upon the effectiveness thereof, (v) such license shall not result in a legal transfer of title of the licensed property, (vi) such license is not perpetual; and (vii) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing agreement that are payable to Parent or any of its Subsidiaries are paid to a Controlled Account.
“Permitted Liens” means any Liens permitted under Section 9.02 or other Liens as may be expressly permitted or consented to from time to time in accordance with Section 14.04.
“Permitted Refinancing” means, with respect to any Indebtedness not prohibited from being refinanced, extended, renewed or replaced hereunder, any refinancings, extensions, renewals and replacements of such Indebtedness; provided that such refinancing, extension, renewal or replacement (A) shall be incurred by the same obligor as the Indebtedness being so refinanced and (B) shall not (i) increase the outstanding principal amount of the Indebtedness being refinanced, extended, renewed or replaced (provided that the final maturity date of such Indebtedness shall be on or after the final maturity of the Indebtedness being refinanced and the
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Weighted Average Life to Maturity of such Indebtedness shall be greater than the Weighted Average Life to Maturity of the Indebtedness being refinanced), (ii) contain terms relating to outstanding principal amount, amortization, maturity, collateral security (if any) or subordination (if any), or other material terms that are less favorable in any material respect to Parent and its Subsidiaries or the Secured Parties than the terms of any agreement or instrument governing the Indebtedness being refinanced, extended, renewed or replaced, (iii) have an applicable interest rate or equivalent yield that exceeds the interest rate or equivalent yield of the Indebtedness being refinanced, extended, renewed or replaced, (iv) require or result in any Lien that is not a Permitted Lien, or (v) contain any new requirement to give Guaranties that was not an existing requirement of the Indebtedness being refinanced, extended, renewed or replaced; provided further that after giving effect to such refinancing, extension, renewal or replacement, no Default or Event of Default shall have occurred and be continuing (or could reasonably be expected to immediately occur) as a result thereof.
“Permitted Tax Distributions” means, with respect to any Obligor or any of its Subsidiaries which is a member of an affiliated group (consisting of only the Obligors and their Subsidiaries) filing consolidated, combined, unitary or similar tax returns of which such Obligor or Subsidiary is not the common parent, an amount with respect to any taxable year no greater than the corresponding Tax liabilities of the common parent of such affiliated group (including, without limitation, federal, state, and local income, franchise, sales, use, or similar Taxes) to the extent attributable to such Obligor or such Subsidiary.
“Person” means any individual, corporation, company, voluntary association, partnership, limited liability company, joint venture, trust, unincorporated organization or Governmental Authority or other entity of whatever nature.
“PIPE Agreement” means the Subscription Agreements to be entered into by and between Parent and each of the investors counterparty thereto.
“PIPE Transaction” means the acquisition by RTW and the other investors party to the PIPE Agreements of common stock of the Parent in a private placement, to occur in connection with the De-SPAC Transaction and the transactions contemplated by this Agreement, resulting in net cash proceeds to the Parent (which shall be contributed to the Borrower).
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Prepayment Date” means any Business Day on which the Borrower (i) elects to optionally prepay or (ii) is required to prepay, in each case, all or any portion of the outstanding principal amount of the Loans pursuant to Section 3.03(a) or Section 3.03(b), respectively.
“Prepayment Price” has the meaning set forth in Section 3.03(a)(i).
“Proceeding” has the meaning set forth in Section 14.03(b)(ii).
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“Product” means all medical products (including medical Devices) of the Parent and its Subsidiaries that have been, or are in the process of being, developed, distributed, imported, exported, labeled, promoted, licensed, marketed, sold or otherwise subject to Product Commercialization and Development Activities by or on behalf of the Parent or any of its Subsidiaries at any time, including by way of an outbound license or similar arrangement to a third party for Product Commercialization and Development Activities.
“Product Commercialization and Development Activities” means, with respect to any Product, any combination of (i) research, development, manufacturing, quality compliance, use, sale, licensing, importation, exportation, shipping, storage, handling, designing, labeling, marketing, promotion, supply, dispensing, distribution, testing, packaging, purchasing or other commercialization activity, (ii) receipt of payment or other remuneration in respect of any of the foregoing (including, without limitation, in respect of licensing, royalty or similar payments) or (iii) any similar or other activities the purpose of which is to commercially exploit such Product.
“Product Related Information” means, with respect to any Product, all books, records, lists, ledgers, files, manuals, Contracts, correspondence, reports, plans, drawings, data and other information of every kind (in any form or medium), including related to Intellectual Property, and all techniques and other know-how, that is necessary or useful for any Product Commercialization and Development Activities relating to such Product, including (i) branding materials, packaging and other marketing, promotion and sales materials and information, (ii) clinical data, information included or supporting any Regulatory Approval and all other documents, records, files, data and other information relating to Product Commercialization and Development Activities, (iii) litigation and dispute records, and accounting records, and (iv) all other information, techniques and know-how necessary or useful in connection with the Product Commercialization and Development Activities for any Product.
“Product Standards” means all safety, quality and other specifications and standards applicable to any Product, including all medical device and other standards promulgated by Standards Bodies.
“Prohibited Payment” means any bribe, rebate, payoff, influence payment, kickback or other payment or gift of money or anything of value (including meals or entertainment) to any officer, employee or ceremonial office holder of any government or instrumentality thereof, political party or supra-national organization (such as the United Nations), any political candidate, any royal family member or any other person who is connected or associated personally with any of the foregoing that is prohibited under any applicable Law for the purpose of influencing any act or decision of such payee in such payee’s official capacity, inducing such payee to do or omit to do any act in violation of such payee’s lawful duty, securing any improper advantage or inducing such payee to use such payee’s influence with a government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality.
“Projections” means a written projection of the revenues and expenses of the Parent and its Subsidiaries, on a quarterly basis, including projected revenues, EBITDA, and capital expenditures, substantially in the form attached hereto as Exhibit L; provided that the same shall be submitted to the Agent in Excel (and not .pdf or another) format.
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“Proportionate Share” means, with respect to each Lender, the percentage obtained by dividing (i) the sum of all Commitments (or, if the Commitments are terminated, the outstanding principal amount of the Loans) of such Lender then in effect by (ii) the sum of all Commitments (or, if the Commitments are terminated, the outstanding principal amount of the Loans) of all Lenders then in effect.
“Qualified Equity Interest” means, with respect to any Person, any Equity Interest of such Person that is not a Disqualified Equity Interest.
“Qualified Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) other than a Multiemployer Plan (i) that is or was at any time maintained or sponsored by any Obligor or any ERISA Affiliate thereof or to which any Obligor or any ERISA Affiliate thereof has ever made, or was ever obligated to make, contributions, and (ii) that is intended to be tax qualified under Section 401(a) of the Code.
“Real Property Security Documents” means any landlord consents, bailee letters, any mortgage or deed of trust or any other real property security document executed or required hereunder to be executed by any Obligor and granting a security interest in real property owned or leased (as tenant) by any Obligor in favor of the Secured Parties for purposes of securing the Obligations, in each case, as amendment, supplemented or otherwise modified from time to time.
“Recipient” means any Lender, the Agent or any other recipient of any payment to be made by or on account of any Obligation, as applicable.
“Referral Source” has the meaning set forth in Section 7.07(c).
“Refinanced Debt” means Indebtedness of the Borrower outstanding pursuant to that certain Amended and Restated Loan and Security Agreement, dated as of December 30, 2021, among the Borrower (or any predecessor thereof), the lenders from time to time party thereto, and Runway Growth Finance Corp., as administrative agent for such lenders, as amended or otherwise modified from time to time.
“Register” has the meaning set forth in Section 14.05(d).
“Registration Statement” has the meaning set forth in Section 8.22(a).
“Regulation T” means Regulation T of the Board of Governors of the Federal Reserve System, as amended.
“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as amended.
“Regulation X” means Regulation X of the Board of Governors of the Federal Reserve System, as amended.
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“Regulatory Approval” means, with respect to any Product or Product Commercialization and Development Activities, any Healthcare Permit or other Governmental Approval, whether U.S. or non-U.S., that is required to be held or maintained by, or for the benefit of, Parent, the Borrower or any of their respective Subsidiaries with respect thereto, including all applicable IDEs, PMAs, 510(k)s, Device Clearance Applications, Product Standards, and similar applications, pre-approvals and post-approvals, governmental pricing approvals, reimbursement approvals and approvals of applications for regulatory exclusivity, clearances, licenses, notifications, registrations or authorizations of any Regulatory Authority, in each case necessary for the ownership, use or other commercialization of such Product or for any such Product Commercialization and Development Activities.
“Regulatory Authority” means any Governmental Authority, whether U.S. or non-U.S., that is concerned with or has regulatory or supervisory oversight with respect to any Product or any Product Commercialization and Development Activities relating to any Product, including the FDA and all equivalent Governmental Authorities, whether U.S. or non-U.S.
“Related Fund” means, with respect to any Lender, a fund which is managed or advised by the same investment manager or investment adviser as such Lender or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of such Lender.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” of any Person means each of the president, chief executive officer, chief financial officer and similar officer of such Person.
“Restricted Payment” means any dividend or other distribution (whether in cash, Equity Interests or other property) with respect to any Equity Interests of Parent or any of its Subsidiaries, any payment of interest, principal or fees in respect of any Indebtedness owed by Parent or any of its Subsidiaries, to any holder of any Equity Interests of Parent or any of its Subsidiaries, or any payment (whether in cash, Equity Interests or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests of Parent or any of its Subsidiaries, or any option, warrant or other right to acquire any such Equity Interests of Parent or any of its Subsidiaries.
“Restrictive Agreement” means any Contract or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of Parent or any of its Subsidiaries to create, incur or permit to exist any Lien upon any of its properties or assets to secure the Obligations (other than (x)(1) customary provisions in Contracts (including without limitation leases and licenses of Intellectual Property) restricting the assignment thereof, and (2) customary restrictions and conditions contained in asset sale agreements, purchase agreements, acquisition agreements (including by way of merger, acquisition or consolidation) solely to the extent that (A) are only in effect pending consummation of the acquisition or sale contemplated pursuant to such agreement and (B) such restrictions or conditions (I) require Parent or any of its Subsidiaries to conduct its business in the ordinary course of business (with respect to such assets or businesses) consistent with historic practices or (II) are only in effect (with respect to such assets or businesses) pending the consummation of such transaction; provided that such
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restrictions and conditions apply only to the assets or property subject to such transaction (or, if applicable, the conduct of business of Parent or such Subsidiaries with respect to such assets or businesses) and that such sale is permitted or, in the case of the sale of the Borrower or any other Change of Control, such agreement contemplates the repayment in full of the Obligations hereunder, and (y) restrictions or conditions imposed by any Contract governing secured Permitted Indebtedness permitted under Section 9.01(e), to the extent that such restrictions or conditions apply only to the property or assets securing such Indebtedness), or (ii) the ability of Parent or any of its Subsidiaries to make Restricted Payments with respect to any of their respective Equity Interests or to make or repay loans or advances to Parent or any of its Subsidiaries or such other Obligor or to Guaranty Indebtedness of Parent or any of its Subsidiaries.
“Revenue” means, for any applicable fiscal period, consolidated total gross revenues of the Parent and its Subsidiaries for such fiscal period resulting from Product Commercialization and Development Activities in the ordinary course of business, as recognized on the income statement of Parent and its Subsidiaries for such fiscal period, determined on a consolidated basis in accordance with GAAP, less the sum of (i) all discounts and allowances (including chargebacks, shelf stock adjustments and allowances), (ii) amounts repaid or credited by reason of rejection, returns or recalls, rebates or bona fide price reductions, (iii) rebates and similar payments actually made with respect to sales paid for by Federal or state Medicaid, Medicare or similar U.S. or non-US governmental programs, (iv) excise Taxes, customs duties, customs levies and import fees imposed on the sale, importation, use or distribution of any Products and (v) all one-time, extraordinary or non-recurring payments of any type or nature, in each case to the extent included in the computation of consolidated total gross revenues of the Parent and its Subsidiaries for such fiscal period.
“RTW” means, collectively or individually, as the context requires, (i) 4010 Royalty Investments ICAV, an Irish collective asset-management vehicle, for and on behalf of its sub-fund, 4010 Royalty Investments Fund 1, and 4010 Royalty Master Fund, LP, a limited partnership organized in the Cayman Islands (as successors in interest to the entities listed in clause (ii) hereof), (ii) RTW Master Fund, Ltd., an exempted company incorporated in the Cayman Islands with limited liability, RTW Innovation Master Fund, Ltd., an exempted company incorporated in the Cayman Islands with limited liability and RTW Biotech Opportunities Ltd (formerly known as RTW Venture Fund Limited) an investment company limited by shares incorporated under the laws of Guernsey, and/or (iii) RTW Investments, LP, as agent for the foregoing, and, in each case, each of their successors and assigns.
“RTW Royalty Financing Agreement” means the Revenue Interest Financing Agreement, dated as of February 9, 2023, between the Borrower and RTW, as amended or otherwise modified in accordance with the Intercreditor Agreement.
“Sanction” means any international economic sanction administered or enforced by the United States government (including, without limitation, OFAC), the United Nations Security Council, the European Union or its Member States, Her Majesty’s Treasury or other relevant sanctions authority.
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“Schedule 6.01(e) Fees” means, as the context may require, any of those fees, costs and expenses incurred or anticipated to be incurred by or on behalf of the Borrower in connection with the consummation of the Transactions and set forth on Schedule 6.01(e).
“Secured Party” means each Lender, the Agent, each other Indemnified Party, any other holder of any Obligation, and any of their respective permitted transferees or assigns.
“Securities Account” means any securities account, as such term is defined in Section 8-501 of the NY UCC.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Security Agreement, in substantially the form set forth in Exhibit J dated as of the Closing Date, among the grantors party thereto (including Parent and the Borrower) and the Agent, granting a security interest in such grantor’s personal property in favor of the Agent, as amended or otherwise modified from time to time.
“Security Documents” means, collectively, the Security Agreement, each Real Property Security Document, each Short-Form IP Security Agreement, each Foreign Security Document, and each other security agreement, control agreement or financing statement, registration, recordation, filing, instrument or approval required, entered into or recommended to grant, perfect and otherwise render enforceable Liens in favor of the Secured Parties for purposes of securing the Obligations, including (without limitation) pursuant to Section 8.12, in each case, as amended or otherwise modified from time to time.
“Short-Form IP Security Agreements” means short-form copyright, patent or trademark (as the case may be) security agreements, substantially in the form Exhibit C, Exhibit D or Exhibit E to the Security Agreement (or otherwise in form and substance reasonably satisfactory to the Agent), entered into by one or more Obligors in favor of the Secured Parties, each as amended or otherwise modified from time to time.
“Side Letter” means that certain letter agreement, dated February 9, 2023 (as amended, modified, restated, amended and restated, replaced or supplemented from time to time in accordance with the Intercreditor Agreement), whereby, among other things, RTW may make a single election in certain circumstances to convert up to $7,500,000 of the purchase price that it paid for certain equity interests in Parent into an amount of financing provided by RTW to the Borrower pursuant to the Additional RTW Royalty Financing Agreement.
“Solvent” means, with respect to any Person at any time, that (i) the present fair saleable value of the property of such Person is greater than the total amount of liabilities (including contingent liabilities) of such Person, (ii) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured in the ordinary course, and (iii) such Person has not incurred and does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s (or such group of Persons’) ability to pay as such debts and liabilities as they mature in the ordinary course.
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“Specified Asset Sale” means any Asset Sale of the type described in any of clauses (d) (l) of Section 9.09.
“Specified Projections” means the Projections attached hereto as Exhibit L.
“Specified Subsidiary” means any direct or indirect Subsidiary of the Parent that (i) after the occurrence of a Collateral Triggering Event is designated by the Agent (in its sole discretion by way of written notice to the Parent) to be a “Specified Subsidiary”, and (ii) was not an Obligor prior to such designation.
“Standards Bodies” means any of the organizations that create, sponsor or maintain safety, quality or other standards, including ISO, ANSI, CEN and SCC and the like.
“Subsidiary” means, with respect to any Person (for purposes of this definition, the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (i) of which securities or other ownership interests representing more than fifty percent (50%) of the equity or more than fifty percent (50%) of the ordinary voting power or, in the case of a partnership, more than fifty percent (50%) of the general partnership interests are, as of such date, owned, controlled or held, directly or indirectly or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more direct or indirect subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of Parent.
“Subsidiary Guarantor” means, (i) initially as of the Closing Date, each Subsidiary of Parent identified under the caption “SUBSIDIARY GUARANTORS” on the signature pages hereto and, thereafter, (ii) each Subsidiary of Parent that becomes, or is required to become, a “Subsidiary Guarantor” after the Closing Date pursuant to Section 8.12, in each case of clauses (i) and (ii), other than an Immaterial Subsidiary.
“Suspension Event” has the meaning set forth in Section 8.22(c).
“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.
“Technical Information” means all Product Related Information, including clinical data and any information submitted to a regulatory authority to obtain approvals, all trade secrets, invention disclosures and other proprietary or confidential information, public information, non-proprietary know-how, any information of a scientific, technical, or commercial nature related to any Product Commercialization and Development Activities, any information of business nature in any form or medium, standards and specifications, conceptions, ideas, innovations, discoveries, Invention disclosures, all documented research, developmental, demonstration or engineering work and all other information, data, plans, specifications, reports, summaries, experimental data, processes, formulae, methods, manuals, models, samples, know-how, technical information, systems, methodologies, computer programs, information technology and any other information.
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“Title IV Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) other than a Multiemployer Plan (i) that is or was at any time maintained or sponsored by any Obligor or any ERISA Affiliate thereof or to which any Obligor or any ERISA Affiliate thereof has ever made, or was obligated to make, contributions, and (ii) that is or was subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA.
“Trademarks” means all trade names, service names, trademarks and service marks, logos, trademark and service mark registrations, and applications for trademark and service mark registrations, including (i) all renewals of trademark and service mark registrations, (ii) all rights to recover for all past, present and future infringements thereof and all rights to sue therefor, and (iii) all rights whatsoever accruing thereunder or pertaining thereto throughout the world, together, in each case, with the goodwill of the business connected with the use thereof.
“Transactions” means the negotiation, preparation, execution, delivery and performance by each Obligor of this Agreement and the other Loan Documents to which such Obligor is (or is intended to be) a party, the making of the Loans hereunder, the repayment of the Refinanced Debt, the consummation of the PIPE Transaction, the De-SPAC Transaction, and the transactions contemplated by the RTW Royalty Financing Agreement and the Side Letter, and all other transactions contemplated pursuant to this Agreement and the other Loan Documents.
“Treasury Rate” means, for the purpose of calculating any Make-Whole Amount, the yield to maturity implied by the yield(s) for the most recently issued actively traded on-the-run U.S. Treasury securities as quoted on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets as of approximately 5:00 p.m. (New York City time) on the second Business Day immediately preceding the date of any repayment or prepayment that is the subject of such Make-Whole Amount, in respect of that period which is mathematically closest in duration to the actual period over which such determination is to be assessed for the purposes of making a present value calculation. The Bloomberg quotation of the US Treasury Rate as at the close of business in New York on the day before any determination is made shall be used and shall be final in the absence of manifest or demonstrable error.
“UCC” means, with respect to any applicable jurisdictions, the Uniform Commercial Code as in effect in such jurisdiction, as may be modified from time to time.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
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“United States” or “U.S.” means the United States of America, its fifty (50) states and the District of Columbia.
“U.S. Person” means a “United States person” as defined in Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate” has the meaning set forth in Section 5.03(f)(ii)(B)(3).
“Wall Street Journal Prime Rate” means the Wall Street Journal Prime Rate, as published and defined in The Wall Street Journal.
“Weighted Average Life to Maturity” means, when applied to any Indebtedness on any date, the number of years obtained by dividing: (i) the sum of the product obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) then outstanding principal amount of such Indebtedness.
“Withdrawal Liability” means, at any time, any liability incurred (whether or not assessed) by any ERISA Affiliate and not yet satisfied or paid in full at such time with respect to any Multiemployer Plan pursuant to Section 4201 of ERISA.
“Withholding Agent” means any of the Borrower, any other Obligor or the Agent.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
1.02 Accounting Terms and Principles. Unless otherwise specified, all accounting terms used in each Loan Document shall be interpreted, and all accounting determinations and computations thereunder (including under Section 10 and any definitions used in such calculations) shall be made, in accordance with GAAP. Unless otherwise expressly provided, all financial covenants and defined financial terms shall be computed on a consolidated basis for Parent and its Subsidiaries, in each case without duplication. If Parent or the Borrower requests an amendment to any provision hereof to eliminate the effect of (a) any change in GAAP or the application thereof or (b) the issuance of any new accounting rule or guidance or in the application thereof, in either case, occurring after the Closing Date, then the Lenders, Parent and the Borrower agree that they will negotiate in good faith amendments to the provisions of this Agreement that are directly affected by such change or issuance with the intent of having the respective positions of the Lenders, Parent and the Borrower after such change or issuance
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conform as nearly as possible to their respective positions as of the Closing Date and, until any such amendments have been agreed upon, (i) the provisions in this Agreement shall be calculated as if no such change or issuance has occurred and (ii) Parent and the Borrower shall provide to the Lenders a written reconciliation in form and substance reasonably satisfactory to the Lenders, between calculations of any baskets and other requirements hereunder before and after giving effect to such change or issuance. Notwithstanding anything herein to the contrary, for purposes of Section 9 hereof and any other negative covenant in the Loan Documents (but not, for the avoidance of doubt any financial reporting obligations under the Loan Documents), with respect to the accounting for leases as either operating leases or capital leases and the impact of such accounting in accordance with FASB ASC 842 on the definitions and covenants contained herein, GAAP as in effect on December 31, 2018, shall be applied.
1.03 Interpretation. For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires,
(a) the terms defined in this Agreement include the plural as well as the singular and vice versa;
(b) words importing gender include all genders;
(c) any reference to a Section, Annex, Schedule or Exhibit refers to a Section of, or Annex, Schedule or Exhibit to, this Agreement;
(d) any reference to “this Agreement” refers to this Agreement, including all Annexes, Schedules and Exhibits hereto, and the words herein, hereof, hereto and hereunder and words of similar import refer to this Agreement and its Annexes, Schedules and Exhibits as a whole and not to any particular Section, Annex, Schedule, Exhibit or any other subdivision;
(e) references to days, months and years refer to calendar days, months and years, respectively;
(f) all references herein to “include” or “including” shall be deemed to be followed by the words “without limitation”;
(g) the word “from” when used in connection with a period of time means “from and including” and the word “until” means “to but not including”;
(h) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer broadly to any and all assets and properties, whether tangible or intangible, real or personal, including cash, securities, rights under contractual obligations and permits and any right or interest in any such assets or properties;
(i) accounting terms not specifically defined herein (other than “property” and “asset”) shall be construed in accordance with GAAP;
(j) where any provision in this Agreement or any other Loan Document refers to an action to be taken by any Person, or an action which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly;
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(k) the word “will” shall have the same meaning as the word “shall”;
(l) references to any Lien granted or created hereunder or pursuant to any other Loan Document securing any Obligations shall be deemed to be a Lien for the benefit of the Secured Parties; and
(m) references to any Law will include all statutory and regulatory provisions amending, consolidating, replacing, supplementing or interpreting such Law from time to time.
Unless otherwise expressly provided herein, references to organizational documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto permitted by the Loan Documents.
If any obligation to pay any amount pursuant to the terms and conditions of any Loan Document falls due on a day which is not a Business Day, then such required payment date shall be extended to the immediately following Business Day.
1.04 Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (i) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (ii) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
1.05 Times of Day; Times of Performance.
(a) Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
(b) If any delivery or other performance obligation hereunder (other than payments) falls due on a day which is not a Business Day, then such due date shall be extended to the immediately following Business Day.
SECTION 2
THE COMMITMENTS AND THE LOANS
2.01 Loans.
(a) On the terms and subject to the conditions of this Agreement, each Lender agrees to make the Loan to the Borrower, in a single Borrowing on the Closing Date, in an aggregate principal amount for all Lenders of $60,000,000 in immediately available funds.
(b) No amounts repaid or prepaid with respect to any Loan may be reborrowed.
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(c) Any term or provision hereof (or of any other Loan Document) to the contrary notwithstanding, Loans made hereunder will be denominated solely in Dollars, and all Loans and other Obligations will be repayable solely in Dollars and no other currency.
2.02 Borrowing Procedures. At least three (3), but not more than fifteen (15) Business Day(s) prior to the Borrowing on the Closing Date, the Borrower shall deliver to the Agent an irrevocable Borrowing Notice, which notice, if received by the Agent on a day that is not a Business Day or after 12:00 noon (New York City time) on a Business Day, shall be deemed to have been delivered on the next Business Day.
2.03 Notes. If requested by any Lender, any Loan of such Lender shall be evidenced by one or more Notes. The Borrower shall prepare, execute and deliver to the Lender such Notes in the form attached hereto as Exhibit A.
2.04 Use of Proceeds. The Borrower shall use the proceeds of the Loans for purposes of (i) the repayment in full of the Refinanced Debt on the Closing Date, (ii) working capital and general corporate purposes, and (iii) without duplication, the payment of fees and expenses associated with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby, it being understood and agreed that the Patent Prosecution Allotment (or such less Loan amount agreed with the Agent) shall be applied to patent prosecution, development and enhancement in accordance with the Patent Prosecution Workplan.
SECTION 3
PAYMENTS OF PRINCIPAL AND INTEREST
3.01 Repayments Generally; Application.
(a) There will be no scheduled repayments of principal on the Loans prior to the third anniversary of the Closing Date. Thereafter, on each Payment Date occurring prior to the Maturity Date, the Borrower shall make a payment of principal on the aggregate outstanding principal balance of the Loans in an amount equal to one twenty-fourth (1/24th) of the aggregate principal amount of the Loans outstanding as of the time immediately prior to the first payment required pursuant to this clause (a) (each such payment being a “Monthly Amortization Payment”).
(b) The Borrower agrees that all amounts payable hereunder or under any other Loan Document, in respect of any Loans, fees or interest accrued or accruing thereon, or any other Obligations, shall be repaid and prepaid solely in Dollars. Except as otherwise provided in this Agreement, proceeds of each payment (including each repayment and prepayment of Loans) by or on behalf of the Borrower shall be deemed to be made ratably to the Lenders in accordance with their respective Proportionate Shares of the Loans being repaid or prepaid.
3.02 Interest.
(a) Interest Generally. The outstanding principal amount of the Loans, as well as the amount of all other outstanding Obligations, shall accrue interest at the Interest Rate on and from the Closing Date. The Agent’s determination of the Interest Rate shall be binding on the Borrower, its Subsidiaries and the Lenders in the absence of manifest or demonstrable error.
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(b) Default Interest. Notwithstanding the foregoing, (i) upon the occurrence and during the continuance of any Event of Default described in clauses (a), (b), and (h) of Section 11.01, and (ii) upon notice from the Agent upon the occurrence and during the continuance of any other Event of Default, the Applicable Margin shall increase automatically by three percent (3.0%) per annum (the Interest Rate, as increased pursuant to this Section 3.02(b), being the “Default Rate”). If any Obligation is not paid when due under any applicable Loan Document, the amount thereof shall accrue interest at the Default Rate.
(c) Interest Payment Dates. Accrued interest on the Loans shall be payable in cash, in arrears, on each Payment Date, and upon the payment or prepayment of the Loans (on the principal amount being so paid or prepaid); provided that interest payable at the Default Rate, or any accrued interest not paid on or before the Maturity Date, shall be payable from time to time in cash on demand by the Agent until paid in full.
3.03 Prepayments; Prepayment Fees.
(a) Optional Prepayments.
(i) Subject to prior written notice pursuant to clause (a)(ii) below and the payment of the Early Prepayment Fee pursuant to clause (c) below and the Exit Fee pursuant to Section 3.04, the Borrower shall have the right to optionally prepay, in whole or in part, the outstanding principal amount of the Loans on a Prepayment Date ; provided that in addition to such prepaid principal amount and the Early Prepayment Fee payable pursuant to clause (c) below, the Borrower shall also make payment in full in cash on such Prepayment Date of all accrued but unpaid interest on the principal amount of the Loans being prepaid (such aggregate amount of principal, the Early Prepayment Fee payable pursuant to clause (c) below, the Exit Fee payable pursuant to Section 3.04 below and accrued interest, the “Prepayment Price”).
(ii) A notice of optional prepayment shall be effective only if received by the Agent not later than 11:00 a.m. (New York City time) on a date not less than three (3) (nor more than five (5)) Business Days prior to the proposed Prepayment Date. Each notice of optional prepayment shall specify the proposed Prepayment Date, the principal amount of the Loans to be prepaid, the amount of accrued and unpaid interest that will be paid on the Prepayment Date, and, in reasonable detail, a calculation of the Early Prepayment Fee and the Exit Fee, payable on such Prepayment Date in connection with such proposed prepayment.
(b) Mandatory Prepayments.
(i) Within five (5) Business Days of the receipt by any Obligor of Net Cash Proceeds from the occurrence of any Casualty Event or Specified Asset Sale, in either case in excess of $1,000,000 in the aggregate during any fiscal year, the Borrower shall cause an amount equal to one hundred percent (100%) of the Net Cash Proceeds received with respect to such Casualty Event or Specified Asset Sale, as the case may be, to be applied and allocated as set forth in clause (d) below to (i) the prepayment of the outstanding principal amount of the Loans, (ii) the payment of accrued and unpaid interest on the principal amount of the Loans being prepaid and (iii) the payment of the Early Prepayment Fee payable pursuant to clause (c) below and the Exit Fee payable pursuant to Section 3.04 below.
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(ii) Notwithstanding clause (i) above, so long as no Default has occurred and is continuing or shall immediately result therefrom, if, within ten (10) Business Days following the occurrence of any such Casualty Event or Specified Asset Sale, a Responsible Officer of Parent delivers to the Agent a notice to the effect that the Borrower intends to apply (or cause to be applied) the Net Cash Proceeds from such Casualty Event or Specified Asset Sale, to (A) repair, refurbish, restore, replace or rebuild the asset subject to such Casualty Event or Specified Asset Sale, (B) the cost of purchase or constructing other assets useful in the business of Parent or another Obligor, or (C) other general corporate purposes (excluding Restricted Payments) not otherwise prohibited by the terms of this Agreement, then such Net Cash Proceeds of such Casualty Event or Specified Asset Sale may be applied for such purpose in lieu of such mandatory prepayment otherwise required pursuant to Section 3.03(b)(i) to the extent such Net Cash Proceeds of such Casualty Event or Specified Asset Sale are actually applied for such purpose. Notwithstanding the foregoing, in the event that Net Cash Proceeds have not been so applied within three hundred sixty (360) days following the occurrence of such Casualty Event or Specified Asset Sale, the Borrower shall cause an amount equal to one hundred percent (100%) of such unused balance of such Net Cash Proceeds with respect to such Casualty Event or Specified Asset Sale, as the case may be, to be applied and allocated as set forth in clause (d) below to the prepayment of the outstanding principal amount of the Loans, together with payment of accrued and unpaid interest on the principal amount of the Loans being so prepaid, the applicable Early Prepayment Fee payable pursuant to clause (c) below.
(c) Early Prepayment Fee. Without limiting the foregoing, whenever any prepayment of Loans is made or required to be made hereunder, pursuant to Section 3.03(a) or Section 3.03(b)(i) or otherwise, whether voluntary, involuntary, mandatory, as a result of a Default, acceleration or otherwise, the Early Prepayment Fee shall be payable in full in cash on the applicable Prepayment Date for such prepayment. Until payment in full in cash of all Obligations, all Early Prepayment Fees shall continue to be due and payable, including after the occurrence of any Default, acceleration, maturity or otherwise.
(d) Application.
(i) With respect to any payment, repayment or prepayment made pursuant to clause (a) or (b) above, the aggregate amount of such payment, repayment or prepayment shall be applied and allocated to (i) the prepayment of the outstanding principal amount of the Loans, (ii) the payment of accrued and unpaid interest on such principal amount being prepaid and (iii) the payment of any applicable Early Prepayment Fee and Exit Fee such that the full amount of the principal amount of the Loans being prepaid, together with any accrued and unpaid interest thereon and the Early Prepayment Fee and Exit Fee payable hereunder, shall be paid in full through such application and allocation of such aggregate amount of such payment, repayment or prepayment.
(ii) With respect to any other payment, repayment or prepayment of the outstanding principal amount of the Loans (including, for the avoidance of doubt, upon the maturity or following the acceleration thereof, whether from the proceeds of Collateral or otherwise), proceeds thereof shall be applied in the following order of priority, with proceeds being applied to a succeeding level of priority only if amounts owing pursuant to the immediately preceding level of priority have been paid in full in cash; provided that all such applications to Lenders shall be made in accordance with their respective Proportionate Shares:
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(A) first, to the payment of that portion of the Obligations payable to the Agent constituting fees, indemnities, costs, expenses, and other amounts then due and owing (including fees and disbursements and other charges of counsel payable under Section 14.03);
(B) second, to the payment of that portion of the Obligations payable to the Lenders constituting fees (other than any Early Prepayment Fee and Exit Fee), indemnities, expenses, and other amounts then due and owing (including fees and disbursements and other charges of counsel payable under Section 14.03) ratably among them in proportion to the respective amounts described in this clause (ii) payable to them;
(C) third, to the payment of any accrued and unpaid interest then due and owing;
(D) fourth, to the payment of unpaid principal of the Loans;
(E) fifth, to the payment of any Early Prepayment Fee and Exit Fee then due and payable;
(F) sixth, to the payment in full of all other Obligations then due and payable to the Agent and the Lenders, ratably among them accordance with their respective Proportionate Shares, to the extent such Obligations are payable to them; and
(G) seventh, to the Borrower or such other Persons as may be required in accordance with Law.
3.04 Exit Fee. In addition to any fees payable pursuant to Section 3.03(c), on the date of each repayment or prepayment of all or any portion of the Loans, whether by voluntary, involuntary or mandatory prepayment or repayment, acceleration (including as a result of the occurrence of any event described in Section 11.01(h)) or otherwise, and whether on, prior to or after the scheduled Maturity Date, the Borrower shall pay to the Agent a fully-earned and nonrefundable exit fee equal to three percent (3.00%) of the principal amount of such repayment or prepayment (an “Exit Fee”); provided that, with respect to any Monthly Amortization Payment made prior to the scheduled Maturity Date, the payment of the Exit Fee with respect to such payment shall be deferred until the earlier of (i) such scheduled Maturity Date and (ii) the date of payment in full in cash of the outstanding principal amount of the Loans, and upon such earlier date all such deferred payments shall be due and payable in full and in cash. Upon payment in full in cash of the Obligations, the Borrower shall pay to the Agent the Exit Fee in respect of the aggregate principal amount of the Obligations paid in accordance with Section 3.01(a). Until payment in full in cash of all Obligations, all Exit Fees shall continue to be due and payable, including after the occurrence of any Default, acceleration, maturity or otherwise.
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SECTION 4
PAYMENTS, ETC.
4.01 Payments.
(a) Payments Generally. Each payment of principal, interest and other amounts to be made by the Obligors under this Agreement or any other Loan Document shall be made (i) in Dollars, in immediately available funds, without deduction, set off or counterclaim, to the Agent, for the account of the respective Lenders to which such payment is owed, to the deposit account of the Agent designated by the Agent by notice to the Borrower, and (ii) not later than 11:00 a.m. (New York City time) on the date on which such payment is due (each such payment made after such time on such due date shall be deemed to have been made on the next succeeding Business Day).
(b) Application of Payments. All such payments referenced in clause (a) above shall be applied as set forth in Section 3.03(d) above.
(c) Non-Business Days. If the due date of any payment under this Agreement (whether in respect of principal, interest, fees, costs or otherwise) would otherwise fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day; provided that if such next succeeding Business Day would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day.
4.02 Computations. All computations of interest and fees hereunder shall be computed on the basis of a year of three hundred and sixty (360) days and actual days elapsed during the period for which payable.
4.03 Set-Off.
(a) Set-Off Generally. Upon the occurrence and during the continuance of any Event of Default, the Agent, each of the Lenders and each of their Affiliates 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 deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent, any Lender and any of their Affiliates to or for the credit or the account of any Obligor against any and all of the Obligations, whether or not such Person shall have made any demand and although such obligations may be unmatured. Any Person exercising rights of set off hereunder agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Agent, the Lenders and each of their Affiliates under this Section 4.03 are in addition to other rights and remedies (including other rights of set-off) that such Persons may have.
(b) Exercise of Rights Not Required. Nothing contained in Section 4.03(a) shall require the Agent, any Lender or any of their Affiliates to exercise any such right or shall affect the right of such Persons to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of any Obligor.
(c) Payments Set Aside. To the extent that any payment by or on behalf of any Obligor is made to the Agent or any Lender, or the Agent, any Lender or any Affiliate of the foregoing exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent, such Lender or such
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Affiliate in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (i) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (ii) each Lender severally agrees to pay to the Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect.
SECTION 5
YIELD PROTECTION, ETC.
5.01 Additional Costs.
(a) Changes in Law Generally. If, on or after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes party to this Agreement), the adoption of any Law, or any change in any Law, or any change in the interpretation or administration thereof by any court or other Governmental Authority charged with the interpretation or administration thereof, or compliance by the Agent or any of the Lenders (or its lending office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, shall impose, modify or deem applicable any reserve (including any such requirement imposed by the Board of Governors of the Federal Reserve System), special deposit, contribution, insurance assessment or similar requirement, in each case that becomes effective after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes party to this Agreement), against assets of, deposits with or for the account of, or credit extended by, a Lender (or its lending office) or other Recipient or shall impose on a Lender (or its lending office) or other Recipient any other condition affecting the Loans or the Commitment, not as a result of any action or inaction on the part of such Lender, and the result of any of the foregoing is to increase the cost to such Lender or such other Recipient of making or maintaining the Loans, or to reduce the amount of any sum received or receivable by such Lender or other Recipient under this Agreement or any other Loan Document, or subject any Lender or other Recipient to any Taxes on its loans, loan principal, commitments or other obligations, or its deposits, reserves, other liabilities or capital (if any) attributable thereto (other than (i) Indemnified Taxes, (ii) Taxes described in clauses (ii) through (iv) of the definition of “Excluded Taxes” and (iii) Connection Income Taxes), then the Borrower shall pay to such Lender or other Recipient within five (5) Business Days after any demand for such additional amount or amounts as will compensate such Lender for such increased cost or reduction.
(b) Change in Capital Requirements. If a Lender shall have determined that, on or after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes party to this Agreement), the adoption of any applicable Law regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, in each case that becomes effective after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes party to this Agreement), has or would have the effect of reducing the rate of return on capital of a Lender (or its parent) as a consequence of a Lender’s obligations hereunder or the Loans to a level below that which a Lender (or its parent) could have achieved but for such adoption, change, request or directive by an amount reasonably deemed by it to be material, then the Borrower shall pay to such Lender within five (5) Business Days after any demand for such additional amount or amounts as will compensate such Lender (or its parent) for such reduction.
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(c) Notification by Lender. Each Lender shall promptly notify the Borrower of any event of which it has knowledge, occurring after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes party to this Agreement), which will entitle such Lender to compensation pursuant to this Section 5.01, together with a certificate setting forth the calculation (in reasonable detail) of such compensation. Before giving any such notice pursuant to this Section 5.01(c) such Lender shall designate a different lending office if such designation (x) will, in the reasonable judgment of such Lender, avoid the need for, or reduce the amount of, such compensation and (y) will not, in the reasonable judgment of such Lender, be materially disadvantageous to such Lender. A certificate of such Lender claiming compensation under this Section 5.01, setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder, shall be conclusive and binding on the Borrower in the absence of manifest or demonstrable error.
(d) Delays in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section 5.01 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section 5.01 for any increased costs or reductions incurred or suffered more than nine months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the circumstances giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).
(e) Other Changes. Notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) 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 constitute a change in Law for all purposes of this Section 5.01, regardless of the date enacted or adopted.
(f) General Policy. Notwithstanding the foregoing, the Borrower shall only be required to compensate a Lender pursuant to this Section 5.01 to the extent it is such Person’s general policy or practice to demand compensation from debtors similarly situated in similar circumstances under comparable provisions of other financing agreements (it being understood that this paragraph shall not be deemed to require any such Person to make available any information that it deems in its reasonable discretion confidential).
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5.02 Illegality. Notwithstanding any other provision of this Agreement, if, on or after the Closing Date (or, with respect to any Lender, such later date on which such Lender becomes party to this Agreement), the adoption of or any change in any applicable Law or in the interpretation or application thereof by any competent Governmental Authority shall make it unlawful for a Lender or its lending office to make or maintain the Loans (and, in the opinion of such Lender, the designation of a different lending office would either not avoid such unlawfulness or would be disadvantageous to such Lender), then such Lender shall promptly notify the Borrower thereof, following which (i) such Lender’s Commitment shall be suspended until such time as such Lender may again make and maintain the Loans hereunder and (ii) if such Law shall so mandate, the Loans shall be prepaid by the Borrower on or before such date as shall be mandated by such Law in an amount equal to the Prepayment Price applicable on such Prepayment Date in accordance with Section 3.03(a).
5.03 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any Obligation shall be made without deduction or withholding for any 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 such Tax is an Indemnified Tax, then the sum payable by such Obligor shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 5.03) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(b) Payment of Other Taxes by the Borrower. The Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable Law, or at the option of the Agent or each Lender, timely reimburse it for the payment of any Other Taxes.
(c) Evidence of Payments. As soon as reasonably practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 5, the Borrower shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.
(d) Indemnification by the Borrower. The Borrower and each other Obligor party hereto each hereby jointly and severally agree to indemnify, hold harmless and reimburse each Recipient, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 5) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified 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 the Borrower by a Lender (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender shall be conclusive absent manifest or demonstrable error.
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(e) Indemnification by the Lenders. Each Lender shall severally indemnify the Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 14.05(g) 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 the Agent in connection with any Loan 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 the Agent shall be conclusive absent manifest or demonstrable error. Each Lender hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Agent to the Lender from any other source against any amount due to the Agent under this clause (e).
(f) Status of Lenders.
(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Agent at the time or times reasonably requested by the Borrower or the Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Agent as will permit such payments to be made without withholding or at a reduced rate of withholding; provided that, other than in the case of U.S. federal withholding Taxes, such Lender has received written notice from the Borrower advising it of the availability of such exemption or reduction and containing all applicable documentation. In addition, any Lender, if reasonably requested by the Borrower or the Agent shall deliver such other documentation prescribed by applicable Law as reasonably requested by the Borrower or the Agent as will enable the Borrower or the 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 Section 5.03(f)(ii)(A), (ii)(B), and (ii)(D)) 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.
(ii) Without limiting the generality of the foregoing, if the Borrower is a U.S. Person:
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the 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 or the Agent), executed copies of IRS Form W-9 (or successor form) certifying that such Lender is exempt from U.S. federal backup withholding Tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower 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 or the Agent), whichever of the following is applicable:
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(1) 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 Loan Document, executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E as applicable (or successor forms) 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 Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E as applicable (or successor forms) 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;
(2) executed copies of IRS Form W-8ECI (or successor form);
(3) 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 D-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 the Borrower within the meaning of Section 871(h)(3)(B) of the Code, or a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E as applicable (or successor forms); or
(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY (or successor form), accompanied by IRS Form W-8ECI (or successor form), IRS Form W-8BEN or IRS Form W-8BEN-E (or successor form), a U.S. Tax Compliance Certificate, substantially in the form of Exhibit D-2 or Exhibit D-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 D-4 on behalf of each such direct and indirect partner.
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower 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 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 such applicable Law to permit the Borrower or the Agent to determine the withholding or deduction required to be made; and
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(D) if a payment made to a Lender under any Loan 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 the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the 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 the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Recipient’s obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment under FATCA. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the Closing Date.
Each Recipient 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 the Borrower and the Agent in writing of its legal inability to do so.
(g) Treatment of Certain Tax Benefits. If any party to this Agreement determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 5.03 (including by the payment of additional amounts pursuant to this Section 5.03), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 5.03 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 5.03(g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) if such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 5.03(g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 5.03(g) 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 5.03(g) 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.
(h) Investment Unit. The Borrower and the applicable Lenders agree, for U.S. federal income (and applicable U.S. state and local and non-U.S.) tax purposes, that (i) each of the Loans issued pursuant to this Agreement, together with the Parent common stock issued pursuant to Section 6.01(s) (the “Parent Stock”) constitute an “investment unit” under Section 1273(c)(2) of the Code and United States Treasury Regulations Section 1.1273-2(h), (ii) the “issue price” of the Loans under Section 1273(b) of the Code shall be determined by taking into account the aggregate purchase price allocated to such Parent Stock pursuant to this Section 5.03(h), and (iii) if the difference between the aggregate principal amount of the Loans and the aggregate “issue price” of the Loans is more than “de minimis,” the difference shall be reported as “original issue discount”. Within thirty (30) days of the issuance of the Parent Stock hereunder, the parties shall cooperate in good faith to agree on the value of such Parent Stock,
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which the parties acknowledge and agree shall be equal to the fair market value of the Parent Stock as of the date of issuance. No party shall take any position inconsistent with the tax treatment set forth in this Section 5.03(h) on any U.S. federal (or applicable U.S. state or local or non-U.S.) tax return or for any other U.S. federal income (or applicable U.S. state or local or non-U.S.) tax purpose, except as required pursuant to a “determination” within the meaning of Section 1313(a) of the Code or pursuant to a good faith settlement of an audit by any tax authority.
(i) Survival. Each party’s obligations under this Section 5.03 below shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all Obligations under any Loan Document.
5.04 Mitigation Obligations. If the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or to any Governmental Authority for the account of any Lender pursuant to Section 5.01 or Section 5.03, then such Lender shall (at the request of the Borrower) use commercially reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign and delegate its rights and obligations hereunder to another of its offices, branches or Affiliates if, in the sole, reasonable judgment of such Lender, such designation or assignment and delegation would (i) eliminate or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the future, (ii) not subject such Lender to any unreimbursed cost or expense and (iii) not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment and delegation.
SECTION 6
CONDITIONS PRECEDENT
6.01 Conditions to the Borrowing of the Loan. The obligation of the Lenders to make the Loan on the Closing Date shall be subject to the execution and delivery of this Agreement by the parties hereto, the delivery of a Borrowing Notice as required pursuant to Section 2.02, the delivery of a funds flow memorandum summarizing, in reasonable detail, the use of proceeds of Loan, the occurrence of the Closing Date on or before the earlier of (x) the “Termination Date” as defined in the De-SPAC Combination Agreement (and as may be extended as provided in Section 7.01(d) therein) and (y) August 7, 2023, and the prior or concurrent satisfaction (or waiver thereof by the Agent) of each of the conditions precedent set forth below in this Section 6.01.
(a) Secretary’s Certificate, Etc. The Agent shall have received from each Obligor party to a Loan Document on the Closing Date:
(i) a copy of a good standing certificate or the equivalent thereof (to the extent such concepts are recognized in such jurisdictions as are applicable), dated a date reasonably close to the Closing Date, for each such Person; and
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(ii) a certificate, dated as of the Closing Date, duly executed and delivered by such Person’s secretary or assistant secretary, managing member, general partner or equivalent, as to:
(A) resolutions of each such Person’s Board then in full force and effect authorizing the execution, delivery and performance of each Loan Document and the Transactions, to be executed and delivered by such Person;
(B) the incumbency and signatures of those of its officers, managing member or general partner or equivalent authorized to act with respect to each Loan Document to be executed and delivered by such Person; and
(C) true and complete copies of each Organic Document of such Person and copies thereof;
which certificates the Agent and the Lenders may conclusively rely upon until they shall have received a further certificate of the secretary, assistant secretary, managing member, general partner or equivalent of any such Person cancelling or amending the prior certificate of such Person.
(b) Information Certificate. The Agent shall have received a fully completed Information Certificate, in form and substance reasonably satisfactory to the Agent, dated as of the Closing Date, duly executed and delivered by a Responsible Officer of Parent and the Borrower, which is true and correct as of the Closing Date. All documents and agreements required to be appended to the Information Certificate, if any, shall be in form and substance reasonably satisfactory to the Agent and the Lenders, shall have been executed and delivered by the requisite parties and shall be in full force and effect.
(c) Closing Date Certificate. The following statements shall be true and correct, and the Agent shall have received a certificate, dated as of the Closing Date and in form reasonably satisfactory to the Agent, duly executed and delivered by a Responsible Officer of Parent and the Borrower certifying that: (i) both immediately before and after giving effect to the Borrowing on the Closing Date, (x) the representations and warranties set forth in each Loan Document that are qualified by materiality, Material Adverse Effect or the like are, in each case, true and correct; provided that to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct as of such earlier date, (y) the representations and warranties set forth in each Loan Document that are not qualified by materiality, Material Adverse Effect or the like are, in each case, true and correct in all material respects; provided that to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date, and (z) no Event of Default has occurred and is continuing, or could reasonably be expected to result from the Borrowing of the Loan, or the consummation of any Transactions contemplated to occur on the Closing Date, and (ii) all of the conditions set forth in this Section 6.01 have been satisfied (or waived in writing by the Agent) except to the extent such condition relates to the satisfaction or approval in form or substance of any documents by the Agent. All documents and agreements required to be appended to the certificate delivered pursuant to this Section 6.01(c), if any, shall be in form and substance reasonably satisfactory to the Agent, shall have been, as applicable, executed and delivered by the requisite parties, and shall, as applicable, be in full force and effect.
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(d) Financial Information, Etc. The Agent shall have received:
(i) audited consolidated financial statements of the Borrower (or any predecessor thereof) and its Subsidiaries for each of the three fiscal years ended prior to the Closing Date for which such audited consolidated financial statements are available; and
(ii) unaudited consolidated balance sheets of Parent and its Subsidiaries for each fiscal quarter ended at least forty five (45) days prior to the Closing Date ended after the date of the most recently available audited consolidated financial statements delivered pursuant to clause (i) above, together with the related consolidated statement of operations, shareholder’s equity and cash flows for each such fiscal quarter.
(e) Minimum Liquidity.
(i) The Agent shall have received evidence reasonably satisfactory to it that, as a result of the consummation of the Transactions on the Closing Date (and without regard to cash on hand immediately prior to the Closing Date), the Borrower shall have received on the Closing Date net cash proceeds of the Transactions (i.e., after giving effect to the payment of all related fees, costs and expenses, repayments, prepayments and any similar Transaction-related costs, expenses and payments, but not the payment of any Schedule 6.01(e) fees)) in an aggregate amount not less than $70,000,000 (the “Minimum Cash Closing Amount”); provided that, any term or provision hereof to the contrary notwithstanding, (i) the Borrower may pay the Schedule 6.01(e) Fees notwithstanding that such payment may result in the Borrower’s cash on hand immediately following the Closing Date to be less than the Minimum Cash Closing Amount so long as the total amount of Schedule 6.01(e) Fees paid by the Borrower does not exceed $6,000,000 in the aggregate, and (ii) in the event that pursuant to and as a result of the Interim Financing (as defined in the Bridging Agreement) the Borrower raises in excess of $15,000,000 of net proceeds (such excess being the “Incremental Financing Excess Amount”), for purposes of calculating the Minimum Cash Closing Amount the Borrower may include an amount equal to the lesser of (x) the Incremental Financing Excess Amount and (y) the amount of cash on hand actually held by the Borrower immediately prior to the Closing Date.
(ii) The Agent shall have received evidence reasonably satisfactory to it that, immediately after giving effect to the consummation of the Transactions on the Closing Date, the Borrower shall be in compliance with the covenant set forth in Section 10.01.
(f) Insurance. The Agent shall have received certificates of insurance evidencing that the insurance required to be maintained pursuant to Section 8.05 is in full force and effect, naming the Agent, for the benefit of the Lenders, as additional insured and loss payee thereunder, in each case, in form and substance reasonably satisfactory to the Agent.
(g) Solvency. The Agent shall have received a solvency certificate substantially in the form of Exhibit I, duly executed and delivered by the chief financial or accounting Responsible Officer of Parent, dated as of the Closing Date, in form and substance reasonably satisfactory to the Agent.
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(h) Security Documents. The Agent shall have received executed counterparts of all Security Documents of all Obligors to be entered into on the Closing Date (including Foreign Security Documents in respect of Allurion France and Allurion Australia), each dated as of the Closing Date, duly executed and delivered by each such Obligor, together with the following (or local equivalent thereof in respect of any Foreign Security Document):
(i) The delivery of all certificates (in the case of Equity Interests that are securities (as defined in the UCC)) evidencing the issued and outstanding capital securities owned by Parent, the Borrower and each Subsidiary that are required to be pledged under such Security Documents, which certificates in each case shall be accompanied by undated instruments of transfer duly executed in blank, or, in the case of Equity Interests that are uncertificated securities (as defined in the UCC), confirmation and evidence satisfactory to the Agent and the Lenders that the security interest required to be pledged therein under such Security Documents has been transferred to and perfected by the Agent for the benefit of the Secured Parties in accordance with Articles 8 and 9 of the NY UCC and all Laws otherwise applicable to the perfection of the pledge of such Equity Interests; provided that those certificated Equity Interests and undated instruments of transfer required to be delivered after the Closing Date pursuant to Section 8.21 shall be delivered on or before the applicable dates, and subject to the terms and conditions, provided in Section 8.21;
(ii) financing statements naming each Obligor as a debtor and the Agent as the secured party, or other similar instruments, registrations, or documents, in each case suitable for filing, filed under the UCC (or equivalent law) of all jurisdictions as may be necessary or, in the opinion of the Agent, desirable to perfect the Liens of the Secured Parties pursuant to such Security Documents;
(iii) UCC-3 termination statements, as may be necessary to release all Liens (other than Permitted Liens) and other rights of any Person in any collateral described in the Security Documents previously granted by any Person; and
(iv) all Short-Form IP Security Agreements, Real Property Security Documents and any other agreement, document or instrument required to be provided under any Security Document on the Closing Date, duly executed and delivered by the applicable Obligors.
(i) Lien Searches. The Agent shall have received the results of Lien searches regarding Parent and its Subsidiaries made within thirty (30) days prior to the Closing Date, and such searches shall reveal no Liens on any of the assets of such Persons except for Liens permitted by Section 9.02 or to be discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Agent.
(j) [Reserved].
(k) [Reserved].
(l) Opinions of Counsel. The Agent shall have received one or more legal opinions, dated as of the Closing Date and addressed to the Agent and the Lenders, from independent legal counsel to Parent, the Borrower and their Subsidiaries and if necessary, other legal counsel reasonably satisfactory to the Agent, in each case, in form and substance reasonably acceptable to the Agent.
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(m) Payoff of Refinanced Debt. The Refinanced Debt, together with all accrued and unpaid interest and related fees, costs and expenses, shall be, substantially contemporaneously with the funding of the Loans, paid in full, and the Agent shall have received executed payoff letters, in form and substance reasonably satisfactory to the Agent, providing for such payment in full (and irrevocable termination) of the Refinanced Debt and satisfactory arrangements shall have been made for the termination of all loan documents evidencing such Refinanced Debt and all Liens granted in connection therewith. On the Closing Date, after giving effect to the Transactions, Parent and its Subsidiaries shall not have any Indebtedness other than the Obligations and other Permitted Indebtedness.
(n) Convertible Notes. The Agent shall have received satisfactory evidence that the Convertible Notes shall have been converted to common Equity Interests of the Parent immediately prior to the consummation of the De-SPAC Transaction and cancelled and of no further force and effect, and the Parent, the Borrower and their Subsidiaries shall have no liability thereunder (other than contingent indemnification claims for which no claims have been made in writing).
(o) RTW Royalty Financing. The Agent shall have received satisfactory evidence that the “Closing Date” under the RTW Royalty Financing Agreement shall have occurred, resulting in gross proceeds to the Parent (which shall be contributed to the Borrower) in an amount not less than $40,000,000. The Agent shall have received fully executed copies of the RTW Royalty Financing Agreement and all transaction documents related thereto, which shall be in form and substance satisfactory to the Agent.
(p) Side Letter. The Agent shall have received satisfactory evidence that the Side Letter has been executed. The Agent shall have received a fully executed copy of the Side Letter and all annexes thereto, each of which shall be in form and substance satisfactory to the Agent.
(q) Intercreditor Agreement. The Agent shall have received the Intercreditor Agreement duly executed by RTW and the Borrower.
(r) PIPE Transaction. The Agent shall have received satisfactory evidence that the PIPE Transaction shall have been consummated in accordance with the PIPE Agreements without any amendments, waivers or consents thereto that are materially adverse to the interests of the Lenders or the Agent without the prior written consent of the Lenders and the Agent. The Agent shall have received fully executed copies of the PIPE Agreement and all transaction documents related thereto, which shall be in form and substance satisfactory to the Agent.
(s) De-SPAC Transaction. The Agent shall have received satisfactory evidence that the De-SPAC Transaction shall have been consummated in accordance with the De-SPAC Combination Agreement without any amendments, waivers or consents thereto that are adverse to the interests of the Lenders or the Agent in any material respect without the prior written consent of the Lenders and the Agent. The Agent shall have received fully executed copies of the De-SPAC Combination Agreement and all transaction documents related thereto, which shall be in form and substance satisfactory to the Agent.
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(t) Closing Date Equity Issuance. (1) The applicable Lenders (or their nominated Affiliates) shall have been issued (at no additional cost to such Lenders and in partial consideration of the Loans made by such Lenders) 250,000 shares of the Parent’s common stock (the “Credit Agreement Shares”) on terms and conditions satisfactory to such Lenders or their nominated Affiliates and (2) the Fortress Investor (or its nominated Affiliates) shall have been issued (at no additional cost to the Fortress Investor) the Backstop Shares (as defined in the Backstop Agreement) consisting of 700,000 shares of the Parent’s common stock (the Backstop Shares, together with the Credit Agreement Shares, the “Closing Shares”) on terms and conditions satisfactory to the Fortress Investor or its nominated Affiliates, but in any event the Closing Shares (i) shall be registered pursuant to the Registration Statement which shall be filed and effective on or before the applicable dates, and subject to the terms and conditions, provided in Section 8.22 and (ii) shall be validly issued, fully paid and non-assessable, issued without violation of any pre-emptive or similar rights of any stockholder of the Parent and free and clear of all Liens.
(u) Material Regulatory Event; Material Adverse Change. No Material Regulatory Event has occurred and is continuing and, since December 31, 2021, no Material Adverse Change has occurred.
(v) Anti-Terrorism Laws. The Agent shall have received, as applicable, all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act and the Beneficial Ownership Regulation.
(w) All Other Loan Documents. The Agent shall have received all other Loan Documents to be entered into on the Closing Date in form and substance satisfactory to the Agent, and the Agent shall have received all information, approvals, resolutions, opinions, documents or instruments as the Agent shall have reasonably requested in writing.
(x) Minimum Revenue. The Agent shall have received satisfactory evidence that (i) if the Closing Date occurs on or prior to March 31, 2023, the Obligors shall have received Revenue in the ordinary course of business, for the twelve (12) month consecutive period ending on the last day of the fiscal quarter ending December 31, 2022 in an aggregate amount not less than $60,000,000 and (ii) if the Closing Date occurs after March 31, 2023, but on or prior to June 30, 2023, the Obligors shall have received Revenue in the ordinary course of business, for the twelve (12) month consecutive period ending on the last day of the fiscal quarter ending March 31, 2023 in an aggregate amount not less than $65,000,000.
(y) Governmental Approvals and Third Party Consents. The Agent shall have received evidence that Parent, the Borrower and the applicable Subsidiaries have obtained all Governmental Approvals and third party permits, licenses, approvals and consents necessary in connection with the execution, delivery and performance of the Loan Documents by the Obligors, the consummation by the Obligors of their obligations in respect of Transactions or the operation and conduct of the Obligors’ business and ownership of their properties (including their Product Commercialization and Development Activities).
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(z) Fees, Expenses, Etc. The Agent shall have received (or shall substantially contemporaneously with the funding of the Loans receive) for its account and the account of each Lender, all fees, costs and expenses due and payable pursuant to Section 14.03.
SECTION 7
REPRESENTATIONS AND WARRANTIES
The Obligors hereby jointly and severally represent and warrant to the Agent and each Lender that:
7.01 Power and Authority. Each of the Obligors and their Subsidiaries (i) is duly organized or incorporated and validly existing under the laws of its jurisdiction of organization or incorporation, (ii) has all requisite corporate or other power, and has all Governmental Approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, including all Regulatory Approvals, (iii) is qualified to do business and, to the extent such concept is recognized in such jurisdictions as are applicable, is in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, and (iv) has full power, authority and legal right to enter into and perform its obligations under each of the Loan Documents to which it is a party and, in the case of the Borrower, to borrow the Loans hereunder.
7.02 Authorization; Enforceability. Each Transaction to which an Obligor or any of its Subsidiaries is a party (or to which it or any of its assets or properties is subject) is within such Person’s corporate or other powers and have been duly authorized by all necessary corporate action including, if required, approval by all necessary holders of Equity Interests. This Agreement has been duly executed and delivered by each Obligor party hereto and constitutes, and each of the other Loan Documents to which it is a party when executed and delivered by such Obligor, will constitute, a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
7.03 Governmental and Other Approvals; No Conflicts. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person (other than those that have been duly obtained or made and which are in full force and effect) is required for the due execution, delivery or performance by any Obligor of any Loan Document to which it is a party, except for filings and recordings in respect of perfecting or recording the Liens created pursuant to the Security Documents. The execution, delivery and performance by each Obligor of each Loan Document to which it is a party will not (i) violate or conflict with any Law, (ii) violate or conflict with any Organic Document of such Obligor, (iii) violate or conflict with any applicable Governmental Approval of any Governmental Authority, (iv) violate
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or result in a default under any Material Agreement binding upon Parent or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect or (v) result in the creation or imposition of any Lien (other than Permitted Liens) on any asset of such Obligor. Each Obligor, its Subsidiaries and their respective properties and businesses are in compliance in all material respects with all applicable Laws (including Healthcare Laws) and Governmental Approvals applicable to such Person and its properties or businesses, as the case may be.
7.04 Financial Statements; Material Adverse Change.
(a) Financial Statements. The consolidated financial statements of the Borrower and its Subsidiaries delivered to the Agent pursuant to Section 6.01(d) present fairly, in all material respects, the consolidated financial position and results of operations, cash flows and shareholders’ equity of the Borrower (or its predecessor entity) and its Subsidiaries as of the dates and for such periods as to which such financial statement relate, in each case in accordance with GAAP. All financial statements delivered by the Parent after the Closing Date pursuant to Section 8.01 present fairly, in all material respects, the consolidated financial position and results of operations, cash flows and shareholders’ equity of the Parent and its Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements of the type described in Section 8.01(b). Neither Parent nor any of its Subsidiaries has any material contingent liabilities or unusual forward or long-term commitments which are required to be disclosed but are not disclosed in the aforementioned financial statements
(b) No Material Adverse Change. Since December 31, 2021, there has been no Material Adverse Change.
7.05 Properties.
(a) Property Generally. With respect to all real and personal assets and properties of each Obligor and each of its Subsidiaries (other than Intellectual Property which is covered in clause (c) below), such Obligor and each of its Subsidiaries has good and marketable fee simple title to, or valid leasehold interests in, all such real and personal property, whether tangible or intangible, material to its business, including all Products and all properties and assets of such Obligor and its Subsidiaries relating to their Products or Product Commercialization and Development Activities, subject only to Permitted Liens and except as could not reasonably be expected to (i) interfere in any material respect with its ability to conduct its business as currently conducted or as anticipated to be conducted or to utilize such properties and assets for their intended purposes or (ii) prevent or interfere in any material respect with the ability of such Obligor or any of its Subsidiaries to conduct its business in the ordinary course.
(b) Products. Schedule 7.05(b) contains a complete and accurate list and description (in reasonable detail) of all Products (set forth on an Obligor-by-Obligor or Subsidiary-by-Subsidiary basis, as the case may be).
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(c) Intellectual Property.
(i) Schedule 7.05(c) contains, with respect to each Obligor and each of its Subsidiaries (set for forth on an Obligor-by-Obligor or Subsidiary-by-Subsidiary basis):
(A) a complete and accurate list of all pending patent applications or unexpired, non-lapsed, non-abandoned, issued Patents, owned by or licensed to any Obligors or any of its Subsidiaries, which would qualify as Material Intellectual Property including the jurisdiction and patent number, and as to each such Patent shall indicate if such Patent covers a Product or its use and shall specify which such Product its claims cover;
(B) a complete and accurate list of all material pending Trademark applications for, or registered Trademarks, owned by or licensed to an Obligor or any of its Subsidiaries, including the jurisdiction, trademark application or registration number and the application or registration date, which would qualify as Material Intellectual Property;
(C) a complete and accurate list of all pending Copyright registrations or registered Copyrights, owned by or licensed to any Obligor or any of its Subsidiaries, which would qualify as Material Intellectual Property; and
(D) a complete and accurate list of all Technical Information which would qualify as Material Intellectual Property.
(ii) An Obligor is the absolute registered legal owner of all right, title and interest in and to the Material Intellectual Property owned by such Person (including, without limitation, any Material Intellectual Property indicated on Schedule 7.05(c) with good and marketable title, free and clear of any Liens or Claims of any kind whatsoever other than Permitted Liens, and such Person has the right to exercise its rights under such Intellectual Property in the ordinary course of its businesses as currently conducted or as anticipated to be conducted. Without limiting the foregoing, and except as set forth on Schedule 7.05(c):
(A) other than as permitted by Section 9.09 none of the Obligors nor any of their Subsidiaries has transferred ownership of any of its Intellectual Property that qualifies as Material Intellectual Property, in whole or in part, to any Person who is not an Obligor;
(B) other than (1) customary restrictions in in-bound licenses of Intellectual Property and non-disclosure agreements, or (2) as would not have been prohibited by Section 9.18, there are no judgments, covenants not to sue, permits, grants, licenses, Liens (other than Permitted Liens), Claims, or other agreements or arrangements relating to or otherwise materially and adversely affecting any Material Intellectual Property, including any development, submission, services, research, license or support agreements, which materially bind, obligate or otherwise restrict an Obligor or any of its Subsidiaries with respect to any Material Intellectual Property;
(C) the use by an Obligor or any of its Subsidiaries of any of its respective Material Intellectual Property in the ordinary course of such Person’s business as currently conducted or as anticipated to be conducted does not breach, violate, infringe or interfere with or constitute a misappropriation of any valid rights arising under any Intellectual Property of any other Person;
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(D) (1) there are no pending or, to any of the Obligor’s or its Subsidiaries’ knowledge, threatened Claims against any Obligor or any of its Subsidiaries asserted by any other Person relating to any Material Intellectual Property including any Claims of adverse ownership, invalidity, infringement, misappropriation, violation or other opposition to or conflict with such Intellectual Property; and (2) none of the Obligors nor any of their Subsidiaries has received any written notice from, or Claim by, any other Person that the business of any Obligor or any of its Subsidiaries as currently conducted or as anticipated to be conducted, the use of Material Intellectual Property by any Obligor or any of its Subsidiaries in the conduct of the Obligors’ business as currently conducted or as anticipated to be conducted, or any Product Commercialization and Development Activities with respect to any Product, infringes upon, violates or constitutes a misappropriation of, or may infringe upon, violate or constitute a misappropriation of, or otherwise interfere with, or otherwise offering a license with respect to, any Intellectual Property of any such other Person, in each case, in any material respect, which have not been finally resolved;
(E) none of the Obligors has knowledge that any Material Intellectual Property is being infringed, violated, misappropriated or otherwise used by any other Person without the express authorization of Parent; and, without limiting the foregoing, none of the Obligors nor any of their Subsidiaries has put any other Person on notice of actual or potential infringement, violation or misappropriation of any Material Intellectual Property and none of the Obligors nor any of their Subsidiaries has initiated the enforcement of any Claim with respect to any Material Intellectual Property;
(F) all relevant current and former employees and contractors of each Obligor and each of its Subsidiaries who contributed within the scope of their employment or engagement, as applicable, to the creation or development of any Material Intellectual Property have executed written confidentiality and valid and enforceable invention assignment Contracts with such Obligor or such Subsidiary, as applicable, that irrevocably (to the extent permitted under applicable Law) assigns to such Obligor or such Subsidiary, as applicable, or its designee all rights of such employees and contractors to any such Material Intellectual Property;
(G) the Intellectual Property of the Obligors and their Subsidiaries, together with the lawful use of open source, freeware and third party licensed Intellectual Property by the Obligors and their Subsidiaries, is all the Intellectual Property necessary for the operation of the business of the Obligors and their Subsidiaries as it is currently conducted or as anticipated to be conducted;
(H) each Obligor and each of its Subsidiaries have made available to the Agent accurate and complete copies of all Material Agreements relating to Material Intellectual Property that have been requested by the Agent in writing; and
(I) each Obligor and each of its Subsidiaries have taken reasonable precautions to protect the secrecy, confidentiality and value of its Material Intellectual Property consisting of trade secrets and confidential information.
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(iii) With respect to the Patents of the Material Intellectual Property, except as set forth on Schedule 7.05(c), and without limiting the representations and warranties in Section 7.05(c)(ii):
(A) each of the issued claims in such issued, non-expired, non-lapsed, non-abandoned Patents is valid and enforceable;
(B) each inventor, including any Person who was an employee or contractor of an Obligor or any of its Subsidiaries, named in such Patents, has executed written Contracts with an Obligor or its predecessor-in-interest that properly and irrevocably assigns to such Obligor or its predecessor-in-interest all of such inventor’s rights, title and interest to any of the Inventions claimed in such Patents;
(C) all such Patents are in good standing and no such Patents, or the Inventions claimed in any such Patent, have been dedicated to the public except as a result of intentional decisions made by the Parent or any of its Subsidiaries;
(D) all prior art material to such Patents known to the Borrower was adequately disclosed to or considered by the respective patent offices during prosecution of such Patents to the extent required by applicable Law;
(E) subsequent to the issuance of such Patents, none of the Obligors nor any of their Subsidiaries nor any of their respective predecessors-in-interest, has filed any disclaimer or made or permitted any other voluntary reduction in the scope of the Inventions claimed in such Patents;
(F) (1) no allowable or allowed claim in such Patents is subject to any competing conception claims of allowable or allowed subject matter of any patent applications or patents of any third party, and such claims have not been the subject of any interference, and are not and have not been the subject of any patent office proceeding (other than prosecution of patent applications up to initially obtaining an issued patent) re-examination, opposition or any other post-grant proceedings, and (2) none of the Obligors nor any of their Subsidiaries has knowledge of any basis for any such interference, re-examination, opposition, inter partes review, post grant review or any other post-grant proceedings;
(G) none of the Patents owned by or licensed to an Obligor or any of its Subsidiaries have ever been finally adjudicated to be invalid, unpatentable or unenforceable for any reason in any administrative, arbitration, judicial or other proceeding, and, with the exception of publicly available documents in the applicable patent office recorded with respect to any Patents, none of the Obligors nor any of their Subsidiaries has received any written notice asserting that such Patents are invalid, unpatentable or unenforceable except as occurs in the normal course of prosecution by the relevant patent office with regard to pending patent applications; if any of such Patent is terminally disclaimed to another patent or patent application, all patents and patent applications subject to such terminal disclaimer are included in the Collateral;
(H) none of the Obligors nor any of their Subsidiaries has received an opinion, whether preliminary in nature or qualified in any manner, which concludes that a challenge to the validity or enforceability of any Patents owned by or licensed to an Obligor or any of its Subsidiaries is more likely than not to succeed;
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(I) none of the Obligors, nor any of their Subsidiaries nor any prior owner of any Patent, or any of their respective agents or representatives, has engaged in any conduct, or omitted to perform any necessary act, the result of which would invalidate or render unpatentable or unenforceable any Patent that constitutes Material Intellectual Property; and
(J) all maintenance fees, annuities, and the like due or payable on or with respect to any Patents have been timely paid or the failure to so pay could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.
(iv) The Obligors own or hold rights to all Material Intellectual Property to conduct all Product Commercialization and Development Activities relating to the Products as such activities are currently conducted or as anticipated to be conducted.
7.06 No Actions or Proceedings.
(a) Litigation. Except as specified on Schedule 7.06(a), there is no litigation, investigation or proceeding pending or, to the knowledge of any Obligor or any of its Subsidiaries, threatened, with respect to each Obligor and any of their Subsidiaries by or before any Governmental Authority or arbitrator that (i) could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or a Material Regulatory Event, or (ii) involves this Agreement, any other Loan Document, any Product or Product Commercialization and Development Activities, the Transactions, or any Material Intellectual Property.
(b) Environmental Matters. The operations and property of each Obligor and each of their Subsidiaries comply with all applicable Environmental Laws, except to the extent the failure to so comply (either individually or in the aggregate) could not reasonably be expected to result in Material Adverse Effect.
(c) Labor Matters. There are no strikes, lockouts or other material labor disputes against any Obligor or any of their Subsidiaries or, to the knowledge of each Obligor, threatened in writing against or affecting such Obligor or any of its Subsidiaries, and no material unfair labor practice complaint is pending against such Obligor or any of its Subsidiaries or, to the knowledge of such Obligor, threatened in writing against any of them before any Governmental Authority. Except as set forth on Schedule 7.06(c), none of the Obligors nor any of their Subsidiaries is a party to any collective bargaining agreements or similar Contracts, no union representation exists on any facilities of any Obligor or any of its Subsidiaries and none of the Obligors nor any of their Subsidiaries has any knowledge of any union organizing activities that are taking place.
7.07 Compliance with Laws and Agreements.
(a) Each Obligor and each of its Subsidiaries is in compliance with all applicable Laws and all Contracts binding upon it or its property, except (other than with respect to Material Intellectual Property, as covered in Section 7.05(c)) where the failure to do so could not individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or a Material Regulatory Event. No Event of Default has occurred and is continuing, or will occur as a result of, any Borrowing hereunder.
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(b) Without limiting the generality of the foregoing, each Obligor and each of its Subsidiaries is in material compliance with all applicable Healthcare Laws and Healthcare Permits, and none of the Obligors nor any of their Subsidiaries has received written notice from any Governmental Authority of any material violation (or of any investigation, audit, or other proceeding involving allegations of any violation) of any Healthcare Laws, and no such investigation, inspection, audit or other proceeding involving allegations of any such violation has been, to the knowledge of such Obligor or any Subsidiary, as applicable, threatened in writing.
(c) Each physician, other licensed healthcare professional, or any other Person who is in a position to refer patients or other business to an Obligor or any of its Subsidiaries (collectively, a “Referral Source”) who has a direct ownership, investment, or financial interest in such Obligor or any such Subsidiary paid fair market value for such ownership, investment or financial interest; any ownership or investment returns distributed to any Referral Source is in proportion to such Referral Source’s ownership, investment or financial interest; and no preferential treatment or more favorable terms were or are offered to such Referral Source compared to investors or owners who are not in a position to refer patients or other business. None of the Obligors nor any of their Subsidiaries, directly or indirectly, has or will guarantee a loan, make a payment toward a loan or otherwise subsidize a loan for any Referral Source including, without limitation, any loans related to financing the Referral Source’s ownership, investment or financial interest in any such Obligor or any such Subsidiary.
(d) Without limiting the generality of the foregoing, except where noncompliance individually or in the aggregate could not reasonably be expected to result in a Material Adverse Effect or a Material Regulatory Event, all financial relationships between or among an Obligor and its Subsidiaries, on the one hand, and any Referral Source, on the other hand (A) comply with all applicable Healthcare Laws including, without limitation, the Federal Anti-Kickback Statute, the Stark Law and other applicable anti-kickback and self-referral laws, whether U.S. or non-U.S.; (B) reflect fair market value, have commercially reasonable terms, and were negotiated at arm’s length; and (C) do not obligate any Referral Source to purchase, use, recommend or arrange for the use of any products or services of such Obligor or any of its Subsidiaries.
(e) None of the Obligors nor any of their Subsidiaries is debarred or excluded from participation under any state or federal health care program or under any federal Law, including any state or federal workers compensation programs.
(f) None of the Obligors nor any of their Subsidiaries is a party to any corporate integrity agreements, deferred prosecution agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with, or imposed by, any Governmental Authority.
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7.08 Taxes. Each Obligor and each of its Subsidiaries has timely filed or caused to be filed all income and other material Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (i) Taxes that are being contested in good faith by appropriate proceedings diligently conducted and for which such Obligor or such Subsidiary, as applicable, has set aside on its books adequate reserves with respect thereto in accordance with GAAP or (ii) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.
7.09 Full Disclosure. None of the reports, financial statements, certificates or other written information furnished by or on behalf of the Obligors to the Agent or any Lender (other than information of a general economic or industry nature) in connection with the negotiation of this Agreement and the other Loan Documents or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contained, as of the date such report, statement, or certificate was so furnished any material misstatement of material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; provided that, with respect to projected financial information, each Obligor represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood by the Agent and the Lenders that such projected financial information is not to be viewed as facts, and that no assurances can be given that any particular projections will be realized and that actual results during the period or periods covered by any such projections may differ from the projected results and such differences may be material).
7.10 Investment Company Act and Margin Stock Regulation.
(a) Investment Company Act. None of the Obligors nor any of their Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
(b) Margin Stock. None of the Obligors nor any of their Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of the Loans will be used to buy or carry any Margin Stock in violation of Regulation T, Regulation U or Regulation X.
7.11 Solvency. Parent and its Subsidiaries, on a consolidated basis, are, and, immediately after giving effect to the Borrowing and the use of proceeds thereof, will be Solvent.
7.12 Equity Holders, Subsidiaries and Other Investments.
(a) Set forth on Schedule 7.12(a) is a complete and correct list of all direct and indirect Subsidiaries of Parent. Each such Subsidiary is duly organized and validly existing under the jurisdiction of its organization shown in Schedule 7.12(a), and the percentage ownership by Parent of each such Subsidiary thereof is as shown in Schedule 7.12(a).
(b) Set forth on Schedule 7.12(b) is a complete and correct list of all other Equity Interests owned or held by Parent or any of its direct or indirect Subsidiaries in any Person that does not qualify as a direct or indirect Subsidiary of Parent. Schedule 7.12(b) also sets forth, in reasonable detail, the type of Equity Interest held by each Obligor in such other Person and the fully-diluted percentage ownership held beneficially by Parent or one or more of its Subsidiaries, as the case may be, in such other Person.
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7.13 Secured Indebtedness. Set forth on Schedule 7.13 is a complete and correct list of all outstanding Indebtedness of Parent and each of its Subsidiaries outstanding as of the Closing Date (after giving effect to the Transactions contemplated to occur on or prior to the Closing Date) that (i) will remain outstanding immediately after the making of the Loans and the application of proceeds therefrom on the Closing Date and (ii) is secured by a Lien on assets or property of the Parent or any of its Subsidiaries.
7.14 Material Agreements. Set forth on Schedule 7.14 is a complete and correct list of (i) each Material Agreement and (ii) each Contract creating or evidencing any Material Indebtedness, in each case, as of the Closing Date. Accurate and complete copies of each Material Agreement disclosed on such schedule have been made available to the Agent; provided, however, that to the extent applicable confidentiality obligations prohibit the Borrower from sharing all or a portion of such Contract, Parent shall provide a reasonably detailed summary of such Material Agreement. None of the Obligors nor any of their Subsidiaries is in material default under any such Material Agreement, and none of the Obligors has knowledge of any material default by any counterparty to any such Contract and there are no pending or, to any Obligor’s knowledge, threatened (in writing) material Claims against any Obligor or any of its Subsidiaries asserted by any other Person relating to any such Contract, including any Claims of breach or default under any such Contract. None of the Obligors nor any of their Subsidiaries has received any information from, or Claim by, any Person that any Material Agreement is breached or is in default. There are no outstanding (and none of the Obligors has knowledge of), any threatened (in writing) material disputes or disagreements with respect to any Material Agreement. Except as otherwise disclosed on Schedule 7.14, all such Material Agreements are in full force and effect without material modification from the form in which the same were disclosed to the Lenders or other modifications not expressly prohibited by Section 9.12.
7.15 Restrictive Agreements. Except as set forth on Schedule 7.15, none of the Obligors nor any of their Subsidiaries is subject to any Restrictive Agreement, except those permitted under Section 9.11.
7.16 Real Property. Except as set forth on Schedule 7.16, none of the Obligors nor any of their Subsidiaries owns or leases (as tenant thereof) (excluding any co-working arrangements) any real property.
7.17 Pension Matters. Schedule 7.17 sets forth a complete and correct list of, and that separately identifies, (i) all Title IV Plans, and (ii) all Multiemployer Plans. Except for those that could not, in the aggregate, reasonably be expected to have a Material Adverse Effect, (x) each Benefit Plan and Foreign Pension Plan is in compliance with all applicable provisions of ERISA, the Code or other applicable Law, (y) there are no existing or pending or, to the knowledge of any Obligor, threatened Claims (other than routine claims for benefits in the normal course of business), sanctions, actions, lawsuits or other proceedings or investigation involving any Benefit Plan to which an Obligor or any Subsidiary thereof incurs or otherwise has or could reasonably be expected to have an obligation or any liability or Claim and (z) no ERISA Event has occurred or is reasonably expected to occur in connection with which obligations and liabilities
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(contingent or otherwise) remain outstanding. Each Obligor and each of its ERISA Affiliates has met all applicable requirements under the ERISA Funding Rules with respect to each Title IV Plan, and no waiver of the minimum funding standards under the ERISA Funding Rules has been applied for or obtained. As of the most recent valuation date for any Title IV Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is at least sixty percent (60%), and none of the Obligors, nor any of their Subsidiaries nor any of their ERISA Affiliates knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage to fall below sixty percent (60%) as of the most recent valuation date. Except as would not (either individually or in the aggregate) reasonably be expected to have a Material Adverse Effect, no ERISA Event has occurred or is reasonably expected to occur in connection with which obligations and liabilities (contingent or otherwise) remain outstanding. No ERISA Affiliate would have any Withdrawal Liability as a result of a complete withdrawal from any Multiemployer Plan on the date this representation is made.
7.18 Priority of Obligations. No monetary Obligation arising hereunder or under any Loan Document, or arising in connection herewith or therewith, is subordinated to any other Indebtedness, except as may from time to time be agreed, be consented to or otherwise result from the action of the Agent or any Lender.
7.19 Regulatory Approvals.
(a) Each Obligor and each of its Subsidiaries hold, and will continue to hold, either directly or through licensees and agents, all Regulatory Approvals, including all Healthcare Permits, necessary or required for such Obligor and each of its Subsidiaries to conduct their respective operations and businesses, including all Product Commercialization and Development Activities, in the manner currently conducted and as anticipated to be conducted in the ordinary course of business.
(b) Set forth on Schedule 7.19(b) is a complete and accurate list of all Regulatory Approvals of the type described in Section 7.19(a) above, which schedule sets forth the Obligor or Subsidiary that holds such Regulatory Approval and briefly explains the purpose of such Regulatory Approval. All such Regulatory Approvals are (i) legally and beneficially owned or held exclusively by the applicable Obligor or Subsidiary, as the case may be, free and clear of all Liens other than Permitted Liens, (ii) validly registered and on file with the applicable Regulatory Authority, in compliance in all material respects with all registration, filing and maintenance requirements (including any fee requirements) thereof, and (iii) valid, enforceable, in good standing, and in full force and effect with the applicable Regulatory Authority in all material respects. All required notices, registrations, listing, supplemental applications or notification reports (including field alerts or other reports of adverse experiences) and other required filings have been filed with the appropriate Regulatory Authority, and all such filings are complete and correct and are in compliance in all material respects with all applicable Laws. Parent and each of its Subsidiaries have disclosed to the Agent all such regulatory filings and all material communications between representatives of the Obligors and each of their Subsidiaries and any Regulatory Authority.
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7.20 Transactions with Affiliates. Except as set forth on Schedule 7.20, none of the Obligors nor any of their Subsidiaries has entered into, renewed, extended or been a party to, any transaction (including the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind, other than services of any director, officer or employee of such Obligor or Subsidiary, as applicable) with any Affiliate on the Closing Date in violation of Section 9.10.
7.21 Sanctions. None of the Obligors nor any of their Subsidiaries, nor, to the knowledge of each Obligor, any of their respective directors, officers, or employees nor, to the knowledge of each Obligor, any agents or other Persons acting on behalf of any of the foregoing (i) is currently the target of any Sanctions, (ii) is located, organized or residing in any Designated Jurisdiction, (iii) is or has been (within the previous five (5) years) engaged in any transaction with, or for the benefit of, any Person who is now or was then the target of Sanctions or who is located, organized or residing in any Designated Jurisdiction or (iv) is or has ever been in violation of or subject to an investigation relating to Sanctions. No Loan, nor the proceeds from any Loan, has been or will be used, directly or indirectly, to lend, contribute or provide to, or has been or will be otherwise made available to fund, any activity or business in any Designated Jurisdiction or to fund any activity or business of any Person located, organized or residing in any Designated Jurisdiction or who is the subject of any Sanctions, or in any other manner that will result in any violation by any Person (including the Agent, the Lenders and their Affiliates) of Sanctions.
7.22 Anti-Corruption. None of the Obligors nor any of their Subsidiaries, nor, to the knowledge of each Obligor, any of their respective directors, officers or employees nor, to the knowledge of each Obligor, any agents or other Persons acting on behalf of any of the foregoing, directly or indirectly, has (i) violated or is in violation of any applicable anti-corruption Law, (ii) made, offered to make, promised to make or authorized the payment or giving of, directly or indirectly, any Prohibited Payment or (iii) been subject to any investigation by any Governmental Authority with regard to any actual or alleged Prohibited Payment.
7.23 Deposit and Disbursement Accounts. Schedule 7.23 contains a list of all banks and other financial institutions at which each Obligor and each of its Subsidiaries maintains Deposit Accounts, Securities Accounts, Commodity Accounts, lockboxes, or other similar accounts, and such Schedule correctly identifies the name, address and telephone number of each bank or financial institution, the name in which the account is held, the type of account, and the complete account number therefor.
7.24 Royalties and Other Payments. Except as set forth on Schedule 7.24, none of the Obligors nor any of their Subsidiaries is obligated, pursuant to any Contract or otherwise, to pay any royalty, milestone payment, deferred payment or any other contingent payment in respect of any Product.
7.25 Non-Competes. None of the Obligors nor any of their Subsidiaries nor any of their respective directors, officers or employees is subject to a non-compete agreement that prohibits or will interfere with any of the Product Commercialization and Development Activities, including the development, commercialization or marketing of any Product.
7.26 Internal Controls. Parent acknowledges that its management is responsible for the preparation and fair presentation of the financial statements of Parent and each of its Subsidiaries provided to the Agent and the Lenders pursuant to Sections 8.01(b) and 8.01(c), in each case, in accordance with GAAP. Parent has designed, implemented and maintained internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
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SECTION 8
AFFIRMATIVE COVENANTS
The Obligors jointly and severally covenant and agree, for the benefit of the Agent and the Lenders, that until the Commitments have expired or been terminated and all Obligations (other than inchoate indemnification and expense reimbursement obligations for which no Claim has been made) have been paid in full in cash:
8.01 Financial Statements and Other Information. Parent shall furnish to the Agent (with sufficient copies for each Lender):
(a) Within ten (10) days after the end of each calendar month of each fiscal year, proof of the Borrower’s compliance with Section 10.01, which proof may be in the form of copies of one or more bank statements demonstrating such compliance, accompanied by a certification thereof from the chief financial officer of the Borrower.
(b) Within forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year, (i) an unaudited consolidated balance sheet of Parent and its Subsidiaries as of the end of such fiscal quarter, and (ii) the related unaudited consolidated statements of income, shareholders’ equity and cash flows of Parent and its Subsidiaries for such quarter and the portion of the fiscal year through the end of such fiscal quarter, in each case, prepared in accordance with GAAP consistently applied (subject to changes resulting from normal, year-end audit adjustments and except for the absence of notes), all in reasonable detail and setting forth in comparative form the figures for the corresponding period in the preceding fiscal year, together with (iii) a certificate of a Responsible Officer of Parent stating that such financial statements (x) fairly present in all material respects the financial condition of Parent and its Subsidiaries as at such date and the results of operations of Parent and its Subsidiaries for the period ended on such date and (y) have been prepared in accordance with GAAP consistently applied, subject to changes resulting from normal, year-end audit adjustments and except for the absence of notes; provided that documents required to be furnished pursuant to this Section 8.01(b) shall be deemed furnished on the date that such documents are publicly available on “EDGAR”.
(c) As soon as available and in any event within ninety (90) days after the end of each fiscal year, (i) the audited consolidated balance sheet of Parent and its Subsidiaries as of the end of such fiscal year, and (ii) the related audited consolidated statements of income, shareholders’ equity and cash flows of Parent and its Subsidiaries for such fiscal year, in each case prepared in accordance with GAAP consistently applied, all in reasonable detail and setting forth in comparative form the figures for the previous fiscal year, accompanied by a report and opinion thereon of any “Big Four” accounting firm or another firm of independent certified public accountants of recognized national standing reasonably acceptable to the Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit, and in the case of such consolidated financial statements, certified by a Responsible Officer of Parent; provided that documents required to be furnished pursuant to this Section 8.01(c) shall be deemed furnished on the date that such documents are publicly available on “EDGAR”
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(d) (i) together with the financial statements required pursuant to Sections 8.01(b) and 8.01(c), a Compliance Certificate delivered by the chief financial Responsible Officer of Parent as of the end of the applicable accounting period, substantially in the form of Exhibit E including a summary of Revenue generated by the Products (in reasonable detail and in a manner that segregates Revenue by type of Product) and which evidences the Obligors’ compliance with Section 10.02 and, with respect to the financial statements delivered pursuant to Section 8.01(c), details of any issues that are material that are raised by Parent’s auditors and (ii) together with the financial statements required pursuant to Sections 8.01(b) and 8.01(c), a management discussion and analysis, prepared in writing and in reasonable detail, discussing Parent’s financial condition and results of operations as set forth in such financial statements.
(e) As soon as available and in any event no later than sixty (60) days following the end of each fiscal year of Parent, copies of an annual budget (or equivalent) on a consolidated basis for Parent and its Subsidiaries, approved by Parent’s Board, for the then current fiscal year, in form reasonably satisfactory to the Agent, together with the Projections used in the preparation thereof, accompanied by a certificate of the chief financial officer of Parent certifying (in his or her capacity as an officer of Parent and not in his or her individual capacity) that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believed that such Projections are incorrect or misleading in any material respect.
(f) Promptly, and in any event within five (5) Business Days after receipt thereof by Parent or any of its Subsidiaries, copies of each material notice or other material correspondence received from any securities regulator or exchange to the authority of which Parent may become subject from time to time concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of Parent or any such Subsidiary; provided that documents required to be furnished pursuant to this Section 8.01(f) shall be deemed furnished on the date that such documents are publicly available on “EDGAR”.
(g) Promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to all the stockholders of Parent or any of its Subsidiaries, and copies of all annual, regular, periodic and special reports and registration statements which Parent or any of its Subsidiaries may file or be required to file with any securities regulator or exchange to the authority of which Parent or any such Subsidiary, as applicable, may become subject from time to time; provided that documents required to be furnished pursuant to this Section 8.01(g) shall be deemed furnished on the date that such documents are publicly available on “EDGAR”.
(h) The information regarding insurance maintained by Parent and its Subsidiaries as required under Section 8.05.
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(i) As soon as possible and in any event within five (5) Business Days after the Borrower obtains knowledge of any Claim related to any Product or inventory involving more than $500,000, written notice thereof from a Responsible Officer of Parent which notice shall include a statement setting forth details of such Claim.
(j) Such other information respecting the operations, properties, business, liabilities or condition (financial and otherwise) of Parent and each of its Subsidiaries (including with respect to the Collateral) as the Agent or any Lender may from time to time reasonably request.
Each of the Parent and the Borrower hereby acknowledges that the Agent or the Lenders may not wish to receive material non-public information with respect to the Parent, the Borrower or their Affiliates, or the respective securities of any of the foregoing, and the Agent, the Lenders or their respective personnel may be engaged in investment and other market-related activities with respect to such Persons’ securities. Notwithstanding anything to the contrary in this Agreement, the Parent and the Borrower covenant and agree that, except for the information required pursuant to clauses (b), (c), (d) and (j) above, neither it, nor any Person acting on its behalf, will provide, or become obligated to provide, the Agent or any Lender or their respective representatives or agents with any other information that the Parent or the Borrower reasonably believes constitutes material non-public information, unless prior thereto, such receiving Person shall have confirmed to the Parent or the Borrower, as applicable, in writing that it consents to receive such information. The Parent and the Borrower hereby acknowledge that each Lender is relying on the foregoing covenant in effecting transactions in securities of the Parent.
8.02 Notices of Material Events. Parent and the Borrower shall furnish to the Agent written notice of each of the following within the time period specified therein (or, if no such time period is specified, on or within ten (10) days (or such longer or shorter period as may be expressly set forth below) after any Responsible Officer of Parent or the Borrower first learns of or acquires knowledge with respect to any of the below events or circumstances):
(a) The occurrence of any Event of Default.
(b) The occurrence of any event with respect to any property or assets of Parent or any of its Subsidiaries resulting in a Loss, which notice shall include whether such loss is covered by insurance or if the insurance carrier has disclaimed coverage of such Loss, aggregating $1,000,000 (or the Equivalent Amount in other currencies) or more.
(c) Any Claim, action, suit, notice of violation, hearing, investigation or other proceedings pending, or to Parent knowledge, threatened (in writing) against or affecting Parent or any of its Subsidiaries or with respect to the ownership, use, maintenance and operation of their respective businesses, operations or properties, whether made by a Governmental Authority or other Person that, if adversely determined could reasonably be expected to result in a Material Adverse Effect.
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(d) (i) On or prior to the date of any filing by any ERISA Affiliate of any notice of intent to terminate any Title IV Plan, a copy of such notice and (ii) promptly, and in any event within ten (10) days, after any Responsible Officer of any ERISA Affiliate knows or has reason to know (A) that an ERISA Event has occurred or is reasonably expected to occur or (B) that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan or Multiemployer Plan, a notice (which may be made by telephone if promptly confirmed in writing) describing such waiver request and any action that any ERISA Affiliate proposes to take with respect to either of the foregoing, together with a copy of any notice filed with the PBGC or the IRS pertaining thereto.
(e) (i) The termination of any Material Agreement other than in accordance with its terms, including as a result of a breach or default; (ii) the receipt by Parent or any of its Subsidiaries of any material notices of default under any Material Agreement that could give rise to an early termination thereof (and a copy thereof); (iii) the entering into of any new Material Agreement by Parent or any of its Subsidiaries (and a copy thereof); or (iv) any material amendment to a Material Agreement (and a copy thereof).
(f) As, when and to the extent required therein, the reports and notices as required by the Security Documents.
(g) Within thirty (30) days of the date thereof, or, if earlier, on the date of delivery of any financial statements pursuant to Section 8.01, notice of any material change in accounting policies or financial reporting practices by the Obligors; provided that disclosure in the notes to such financial statements, if any, shall be deemed to satisfy the requirements of this Section 8.02(g).
(h) Notice of any labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other material labor disruption against or involving Parent or any of its Subsidiaries which could reasonably be expected to result in a Material Adverse Effect.
(i) Any licensing agreement or similar arrangement entered into by Parent or any of its Subsidiaries in connection with any infringement or alleged infringement of any Material Intellectual Property of another Person.
(j) Concurrently with the delivery of a Compliance Certificate pursuant to Section 8.01(d), notice of the creation, development or other acquisition of any Intellectual Property by Parent or any of its Subsidiaries after the Closing Date and during such prior fiscal quarter or fiscal year, as the case may be, for which such financial statements were delivered, which is registered or becomes registered or the subject of an application for registration with the U.S. Copyright Office or the U.S. Patent and Trademark Office, as applicable, or with any other equivalent foreign Governmental Authority.
(k) Any change to any Obligor’s ownership of Deposit Accounts, Securities Accounts and Commodity Accounts (in each case, other than Excluded Accounts), by delivering to the Agent, a notice setting forth a complete and correct list of all such accounts as of the date of such change.
(l) The acquisition by any Obligor or any of its Subsidiaries, in a single or series or related transactions, of any fee interest in any real property having a fair market value in excess of $500,000.
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(m) Concurrently with the delivery thereof to RTW, copies of all notices and other reports required to be delivered by the Borrower to RTW under the RTW Royalty Financing Agreement and, to the extent that the Additional RTW Royalty Financing Agreement has been executed by RTW and the Borrower pursuant to the terms of the Side Letter, the Additional RTW Royalty Financing Agreement.
(n) The occurrence of any material product recalls, safety alerts, corrections, withdrawals, marketing suspensions, removals or the like conducted, to be undertaken or issued by an Obligor, any Subsidiary thereof or their respective suppliers whether or not at the request, demand or order of any Governmental Authority or otherwise with respect to any Product, or any basis for undertaking or issuing any such action or item.
(o) The occurrence or existence of any event, circumstance, act or omission that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect or a Material Regulatory Event.
Each notice delivered under this Section 8.02 (other than any notice delivered pursuant to Section 8.02(e)(iii) or (iv)) shall be accompanied by a statement of a Responsible Officer of Parent and the Borrower setting forth summary details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. Nothing in this Section 8.02 is intended to waive, consent to or otherwise permit any action or omission that is otherwise prohibited by this Agreement or any other Loan Document.
Documents required to be delivered pursuant to Section 8.01 and this Section 8.02 (i) (to the extent any such documents are included in materials otherwise filed with the Commission) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at any website address of the Borrower, or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Agent have access (whether a commercial, third-party website or whether sponsored by the Agent). The Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
Each of the Parent and the Borrower hereby acknowledges that the Agent or the Lenders may not wish to receive material non-public information with respect to the Parent, the Borrower or their Affiliates, or the respective securities of any of the foregoing, and the Agent, the Lenders or their respective personnel may be engaged in investment and other market-related activities with respect to such Persons’ securities. Notwithstanding anything to the contrary in this Agreement, the Parent and the Borrower covenant and agree that, except for the information required pursuant to clauses (a) above, neither it, nor any Person acting on its behalf, will provide, or become obligated to provide, the Agent or any Lender or their respective representatives or agents with any other information that the Parent or the Borrower reasonably believes constitutes material non-public information, unless prior thereto, such receiving Person shall have confirmed to the Parent or the Borrower, as applicable, in writing that it consents to receive such information. The Parent and the Borrower hereby acknowledge that each Lender is relying on the foregoing covenant in effecting transactions in securities of the Parent.
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8.03 Existence; Conduct of Business. Each Obligor shall, and shall cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and all Governmental Approvals necessary or material to the conduct of its business; provided that the foregoing shall not prohibit any merger, amalgamation, consolidation, liquidation or dissolution permitted under Section 9.03.
8.04 Payment of Obligations. Each Obligor shall, and shall cause each of its Subsidiaries to, pay and discharge its obligations, including (i) all Taxes, fees, assessments and governmental charges or levies imposed upon it or upon its properties or assets prior to the date on which penalties attach thereto, and all lawful Claims for labor, materials and supplies which, if unpaid, might become a Lien (other than a Permitted Lien) upon any properties or assets of such Obligor or any of its Subsidiaries, except to the extent such Taxes, fees, assessments or governmental charges or levies, or such claims are being contested in good faith by appropriate proceedings and are adequately reserved against in accordance with GAAP, and (ii) all other lawful Claims which, if unpaid, would by Law become a Lien upon any properties or assets of such Obligor or any of its Subsidiaries, other than any Permitted Lien.
8.05 Insurance. Each Obligor shall, and shall cause each of its Subsidiaries to maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. Upon the reasonable request of the Agent, Parent shall furnish to the Agent from time to time: information as to the insurance carried by such Obligor and each of its Subsidiaries and, if so requested, copies of all such insurance policies. The Obligors shall use commercially reasonable efforts to ensure, or cause others to ensure, that all insurance policies required under this Section 8.05 shall provide that they shall not be terminated or cancelled nor shall any such policy be materially changed in a manner adverse to the insured Person without at least thirty (30) days’ (or ten (10) days’ for nonpayment of premium) prior written notice to the applicable Obligor and the Agent. Receipt of notice of cancellation or modification of any such insurance policies or reduction of coverage or amounts thereunder shall entitle any Secured Party to renew any such policies, cause the coverage and amounts thereof to be maintained at levels required pursuant to the first sentence of this Section 8.05 or otherwise to obtain similar insurance in place of such policies, in each case at the expense of the applicable Obligor (payable on demand). The amount of any such expenses shall accrue interest at the Default Rate if not paid on demand and shall constitute “Obligations.”
8.06 Books and Records; Inspection Rights. Each Obligor shall, and shall cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Each Obligor shall, and shall cause each of its Subsidiaries to, permit any representatives designated by the Agent or any Lender, upon reasonable prior written notice, to, during normal business hours, visit and reasonably inspect its properties, to reasonably examine and make extracts from its books and records (excluding records subject to attorney-client privilege, subject to confidentiality agreements with third parties that preclude disclosure to any Secured Party (acting in such capacity) or subject to confidentiality restrictions pursuant to Law), and to discuss its affairs, finances and condition (financial or otherwise) with its officers, all at such reasonable times (but not more often than once per year unless an Event of Default has occurred and is continuing) as the Agent or the Lenders may reasonably request. Each Obligor shall pay all reasonable costs and expenses of all such inspections.
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8.07 Compliance with Laws and Other Obligations. Each Obligor shall, and shall cause each of its Subsidiaries to, (i) comply in all material respects with all applicable Laws and applicable Governmental Approvals (including Environmental Laws and all Healthcare Laws); and (ii) maintain in full force and effect, remain in compliance in all material respects with, and perform in all material respects all terms of outstanding Material Agreements and all Healthcare Permits.
8.08 Maintenance of Properties, Etc. Each Obligor shall, and shall cause each of its Subsidiaries to, maintain and preserve all of its assets and properties, whether tangible or intangible, relating to its Products or Product Commercialization and Development Activities or otherwise, necessary in the proper conduct of its business in good working order and condition in all material respects in accordance with the general practice of other Persons of similar character and size, ordinary wear and tear and damage from casualty or condemnation excepted.
8.09 Licenses. Each Obligor shall, and shall cause each of its Subsidiaries to, obtain and maintain all Governmental Approvals (including all Healthcare Permits) necessary in connection with the execution, delivery and performance of the Loan Documents, the consummation of the Transactions or the operation and conduct of its business and ownership of its properties (including its Product Commercialization and Development Activities).
8.10 Action under Environmental Laws. Each Obligor shall, and shall cause each of its Subsidiaries to, upon becoming aware of the release of any Hazardous Materials or the existence of any environmental liability under applicable Environmental Laws with respect to their respective businesses, operations or properties, take all actions, at their cost and expense, as shall be necessary or advisable to investigate and clean up the condition of their respective businesses, operations or properties, including all required removal, containment and remedial actions, to restore their respective businesses, operations and properties to a condition in compliance with applicable Environmental Laws.
8.11 Use of Proceeds. The proceeds of the Loans shall be used only as provided in Section 2.04. Without limiting the foregoing, no part of the proceeds of the Loans shall be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board of Governors of the Federal Reserve System, including Regulation T, Regulation U and Regulation X.
8.12 Certain Obligations Respecting Subsidiaries; Further Assurances.
(a) Subsidiary Guarantors. Parent and the Borrower shall take such action from time to time as shall be necessary to ensure that (x) it and each of its Subsidiaries that is a party to this Agreement as of the Closing Date will be and will remain an Obligor and Subsidiary Guarantor hereunder (except as otherwise permitted by Section 9.03), and (y) each of its other Subsidiaries (other than any Excluded Subsidiary), whether direct or indirect, now existing or
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hereafter created, will, within (x) thirty (30) days of becoming a Subsidiary organized under the laws of the United States or (y) sixty (60) days of becoming a Foreign Subsidiary (in each case, as may be extended by the Agent in its reasonably discretion) or ceasing to constitute an Excluded Subsidiary, become an “Obligor” and a “Subsidiary Guarantor” pursuant to this Section 8.12. Without limiting the generality of the foregoing, if (i) the Parent or any of its Subsidiaries form or acquire any new Subsidiary (other than any Excluded Subsidiary), (ii) a Subsidiary ceases to constitute an Excluded Subsidiary or (iii) the Agent designates a Subsidiary as a Specified Subsidiary, then Parent and the Borrower shall (unless otherwise agreed by the Agent in its sole discretion), within thirty (30) days (or sixty (60) days, as the context may require) of such event:
(i) cause such Subsidiary to become an “Obligor” and a “Subsidiary Guarantor” hereunder, a “Grantor” (or the equivalent thereof) under the applicable Security Documents, and a “Subsidiary Party” under the Intercompany Subordination Agreement;
(ii) take such action or cause such Subsidiary to take such action (including joining the Security Agreement or the applicable Security Documents and delivering certificated Equity Interests together with undated transfer powers executed in blank, applicable control agreements, and other instruments) as shall be necessary or reasonably desirable by the Agent to create and perfect, in favor of the Agent, for the benefit of the Secured Parties valid and enforceable first priority Liens (subject to Permitted Liens) on the Collateral of such new Subsidiary as collateral security for the Obligations hereunder;
(iii) to the extent that the parent of such Subsidiary is not a party to the Security Agreement or has not otherwise pledged Equity Interests in its Subsidiaries in accordance with the terms of the Security Agreement and this Agreement, cause such parent of such Subsidiary to execute and deliver a pledge agreement in favor of the Agent, for the benefit of the Secured Parties, in respect of all outstanding issued Equity Interests of such Subsidiary for the purpose of creating and perfecting, in favor of the Agent for the benefit of the Secured Parties, a valid and perfected first priority Lien (subject to Permitted Liens) on such Equity Interests; and
(iv) deliver such proof of corporate action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by each Obligor pursuant to Section 6.01 or as the Agent shall have reasonably requested.
(b) Further Assurances.
(i) Each Obligor shall, and shall cause each of its direct or indirect Subsidiaries (including any newly formed or newly acquired Subsidiaries) to take such action from time to time as shall reasonably be requested by the Agent to effectuate the purposes and objectives of this Agreement (including this Section 8.12) and the applicable Security Documents.
(ii) In the event that Parent or any of its Subsidiaries holds or acquires Intellectual Property during the term of this Agreement or any other material assets or properties, then, upon the written request of the Agent, Parent or any such Subsidiary shall take any action as shall be necessary or reasonably desirable to ensure that the provisions of this Agreement and the Security Agreement shall apply thereto and any such Intellectual Property or other assets or properties shall constitute part of the Collateral under the Security Documents.
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(iii) Without limiting the generality of the foregoing, within ten (10) Business Days (or such longer period that the Agent and the Borrower reasonably and mutually agree) following written request from the Agent, Parent and the Borrower shall cause each Person that is required to be a Subsidiary Guarantor or an Obligor hereunder to take such action from time to time (including executing and delivering such assignments, security agreements, control agreements and other instruments, and delivering certificated Equity Interests together with undated transfer powers executed in blank) as shall be reasonably requested by the Agent to create, in favor of the Secured Parties, a first priority perfected security interests and Lien (subject to Permitted Liens) in substantially all of the assets and property of such Person as collateral security for the Obligations; provided that any such security interest or Lien shall be subject to the relevant requirements of the applicable Security Documents.
(iv) In the event that the Borrower delivers a notice to the Agent pursuant to Section 8.02(l) in respect of real property with a value in excess of $500,000, upon the written request of the Agent, Parent or any such Subsidiary shall execute and deliver a Mortgage with respect to such acquired real property to secure the Obligations.
(c) Costs and Benefits. Notwithstanding any term or provision of this Section 8.12 to the contrary, without limiting the right of the Agent or the Lenders to require a Lien or a security interest in the Equity Interests of, or guaranty from, any newly acquired or created Subsidiary of Parent, or a Lien or security interest on any assets or properties of Parent or any of its Subsidiaries, so long as no Event of Default has occurred and is continuing, Parent and the Borrower may request in writing to the Agent that the Majority Lenders waive the requirements of this Section 8.12 to provide a Lien, security interest or guaranty, as the case may be, due to the cost or burden thereof to Parent and its Subsidiaries (when taken as a whole) being unreasonably excessive relative to the benefit that would inure to the Secured Parties, and describing such cost or burden in reasonable detail. Upon receipt of any such written notice, the Agent shall review and consider such request with the Lenders in good faith and, within five (5) Business Days of receipt of such request, the Majority Lenders (after consultation with the Agent) shall determine in their sole but commercially reasonable discretion, and notify Parent and the Borrower of such determination, whether the Majority Lenders will grant such request for a waiver. With respect to any Subsidiary for which the requirement to provide a Lien, security interest or Guaranty, as the case may be, has been waived by the Agent and the Majority Lenders in accordance with this Section 8.12(c), such waiver may be terminated by the Agent and the Majority Lenders if they determine in their sole but commercially reasonable discretion that the cost or burden of providing such Lien, security interest or Guaranty is no longer unreasonably excessive relative to the benefits that would inure to the Secured Parties. If such waiver is terminated, such Subsidiary shall be required to comply with the requirements of this Section 8.12.
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8.13 Patent Prosecution Workplan. The Obligors shall work in good faith to comply with the Patent Prosecution Workplan in all material respects. The Agent hereby agrees that no information gained in connection with the development or implementation of the Patent Prosecution Workplan (a) will be used to institute a cause of action against the Parent or its Subsidiaries in any court or legal proceeding, or (b) will be shared with any Competitor or Person seeking to become a Competitor or (c) will be used by the Agent or any of its Affiliates for any purpose other than in connection with the development and implementation of the Patent Prosecution Workplan.
8.14 Intellectual Property. In the event that an Obligor or any of its Subsidiaries creates, develops or acquires Intellectual Property during the term of this Agreement, then the applicable provisions of this Agreement shall automatically apply thereto and any such Intellectual Property shall automatically constitute part of the Collateral under the Security Documents (other than to the extent such Intellectual Property constitutes an Excluded Asset), without further action by any party, in each case from and after the date of such creation, development, or acquisition (except that any applicable representations or warranties of any Obligor shall apply to any such Intellectual Property only from and after the date, if any, subsequent to such acquisition that such representations and warranties are brought down or made anew as provided herein).
8.15 Maintenance of Regulatory Approvals, Contracts, Intellectual Property, Etc. Each Obligor shall, and shall cause each of its Subsidiaries (to the extent applicable) to, (i) use commercially reasonable best efforts to prepare, execute, deliver and file any and all agreements, documents or instruments, and to pay any costs and expenses, that are necessary or desirable to secure all material Regulatory Approvals, Material Agreements, Material Intellectual Property, Healthcare Permits and other rights, interests or assets (whether tangible or intangible) reasonably necessary for the operations of such Person’s business, including any Product Commercialization and Development Activities, (ii) maintain in full force and effect, and pay all costs and expenses relating to, all such Regulatory Approvals, Material Agreements, Healthcare Permits and Material Intellectual Property owned, used or controlled by such Obligor or any such Subsidiary that are used in or reasonably necessary for the operations of such Person’s business, including any Product Commercialization and Development Activities, (iii) promptly after obtaining knowledge thereof, notify the Agent of any infringement or violation by any Person of the Borrower’s or any such Subsidiaries’ Material Intellectual Property, and take commercially reasonable efforts to pursue any such infringement or other violation, (iv) use commercially reasonable efforts to pursue and maintain in full force and effect legal protection for all new Material Intellectual Property created, developed or acquired by such Obligor or any of its Subsidiaries, as the case may be, that is necessary for the operations of the business of such Person, or in connection with any Product Commercialization and Development Activities relating to any Product, and (v) promptly after obtaining knowledge thereof, notify the Agent of any written Claim by any Person that the conduct of the business of such Obligor or any of its Subsidiaries, including in connection with any Product Commercialization and Development Activities, has infringed upon any Intellectual Property of such Person.
8.16 ERISA and Foreign Pension Plan Compliance. Each Obligor shall, and shall cause each of its Subsidiaries to, comply in all material respects with the provisions of ERISA or applicable Law with respect to any Plans or Foreign Pension Plans to which Parent or any such Obligor is a party as an employer.
8.17 Cash Management. Subject to Section 8.21, each Obligor shall, and shall cause each of its Subsidiaries to:
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(a) maintain at all times all Deposit Accounts, Securities Accounts, Commodity Accounts, lockboxes and similar accounts (other than Excluded Accounts) to be held by each Obligor with a bank or financial institution that has executed and delivered to and in favor of the Agent a customary “springing” account control agreement, in form and substance reasonably acceptable to the Agent (each such Deposit Account, Securities Account, Commodity Account, lockbox or similar account, a “Controlled Account”);
(b) maintain each such Controlled Account as a cash collateral account, with each such cash collateral account and all cash, checks and other similar items of payment held in any such account to be Collateral securing payment of the Obligations, and each Obligor shall have granted a Lien and security interest to the Agent, for the benefit of the Secured Parties, over such Controlled Accounts;
(c) deposit promptly, and in any event no later than five (5) Business Days after the date of receipt thereof, all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all accounts receivable, Contracts or any other rights and interests into one or more Controlled Accounts or Excluded Accounts; and
(d) at any time after the occurrence and during the continuance of an Event of Default, at the request of the Agent, direct all payments constituting proceeds of accounts receivable to be directed into lockbox accounts pursuant to agreements in form and substance reasonably satisfactory to the Agent.
8.18 Conference Calls. After delivery of the financial statements pursuant to Sections 8.01(b) and 8.01(c), at the request of the Agent, the Borrower shall cause its chief financial officer to participate in conference calls with the Agent and the Lenders to discuss, among other things, the financial condition of each Obligor and any financial or earnings reports; provided that such conference calls shall be held at reasonable times during normal business hours and, so long as no Event of Default has occurred and is continuing, not more frequently than once after delivery of each such financial statement.
8.19 Board Observation Rights. The Agent from time to time, at its option and in its sole discretion, may require that the Parent allow one representative designated by the Agent to attend and participate solely as a non-voting observer in all meetings of the Board of the Parent (each such meeting, a “Board Meeting”; and such representative, a “Board Observer”). The Parent shall (i) give the Board Observer notice of all Board Meetings at the same time and in the same manner as such notice is furnished to the Board of the Parent, (ii) provide to the Board Observer all notices, documents and information (including proposed written consents) furnished to the Board of the Parent at the same time and in the same manner furnished to such members, (iii) permit the Board Observer to participate by telephone in each Board Meeting, (iv) provide the Board Observer copies of the minutes of all Board Meetings at the time such minutes are furnished to the Board of the Parent and (v) provide the Board Observer with copies of all written consents duly passed by the Board of the Parent. Borrower shall reimburse the Board Observer for all reasonable and documented out-of-pocket expenses incurred in connection with the Board Observer’s attendance at the Board Meetings. The Parent shall indemnify the Board Observer to the same extent provided by the Parent to its directors. Notwithstanding the foregoing, the Parent may exclude the Board Observer from access to any material or meeting or
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portion thereof if: (i) the Board of the Parent concludes in good faith, upon advice of its counsel, that such exclusion is necessary to preserve the attorney-client privilege between the Parent or any of its Affiliates and its counsel or (ii) such exclusion is necessary to avoid a conflict of interest between the Parent on the one hand and the Lenders on the other; provided that the Board Observer may only be excluded from access to the portion of such material or meeting (x) as is necessary to protect such attorney-client privilege or (y) as is necessary to avoid such conflict of interest, as the case may be.
8.20 Litigation Cooperation. The Parent shall, and shall cause each of its Subsidiaries to use commercially reasonable efforts to confer with the Agent, and make reasonably available to the Agent, its (and its Subsidiaries’) officers, employees, agents, books and records, without expense to the Agent, prior to prosecuting or defending against any third party suit or proceeding in respect of Patents instituted by or against the Parent or any of its Subsidiaries.
8.21 Post-Closing Covenants. The Borrower shall complete or shall cause to be completed each of the items set forth on Schedule 8.20 in the timeframes set forth therein.
8.22 Registration of Closing Shares.
(a) Subject to Section 8.22(f) and Section 8.22(k) the Parent agrees that, within forty-five (45) calendar days following the Closing Date, the Parent will file with the Commission (at the Parent’s sole cost and expense) a registration statement registering the resale of the Closing Shares (the “Registration Statement”), and the Parent shall use its commercially reasonable efforts to have the Registration Statement declared effective as soon as practicable after the filing thereof, but in any event no later than ninety (90) calendar days after the Closing Date (the “Effectiveness Deadline”); provided that the Effectiveness Deadline shall be extended to one hundred twenty (120) calendar days after the Closing Date if the Registration Statement is reviewed by, and comments thereto are provided from, the Commission; provided further that the Parent shall have the Registration Statement declared effective within ten (10) Business Days after the date the Parent is notified (orally or in writing, whichever is earlier) by the staff of the Commission that the Registration Statement will not be “reviewed” or will not be subject to further review; provided further that (i) if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the Commission is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the Commission is open for business and (ii) if the Commission is closed for operations due to a government shutdown the Effectiveness Deadline shall be extended by the same number of Business Days that the Commission remained closed. Unless otherwise agreed to in writing by the applicable Lenders prior to the filing of the Registration Statement, no Lender shall be identified as a statutory underwriter in the Registration Statement; provided that if the Commission requests that any Lender be identified as a statutory underwriter in the Registration Statement, such Lender will have the opportunity to withdraw from the Registration Statement upon its prompt written request to the Parent. Notwithstanding the foregoing, if the Commission prevents the Parent from including any or all of the shares proposed to be registered under the Registration Statement due to limitations on the use of Rule 415 of the Securities Act for the resale of the Equity Interests proposed to be covered by the Registration Statement by the applicable stockholders or otherwise, such Registration Statement shall register for resale such number of such Equity Interests which is equal to the maximum number of such Equity Interests as is permitted by the Commission. In such event, the
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number of such Equity Interests or other shares to be registered for each selling stockholder named in the Registration Statement shall be reduced pro rata among all such selling stockholders and as promptly as practicable after being permitted to register additional shares under Rule 415 under the Securities Act, the Parent shall amend the Registration Statement or file one or more new Registration Statement(s) (such amendment or new Registration Statement shall also be deemed to be a “Registration Statement” hereunder) to register such additional Equity Interests and cause such amendment or Registration Statement(s) to become effective as promptly as practicable after the filing thereof, but in any event no later than thirty (30) calendar days after the filing of such Registration Statement (the “Additional Effectiveness Deadline”); provided that the Additional Effectiveness Deadline shall be extended to one hundred thirty-five (135) calendar days after the filing of such Registration Statement if such Registration Statement is reviewed by, and comments thereto are provided from, the Commission; provided further that the Parent shall have such Registration Statement declared effective within ten (10) Business Days after the date the Parent is notified (orally or in writing, whichever is earlier) by the staff of the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review; provided further that (i) if such day falls on a Saturday, Sunday or other day that the Commission is closed for business, the Additional Effectiveness Deadline shall be extended to the next Business Day on which the Commission is open for business and (ii) if the Commission is closed for operations due to a government shutdown, the Effectiveness Deadline shall be extended by the same number of Business Days that the Commission remained closed. Any failure by the Parent to file a Registration Statement by the Effectiveness Deadline or Additional Effectiveness Deadline shall not otherwise relieve the Parent of its obligations to file or effect a Registration Statement as set forth in this Section 8.22.
(b) The Parent agrees that, except for such times as the Parent is permitted hereunder to suspend the use of the prospectus forming part of a Registration Statement, the Parent will use its commercially reasonable efforts to cause such Registration Statement to remain effective with respect to the applicable Lenders, including to prepare and file any post-effective amendments to such Registration Statement or supplements to the related prospectus such that the prospectus will not include any untrue statement or a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, until the earliest to occur of (i) the date on which all applicable Lenders cease to hold any Closing Shares issued pursuant to this Agreement and (ii) the first date on which the applicable Lenders can sell all of their respective Closing Shares issued pursuant to this Agreement (or shares received in exchange therefor) under Rule 144 of the Securities Act without limitation as to the manner of sale or the amount of such securities that may be sold and without the requirement for the Parent to be in compliance with the current public information required under Rule 144(c)(l) (or Rule 144(i)(2), if applicable) (the earliest of clauses (i) and (ii), the “End Date”). Prior to the End Date, the Parent will use commercially reasonable efforts to (1) obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable, file all reports, and provide all customary and reasonable cooperation, necessary to enable the applicable Lenders to resell Closing Shares pursuant to the Registration Statement and (2) qualify the Closing Shares for listing on the applicable stock exchange on which the Company Class A Common Stock is then listed and update or amend the Registration Statement as necessary to include Closing Shares. The Parent will use its commercially reasonable efforts to (A) for so long as any applicable Lender holds any Closing Shares, make and keep public information available (as those terms are understood
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and defined in Rule 144) and file with the Commission in a timely manner all reports and other documents required of the Parent under the Exchange Act so long as the Parent remains subject to such requirements to enable any such Lender to resell the Closing Shares pursuant to Rule 144, (B) at the reasonable request of any applicable Lender, deliver all the necessary documentation to cause the Parent’s transfer agent to remove all restrictive legends from any Closing Shares being sold under the Registration Statement or pursuant to Rule 144 at the time of sale of its Closing Shares, or that may be sold by any applicable Lender without restriction under Rule 144, including without limitation, any volume and manner of sale restrictions, and (C) cause its legal counsel to deliver to the transfer agent the necessary legal opinions required by the transfer agent, if any, in connection with the instruction under clause (B) of this Section 8.22(b) upon the receipt of any applicable Lender representation letters and such other customary supporting documentation as requested by (and in a form reasonably acceptable to) such counsel. The applicable Lenders agree to disclose their respective beneficial ownership, as determined in accordance with Rule 13d-3 of the Exchange Act, of Closing Shares to the Parent (or its successor) upon reasonable request to assist the Parent in making the determination described above.
(c) The Parent’s obligations to include the Closing Shares of any applicable Lender in the Registration Statement are contingent upon such Lender furnishing in writing to the Parent a completed selling stockholder questionnaire in customary form that contains such information regarding such Lender, the securities of the Parent held by such Lender and the intended method of disposition of the Closing Shares as shall be reasonably requested by the Parent to effect the registration thereof, and each applicable Lender shall execute such documents in connection with such registration as the Parent may reasonably request that are customary of a selling stockholder in similar situations, including providing that the Parent shall be entitled to postpone and suspend the effectiveness or use of the Registration Statement (i) during any customary blackout or similar period or as permitted hereunder and (ii) as may be necessary in connection with the preparation and filing of a post-effective amendment to the Registration Statement following the filing of the Parent’s Annual Report on Form 10-K for its first completed fiscal year following the effective date of the Registration Statement; provided that the Parent shall request such information from any such Lender, including the selling stockholder questionnaire, at least five (5) Business Days prior to the anticipated date of filing the Registration Statement with the Commission. In the case of the registration effected by the Parent pursuant to this Agreement, the Parent shall, upon reasonable request, inform any requesting Lender as to the status of such registration. No Lender shall be entitled to use the Registration Statement for an underwritten offering of Closing Shares. Notwithstanding anything to the contrary contained herein, the Parent may delay or postpone filing of such Registration Statement, and from time to time require any applicable Lender not to sell under the Registration Statement or suspend the use or effectiveness of any such Registration Statement if (A) it determines in good faith that in order for the registration statement to not contain a material misstatement or omission, an amendment thereto would be needed, (B) such filing or use would materially affect a bona fide business or financing transaction of the Parent or would require premature disclosure of information that would materially adversely affect the Parent, (C) in the good faith judgment of the majority of the members of the Parent’s Board, such filing or effectiveness or use of such Registration Statement would be seriously detrimental to the Parent, or (D) the majority of the Board determines to delay the filing or initial effectiveness of, or suspend use of, a Registration Statement and such delay or suspension arises out of, or is a result of, or is related to or is in connection with
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guidance from the Commission relating to, initial public offering securities or expenses or future Commission guidance directed at special purpose acquisition companies, or any related disclosure or related matters (each such circumstance, a “Suspension Event”); provided that (w) the Parent shall not so delay filing or so suspend the use of the Registration Statement for a period of more than sixty (60) consecutive days or more than one hundred twenty (120) total calendar days, or more than three (3) times in any three hundred sixty (360) day period and (x) the Parent shall use commercially reasonable efforts to make such Registration Statement available for the sale by each applicable Lender of such securities as soon as practicable thereafter.
(d) Upon receipt of any written notice from the Parent (which notice shall not contain any material non-public information regarding the Parent) of the happening of (i) an issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for such purpose, which notice shall be given no later than three (3) Business Days from the date of such event, (ii) any Suspension Event during the period that the Registration Statement is effective, which notice shall be given no later than three (3) Business Days from the date of such Suspension Event, or (iii) if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, each applicable Lender agrees that (1) it will immediately discontinue offers and sales of the Closing Shares under the Registration Statement until such Lender receives copies of a supplemental or amended prospectus (which the Parent agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Parent that it may resume such offers and sales and (2) it will maintain the confidentiality of any information included in such written notice delivered by the Parent unless otherwise required by law, subpoena or regulatory request or requirement. If so directed by the Parent, any applicable Lender will deliver to the Parent or, in such Lender’s sole discretion destroy, all copies of the prospectus covering the Closing Shares in its possession; provided that this obligation to deliver or destroy all copies of the prospectus covering the Closing Shares shall not apply (x) to the extent such Lender is required to retain a copy of such prospectus (A) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (B) in accordance with a bona fide pre-existing document retention policy or (y) to copies stored electronically on archival servers as a result of automatic data back-up.
(e) For purposes of this Section 8.22, (i) “Closing Shares” shall mean, as of any date of determination, the Closing Shares (as defined herein) and any other equity security issued or issuable with respect to the Closing Shares by way of share split, dividend, distribution, recapitalization, merger, exchange or replacement, and (ii) “Lender” shall include any Person to which the rights under this Section 8.22 shall have been duly assigned, including the Fortress Investor under the Backstop Agreement and any of its permitted assigns.
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(f) The Parent shall indemnify and hold harmless each applicable Lender (to the extent such Lender is a seller under the Registration Statement), the officers, directors, members, managers, partners, agents and employees of each such Lender, each Person who controls any such Lender (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, managers, partners, agents and employees of each such controlling person, to the fullest extent permitted by applicable Law, from and against any and all Losses arising out of or caused by or based upon any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any prospectus included in the Registration Statement or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent that such untrue statements, alleged untrue statements, omissions or alleged omissions are (1) based upon information regarding such Lender furnished in writing to the Parent by or on behalf of such Lender expressly for use therein or such Lender has omitted a material fact from such information or (2) result from or in connection with any offers or sales effected by or on behalf of such Lender in violation of clause (g), below. Notwithstanding the foregoing, the Parent’s indemnification obligations shall not apply to amounts paid in settlement of any Losses or action if such settlement is effected without the prior written consent of the Parent (which consent shall not be unreasonably withheld or delayed). Upon the request of any applicable Lender, the Parent shall provide such Lender with an update on any threatened or asserted proceedings arising from or in connection with the transactions contemplated by this Section 8.22 of which the Parent receives notice in writing.
(g) Each applicable Lender shall, severally and not jointly with any other applicable Lender in the offering contemplated by this Agreement, indemnify and hold harmless the Parent, its directors, officers, members, managers, partners, agents and employees, each Person who controls the Parent (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, members, managers, partners, agents or employees of such controlling Persons, to the fullest extent permitted by applicable Law, from and against all Losses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus included in the Registration Statement, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus, or any form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based upon information regarding such Lender furnished in writing to the Parent by or on behalf of such Lender expressly for use therein. In no event shall the liability of any Lender hereunder be greater in amount than the dollar amount of the net proceeds received by such Lender upon the sale of its Closing Shares giving rise to such indemnification obligation. Notwithstanding the forgoing, the indemnification obligation of each applicable Lender hereunder shall not apply to amounts paid in settlement of any Losses or action if such settlement is effected without the prior written consent of such Lender (which consent shall not be unreasonably withheld or delayed).
(h) Any Person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified
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and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld, conditioned or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement), which settlement shall not include a statement or admission of fault and culpability on the part of such indemnified party, and which settlement shall 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 to such claim or litigation.
(i) The indemnification provided for under this Section 8.22 shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of the Closing Shares.
(j) If the indemnification provided under this Section 8.22 from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any Losses, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations; provided that the liability of each applicable Lender hereunder shall be limited to the net proceeds received by such Lender from the sale of Closing Shares giving rise to such indemnification obligation. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by (or not made by, in the case of an omission), or relates to information supplied by (or not supplied by, in the case of an omission), or on behalf of such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Losses shall be deemed to include, subject to the limitations set forth in this Section 8.22, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. No person guilty of fraudulent misrepresentation (within the meaning of Section l l(f) of the Securities Act) shall be entitled to contribution pursuant to this clause (j) from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything to the contrary herein, in no event will any party be liable for punitive damages in connection with this Section 8.22 or the transactions contemplated hereby.
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(k) Notwithstanding anything herein to the contrary, the filing Registration Statement shall occur prior to or concurrently with the filing of any other registration statement registering the resale of the Parent’s common stock (an “Other Resale RS”) that is made after the Intermediate Merger Closing (as defined the De-SPAC Combination Agreement).
SECTION 9
NEGATIVE COVENANTS
The Obligors jointly and severally covenant and agree, for the benefit of the Agent and the Lenders that until the Commitments have expired or been terminated and all Obligations (other than inchoate indemnification and expense reimbursement obligations for which no Claim has been made) have been paid in full in cash:
9.01 Indebtedness. The Obligors shall not, and shall not permit any of their Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, whether directly or indirectly, except for the following:
(a) the Obligations;
(b) Indebtedness existing as of the Closing Date (after giving effect to the Transactions contemplated to occur on or prior to the Closing Date) set forth on Schedule 9.01; provided that such Indebtedness is subordinated to the Obligations on terms satisfactory to the Agent;
(c) Indebtedness of an Obligor owing to another Obligor; provided that, in each case, such Indebtedness shall be subordinated to the Obligations pursuant to the Intercompany Subordination Agreement;
(d) Guaranties by an Obligor of the Indebtedness of another Obligor to the extent such Indebtedness is otherwise permitted hereunder; provided that any subrogation claims of any such guarantying Obligor shall be subordinated to the Obligations pursuant to the Intercompany Subordination Agreement;
(e) ordinary course of business equipment financing and leasing; provided that (i) if secured, the collateral therefor consists solely of the assets being financed, the products and proceeds thereof and books and records related thereto, and (ii) the aggregate outstanding principal amount of such Indebtedness shall not exceed $3,000,000 (or the Equivalent Amount in other currencies) at any time;
(f) Indebtedness under Hedging Agreements permitted by Section 9.05(e); provided that the aggregate notional amount for all such Hedging Agreements shall not exceed $1,500,000 (or the Equivalent Amount in other currencies);
(g) Indebtedness assumed pursuant to any Permitted Acquisition; provided that (i) the aggregate amount of Indebtedness permitted pursuant to this Section 9.01(g) shall not exceed $2,500,000 at any time outstanding and (ii) no such Indebtedness shall have been created or incurred in connection with, or in contemplation of, such Permitted Acquisition;
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(h) Indebtedness in respect of any agreement providing for treasury, depositary or cash management services, including in connection with any automated clearing house transfers of funds or any similar transfers, netting services, overdraft protections and other cash management and similar arrangements, in each case in the ordinary course of business;
(i) advances or deposits from customers or vendors received in the ordinary course of business;
(j) workers’ compensation claims, payment obligations in connection with health, disability or other types of social security benefits, unemployment or other insurance obligations and reclamation and statutory obligations, in each case incurred in the ordinary course of business;
(k) Indebtedness consisting of deferred obligations to pay insurance premiums solely in respect of insurance policies described in Section 8.05 insuring assets or businesses of an Obligor that are written or arranged in such Obligor’s ordinary course of business and which are payable within one (1) year;
(l) Indebtedness consisting of guarantees resulting from the endorsement of negotiable instruments for collection in the ordinary course of business;
(m) credit card Indebtedness in an outstanding principal amount not to exceed at any time $1,000,000 in the aggregate; provided that the aggregate amount of such Indebtedness incurred in reliance on this Section 9.01(m) by Allurion France shall not exceed $250,000;
(n) Indebtedness under any letters of credit in an aggregate face amount not to exceed $500,000; provided that no such Indebtedness shall be permitted to be incurred in reliance on this Section 9.01(n) by Allurion France;
(o) Indebtedness incurred under performance, surety, bid, statutory and appeal bonds, completion guarantees and other similar obligations, in each case in the ordinary course of business not to exceed $500,000 in the aggregate at any time outstanding;
(p) (i) Indebtedness of the Borrower owing to RTW pursuant to the RTW Royalty Financing Agreement and, to the extent that the Additional RTW Royalty Financing Agreement has been executed by RTW and the Borrower pursuant to the terms of the Side Letter, the Additional RTW Royalty Financing Agreement in an aggregate principal amount not to exceed the amount permitted under the Intercreditor Agreement, and (ii) any Indebtedness that refinances Indebtedness referred to in subclause (i) to the extent such refinancing is permitted in accordance with the Intercreditor Agreement;
(q) Permitted Refinancings of Indebtedness permitted pursuant to this Section 9.01 (other than Sections 9.1(h), (i), (j) and (p);
(r) to the extent constituting Indebtedness, customary transfer pricing and cost-sharing arrangements (i.e., “cost-plus” arrangements) among the Borrower and its Subsidiaries that are in the ordinary course of business; and
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(s) other unsecured Indebtedness not otherwise permitted hereunder not to exceed $2,000,000 in the aggregate at any time outstanding; provided that no such Indebtedness shall be permitted to be incurred in reliance on this Section 9.01(s) by Allurion France.
9.02 Liens. The Obligors shall not, and shall not permit any of their Subsidiaries to, create, incur, assume or permit to exist any Lien on any property or assets now owned or hereafter acquired by it or such Subsidiary, except for the following:
(a) Liens securing the Obligations;
(b) any Lien on any property or asset of any Obligor or any of its Subsidiaries existing on the Closing Date and set forth on Schedule 7.13; provided that (i) no such Lien shall extend to any other property or asset of any Obligor or any of its Subsidiaries and (ii) any such Lien shall secure only those obligations which it secures on the Closing Date and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(c) Liens securing Indebtedness permitted under Section 9.01(e) (including any Permitted Refinancings thereof); provided that such Liens are restricted solely to the collateral permitted to be secured pursuant to Section 9.01(e);
(d) Liens imposed by any applicable Law arising in the ordinary course of business, including (but not limited to) carriers’, warehousemen’s, lessor’s and mechanics’ liens and other similar Liens arising in the ordinary course of business and which (x) do not in the aggregate materially detract from the value of the property subject thereto or materially impair the use thereof in the operations of the business of any Obligor or any of its Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject to such Liens and for which adequate reserves have been made if required in accordance with GAAP;
(e) pledges or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other similar social security legislation;
(f) Liens securing Taxes, assessments and other governmental charges, the payment of which is not yet due or is being contested in good faith by appropriate proceedings promptly initiated and diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required GAAP shall have been made;
(g) servitudes, easements, rights of way, restrictions and other similar encumbrances on real property imposed by any applicable Law and Liens consisting of zoning or building restrictions, easements, licenses, restrictions on the use of property or minor imperfections in title thereto which, in the aggregate, are not material, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of any of the Obligors or any of their Subsidiaries;
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(h) with respect to any real property, (i) such defects or encroachments as might be revealed by an up-to-date survey of such real property; (ii) the reservations, limitations, provisos and conditions expressed in the original grant, deed or patent of such property by the original owner of such real property pursuant to applicable Law; (iii) rights of expropriation, access or user or any similar right conferred or reserved by or in any applicable Law, which, in the aggregate for clauses (i), (ii) and (iii) above, are not material, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of any of the Obligors or their Subsidiaries; and (iv) leases or subleases in the ordinary course of business;
(i) Liens securing Indebtedness permitted under Section 9.01(g); provided that (i) such Lien is not created in contemplation of or in connection with such Permitted Acquisition, (ii) such Lien shall not apply to any other property or assets of any Obligor or any of its Subsidiaries other than the property or assets being acquired pursuant to such Permitted Acquisition, and (iii) such Lien shall secure only those obligations that it secured immediately prior to the consummation of such Permitted Acquisition and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(j) bankers’ liens, rights of setoff and similar Liens incurred on deposits made in the ordinary course of business;
(k) (i) licenses permitted pursuant to Section 9.18 and (ii) any ordinary course interest or title of a licensor, sublicensor, collaborator, lessor or sublessor with respect to any assets under any inbound license, collaboration agreement or lease agreement permitted pursuant to Section 9.18;
(l) cash collateral accounts serving as collateral in connection with Indebtedness permitted pursuant to Section 9.01(n) in an amount up to 105% of such Indebtedness;
(m) Liens securing judgments for the payment of money not constituting an Event of Default under Section 11.01(i);
(n) Liens solely on any cash earnest money deposits made by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement in connection with a Permitted Acquisition;
(o) Liens in favor of customs and revenue authorities arising as a matter of Law which secure payment of customs duties in connection with the importations of goods in the ordinary course of business;
(p) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases for personal property entered into in the ordinary course of business;
(q) Liens securing Indebtedness permitted by Section 9.01(p) so long as such Liens are subject to the Intercreditor Agreement;
(r) pledges or deposits made in the ordinary course of business in connection with obligations in respect of (i) surety or appeal bonds, bid or performance bonds, or other obligations of a like nature to the extent permitted pursuant to Section 9.01(o) and (ii) leases in the ordinary course of business; and
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(s) Liens consisting of Permitted Licenses.
Any term or provision of this Agreement to the contrary notwithstanding no Lien otherwise permitted under any of the foregoing clauses (b) through (s) (other than pursuant to clause (m) above and other non-consensual Permitted Liens) shall apply to any Material Intellectual Property or any Equity Interests of any Person that owns Material Intellectual Property.
9.03 Fundamental Changes, Acquisitions, Etc. The Obligors shall not, and shall not permit any of their Subsidiaries to, (i) enter into any transaction of merger, amalgamation or consolidation (other than in connection with the De-SPAC Transaction), (ii) liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), (iii) sell or issue any Disqualified Equity Interests or (iv) other than Permitted Acquisitions, make any Acquisition or otherwise acquire any business or all or substantially all the property from, or Equity Interests of, or be a party to any Acquisition of, any Person, except for the following (in each case so long as no Event of Default has occurred and is continuing and no Event of Default could reasonably be expected to result therefrom):
(a) the merger, amalgamation or consolidation of any Subsidiary with or into any other Obligor (other than any Subsidiary that is required to become a Subsidiary Guarantor but has not yet done so within the time periods set forth in Section 8.12(a)); provided that the Parent and the Borrower shall not merge, amalgamate or consolidate with or into one another, and with respect to any other such transaction involving the Parent or the Borrower, the Parent or the Borrower, as applicable must be the surviving or successor entity of such transaction and with respect to any transaction involving any other Obligor and a Subsidiary that is not an Obligor, the Obligor must be the surviving or successor entity of such transaction
(b) the sale, lease, transfer or other disposition by any Subsidiary (other than the Borrower) of any or all of its property (upon voluntary liquidation or otherwise) to any Obligor (other any Subsidiary that is required to become a Subsidiary Guarantor but has not yet done so within the time periods set forth in Section 8.12(a));
(c) the sale, transfer or other disposition of the Equity Interests of any Subsidiary (other than the Borrower) to any Obligor (other than any Person that is required to become a Subsidiary Guarantor but has not yet done so within the time periods set forth in Section 8.12(a));
(d) transactions permitted by Section 9.05;
(e) the creation of any Subsidiary in compliance with Section 8.12; and
(f) the sale, lease, transfer or other disposition by any Subsidiary that is not an Obligor of any or all of its property (upon voluntary liquidation or otherwise) to an Obligor.
9.04 Lines of Business. The Obligors shall not, and shall not permit any of their Subsidiaries to, engage in any business other than the business engaged in on the Closing Date by such Persons or a similar, corollary, ancillary, incidental, complementary or related line of business, or a reasonable extension, development or expansion thereof.
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9.05 Investments. The Obligors shall not, and shall not permit any of their Subsidiaries to, make, directly or indirectly, or permit to remain outstanding any Investments except for the following:
(a) Investments outstanding on the Closing Date and identified on Schedule 9.05 and any modification, replacement, renewal or extension thereof to the extent not involving new or additional Investments or otherwise increasing the amount thereof;
(b) operating Deposit Accounts, Securities Accounts or Commodity Accounts with banks or financial institutions that are Controlled Accounts or Excluded Accounts;
(c) extensions of credit in the nature of accounts receivable or notes receivable arising from the sales of goods or services in the ordinary course of business and prepaid royalties in the ordinary course of business;
(d) Permitted Cash Equivalent Investments in Controlled Accounts;
(e) Hedging Agreements entered into in any Obligor’s or any of its Subsidiaries’ ordinary course of business for the purpose of hedging currency risks or interest rate risks (but not for speculative purposes); provided that the aggregate notional amount for all such Hedging Agreements shall not exceed $1,500,000 (or the Equivalent Amount in other currencies);
(f) Investments consisting of security deposits with utilities and landlords to secure office space and other like Persons made in the ordinary course of business;
(g) employee loans, travel advances and guarantees in accordance with Parent’s usual and customary practices with respect thereto (if permitted by applicable Law) which in the aggregate shall not exceed $1,000,000 outstanding at any time (or the Equivalent Amount in other currencies);
(h) Investments received in connection with any Insolvency Proceedings in respect of any customers, suppliers or clients and in settlement of delinquent obligations of, and other disputes with, customers, suppliers or clients;
(i) Investments in the form of Indebtedness owing by an Obligor or any of its Subsidiaries to another Obligor to the extent such Indebtedness is permitted pursuant to Section 9.01 (including any Permitted Refinancings thereof);
(j) Permitted Acquisitions;
(k) (i) loans to employees, officers or directors relating to the purchase of equity securities of Parent or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Parent’s Board and (ii) non-cash loans to employees, officers or directors relating to the exercise of options to purchase equity securities of Parent or its Subsidiaries which, in each case, in the aggregate of (i) and (ii) together shall not exceed $100,000 outstanding at any time;
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(l) Investments of any Person existing at the time such Person becomes a Subsidiary of the Borrower or consolidates or merges with the Borrower or any Subsidiary, in each case, so long as (i) such Person becomes a Subsidiary pursuant to a Permitted Acquisition or such consolidation or merger, as the case may be, is permitted pursuant hereto, (ii) such Person becomes a Subsidiary Guarantor pursuant to Section 8.12 and (iii) such Investments were not made in contemplation of such Person becoming a Subsidiary or of such merger;
(m) Investments consisting of payments of the cost of the formation of and maintenance of Subsidiaries so long as such Subsidiaries comply with Section 8.12 and the aggregate amount of such Investments at any time outstanding does not exceed $200,000;
(n) advances in respect of customary transfer pricing and cost-sharing arrangements (i.e., “cost-plus” arrangements) among the Parent and its Subsidiaries that are in the ordinary course of business;
(o) non-cash Investments in joint ventures or strategic alliances in the ordinary course of the Borrower’s business consisting of the licensing of technology, the development of technology or the providing of technical support; provided that the aggregate amount of Investments permitted under this Section 9.05(o) shall not exceed $1,500,000 at any time outstanding; provided further that no such Investments of Allurion France shall be permitted under this Section 9.05(o);
(p) cash Investments in small partner companies in connection with product development projects and investments in joint ventures and other strategic alliances; provided that the aggregate amount of Investments permitted under this Section 9.05(p) shall not exceed $250,000 at any time outstanding; and
(q) so long as no Event of Default has occurred and is continuing or could reasonably be expected to result therefrom, Investments not otherwise permitted hereunder in an aggregate amount not to exceed $500,000 at any time outstanding; provided that no such Investments of Allurion France shall be permitted under this Section 9.05(q).
9.06 Restricted Payments. The Obligors shall not, and shall not permit any of their Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment except for the following:
(a) non-cash dividends with respect to Parent’s Equity Interests payable solely in shares of its Qualified Equity Interests so long as no Event of Default has occurred and is continuing or could reasonably be expected to occur or result therefrom;
(b) dividends paid by any Subsidiary of any Obligor to any Obligor (other than any Person that is required to become a Subsidiary Guarantor but has not yet done so within the time periods set forth in Section 8.12(a));
(c) upon the death, incapacity or termination of any present or former officer or employee that is a holder of Qualified Equity Interests of Parent or the exercise of a right of first refusal or similar right in respect of any such holder, Parent may repurchase such Qualified Equity Interests of such holder or such holder’s family, trusts, estates and heirs pursuant to stock repurchase agreements in an amount not to exceed $100,000 per fiscal year so long as no Event of Default has occurred and is continuing or could reasonably be expected to occur or result therefrom;
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(d) the payment by any Obligor or any of its Subsidiaries of cash in lieu of the issuance of fractional shares made to redeem, purchase, repurchase, or retire the obligations under any warrants issued by it in accordance with the terms thereof;
(e) the repurchase or other acquisition of Qualified Equity Interests of Parent deemed to occur (i) upon the exercise of stock options, warrants, restricted stock units or other rights to purchase Qualified Equity Interests of Parent if such Equity Interests represent a portion of the exercise price thereof or conversion price thereof and (ii) in connection with any tax withholding required upon the grant of or any exercise or vesting of any Qualified Equity Interests of Parent (or options in respect thereof);
(f) cash in lieu of the issuance of fractional shares not to exceed $25,000 per fiscal year;
(g) Parent may honor any non-cash (or, in the case of fractional shares, cash) conversion or exercise requests in respect of any convertible securities, options, or warrants of Parent into Qualified Equity Interests of Parent pursuant to the terms of such convertible securities, options or warrants or otherwise in exchange therefor;
(h) The payment by any Obligor of any or its Subsidiaries of Permitted Tax Distributions; and
(i) Restricted Payments not otherwise permitted hereunder in an aggregate amount not to exceed $500,000 since the Closing Date so long as no Event of Default has occurred and is continuing or could reasonably be expected to occur or result therefrom;
provided that, notwithstanding anything to the contrary in this Agreement or in any other Loan Document, Allurion France shall not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment otherwise permitted pursuant to this Section 9.06 except to the Borrower.
9.07 Payments of Indebtedness. The Obligors shall not, and shall not permit any of their Subsidiaries to, make any payments (whether voluntary or mandatory, a prepayment or repayment, repurchase or redemption) in respect of any Indebtedness (including under the RTW Royalty Financing Agreement) other than, subject to the terms of any applicable subordination, intercreditor, or similar agreement in favor of (or entered into for the benefit of) the Agent or the Lenders (including the Intercreditor Agreement), (i) payments in respect of the Obligations, (ii) other required or scheduled payments (including, without limitation, associated fees and costs) of such Indebtedness to the extent payment is permitted pursuant to the terms of the applicable subordination or similar agreement, (iii) any “Permitted RIFA Payments” (as defined in the Intercreditor Agreement) and (iv) payments of Indebtedness permitted under Section 9.01(e).
9.08 Change in Fiscal Year. The Obligors shall not, and shall not permit any of their Subsidiaries to, change the last day of their fiscal year from that in effect on the Closing Date, except to change the fiscal year of a Subsidiary acquired in connection with an Acquisition to conform its fiscal year to that of the Obligors or as otherwise required by Law.
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9.09 Sales of Assets, Etc.. The Obligors shall not, and shall not permit any of their Subsidiaries to sell, lease, transfer, or otherwise dispose of any of their assets or properties, whether now owned or hereafter acquired (including accounts receivable, Intellectual Property or Equity Interests of Subsidiaries), grant or enter into any outbound license (or equivalent) of Intellectual Property, forgive, release or compromise any amount owed to any Obligor or any such Subsidiary, or irretrievably abandon or dispose of any Patents, in each case, in one transaction or series of transactions (any thereof, an “Asset Sale”), except for the following (provided that, in the case of any Asset Sale of the type described in clauses (c) or (i) below, the Obligors shall not, and shall not permit any of their Subsidiaries to, allow any such Asset Sale to occur if any Event of Default has occurred and is continuing or could reasonably be expected to occur as a result of such Asset Sale):
(a) sales of inventory in the ordinary course of its business on ordinary business terms;
(b) the forgiveness, release or compromise of any amount owed to an Obligor or any of its Subsidiaries in the ordinary course of business;
(c) transfers of assets or properties (other than any Intellectual Property) by any by any Obligor or any of its Subsidiaries to another Obligor (other than any Person that is required to become a Subsidiary Guarantor but has not yet done so within the time periods set forth in Section 8.12(a));
(d) dispositions of any asset or property (including leasehold interests, but other than any Material Intellectual Property) that is obsolete or worn out or no longer used or useful in the business of the Parent and its Subsidiaries; provided that no disposition of Intellectual Property that does not constitute Material Intellectual Property shall be permitted under this Section 9.09(d) unless the applicable Obligor or Subsidiary has first offered the Agent a right of first negotiation for the right to purchase or license such Intellectual Property;
(e) as expressly permitted under Sections 9.03 or 9.05;
(f) the use of cash and Permitted Cash Equivalent Investments in the ordinary course of business or in connection with other business activities not prohibited or otherwise restricted hereby or by any other Loan Document;
(g) dispositions consisting of the sale, transfer, assignment or other disposition of unpaid and overdue accounts receivable in connection with the collection, compromise or settlement thereof;
(h) dispositions of any asset or property (other than Intellectual Property) to the extent that such asset or property is exchanged for credit against the purchase price of similar replacement property;
(i) any license of Intellectual Property to the extent permitted by Section 9.18;
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(j) any Casualty Event that would constitute an Asset Sale;
(k) the sale of Qualified Equity Interests of Parent (to the extent not resulting in a Change of Control or other Event of Default);
(l) the lapse or abandonment of any registrations or applications for registration of any Intellectual Property (other than Material Intellectual Property) no longer used or useful in the conduct in the business of the Parent or its Subsidiaries to the extent no longer economically desirable in the conduct of their business (in the reasonable, good faith judgment of the Obligors); provided that no such lapse or abandonment of Intellectual Property that does not constitute Material Intellectual Property shall be permitted under this Section 9.09(l) unless the applicable Obligor or Subsidiary has first offered the Agent a right of first negotiation for the right to purchase or license such Intellectual Property;
(m) customary transfer pricing and cost-sharing arrangements (i.e., “cost-plus” arrangements) among the Parent and its Subsidiaries that are in the ordinary course of business; and
(n) other Asset Sales (other than any abandonment or disposal of Patents) not otherwise permitted hereunder not to exceed $500,000 in the aggregate.
9.10 Transactions with Affiliates. The Obligors shall not, and shall not permit any of their Subsidiaries to, sell, lease, license or otherwise transfer any assets to, or purchase, lease, license or otherwise acquire any assets from, or otherwise engage in any other transactions with, any of its Affiliates, except:
(a) transactions between or among Obligors and their Subsidiaries (other than any Subsidiary that is required to become a Subsidiary Guarantor but has not yet done so within the time periods set forth in Section 8.12(a));
(b) customary compensation and indemnification of, and other employment arrangements with, directors, officers and employees of Parent or any of its Subsidiaries in the ordinary course of business; and
(c) any other transaction of any Obligor or any of its Subsidiaries that is (i) on fair and reasonable terms that are no less favorable (including with respect to the amount of cash or other consideration receivable or payable in connection therewith ) to such Obligor or such Subsidiary, as applicable, than it could obtain in an arm’s-length transaction with a Person that is not an Affiliate of such Obligor or such Subsidiary, and (ii) of the kind which would be entered into by a prudent Person in the position of such Obligor or such Subsidiary, as applicable, with another Person that is not an Affiliate of such Obligor or such Subsidiary, as applicable.
9.11 Restrictive Agreements. The Obligors shall not, and shall not permit any of their Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any Restrictive Agreement other than (i) restrictions and conditions imposed by applicable Laws or by the Loan Documents and (ii) Restrictive Agreements listed on Schedule 7.15.
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9.12 Modifications and Terminations of Material Agreements and Organic Documents. The Obligors shall not, and shall not permit any of their Subsidiaries to:
(a) waive, amend, modify, terminate, replace or otherwise modify any term or provision of any Organic Document in any manner adverse to the interests of the Agent or to the Lenders in their capacities as such;
(b) (x) take or omit to take any action that results in the termination of, or permits any other Person to terminate, any Material Agreement or Material Intellectual Property, or (y) waive, amend, terminate, replace or otherwise modify any term or provision of any Material Agreement in any manner materially adverse to the interests of the Secured Parties in their capacities as such (provided that, for the avoidance of doubt, any such actions with respect to the RTW Royalty Financing Agreement or, once entered into, the Additional RTW Royalty Financing Agreement shall be governed by clause (c) below and not this clause (b)); or
(c) waive, amend, modify, terminate, replace or otherwise modify any term or provision of the RTW Royalty Financing Agreement or, to the extent that the Additional RTW Royalty Financing Agreement has been executed by RTW and the Borrower pursuant to the terms of the Side Letter, the Additional RTW Royalty Financing Agreement except as permitted pursuant to the Intercreditor Agreement.
9.13 Sales and Leasebacks. Except as disclosed on Schedule 9.13, the Obligors shall not, and shall not permit any of their Subsidiaries to, become liable, directly or indirectly, with respect to any lease, whether an operating lease or a Capital Lease Obligation, of any asset or property (whether real, personal, or mixed), whether now owned or hereafter acquired, (i) which such Person has sold or transferred or is to sell or transfer to any other Person and (ii) which such Person intends to use for substantially the same purposes as property which has been or is to be sold or transferred.
9.14 Hazardous Material. The Obligors shall not, and shall not permit any of their Subsidiaries to, use, generate, manufacture, install, treat, release, store or dispose of any Hazardous Material, except in compliance with all applicable Environmental Laws or where the failure to comply could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
9.15 Accounting Changes. The Obligors shall not, and shall not permit any of their Subsidiaries to, make any significant change in accounting treatment or reporting practices, except as required or permitted by GAAP.
9.16 [Reserved].
9.17 Sanctions; Anti-Corruption Use of Proceeds. The Borrower shall not, directly or indirectly, use the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any applicable anti-corruption Law, or (ii) (A) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (B) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans, whether as Agent, Lender, underwriter, advisor, investor, or otherwise).
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9.18 Inbound and Outbound Licenses.
(a) Inbound Licenses. The Obligors shall not, and shall not permit any of their Subsidiaries to, enter into or become or remain bound by any inbound license agreement requiring any Obligor or any of its Subsidiaries, as the case may be, during any twelve (12) month period during the term of such license agreement, to make aggregate payments in excess of $500,000 in respect of such inbound license unless the Borrower has (i) provided prior written notice to the Agent of the material terms of such license or agreement with a description of its anticipated and projected impact on the Borrower’s or such Subsidiary’s, as applicable, business or financial condition and (ii) taken such commercially reasonable actions as the Agent may reasonably request to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for the Agent and the Lenders to be granted a valid and perfected Lien on such license agreement and the right to fully exercise its rights under any of the Loan Documents in the event of a disposition or liquidation (including in connection with a foreclosure) of the rights, assets or properties that are the subject of such license agreement; provided that inbound license agreements in the nature of over the counter or “shrink wrap” software that are commercially available to the public shall not be prohibited by this clause (a).
(b) Outbound Licenses. The Obligors shall not, and shall not permit any of their Subsidiaries to, enter into or become or remain bound by any outbound license, including any collaboration or development agreement, of Intellectual Property of any Obligor or any of its Subsidiaries other than Permitted Licenses.
9.19 Take-Or-Pay Agreements. The Obligors shall not, and shall not permit any of their Subsidiaries to, enter into any agreements to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, other than operating leases entered into in the ordinary course of business and any such license or other agreement for the purchase of goods, software and other intangibles, services or supplies in the ordinary course of business.
9.20 Passive Holding Company. Parent shall not conduct, transact or otherwise engage in any active trade, business or operations or incur any Indebtedness or other liability or obligation, nor shall Parent acquire or own any assets or properties other than Qualified Equity Interests of the Borrower; provided that the foregoing will not prohibit Parent from the following: (i) the maintenance of its legal existence (including the ability to incur reasonable fees, costs, expenses and other liabilities to the extent related to such maintenance), (ii) the performance of its Obligations arising pursuant to the Loan Documents to which it is a party, (iii) the making of Investments in the ordinary course of business in the Parent and any of its wholly-owned direct or indirect Subsidiaries; provided that such Investments shall only be in the form of Qualified Equity Interests, (iv) participating in tax, accounting and other administrative and fiduciary matters as a direct owner of the Borrower, in each case, in accordance with the terms of the Loan Documents to which it is a party, (v) holding any cash or Permitted Cash Equivalent Investments on a temporary basis (and in no event longer than ten (10) Business Days) that is in the process of being transferred by Parent to the Borrower as a permitted Investment pursuant to clause (iii) above, (vi) taking such actions as may be necessary or required in order to comply with the rules and regulations of the Exchange Act, the Securities Act, and (vii) providing customary compensation, indemnification and insurance coverage to the officers and directors of Parent and its Subsidiaries, if any.
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SECTION 10
FINANCIAL COVENANTS
10.01 Minimum Liquidity. The Borrower shall at all times maintain a minimum aggregate balance of twelve million and five hundred thousand dollars ($12,500,000) in cash in one or more Controlled Accounts (subject to Section 8.21) maintained with one or more commercial banks or similar deposit-taking institutions in the U.S. that are free and clear of all Liens, other than Liens granted under the Loan Documents in favor of the Secured Parties.
10.02 Minimum Revenue. As of the last day of each fiscal quarter set forth below, the Parent and its Subsidiaries shall have received consolidated Revenue for the period of twelve (12) consecutive months ending on the last day of such fiscal quarter, determined on the basis of the financial statements most recently delivered pursuant to Sections 8.01(b) or 8.01(c), as applicable, in an aggregate amount not less than the corresponding amount set forth opposite such fiscal quarter:
| Fiscal Quarter Ending |
TTM Revenue | |||
| September 30, 2023 |
$ | 63.6 million | ||
| December 31, 2023 |
$ | 80.5 million | ||
| March 31, 2024 |
$ | 92.0 million | ||
| June 30, 2024 |
$ | 105.5 million | ||
| September 30, 2024 |
$ | 98.3 million | ||
| December 31, 2024 |
$ | 108.0 million | ||
| March 31, 2025 |
$ | 119.6 million | ||
| June 30, 2025 |
$ | 125.8 million | ||
| September 30, 2025 and Thereafter |
$ | 107.3 million | ||
SECTION 11
EVENTS OF DEFAULT
11.01 Events of Default. Each of the following events shall constitute an “Event of Default”:
(a) Principal or Interest Payment Default. The Borrower shall fail to pay any principal of or interest on the Loans, when and as the same shall become due and payable, whether at the due date thereof, at a date fixed for prepayment thereof or otherwise.
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(b) Other Payment Defaults. Any Obligor shall fail to pay any Obligation (other than an amount referred to in Section 11.01(a)) when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) Business Days.
(c) Representations and Warranties. Any representation or warranty made or deemed made by or on behalf of any Obligor or any of its Subsidiaries in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, shall: (i) prove to have been incorrect when made or deemed made to the extent that such representation or warranty contains any materiality or Material Adverse Effect qualifier; or (ii) prove to have been incorrect in any material respect when made or deemed made to the extent that such representation or warranty does not otherwise contain any materiality or Material Adverse Effect qualifier.
(d) Certain Covenants. Any Obligor shall fail to observe or perform any covenant, condition or agreement contained in Sections 8.01, 8.02, 8.03 (with respect to the Borrower’s existence), 8.11, 8.12, 8.13, 8.15, 8.17, 8.19, 8.20, 8.21, 8.22, Section 9 or Section 10.
(e) Other Covenants. Any Obligor shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 11.01(a), 11.01(b) or 11.01(d)) or any other Loan Document, and, in the case of any failure that is capable of cure, such failure shall continue unremedied for a period of thirty (30) or more days.
(f) Payment Default on Other Indebtedness. Any Obligor or any of its Subsidiaries shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness or other Indebtedness in an aggregate principal amount in excess of $1,000,000, when and as the same shall become due and payable after giving effect to any applicable grace or cure period as originally provided by the terms of such Indebtedness.
(g) Other Defaults on Other Indebtedness. (i) Any breach of, “default” or “event of default”, or similar event shall occur under, pursuant to or in connection with Material Indebtedness, or any other event or condition shall occur, that, in either case, shall (x) result in any Material Indebtedness becoming due prior to its scheduled maturity or (y) enable or permit (with or without the giving of notice, the lapse of time or both) the holder or holders or beneficiaries of any Material Indebtedness or any trustee or agent on its or their behalf to cause such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity (which shall include in any event the obligation to make any Change of Control Payment under and as defined in the RTW Royalty Financing Agreement or any similar obligation under, pursuant to or in connection with any other Material Indebtedness), or (ii) there occurs under any Hedging Agreement an early termination date (as defined in such Hedging Agreement) resulting from (x) any event of default under such Hedging Agreement as to which Parent or any of its Subsidiaries is the defaulting party (as defined in such Hedging Agreement) and such event of default shall continue unremedied, uncured or unwaived after the expiration of any cure period thereunder or (y) any
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termination event (as defined in such Hedging Agreement) under such Hedging Agreement as to which Parent or any Subsidiary is an affected party (as defined in such Hedging Agreement) and, in either event, the termination value (if determined in accordance with the Hedging Agreement) or the amount determined as the mark-to-market value (if the termination value has not been so determined) for such affected Hedging Agreement that is owed by Parent or such Subsidiary as a result thereof is greater than $1,000,000; provided that this clauses (i) and (ii) of this Section 11.01(g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Material Indebtedness so long as such Material Indebtedness is repaid in full substantially contemporaneously with such sale or transfer.
(h) Insolvency, Bankruptcy, Etc.
(i) An involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (x) liquidation, reorganization or other relief in respect of Parent or any of its Subsidiaries or its debts, or of a substantial part of its assets, under any Debtor Relief Law now or hereafter in effect or (y) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Parent or any of its Subsidiaries or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for a period of 60 or more days or an order or decree approving or ordering any of the foregoing shall be entered;
(ii) Parent or any of its Subsidiaries shall (w) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law now or hereafter in effect, (x) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) above, (y) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Parent or any of its Subsidiaries or for a substantial part of its assets, (z) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (aa) make a general assignment for the benefit of creditors or (bb) take any action for the purpose of effecting any of the foregoing; or
(iii) Parent or any of its Subsidiaries shall become unable, admit in writing its inability or fail generally to pay its debts as they become due.
(i) Judgments. One or more final judgments for the payment of money in an aggregate amount in excess of $1,000,000 (or the Equivalent Amount in other currencies) (in each case excluding any amounts covered by insurance as to which the applicable carrier has not denied coverage) shall be rendered against Parent or any of its Subsidiaries or any combination thereof and the same shall remain undismissed, unsatisfied or undischarged for a period of forty-five (45) calendar days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Obligor to enforce any such judgment.
(j) ERISA and Pension Plans. An ERISA Event shall have occurred that, in the opinion of the Agent, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Change.
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(k) Material Adverse Change, Etc. A Material Adverse Change, Material Adverse Effect or Material Regulatory Event shall have occurred.
(l) Change of Control. A Change of Control shall have occurred.
(m) Impairment of Security, Etc. If any of the following events occurs, and with respect to the following clause (i), other than as a result of the acts or omissions of the Agent or any Lender: (i) the Liens created by any of the Security Documents shall at any time not constitute a valid and perfected Lien on a material portion of the applicable Collateral in favor of the Secured Parties, free and clear of all other Liens (other than Permitted Liens), (ii) except for expiration in accordance with its terms or as a result of payment in full, any material portion of the Security Documents, taken as a whole, or of any material Guaranty of any of the Obligations (including that contained in Section 13) shall for whatever reason cease to be in full force and effect, or (iii) other than by reason of payment in full or permitted release in accordance with the terms of the Loan Documents, any Obligor shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability of any such Lien or any Loan Document, in each case subject to any limitations following from (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
11.02 Remedies. Upon the occurrence and during the continuance of any Event of Default, then, and in every such event (other than an Event of Default described in Section 11.01(h)), and at any time thereafter during the continuance of such event, the Agent may, by notice to the Borrower, declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other Obligations, shall become due and payable immediately (in the case of the Loans, at the Prepayment Price therefor), without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Obligor; and upon the occurrence of an Event of Default described in Section 11.01(h), the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other Obligations, shall automatically become due and payable immediately (in the case of the Loans, at the Prepayment Price therefor), without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Obligor.
11.03 Additional Remedies. Upon the occurrence and during the continuance of any Event of Default, if Parent or any of its Subsidiaries shall be in uncured default under a Material Agreement, the Agent or the Lenders shall have the right (but not the obligation) to cause the default or defaults under such Material Agreement to be remedied (including without limitation by paying any unpaid amount thereunder) and otherwise exercise any and all rights of Parent or such Subsidiary, as the case may be, thereunder, as may be necessary to prevent or cure any default. Without limiting the foregoing, upon any such default, Parent and each of its Subsidiaries shall promptly execute, acknowledge and deliver to the Agent such instruments as may reasonably be required of Parent or such Subsidiary to permit the Agent and the Lenders to cure any default under the applicable Material Agreement or permit the Agent and the Lenders to take such other action required to enable the Agent and the Lenders to cure or remedy the matter in default and preserve the interests of the Agent or Lenders. Any amounts paid by the Agent or Lenders pursuant to this Section 11.03 shall be payable on demand by Obligors, shall accrue interest at the Default Rate if not paid on demand, and shall constitute “Obligations.”
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SECTION 12
THE AGENT
12.01 Appointment and Duties. Subject in all cases to clause (c) below:
(a) Appointment of the Agent. Each of the Lenders hereby irrevocably appoints Fortress Credit Corp. (together with any successor the Agent pursuant to Section 12.09) as the administrative agent hereunder and authorizes the Agent to (i) execute and deliver the Loan Documents and accept delivery thereof on its behalf from Parent or any of its Subsidiaries, (ii) take such action on its behalf and to exercise all rights, powers and remedies and perform the duties as are expressly delegated to the Agent under such Loan Documents and (iii) exercise such powers as are reasonably incidental thereto.
(b) Duties as Collateral and Disbursing Agent. Without limiting the generality of Section 12.01(a), the Agent shall have the sole and exclusive right and authority (to the exclusion of the Lenders), and is hereby authorized, to (i) act as the disbursing and collecting agent for the Lenders with respect to all payments and collections arising in connection with the Loan Documents (including in any proceeding described in Section 11.01(h) or any other bankruptcy, insolvency or similar proceeding); provided that (i) the Agent shall only be required to act in such agency capacity if it has notified the Borrower and the Lenders in writing that it has elected to do so, and (ii) so long as the Agent has not delivered any such election notice it shall not be deemed to be acting as a disbursing and collecting agent for any other Lender or Secured Party and no Person (including any Withholding Agent) shall be authorized to make any payment to the Agent for such purpose, (ii) file and prove claims and file other documents necessary or desirable to allow the claims of the Secured Parties with respect to any Obligation in any proceeding described in Section 11.01(h), and each Person making any payment in connection with any Loan Document to any Secured Party is hereby authorized to make such payment to the Agent, (ii) file and prove claims and file other documents necessary or desirable to allow the claims of the Secured Parties with respect to any Obligation in any proceeding described in Section 11.01(h) or any other bankruptcy, insolvency or similar proceeding (but not to vote, consent or otherwise act on behalf of such Secured Party), (iii) act as collateral agent for each Secured Party for purposes of the perfection of all Liens created by such agreements and all other purposes stated therein, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such other action as is necessary or desirable to maintain the perfection and priority of the Liens created or purported to be created by the Loan Documents, (vi) except as may be otherwise specified in any Loan Document, exercise all remedies given to the Agent and the other Secured Parties with respect to the Collateral, whether under the Loan Documents, applicable Laws or otherwise and (vii) execute any amendment, consent or waiver under the Loan Documents on behalf of any Lender that has consented in writing to such amendment, consent or waiver; provided that the Agent hereby appoints, authorizes and directs each Lender to act as collateral sub-agent for the Agent and the Lenders for purposes of the perfection of all Liens with respect to the Collateral, including any deposit account maintained by any Obligor with, and cash and Permitted Cash Equivalent Investments held by, such Lender, and may further authorize and direct the Lenders to take further actions as collateral sub-agents for purposes of enforcing such Liens or otherwise to transfer the Collateral subject thereto to the Agent, and each Lender hereby agrees to take such further actions to the extent, and only to the extent, so authorized and directed.
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(c) Limited Duties. The Lenders and the Obligors hereby each acknowledge and agree that the Agent (i) has undertaken its role hereunder purely as an accommodation to the parties hereto and the Transactions, (ii) is receiving no compensation for undertaking such role and (iii) subject only to the notice provisions set forth in Section 12.09, may resign from such role at any time for any reason or no reason whatsoever. Without limiting the foregoing, the parties hereto further acknowledge and agree that under the Loan Documents, the Agent (i) is acting solely on behalf of the Lenders (except to the limited extent provided in Section 12.11), with duties that are entirely administrative in nature and do not (and are not intended to) create any fiduciary obligations, notwithstanding the use of the defined term “the Agent”, the terms “agent”, “administrative agent” and “collateral agent” and similar terms in any Loan Document to refer to the Agent, which terms are used for title purposes only, (ii) is not assuming any obligation under any Loan Document other than as expressly set forth therein or any role as agent, fiduciary or trustee of or for any Lender or any other Secured Party and (iii) shall have no implied functions, responsibilities, duties, obligations or other liabilities under any Loan Document (fiduciary or otherwise), and each Lender hereby waives and agrees not to assert any claim against the Agent based on the roles, duties and legal relationships expressly disclaimed in this clause (c).
12.02 Binding Effect. Each Lender agrees that (i) any action taken by the Agent or the Majority Lenders (or, if expressly required hereby, a greater proportion of the Lenders) in accordance with the provisions of the Loan Documents, (ii) any action taken by the Agent in reliance upon the instructions of the Majority Lenders (or, where so required, such greater proportion) and (iii) the exercise by the Agent or the Majority Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Secured Parties.
12.03 Use of Discretion.
(a) No Action without Instructions. The Agent shall not be required to exercise any discretion or take, or to omit to take, any action, including with respect to enforcement or collection, except (subject to clause (b) below) any action it is required to take or omit to take (i) under any Loan Document or (ii) pursuant to instructions from the Majority Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders).
(b) Right Not to Follow Certain Instructions. Notwithstanding Section 12.03(a) or any other term or provision of this Section 12, the Agent shall not be required to take, or to omit to take, any action (i) unless, upon demand, the Agent receives an indemnification satisfactory to it from the Lenders (or, to the extent applicable and acceptable to the Agent, any other Secured Party) against all liabilities that, by reason of such action or omission, may be imposed on, incurred by or asserted against the Agent or any Related Parties thereof or (ii) that is, in the opinion of the Agent, in its sole and absolute discretion, contrary to any Loan Document, applicable Law or the best interests of the Agent or any of its Affiliates or Related Parties.
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12.04 Delegation of Rights and Duties. The Agent may, upon any term or condition it specifies, delegate or exercise any of its rights, powers and remedies under, and delegate or perform any of its duties or any other action with respect to, any Loan Document by or through any trustee, co-agent, employee, attorney-in-fact and any other Person (including any Secured Party). Any such Person shall benefit from this Section 12 to the extent provided by the Agent.
12.05 Reliance and Liability.
(a) The Agent may, without incurring any liability hereunder, (i) consult with any of its Related Parties and, whether or not selected by it, any other advisors, accountants and other experts (including advisors to, and accountants and experts engaged by, any Obligor) and (ii) rely and act upon any document and information and any telephone message or conversation, in each case believed by it to be genuine and transmitted, signed or otherwise authenticated by the appropriate parties.
(b) Neither the Agent nor any of its Related Parties shall be liable for any action taken or omitted to be taken by any of them under or in connection with any Loan Document, and each Lender hereby waives and shall not assert any right, claim or cause of action based thereon, except to the extent of liabilities resulting primarily from the fraudulent conduct or behavior of the Agent or, as the case may be, such Related Party (each as determined in a final, non-appealable judgment or order by a court of competent jurisdiction) in connection with the duties expressly set forth herein. Without limiting the foregoing, the Agent:
(i) shall not be responsible or otherwise incur liability for any action or omission taken in reliance upon the instructions of the Majority Lenders or for the actions or omissions of any of their Related Parties selected with reasonable care (other than employees, officers and directors of the Agent, when acting on behalf of the Agent);
(ii) shall not be responsible to any Secured Party for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, any Loan Document;
(iii) makes no warranty or representation, and shall not be responsible, to any Secured Party for any statement, document, information, representation or warranty made or furnished by or on behalf of any Related Party, in or in connection with any Loan Document or any transaction contemplated therein, whether or not transmitted by the Agent, including as to completeness, accuracy, scope or adequacy thereof, or for the scope, nature or results of any due diligence performed by the Agent in connection with the Loan Documents; and
(iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any provision of any Loan Document, whether any condition set forth in any Loan Document is satisfied or waived, as to the financial condition of any Obligor or as to the existence or continuation or possible occurrence or continuation of any Default or Event of Default and shall not be deemed to have notice or knowledge of such occurrence or continuation unless it has received a notice from Parent, any Lender describing such Default or Event of Default clearly labeled “notice of default” (in which case the Agent shall promptly give notice of such receipt to all Lenders);
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and, for each of the items set forth in clauses (i) through (iv) above, each Lender hereby waives and agrees not to assert any right, claim or cause of action it might have against the Agent based thereon.
12.06 Agent Individually. The Agent and its Affiliates may make loans and other extensions of credit to, acquire stock and stock equivalents of, engage in any kind of business with, any Obligor or Affiliate thereof as though it were not acting as the Agent and may receive separate fees and other payments therefor. To the extent the Agent or any of its Affiliates makes any Loan or otherwise becomes a Lender hereunder, it shall have and may exercise the same rights and powers hereunder and shall be subject to the same obligations and liabilities as any other Lender and the terms “Lender”, “Majority Lender”, and any similar terms shall, except where otherwise expressly provided in any Loan Document, include, without limitation, the Agent or such Affiliate, as the case may be, in its individual capacity as Lender or as one of the Majority Lenders, respectively.
12.07 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, any Lender or any of their Related Parties or upon any document solely or in part because such document was transmitted by the Agent or any of its Related Parties, conducted its own independent investigation of the financial condition and affairs of each Obligor and has made and continues to make its own credit decisions in connection with entering into, and taking or not taking any action under, any Loan Document or with respect to any transaction contemplated in any Loan Document, in each case based on such documents and information as it shall deem appropriate.
12.08 Expenses; Indemnities.
(a) Each Lender agrees to reimburse the Agent and each of its Related Parties (to the extent not reimbursed by any Obligor) promptly upon demand for such Lender’s Proportionate Share of any costs and expenses (including fees, charges and disbursements of financial, legal and other advisors and Other Taxes paid in the name of, or on behalf of, any Obligor) that may be incurred by the Agent or any of its Related Parties in connection with the preparation, syndication, execution, delivery, administration, modification, consent, waiver or enforcement (whether through negotiations, through any work-out, bankruptcy, restructuring or other legal or other proceeding or otherwise) of, or legal advice in respect of its rights or responsibilities under, any Loan Document.
(b) Each Lender further agrees to indemnify the Agent and each of its Related Parties (to the extent not reimbursed by any Obligor), from and against such Lender’s aggregate Proportionate Share of the liabilities (including taxes, interests and penalties imposed for not properly withholding or backup withholding on payments made to on or for the account of any Lender) that may be imposed on, incurred by or asserted against the Agent or any of its Related Parties in any matter relating to or arising out of, in connection with or as a result of any Loan Document or any other act, event or transaction related, contemplated in or attendant to any such
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Loan Document, or, in each case, any action taken or omitted to be taken by the Agent or any of its Related Parties under or with respect to any of the foregoing; provided that no Lender shall be liable to the Agent or any of its Related Parties to the extent such liability has resulted primarily from the gross negligence or willful misconduct of the Agent or, as the case may be, such Related Party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.
12.09 Resignation of the Agent.
(a) At any time upon not less than thirty (30) Business Days prior written notice, the Agent may resign as the “the Agent” hereunder, in whole or in part (in the sole and absolute discretion of the Agent), effective on the date set forth in such notice, which effective date shall not be less than thirty (30) (or more than sixty (60)) days following delivery of such notice. If the Agent delivers any such notice, the Majority Lenders shall have the right to appoint a successor to the Agent; provided that if a successor to the Agent has not been appointed on or before the effectiveness of the resignation of the resigning Agent, then the resigning Agent may, on behalf of the Lenders, appoint any Person reasonably chosen by it as the successor to the Agent.
(b) Effective immediately upon its resignation, (i) the resigning Agent shall be discharged from its duties and obligations under the Loan Documents to the extent set forth in the applicable resignation notice, (ii) the Lenders shall assume and perform all of the duties of the Agent until a successor the Agent shall have accepted a valid appointment hereunder, (iii) the resigning Agent and its Related Parties shall no longer have the benefit of any provision of any Loan Document other than with respect to (x) any actions taken or omitted to be taken while such resigning Agent was, or because the Agent had been, validly acting as the Agent under the Loan Documents or (y) any continuing duties such resigning Agent continues to perform, and (iv) subject to its rights under Section 12.04, the resigning Agent shall take such action as may be reasonably necessary to assign to the successor the Agent its rights as the Agent under the Loan Documents. Effective immediately upon its acceptance of a valid appointment as the Agent, a successor the Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the resigning Agent under the Loan Documents.
12.10 Release of Collateral or Guarantors. Each Lender hereby consents to the release and hereby directs the Agent to release the following:
(a) any Subsidiary of Parent from its guaranty of any Obligation of any Obligor if all of the Equity Interests in such Subsidiary owned by any Obligor or any of its Subsidiaries are disposed of in an Asset Sale permitted under the Loan Documents (including pursuant to a waiver or consent), to the extent that, after giving effect to such Asset Sale, such Subsidiary would not be required to guaranty any Obligations pursuant to Section 8.12(a); and
(b) any Lien held by the Agent for the benefit of the Secured Parties against (i) any Collateral that is disposed of by an Obligor in an Asset Sale permitted by the Loan Documents (including pursuant to a valid waiver or consent), and (ii) all of the Collateral and all Obligors, upon (w) termination of the Commitments, (x) payment and satisfaction in full of all Loans and all other Obligations (other than inchoate indemnification and expense reimbursement
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obligations for which no Claim has been made) that the Agent has been notified in writing are then due and payable, (y) deposit of cash collateral with respect to all contingent Obligations (other than inchoate indemnification and expense reimbursement obligations for which no Claim has been made), in amounts and on terms and conditions and with parties satisfactory to the Agent and each Indemnified Party that is owed such Obligations, and (z) to the extent requested by the Agent, receipt by the Secured Parties of liability releases from the Obligors, each in form and substance acceptable to the Agent.
Each Lender hereby directs the Agent, and the Agent hereby agrees, upon receipt of reasonable advance notice from Parent, to execute and deliver or file such documents and to perform other actions reasonably necessary to release the Guaranties and Liens when and as directed in this Section 12.10.
12.11 Additional Secured Parties. The benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any Secured Party that is not a Lender so long as, by accepting such benefits, such Secured Party agrees, as among the Agent and all other Secured Parties, that such Secured Party is bound by (and, if requested by the Agent, shall confirm such agreement in a writing in form and substance acceptable to the Agent) this Section 12 and the decisions and actions of the Agent and the Majority Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders) to the same extent a Lender is bound; provided that, notwithstanding the foregoing, (i) such Secured Party shall be bound by Section 12.08 only to the extent of liabilities, costs and expenses with respect to or otherwise relating to the Collateral held for the benefit of such Secured Party, in which case the obligations of such Secured Party thereunder shall not be limited by any concept of Proportionate Share or similar concept, (ii) each of the Agent and each Lender shall be entitled to act at its sole discretion, without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any such Obligation and (iii) such Secured Party shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document.
SECTION 13
GUARANTEE
13.01 The Guarantee. Parent and the Subsidiary Guarantors hereby jointly and severally guarantee to the Agent and the Lenders, and their successors and assigns, the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans, all fees and other amounts and Obligations from time to time owing to the Agent and the Lenders by the Borrower and each other Obligor under this Agreement or under any other Loan Document, in each case strictly in accordance with the terms hereof and thereof (such obligations being herein collectively called the “Guaranteed Obligations”). Parent and the Subsidiary Guarantors hereby further jointly and severally (i) agree that if the Borrower or any other Obligor shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, Parent and the Subsidiary Guarantors shall promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same shall be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal; and (ii) agree that if an Ipso Facto Event is continuing, then the Parent and the Subsidiary Guarantors shall promptly on demand from the Agent or a Lender pay the Guaranteed Obligations.
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In this Section, “Ipso Facto Event” means a Subsidiary Guarantor incorporated in Australia is the subject of (i) an announcement, application, compromise, arrangement, managing controller, or administration as described in section 415D(1), 434J(1) or 451E(1) of the Corporations Act 2001 (Cth); or (ii) any process which under any law with a similar purpose may give rise to a stay on, or prevention of, the exercise of contractual rights.
13.02 Obligations Unconditional. The obligations of Parent and the Subsidiary Guarantors under Section 13.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of Parent, the Borrower or any other Subsidiary Guarantor under this Agreement or any other agreement or instrument referred to herein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by all applicable Laws, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 13.02 that the obligations of Parent and the Subsidiary Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of Parent and the Subsidiary Guarantors hereunder, which shall remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to Parent and the Subsidiary Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein shall be done or omitted;
(c) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or
(d) any lien or security interest granted to, or in favor of, the Secured Parties as security for any of the Guaranteed Obligations shall fail to be perfected.
Parent and the Subsidiary Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or any Lender exhaust any right, power or remedy or proceed against Parent, the Borrower or any other Subsidiary Guarantor under this Agreement or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations.
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13.03 Reinstatement. The obligations of Parent and the Subsidiary Guarantors under this Section 13 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.
13.04 Subrogation. Parent and the Subsidiary Guarantors hereby jointly and severally agree that, until the payment and satisfaction in full of all Guaranteed Obligations (other than inchoate indemnification and expense reimbursement obligations for which no Claim has been made) and the expiration and termination of the Commitments, but subject to the reinstatement provisions set forth in Section 13.03, they shall not exercise any right or remedy arising by reason of any performance by them of their guarantee in Section 13.01, whether by subrogation or otherwise, against the Borrower or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.
13.05 Remedies. Parent and the Subsidiary Guarantors jointly and severally agree that, as between Parent and the Subsidiary Guarantors, on one hand, and the Agent and the Lenders, on the other hand, the obligations of the Borrower under this Agreement and under the other Loan Documents may be declared to be forthwith due and payable as provided in Section 11 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 11) for purposes of Section 13.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by Parent and the Subsidiary Guarantors for purposes of Section 13.01.
13.06 Instrument for the Payment of Money. Each Subsidiary Guarantor and Parent hereby acknowledges that the guarantee in this Section 13 constitutes an instrument for the payment of money, and consents and agrees that the Agent and the Lenders, at their sole option, in the event of a dispute by such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the right to proceed by motion for summary judgment in lieu of complaint pursuant to N.Y. Civ. Prac. L&R § 3213.
13.07 Continuing Guarantee. The guarantee in this Section 13 is a continuing guarantee, and shall apply to all Guaranteed Obligations (other than inchoate indemnification and expense reimbursement obligations for which no Claim has been made) whenever arising.
13.08 General Limitation on Guarantee Obligations. In any action or proceeding involving any provincial, territorial or state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor or Parent under Section 13.01 would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 13.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Subsidiary Guarantor, Parent, the Agent, any Lender or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.
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SECTION 14
MISCELLANEOUS
14.01 No Waiver. No failure on the part of the Agent or the Lenders to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.
14.02 Notices. All notices, requests, instructions, directions and other communications provided for herein (including any modifications of, or waivers, requests or consents under, this Agreement) or in the other Loan Documents shall be given or made in writing (including by telecopy or email) delivered, if to Parent, the Borrower, another Obligor, the Agent or any Lender, to its address specified on the signature pages hereto or its Guaranty Assumption Agreement, as the case may be, or at such other address as shall be designated by such party in a written notice to the other parties. Except as otherwise provided in this Agreement or therein, all such communications shall be deemed to have been duly given upon receipt of a legible copy thereof, in each case given or addressed as aforesaid. All such communications provided for herein by telecopy shall be confirmed in writing promptly after the delivery of such communication (it being understood that non-receipt of written confirmation of such communication shall not invalidate such communication). Notwithstanding anything to the contrary in this Agreement or any other Loan Document, notices, documents, certificates and other deliverables to the Lenders by any Obligor may be made solely to the Agent and the Agent shall promptly deliver such notices, documents, certificates and other deliverables to the Lenders.
14.03 Expenses, Indemnification, Etc.
(a) Expenses. Each Obligor, jointly and severally, agrees to pay or reimburse (i) the Agent and the Lenders for all of their reasonable and documented (in reasonable detail) out-of-pocket costs and expenses limited to, in the case of legal counsel, the reasonable and documented (in reasonable detail) charges and disbursements of Morrison & Foerster LLP, lead counsel for the Agent and the Lenders, and one additional local outside counsel in each material jurisdiction or discipline in each case for the Agent and the Lenders in connection with (x) the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents and the making of the Loans (exclusive of post-closing costs), and (y) any such costs or expenses incurred after the Closing Date, including any costs or expenses relating to the negotiation or preparation of any modification, supplement, forbearance, consent or waiver of any of the terms of this Agreement or any of the other Loan Documents (whether or not consummated); and (ii) the Agent and the Lenders for all of their reasonable and documented out-of-pocket costs and expenses (including the out-of-pocket fees and expenses of legal counsel, but limited to, in the
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case of legal counsel, the reasonable and documented (in reasonable detail) charges and disbursements of one lead counsel for the Agent and all Lenders, together, and one additional local outside counsel in each material jurisdiction or discipline in each case for the Agent and all Lenders together and, in the case of actual conflict of interest, one additional such set of applicable counsel)) in connection with any enforcement or collection proceedings resulting from the occurrence of an Event of Default.
(b) Exculpation, Indemnification, etc.
(i) In no event shall any party hereto, any successor, transferee or assignee of any party hereto, or any of their respective Affiliates, directors, officers, employees, attorneys, agents, advisors or controlling parties (each, an “Exculpated Party”) have any obligation or responsibility for (and the Obligors jointly and severally waive any claims they may have in respect of) any Loss, on any theory of liability, for consequential, indirect, special or punitive damages arising out of or otherwise relating to this Agreement or any of the other Loan Documents or any of the Transactions or the actual or proposed use of the proceeds of the Loans; provided that, nothing in this clause (i) shall relieve any Obligor of any obligation such Obligor may have to indemnify an Indemnified Person, as provided in clause (ii) below, against any special, indirect, consequential or punitive damages asserted against such Indemnified Person by a third party. Each party hereto agrees, to the fullest extent permitted by applicable Law, that it will not assert, directly or indirectly, any Claim against any Exculpated Party with respect to any of the foregoing.
(ii) Each Obligor, jointly and severally, hereby indemnifies the Agent, each Lender, each of their respective successors, transferees and assigns and each of their respective Affiliates, directors, officers, employees, attorneys, agents, advisors and controlling parties (each, an “Indemnified Party”) from and against, and agrees to hold them harmless against, any and all Claims and Losses of any kind (limited to, in the case of legal counsel, the reasonable and documented (in reasonable detail) charges and disbursements of one lead counsel for all Indemnified Parties, together, and one additional local outside counsel in each material jurisdiction or discipline in each case for the Indemnified Parties together and, in the case of actual conflict of interest, one additional such set of applicable counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to any investigation, litigation or proceeding (each, a “Proceeding”) or the preparation of any defense with respect thereto arising out of or in connection with or relating to this Agreement or any of the other Loan Documents or the Transactions or any use made or proposed to be made with the proceeds of the Loans, whether or not such Proceeding is brought by any Obligor, any of its Subsidiaries, any of its shareholders or creditors, an Indemnified Party or any other Person, or an Indemnified Party is otherwise a party thereto, and whether or not any of the conditions precedent set forth in Section 6 are satisfied or the other transactions contemplated by this Agreement are consummated, except to the extent such Claim or Loss is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. This Section 14.03(b) shall not apply with respect to Taxes other than any Taxes that represent Losses arising from any non-Tax Claim.
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(c) No Obligor shall be liable for any settlement of any Proceeding if the amount of such settlement was effected without such Obligor’s consent (which consent shall not be unreasonably withheld, conditioned or delayed), but if settled with such Obligor’s written consent or if there is a final judgment for the plaintiff in any such Proceeding, each Obligor agrees to, jointly and severally, indemnify and hold harmless each Indemnified Person from and against any and all Loss and related expenses by reason of such settlement or judgment in accordance with the terms of clause (ii) above. No Obligor shall, without the prior written consent of the Agent (which consent shall not be unreasonably withheld, conditioned or delayed), effect any settlement of any pending or threatened Proceedings in respect of which indemnity could have been sought hereunder by any Indemnified Person unless such settlement (x) includes an unconditional release of such Indemnified Person in form and substance reasonably satisfactory to the Agent from all liability on Claims that are the subject matter of such Proceedings and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person or any injunctive relief or other non-monetary remedy. Each Obligor acknowledges that any failure to comply with the obligations under the preceding sentence may cause irreparable harm to the Agent and the other Indemnified Persons.
14.04 Amendments, Etc. Except as otherwise expressly provided in this Agreement, any provision of this Agreement and any other Loan Document may be modified or supplemented only by an instrument in writing signed by Parent, the Borrower, the Agent and the Majority Lenders; provided that:
(a) any such modification or supplement that is disproportionately adverse to any Lender as compared to other Lenders or subjects any Lender to any additional obligation shall not be effective without the consent of such affected Lender;
(b) the consent of all of the Lenders directly affected thereby shall be required to:
(i) amend, modify, discharge, terminate or waive any of the terms of this Agreement or any other Loan Document if such amendment, modification, discharge, termination or waiver would increase the amount of the Loans or any Commitment of any Lender, reduce the fees payable to any Lender hereunder, reduce interest rates or other amounts payable with respect to the Loans held by any Lender, extend any date fixed for payment of principal, interest or other amounts payable relating to the Loans held by any Lender or extend the repayment dates of the Loans held by any Lender;
(ii) amend, modify, discharge, terminate or waive any Security Document if the effect is to release a material part of the Collateral subject thereto other than pursuant to the terms hereof or thereof; or
(iii) amend this Section 14.04 or the definition of “Majority Lenders”; and
(c) if the Agent and the Borrower shall have jointly identified an obvious error or any error or omission of a technical nature, in each case, in any provision of the Loan Documents, then the Agent and the Borrower shall be permitted to amend such provision, and, in each case, such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Majority Lenders to the Agent within ten (10) Business Days following receipt of notice thereof.
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14.05 Successors and Assigns.
(a) General. The provisions of this Agreement and the other Loan Documents shall be binding upon and shall inure to the benefit of the parties hereto or thereto and their respective successors and assigns permitted hereby or thereby, except that no Obligor may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Agent. Any Lender may assign or otherwise transfer any of its rights or obligations hereunder or under any of the other Loan Documents (i) to an assignee in accordance with the provisions of Section 14.05(b), (ii) by way of participation in accordance with the provisions of Section 14.05(e), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 14.05(h). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 14.05(e) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) Assignments by Lender. Any Lender may at any time assign to one or more Eligible Transferees (other than a Disqualified Institution unless an Event of Default under Section 11.01(a) or (h) has occurred and is continuing) all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it) and the other Loan Documents; provided that (i) no such assignment shall be made to any Obligor, any Affiliate of any Obligor, or any employees or directors of any Obligor at any time, and (ii) no such assignment shall be made without the prior written consent of the Agent. Subject to the recording thereof by the Lender pursuant to Section 14.05(d), from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of the Lender under this Agreement and the other Loan Documents, and correspondingly the assigning Lender shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) and the other Loan Documents but shall continue to be entitled to the benefits of Section 5 and Section 14.03. Any assignment or transfer by the Lender of rights or obligations under this Agreement that does not comply with this Section 14.05(b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 14.05(e).
(c) Amendments to Loan Documents. Each of the Agent, the Lenders, Parent, and its Subsidiaries agrees to enter into such amendments to the Loan Documents, and such additional Security Documents and other instruments and agreements, in each case in form and substance reasonably acceptable to the Agent, the Lenders, Parent, and its Subsidiaries, as shall reasonably be necessary to implement and give effect to any assignment made under this Section 14.05.
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(d) Register. The Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices in the United States a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest or demonstrable error, and Parent, the Borrower, the Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Parent, the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(e) Participations. Any Lender may at any time, without the consent of, or notice to, Parent or the Borrower, sell participations to any Eligible Transferee (other than to a Disqualified Institution unless an Event of Default under Section 11.01(a) or (h) has occurred and is continuing) (each, a “Participant”) in all or a portion of the Lender’s rights and/or obligations under this Agreement (including all or a portion of the Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Parent and the Borrower shall continue to deal solely and directly with such Lender in connection therewith. Any agreement or instrument pursuant to which any Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender shall not, without the consent of the Participant, agree to any amendment, modification or waiver that would (i) increase or extend the term of such Lender’s Commitment, (ii) extend the date fixed for the payment of principal of or interest on the Loans or any portion of any fee hereunder payable to the Participant, (iii) reduce the amount of any such payment of principal, or (iv) reduce the rate at which interest is payable thereon to a level below the rate at which the Participant is entitled to receive such interest. Subject to Section 14.05(f), Parent and the Borrower agree that each Participant shall be entitled to the benefits of Section 5 (subject to the requirements and limitations therein including the requirements under Section 5.03(f) (it being understood that the documentation required under Section 5.03(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 14.05(b); provided that such Participant agrees to be subject to the provisions of Section 5.04 as if it were an assignee under Section 14.05(b) above. To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 4.03(a) as though it were a Lender.
(f) Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Sections 5.01 or 5.03 with respect to any participation than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a change in Law that occurs after the Participant acquired the applicable participation.
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(g) Participant Register. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the 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 Loans or other Obligations under the Loan Documents (the “Participant Register”); 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, or its other Obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan, or other Obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest or demonstrable error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.
(h) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under the Loan Documents to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided 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.
14.06 Survival. The obligations of the Obligors under Sections 5.01, 5.02, 5.03, 14.03, 14.05, 14.06, 14.09, 14.10, 14.11, 14.12, 14.13, 14.14 and the obligations of the Subsidiary Guarantors under Section 13 (solely to the extent guaranteeing any of the obligations under the foregoing Sections) shall survive the repayment of the Obligations and the termination of the Commitment and, in the case of the Lenders’ assignment of any interest in the Commitment or the Loans hereunder, shall survive, in the case of any event or circumstance that occurred prior to the effective date of such assignment, the making of such assignment, notwithstanding that the Lenders may cease to be “Lenders” hereunder. In addition, each representation and warranty made, or deemed to be made by a Borrowing Notice, herein or pursuant hereto shall survive the making of such representation and warranty.
14.07 Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.
14.08 Counterparts; Electronic Signatures. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of an executed signature page of this Agreement by facsimile transmission or electronic transmission (in PDF format) shall be effective as delivery of a manually executed counterpart hereof. Any signature (including, without limitation, (x) any electronic symbol or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record and (y) any facsimile or .pdf signature) hereto or the other Loan Documents or to any other certificate, agreement or document related to any Loan Document or the Transactions, and any contract formation or record-keeping, in each case, through electronic means, shall have the same legal validity and enforceability as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any similar state law based on the Uniform Electronic Transactions Act, and the parties hereto hereby waive any objection to the contrary.
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14.09 Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by, and construed in accordance with, the law of the State of New York, without regard to principles of conflicts of laws that would result in the application of the laws of any other jurisdiction; provided that Section 5-1401 and 5-1402 of the New York General Obligations Law shall apply.
14.10 Jurisdiction, Service of Process and Venue.
(a) Submission to Jurisdiction. Each Obligor agrees that any suit, action or proceeding with respect to this Agreement or any other Loan Document to which it is a party or any judgment entered by any court in respect thereof may be brought initially in the federal or state courts in New York, New York and irrevocably submits to the non-exclusive jurisdiction of each such court for the purpose of any such suit, action, proceeding or judgment. This Section 14.10(a) is for the benefit of the Agent and the Lenders only and, as a result, no Lender shall be prevented from taking proceedings in any other courts with jurisdiction. To the extent allowed by any applicable Law, the Lenders may take concurrent proceedings in any number of jurisdictions.
(b) Alternative Process. Nothing herein shall in any way be deemed to limit the ability of the Agent and the Lenders to serve any process or summons in any manner permitted by any applicable Law.
(c) Waiver of Venue, Etc. Each Obligor irrevocably waives to the fullest extent permitted by law any objection that it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document and hereby further irrevocably waives to the fullest extent permitted by law any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. A final judgment (in respect of which time for all appeals has elapsed) in any such suit, action or proceeding shall be conclusive and may be enforced in any court to the jurisdiction of which such Obligor is or may be subject, by suit upon judgment.
14.11 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
14.12 Waiver of Immunity. To the extent that any Obligor may be or become entitled to claim for itself or its property or revenues any immunity on the ground of sovereignty or the like from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment or execution of a judgment, and to the extent that in any such jurisdiction there may be attributed such an immunity (whether or not claimed), such Obligor hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity with respect to its obligations under this Agreement and the other Loan Documents.
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14.13 Entire Agreement. This Agreement and the other Loan Documents constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof, including any confidentiality (or similar) agreements. EACH OBLIGOR ACKNOWLEDGES, REPRESENTS AND WARRANTS THAT IN DECIDING TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR IN TAKING OR NOT TAKING ANY ACTION HEREUNDER OR THEREUNDER, IT HAS NOT RELIED, AND SHALL NOT RELY, ON ANY STATEMENT, REPRESENTATION, WARRANTY, COVENANT, AGREEMENT OR UNDERSTANDING, WHETHER WRITTEN OR ORAL, OF OR WITH THE AGENT OR THE LENDERS OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
14.14 Severability. If any provision hereof is found by a court to be invalid or unenforceable, to the fullest extent permitted by any applicable Law the parties agree that such invalidity or unenforceability shall not impair the validity or enforceability of any other provision hereof..
14.15 Confidentiality. The Agent and each Lender agree to keep confidential all information provided to them by or on behalf of any Obligor or Subsidiary pursuant to this Agreement relating to any Obligor or Subsidiary that has not been made publicly available on “EDGAR” or is not otherwise available to the Agent or any Lender on a nonconfidential basis prior disclosure; provided that, in the case of information received from or on behalf of any Obligor or Subsidiary after the Closing Date, such information is clearly designated by such Obligor or Subsidiary as confidential in accordance with reasonable and customary procedures for handling its own confidential information; provided that nothing herein shall prevent the Agent or any Lender from disclosing any such information (i) to the Agent, any other Lender or, subject to an agreement to comply with the provisions of this Section 14.15, any Affiliate of a Lender or any Eligible Transferee or other assignee permitted under Section 14.05(b) in connection with an actual or bona fide prospective assignment permitted under Section 14.05, (ii) subject to an agreement to comply with the provisions of this Section and the request of the Borrower, to any actual or prospective direct or indirect counterparty to any Hedging Agreement (or any professional advisor to such counterparty), (iii) to its employees, officers, directors, agents, attorneys, accountants, trustees and other professional advisors or those of any of its affiliates (collectively, its “Related Parties”) subject to an agreement to comply with the provisions of this Section 14.15 or other customary professional confidentiality obligations, (iv) upon the request or demand of any Governmental Authority or any Regulatory Authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any applicable Law; provided, however, that to the extent legally permissible, such party shall give the Borrower prompt written notice of such requirement and shall reasonably cooperate (at Borrower’s sole cost) with Borrower’s attempts to limit any such disclosure, (vi) if required to do so in connection with any litigation or similar proceeding, (vii) that has been publicly disclosed (other than as a result of a disclosure in violation of this Section 14.15), (viii) to the National Association of Insurance Commissioners or any similar organization or any nationally
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recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender, (ix) in connection with the exercise of any remedy permitted hereunder or under any other Loan Document, (x) on a confidential basis to (A) any rating agency in connection with rating Parent or any of its Subsidiaries or the Loans or (B) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers of other market identifiers with respect to the Loans or (xi) to any other party hereto; provided, further that, unless specifically prohibited by applicable law or court order, each Lender shall, to the extent reasonably practicably, notify Parent and the Borrower of any request or demand by any Governmental Authority or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by such Governmental Authority) for disclosure of any such non-public information prior to disclosure of such information and shall reasonably cooperate (at the Borrower’s sole cost) with the Borrower’s efforts to limit any such disclosure.
14.16 No Fiduciary Relationship. The Borrower acknowledges that the Agent and the Lenders have no fiduciary relationship with, or fiduciary duty to, the Borrower arising out of or in connection with this Agreement or the other Loan Documents, and the relationship between the Lenders and the Borrower is solely that of creditor and debtor. This Agreement and the other Loan Documents do not create a joint venture among the parties.
14.17 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable Law (collectively, “charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Agent and the Lender holding such Loan in accordance with applicable Law, the rate of interest payable in respect of such Loan hereunder, together with all charges payable in respect thereof, shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated and the interest and charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate for each day to the date of repayment, shall have been received by such Lender. Any amount collected by such Lender that exceeds the maximum amount collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan so that at no time shall the interest and charges paid or payable in respect of such Loan exceed the maximum amount collectible at the Maximum Rate.
14.18 Early Prepayment Fee; Exit Fee. If the Loans are accelerated or otherwise become due prior to their maturity date, in each case, as a result of an Event of Default (including upon the occurrence of a Insolvency Proceeding (including the acceleration of claims by operation of Law)), the amount of principal of and premium on the Loans that becomes due and payable shall equal 100% of the principal amount of the Loans plus the Early Prepayment Fee and Exit Fee in effect on the date of such acceleration or such other prior due date, as if such acceleration or other occurrence were a voluntary prepayment of the Loans accelerated or otherwise becoming due. Without limiting the generality of the foregoing, it is understood and agreed that if the Loans are accelerated or otherwise become due prior to the Maturity Date, in each case, in
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respect of any Event of Default (including upon the occurrence of a Insolvency Proceeding (including the acceleration of claims by operation of Law)), the Early Prepayment Fee and Exit Fee applicable with respect to a voluntary prepayment of the Loans will also be due and payable on the date of such acceleration or such other prior due date as though the Loans were voluntarily prepaid as of such date and shall constitute part of the Obligations, in view of the impracticability and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of each Lender’s loss as a result thereof. Any such premium payable above shall be presumed to be the liquidated damages sustained by each Lender and Parent and the Borrower agrees that it is reasonable under the circumstances currently existing. PARENT AND THE BORROWER EXPRESSLY WAIVES (TO THE FULLEST EXTENT IT MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE EARLY PREPAYMENT FEE AND EXIT FEE IN CONNECTION WITH ANY SUCH ACCELERATION. Parent and the Borrower expressly agree (to the fullest extent it may effectively do so) that: (i) the Early Prepayment Fee and Exit Fee is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (ii) the Early Prepayment Fee and Exit Fee shall be payable notwithstanding the then prevailing market rates at the time payment is made; (iii) there has been a course of conduct between the Lenders, Parent and the Borrower giving specific consideration in this transaction for such agreement to pay the Early Prepayment Fee and Exit Fee; and (iv) Parent and the Borrower shall be estopped hereafter from claiming differently than as agreed to in this paragraph.
14.19 Judgment Currency.
(a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent permitted by Law, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Agent could purchase Dollars with such other currency at the buying spot rate of exchange in the New York foreign exchange market on the Business Day immediately preceding that on which any such judgment, or any relevant part thereof, is given.
(b) The obligations of the Obligors in respect of any sum due to the Agent hereunder and under the other Loan Documents shall, notwithstanding any judgment in a currency other than Dollars, be discharged only to the extent that on the Business Day following receipt by the Agent of any sum adjudged to be so due in such other currency the Agent may, in accordance with normal banking procedures, purchase Dollars with such other currency. If the amount of Dollars so purchased is less than the sum originally due to the Agent in Dollars, Parent and the Borrower agree, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent against such loss. If the amount of Dollars so purchased exceeds the sum originally due to the Agent in Dollars, the Agent shall remit such excess to Parent and the Borrower.
14.20 USA PATRIOT Act. The Agent and the Lenders hereby notify Parent and its Subsidiaries that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”) and the Beneficial Ownership Regulation, they are required to obtain, verify and record information that identifies Parent and its Subsidiaries, which information includes the name and address of Parent and its Subsidiaries and other information that will allow such Person to identify Parent or such Subsidiary in accordance with the Patriot Act and the Beneficial Ownership Regulation.
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14.21 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
| BORROWER: | ||
| ALLURION TECHNOLOGIES, LLC | ||
| By |
/s/ Shantanu Gaur | |
| Name: Shantanu Gaur | ||
| Title: Chief Executive Officer | ||
| PARENT: | ||
| ALLURION TECHNOLOGIES, INC. | ||
| By |
/s/ Shantanu Gaur | |
| Name: Shantanu Gaur | ||
| Title: Chief Executive Officer | ||
| Address for Notices: | ||
| Allurion Technologies Inc. | ||
| 11 Huron Drive | ||
| Suite 200 | ||
| Natick, MA 01760 | ||
| Attn: Chris Geberth, Shantanu Gaur | ||
| Tel.: (508) 762-1665 | ||
| Fax: (508) 258-3509 | ||
| Email: cgeberth@allurion.com; | ||
| sgaur@allurion.com | ||
| With a copy to: | ||
| Goodwin Procter LLP | ||
| 520 Broadway | ||
| Suite 500 | ||
| Santa Monica, CA 90401 | ||
| Attn: Kris Ring | ||
| Tel.: (424) 252-6364 | ||
| Email: kring@goodwinlaw.com | ||
[SIGNATURE PAGE TO CREDIT AGREEMENT AND GUARANTY]
SUBSIDIARY GUARANTORS:
| EXECUTED by ALLURION | ) | |||
| AUSTRALIA PTY LTD ACN 658 | ) | |||
| 546 117 in accordance with section | ) | |||
| 127(1) of the Corporations Act 2001 | ) | |||
| (Cth) by authority of its directors: | ) | |||
| ) | ||||
| ) | /s/ Chris Geberth | |||
| /s/ Shantanu Gaur |
) | Signature of director/company | ||
| Signature of director | ) | secretary* | ||
| ) | *delete whichever is not applicable | |||
| ) | ||||
| Shantanu Kadir Gaur |
) | Christopher James Geberth | ||
| Name of director (block letters) | Name of director/company | |||
| secretary* (block letters) | ||||
| *delete whichever is not applicable |
Address for Notices:
Suite 902
Level 9, 146 Arthur Street
NORTH SYDNEY NSW 2060
| Attn: | Chris Geberth, Shantanu Gaur |
| Tel.: | (508) 762-1665 |
| Fax: | (508) 258-3509 |
| Email: | cgeberth@allurion.com; and sgaur@allurion.com |
With a copy to:
Goodwin Procter LLP
520 Broadway
Suite 500
Santa Monica, CA 90401
| Attn: | Kris Ring |
| Tel.: | (424) 252-6364 |
| Email: | kring@goodwinlaw.com |
[SIGNATURE PAGE TO CREDIT AGREEMENT AND GUARANTY]
| AGENT: | ||
| FORTRESS CREDIT CORP. | ||
| By |
/s/ Timothy Bailey | |
| Name: Timothy Bailey | ||
| Title: Authorized Signatory | ||
| Address for Notices: | ||
| Fortress Credit Corp. | ||
| 1345 Avenue of the Americas, 46th Floor | ||
| New York, NY 10105 | ||
| Email: gccredit@fortress.com / creditoperations@fortress.com | ||
| Tel: 212-798-6100 | ||
| Attn: David N. Brooks, General Counsel | ||
| David Sharpe, Credit Operations | ||
| With a copy (which shall not constitute notice) to: | ||
| Morrison & Foerster LLP | ||
| 250 West 55th Street | ||
| New York, NY 10019 | ||
| Attn: Mark S. Wojciechowski | ||
| Tel.: (212) 468-8079 | ||
| Email:MWojciechowski@mofo.com | ||
[SIGNATURE PAGE TO CREDIT AGREEMENT AND GUARANTY]
| LENDERS: | ||
| FORTRESS CREDIT CORP. | ||
| By |
/s/ Timothy Bailey | |
| Name: Timothy Bailey | ||
| Title: Authorized Signatory | ||
| Address for Notices: | ||
| Fortress Credit Corp. | ||
| 1345 Avenue of the Americas, 46th Floor | ||
| New York, NY 10105 | ||
| Email: gccredit@fortress.com / creditoperations@fortress.com | ||
| Tel: 212-798-6100 | ||
| Attn: David N. Brooks, General Counsel | ||
| David Sharpe, Credit Operations | ||
| With a copy (which shall not constitute notice) to: | ||
| Morrison & Foerster LLP | ||
| 250 West 55th Street | ||
| New York, NY 10019 | ||
| Attn: Mark S. Wojciechowski | ||
| Tel.: (212) 468-8079 | ||
| Email:MWojciechowski@mofo.com | ||
Schedule 1
to Credit Agreement
COMMITMENTS
| Lender |
Commitment | Proportionate Share |
||||||
| Fortress Credit Corp. |
$ | 60,000,000 | 100 | % | ||||
|
|
|
|
|
|||||
| TOTAL |
$ | 60,000,000 | 100 | % | ||||
|
|
|
|
|
|||||
Exhibit 10.27
RESTRICTED STOCK UNIT AWARD AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE ALLURION TECHNOLOGIES, INC.
2023 STOCK OPTION AND INCENTIVE PLAN
Name of Grantee:
No. of Restricted Stock Units:
Grant Date:
Pursuant to the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), Allurion Technologies, Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.0001 per share (the “Stock”), of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee remains in a Service Relationship on such Vesting Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.
| Incremental Number of Restricted Stock Units Vested |
Vesting Date | |
| _____________ (___%) | ||
| _____________ (___%) | ||
| _____________ (___%) | ||
| _____________ (___%) | ||
| _____________ (___%) | ||
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service Relationship. If the Grantee’s Service Relationship terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.
4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Grantee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Grantee on account of such transfer.
7. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
8. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee’s employment or other Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Grantee’s employment or other Service Relationship at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and
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transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| ALLURION TECHNOLOGIES, INC. | ||
| By: |
| |
| Title: | ||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
| Dated: |
|
| ||||
| Grantee’s Signature | ||||||
| Grantee’s name and address: | ||||||
|
| ||||||
|
| ||||||
|
| ||||||
3
Exhibit 10.28
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE ALLURION TECHNOLOGIES, INC.
2023 STOCK OPTION AND INCENTIVE PLAN
| Name of Optionee: | ||
| No. of Option Shares: | ||
| Option Exercise Price per Share: | $ | |
| [FMV on Grant Date (110% of FMV if a 10% owner)] | ||
| Grant Date: | ||
| Expiration Date: | ||
| [No more than 10 years (5 years if a 10% owner)] | ||
Pursuant to the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), Allurion Technologies, Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.0001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 1 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated below so long as the Optionee remains in a Service Relationship on such dates:
| Incremental Number of Option Shares Exercisable* |
Exercisability Date | |
| _____________ (___%) | ||
| _____________ (___%) | ||
| _____________ (___%) | ||
| _____________ (___%) | ||
| _____________ (___%) | ||
| * | Max. of $100,000 per yr. |
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the shares of Stock attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
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(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. If the Optionee’s Service Relationship terminates, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionee’s Service Relationship terminates by reason of the Optionee’s disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionee’s Service Relationship terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment or other service agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company or a Subsidiary.
(d) Other Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death, the Optionee’s disability, or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of 90 days from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the Optionee and his or her representatives or legatees.
3
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. Status of the Stock Option. This Stock Option is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), but the Company does not represent or warrant that this Stock Option qualifies as such. The Optionee should consult with his or her own tax advisors regarding the tax effects of this Stock Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements and that this Stock Option must be exercised within three months after termination of employment as an employee (or 12 months in the case of death or disability) to qualify as an “incentive stock option.” To the extent any portion of this Stock Option does not so qualify as an “incentive stock option,” such portion shall be deemed to be a non-qualified stock option. If the Optionee intends to dispose or does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of this Stock Option, he or she will so notify the Company within 30 days after such disposition.
7. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Optionee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee on account of such transfer.
8. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee’s Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Optionee’s Service Relationship at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
4
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
5
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| ALLURION TECHNOLOGIES, INC. | ||
| By: |
| |
| Title: | ||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
| Dated: |
|
| ||||
| Optionee’s Signature | ||||||
| Optionee’s name and address: | ||||||
|
| ||||||
|
| ||||||
|
| ||||||
6
Exhibit 10.29
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE ALLURION TECHNOLOGIES, INC.
2023 STOCK OPTION AND INCENTIVE PLAN
| Name of Optionee: | ||
| No. of Option Shares: | ||
| Option Exercise Price per Share: | $ | |
| [FMV on Grant Date] | ||
| Grant Date: | ||
| Expiration Date: | ||
| [No more than 10 years] | ||
Pursuant to the Allurion Technologies, Inc. 2023 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), Allurion Technologies, Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.0001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 1 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated below so long as the Optionee remains in a Service Relationship on such dates:
| Incremental Number of Option Shares Exercisable |
Exercisability Date | |
| _____________ (___%) | _____________ | |
| _____________ (___%) | _____________ | |
| _____________ (___%) | _____________ | |
| _____________ (___%) | _____________ | |
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the shares of Stock attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
2
(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. If the Optionee’s Service Relationship terminates, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionee’s Service Relationship terminates by reason of the Optionee’s disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionee’s Service Relationship terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment or other service agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company or a Subsidiary.
(d) Other Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death, the Optionee’s disability or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of 90 days from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the Optionee and his or her representatives or legatees.
3
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Optionee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee on account of such transfer.
7. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee’s Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Optionee’s Service Relationship at any time.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
4
10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| ALLURION TECHNOLOGIES, INC. | ||
| By: |
| |
| Title: | ||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
| Dated: |
|
| ||||
| Optionee’s Signature | ||||||
| Optionee’s name and address: | ||||||
|
| ||||||
|
| ||||||
|
| ||||||
5
Exhibit 21.1
Subsidiaries of Allurion Technologies, Inc.
| Name of Subsidiary |
Jurisdiction of Incorporation | |
| Allurion France SAS |
France | |
| Allurion Middle East Medical Instrument Trading LLC |
United Arab Emirates | |
| Allurion Hong Kong Ltd. |
Hong Kong | |
| Allurion UK Ltd. |
United Kingdom | |
| Allurion Italy, Srl |
Italy | |
| Allurion Spain, Srl |
Spain | |
| Allurion Australia Pty Ltd. |
Australia | |
| Allurion Mexico S. de R.L de C.V. |
Mexico | |
| Allurion Technologies Opco, Inc. |
Delaware |
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information (“pro forma financial information”) is based on the historical financial statements of Compute Health and Allurion, adjusted to depict the accounting of the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the Contribution Agreements, the RSU Forfeiture Agreement, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement, each as described in Note 1. The unaudited pro forma condensed combined balance sheet as of March 31, 2023 reflects adjustments that depict the accounting of the Mergers, the PIPE Investment, the Revenue Interest Financing, the Fortress Financing, the Incremental Financing, the Chardan Equity Facility, the Backstop Agreement, the Contribution Agreements, the RSU Forfeiture Agreement, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement (the “Balance Sheet Pro Forma Transaction Accounting Adjustments”). The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2023 and the year ended December 31, 2022 reflects the Statement of Operations Pro Forma Transaction Accounting Adjustments assuming those adjustments were made as of January 1, 2022, which is the beginning of the earliest period presented (“Statement of Operations Pro Forma Transaction Accounting Adjustments”). Collectively, the Balance Sheet Pro Forma Transaction Accounting Adjustments and Statement of Operations Pro Forma Transaction Accounting Adjustments are referred to in this section as “transaction accounting adjustments.”
The pro forma financial information has been derived from:
| • | the accompanying notes to the pro forma financial information; |
| • | the historical unaudited condensed financial statements of Compute Health as of and for the three months ended March 31, 2023 and the related notes included in the Proxy Statement/Prospectus, which is incorporated herein by reference; |
| • | the historical unaudited condensed consolidated financial statements of Allurion as of and for the three months ended March 31, 2023 and the related notes included in the Proxy Statement/Prospectus, which is incorporated herein by reference; |
| • | the historical audited financial statements of Compute Health as of and for the year ended December 31, 2022 and the related notes included in the Proxy Statement/Prospectus, which is incorporated herein by reference; and |
| • | the historical audited consolidated financial statements of Allurion as of and for the year ended December 31, 2022 and the related notes included in the Proxy Statement/Prospectus, which is incorporated herein by reference; and should be read together with: |
| • | the Existing Business Combination Agreement, a copy of which is incorporated by reference to Annex A to the Proxy Statement/Prospectus, and the BCA Amendment, a copy of which is incorporated by reference to Annex A-1 to the Proxy Statement/Prospectus; and |
| • | the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Compute Health,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Allurion,” and the other financial information relating to Compute Health and Allurion included in the Proxy Statement/Prospectus, which is incorporated herein by reference. |
The pro forma financial information is provided for illustrative purposes only and is not necessarily indicative of what the actual results of operations and financial position would have been had the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the Contribution Agreements, the RSU Forfeiture Agreement, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement taken place on the dates indicated, nor is it indicative of the future consolidated results of operations or financial position of the combined company.
The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
1
ALLURION TECHNOLOGIES, INC./COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2023
(in thousands, except share and per share amounts)
| Historical | Balance Sheet Pro Forma Transaction Accounting Adjustments |
Pro Forma Balance Sheet |
||||||||||||||||||
| Compute Health | Allurion | |||||||||||||||||||
| ASSETS |
||||||||||||||||||||
| Current assets: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 281 | $ | 9,943 | $ | 3,095 | (5c | ) | $ | 103,701 | ||||||||||
| (7,143 | ) | (5h | ) | |||||||||||||||||
| (5,293 | ) | (5i | ) | |||||||||||||||||
| 35,944 | (5j | ) | ||||||||||||||||||
| 12 | (5k | ) | ||||||||||||||||||
| 40,000 | (5o | ) | ||||||||||||||||||
| 1,841 | (5p | ) | ||||||||||||||||||
| (2,500 | ) | (5q | ) | |||||||||||||||||
| 13,176 | (5s | ) | ||||||||||||||||||
| 37,922 | (5v | ) | ||||||||||||||||||
| (75 | ) | (5w | ) | |||||||||||||||||
| 2,850 | (5n | ) | ||||||||||||||||||
| Accounts receivable, net of allowance of uncollectible accounts of $1,741 |
— | 28,988 | — | 28,988 | ||||||||||||||||
| Inventory |
— | 4,314 | — | 4,314 | ||||||||||||||||
| Prepaid expenses and other current assets |
139 | 2,485 | — | 2,624 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total current assets |
420 | 45,730 | 93,477 | 139,627 | ||||||||||||||||
| Investments held in Trust Account |
96,539 | — | (60,595 | ) | (5a | ) | — | |||||||||||||
| (35,944 | ) | (5j | ) | |||||||||||||||||
| Property and equipment, net |
— | 2,587 | — | 2,587 | ||||||||||||||||
| Right-of-use asset |
— | 3,564 | — | 3,564 | ||||||||||||||||
| Other long-term assets |
— | 6,085 | (5,420 | ) | (5s | ) | 665 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total assets |
$ | 96,959 | $ | 57,966 | $ | (8,482 | ) | $ | 146,443 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDER’S EQUITY (DEFICIT) |
||||||||||||||||||||
| Current liabilities: |
||||||||||||||||||||
| Accounts payable |
$ | 42 | $ | 13,706 | $ | (3,076 | ) | (5s | ) | $ | 10,672 | |||||||||
| Accrued and other current liabilities |
— | 15,888 | (1,591 | ) | (5s | ) | 14,297 | |||||||||||||
| Franchise tax payable |
50 | — | — | 50 | ||||||||||||||||
| Term loan, net of discounts |
— | 53,521 | (53,521 | ) | (5p | ) | — | |||||||||||||
| Current portion of lease liabilities |
— | 865 | — | 865 | ||||||||||||||||
| Convertible promissory note—related party |
755 | — | (3,850 | ) | (5q | ) | — | |||||||||||||
| 3,095 | (5c | ) | ||||||||||||||||||
| Promissory note—related party |
2,350 | — | (2,350 | ) | (5q | ) | — | |||||||||||||
| Income tax payable |
27 | — | — | 27 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total current liabilities |
3,224 | 83,980 | (61,293 | ) | 25,911 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Revenue interest notes payable |
— | — | 40,000 | (5o | ) | 40,000 | ||||||||||||||
| PIPE Conversion Option derivative |
— | — | 1,752 | (5o | ) | 1,752 | ||||||||||||||
| Term loan, net of discounts |
— | — | 59,500 | (5p | ) | 59,500 | ||||||||||||||
| Convertible notes payable, net of discounts |
— | 16,703 | (3,103 | ) | (5m | ) | — | |||||||||||||
| (13,600 | ) | (5n | ) | |||||||||||||||||
| Lease liabilities |
— | 2,902 | — | 2,902 | ||||||||||||||||
| Derivative warrant liabilities |
13,758 | — | (5,133 | ) | (5d | ) | 8,625 | |||||||||||||
| Deferred legal costs |
7,143 | — | (7,143 | ) | (5h | ) | — | |||||||||||||
| Contingent consideration liability |
— | — | 53,310 | (5r | ) | 53,310 | ||||||||||||||
| Other liabilities |
— | 4,037 | (1,454 | ) | (5t | ) | 2,583 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities |
$ | 24,125 | $ | 107,622 | $ | 62,836 | $ | 194,583 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
2
ALLURION TECHNOLOGIES, INC./COMPUTE HEALTH ACQUISITION CORP.—(Continued)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2023
(in thousands, except share and per share amounts)
| Historical | Balance Sheet Pro Forma Transaction Accounting Adjustments |
Pro Forma Balance Sheet |
||||||||||||||||||
| Compute Health | Allurion | |||||||||||||||||||
| LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDER’S EQUITY (DEFICIT) |
||||||||||||||||||||
| Compute Health Class A Common Stock, subject to possible redemption |
$ | 96,362 | $ | — | $ | (60,595 | ) | (5a | ) | $ | — | |||||||||
| (7,000 | ) | (5f | ) | |||||||||||||||||
| (28,767 | ) | (5g | ) | |||||||||||||||||
| Allurion Series C Redeemable Convertible Preferred Stock |
— | 39,122 | (39,122 | ) | (5u | ) | — | |||||||||||||
| Stockholders’ deficit: |
||||||||||||||||||||
| Compute Health Preferred Stock |
— | — | — | — | ||||||||||||||||
| Compute Health Class A Common Stock |
— | — | — | (5d | ) | — | ||||||||||||||
| — | (5e | ) | ||||||||||||||||||
| — | (5f | ) | ||||||||||||||||||
| — | (5g | ) | ||||||||||||||||||
| Compute Health Class B Common Stock |
2 | — | — | (5b | ) | — | ||||||||||||||
| (2 | ) | (5d | ) | |||||||||||||||||
| — | (5e | ) | ||||||||||||||||||
| Allurion Preferred Stock |
— | 58,029 | (58,029 | ) | (5u | ) | — | |||||||||||||
| — | (5k | ) | ||||||||||||||||||
| Allurion Common Stock |
— | 51 | — | (5k | ) | — | ||||||||||||||
| — | (5m | ) | ||||||||||||||||||
| (51 | ) | (5u | ) | |||||||||||||||||
| — | (5n | ) | ||||||||||||||||||
| — | (5l | ) | ||||||||||||||||||
| New Allurion Common Stock |
— | — | 1 | (5g | ) | 5 | ||||||||||||||
| — | (5n | ) | ||||||||||||||||||
| 3 | (5u | ) | ||||||||||||||||||
| 1 | (5v | ) | ||||||||||||||||||
| — | (5w | ) | ||||||||||||||||||
| — | (5o | ) | ||||||||||||||||||
| — | (5p | ) | ||||||||||||||||||
| — | (5q | ) | ||||||||||||||||||
| Additional paid-in capital |
— | 3,135 | — | (5b | ) | 115,064 | ||||||||||||||
| 12 | (5k | ) | ||||||||||||||||||
| 5,135 | (5d | ) | ||||||||||||||||||
| — | (5e | ) | ||||||||||||||||||
| 7,000 | (5f | ) | ||||||||||||||||||
| 28,766 | (5g | ) | ||||||||||||||||||
| 3,155 | (5m | ) | ||||||||||||||||||
| — | (5o | ) | ||||||||||||||||||
| (53,310 | ) | (5r | ) | |||||||||||||||||
| 1,454 | (5t | ) | ||||||||||||||||||
| 68,376 | (5u | ) | ||||||||||||||||||
| 5,042 | (5l | ) | ||||||||||||||||||
| 37,921 | (5v | ) | ||||||||||||||||||
| 250 | (5w | ) | ||||||||||||||||||
| — | (5p | ) | ||||||||||||||||||
| 3,700 | (5q | ) | ||||||||||||||||||
| (13,929 | ) | (5s | ) | |||||||||||||||||
| 18,357 | (5n | ) | ||||||||||||||||||
| Accumulated deficit |
(23,530 | ) | (149,993 | ) | (5,293 | ) | (5i | ) | (163,209 | ) | ||||||||||
| (52 | ) | (5m | ) | |||||||||||||||||
| (1,907 | ) | (5n | ) | |||||||||||||||||
| (1,752 | ) | (5o | ) | |||||||||||||||||
| (4,138 | ) | (5p | ) | |||||||||||||||||
| 28,823 | (5u | ) | ||||||||||||||||||
| (5,042 | ) | (5l | ) | |||||||||||||||||
| (325 | ) | (5w | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total stockholders’ equity (deficit) |
(23,528 | ) | (88,778 | ) | 64,166 | (48,140 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit) |
$ | 96,959 | $ | 57,966 | $ | (8,482 | ) | $ | 146,443 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
3
ALLURION TECHNOLOGIES, INC./COMPUTE HEALTH ACQUISITION CORP. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2023
(in thousands, except share and per share amounts)
| Historical | Statement of Operations Pro Forma Transaction Accounting Adjustments |
Pro Forma Statement of Operations |
||||||||||||||||||
| Compute Health |
Allurion | |||||||||||||||||||
| Revenue |
$ | — | $ | 14,071 | $ | — | $ | 14,071 | ||||||||||||
| Cost of revenue |
— | 2,940 | — | 2,940 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total gross profit |
— | 11,131 | — | 11,131 | ||||||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Research and development |
— | 7,852 | — | 7,852 | ||||||||||||||||
| General and administrative |
3,512 | 5,306 | (30 | ) | (6a | ) | 5,442 | |||||||||||||
| (3,096 | ) | (6e | ) | |||||||||||||||||
| (250 | ) | (6h | ) | |||||||||||||||||
| Sales and marketing |
— | 11,864 | — | 11,864 | ||||||||||||||||
| Franchise tax expenses |
50 | — | — | 50 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
3,562 | 25,022 | (3,376 | ) | 25,208 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Loss from operations |
(3,562 | ) | (13,891 | ) | 3,376 | (14,077 | ) | |||||||||||||
| Other income (expense), net: |
||||||||||||||||||||
| Interest expense, net |
1 | (2,237 | ) | 2,237 | (6g | ) | (1,446 | ) | ||||||||||||
| (1,447 | ) | (6j | ) | |||||||||||||||||
| Change in fair value of derivative liabilities |
— | (29 | ) | — | (29 | ) | ||||||||||||||
| Change in fair value of derivative warrant liabilities |
(9,975 | ) | (1,475 | ) | 3,722 | (6b | ) | (7,728 | ) | |||||||||||
| Change in fair value of promissory note—related party |
(573 | ) | — | 573 | (6c | ) | — | |||||||||||||
| Income from investments held in trust account |
1,012 | — | (1,012 | ) | (6d | ) | — | |||||||||||||
| Other expense, net |
— | (135 | ) | 708 | (6l | ) | 573 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total other income (expense), net |
(9,535 | ) | (3,876 | ) | 4,781 | (8,630 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss before income taxes |
(13,097 | ) | (17,767 | ) | 8,157 | (22,707 | ) | |||||||||||||
| Provision for income taxes |
202 | 34 | — | 236 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss and comprehensive loss |
(13,299 | ) | (17,801 | ) | 8,157 | (22,943 | ) | |||||||||||||
| Loss attributable to common shares subject to conversion |
— | (717 | ) | — | (717 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to common shareholders |
$ | (13,299 | ) | $ | (18,518 | ) | $ | 8,157 | $ | (23,660 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Weighted average common shares outstanding: |
||||||||||||||||||||
| Basic |
21,562,500 | 7,661,736 | 25,818,056 | (6n | ) | 47,380,556 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Diluted |
21,562,500 | 7,661,736 | 25,818,056 | (6n | ) | 47,380,556 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss attributable to common stockholders: |
||||||||||||||||||||
| Basic |
$ | (0.43 | ) | $ | (2.42 | ) | $ | (0.50 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Diluted |
$ | (0.43 | ) | $ | (2.42 | ) | $ | (0.50 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||||||
4
ALLURION TECHNOLOGIES, INC./COMPUTE HEALTH ACQUISITION CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2022
(in thousands, except share and per share amounts)
| Historical | Statement of Operations Pro Forma Transaction Accounting Adjustments |
Pro Forma Statement of Operations |
||||||||||||||||||
| Compute Health |
Allurion | |||||||||||||||||||
| Revenue |
$ | — | $ | 64,211 | $ | — | $ | 64,211 | ||||||||||||
| Cost of revenue |
— | 13,485 | — | 13,485 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total gross profit |
— | 50,726 | — | 50,726 | ||||||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Research and development |
— | 16,966 | — | 16,966 | ||||||||||||||||
| General and administrative |
4,488 | 15,365 | (120 | ) | (6a | ) | 36,338 | |||||||||||||
| 5,138 | (6f | ) | ||||||||||||||||||
| 2,752 | (6h | ) | ||||||||||||||||||
| 8,390 | (6e | ) | ||||||||||||||||||
| 325 | (6m | ) | ||||||||||||||||||
| Sales and marketing |
— | 50,405 | — | 50,405 | ||||||||||||||||
| Franchise tax expenses |
200 | — | — | 200 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating expenses |
4,688 | 82,736 | 16,485 | 103,909 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Loss from operations |
(4,688 | ) | (32,010 | ) | (16,485 | ) | (53,183 | ) | ||||||||||||
| Other income (expense), net: |
||||||||||||||||||||
| Interest expense, net |
1 | (4,426 | ) | 4,426 | (6g | ) | (5,776 | ) | ||||||||||||
| (5,777 | ) | (6j | ) | |||||||||||||||||
| Change in fair value of derivative liabilities |
866 | (19 | ) | — | 847 | |||||||||||||||
| Change in fair value of derivative warrant liabilities |
26,485 | — | (9,882 | ) | (6b | ) | 16,603 | |||||||||||||
| Change in fair value of promissory note—related party |
1,211 | — | (1,211 | ) | (6c | ) | — | |||||||||||||
| Income from investments held in trust account |
10,661 | — | (10,661 | ) | (6d | ) | — | |||||||||||||
| Loss on extinguishment of term loan |
— | — | (4,298 | ) | (6i | ) | (5,798 | ) | ||||||||||||
| — | — | (1,500 | ) | (6k | ) | |||||||||||||||
| Other expense, net |
— | (1,146 | ) | 454 | (6l | ) | (692 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total other income (expense), net |
39,224 | (5,591 | ) | (28,449 | ) | 5,184 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) before income taxes |
34,536 | (37,601 | ) | (44,934 | ) | (47,999 | ) | |||||||||||||
| Provision for income taxes |
2,165 | 143 | — | 2,308 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) and comprehensive income (loss) |
32,371 | (37,744 | ) | (44,934 | ) | (50,307 | ) | |||||||||||||
| Loss attributable to common shares subject to conversion |
— | (2,907 | ) | — | (2,907 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable to common shareholders |
$ | 32,371 | $ | (40,651 | ) | $ | (44,934 | ) | $ | (53,214 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Weighted average common shares outstanding: |
||||||||||||||||||||
| Basic |
21,562,500 | 7,495,479 | 25,818,056 | (6n | ) | 47,380,556 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Diluted |
21,562,500 | 7,495,479 | 25,818,056 | (6n | ) | 47,380,556 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable to common stockholders: |
||||||||||||||||||||
| Basic |
$ | 0.32 | $ | (5.42 | ) | $ | (1.12 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Diluted |
$ | 0.32 | $ | (5.42 | ) | $ | (1.12 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
| 1. | Description of the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the Contribution Agreements, the RSU Forfeiture Agreement, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement |
On February 9, 2023, Compute Health entered into the Existing Business Combination Agreement with Merger Sub I, Merger Sub II, Allurion, and New Allurion. On May 2, 2023, Compute Health, Merger Sub I, Merger Sub II, Allurion and New Allurion entered into the BCA Amendment which, among other things, amended the calculation of the aggregate number of shares of New Allurion Common Stock to be issued to (or reserved for issuance for) Allurion equityholders upon the consummation of the Intermediate Merger to be as follows: (a) 37,812,000 minus (b) the Allocated Shares. Other than as expressly modified by the BCA Amendment, the terms of the Existing Business Combination Agreement remain in full force and effect.
Pursuant to the Business Combination Agreement, and described in the Proxy Statement/Prospectus, and filed with the SEC, in the section titled “Proposal No. 1 — The Business Combination Proposals,” the merger transactions were consummated in three steps: (a) Compute Health merged with and into New Allurion, with New Allurion surviving the CPUH Merger as a publicly listed entity and became the sole owner of the Merger Subs; (b) three hours following the consummation of the CPUH Merger, Merger Sub I merged with and into Allurion, with Allurion surviving the Intermediate Merger and becoming a direct, wholly-owned subsidiary of New Allurion; and (c) thereafter, Allurion merged with and into Merger Sub II, with Merger Sub II surviving the Final Merger and remaining a direct, wholly-owned subsidiary of New Allurion.
In connection with the execution of the Business Combination Agreement, Allurion entered into the Revenue Interest Financing Agreement with RTW and has agreed to enter into the Fortress Financing with Fortress.
In connection with the execution of the Business Combination Agreement, Compute Health and New Allurion entered into the PIPE Subscription Agreements with respect to the PIPE Investment and Allurion entered into a commitment letter with respect to the Chardan Equity Facility.
Pursuant to the Business Combination Agreement, Allurion was required to use reasonable best efforts to obtain gross cash proceeds of at least $15 million of additional financing pursuant to one or more private sales of Allurion’s equity securities, which automatically converted into shares of Allurion Common Stock upon the consummation of the Business Combination, which is referred to as the Incremental Financing. From February 15, 2023 until August 1, 2023, Allurion issued an aggregate principal amount of $28.7 million of Bridge Notes to various investors pursuant to convertible note purchase agreements, dated as of February 15, 2023 and June 14, 2023, including the $13 million HVL Bridge Note sold to HVL on February 15, 2023, pursuant to the Initial Financing. As of August 1, 2023, Allurion has repaid $10.8 million principal amount of the Bridge Notes sold to HVL, resulting in an aggregate principal amount of $18.0 million of Bridge Notes outstanding upon the Closings, which were converted into 3,153,788 shares of Allurion Common Stock. The Side Letter Holders, including RTW, HVL and Jason Gulbinas, also entered into the Side Letters with Allurion, pursuant to which, in the event the Side Letter Holders’ Bridge Notes converted in connection with the consummation of the transactions contemplated by the Business Combination Agreement, the conversion rate for such Bridge Notes would be adjusted after the Closing Date to provide each of the Side Letter Holders with additional shares of New Allurion Common Stock, in the event that the trading price of the shares of New Allurion Common Stock was lower than the Conversion Price, as adjusted for the Intermediate Merger Exchange Ratio (as defined in the Business Combination Agreement).
6
Following the consummation of the Initial Financing, Compute Health, Allurion, and New Allurion refinanced the Initial Financing and, pursuant to the Termination Agreements entered into by Allurion with each of the Side Letter Holders, the Side Letters were terminated, effective as of May 2, 2023. In addition, under the Termination Agreements, the Side Letter Holders also waived certain provisions and obligations set forth in their respective Bridge Notes with respect to proportionate repayment obligations that would otherwise apply to Allurion under the Bridge Notes. Other provisions of the Side Letter Holders’ Bridge Notes remained unchanged and in full force and effect. In addition, in connection with the refinancing of the Initial Financing, the applicable parties entered into the Backstop Agreement, the Contribution Agreements, the RSU Forfeiture Agreement, the Amended and Restated Side Letter and the Fortress Letter Agreement.
Related events that occurred in connection with the Mergers, including the Revenue Interest Financing, the Fortress Financing, the Incremental Financing, the Chardan Equity Facility, the Backstop Agreement, the Contribution Agreements, the RSU Forfeiture Agreement, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement, are discussed in more details below:
| I. | The CPUH Merger |
| A. | On July 28, 2023, Public Stockholders holding 5,649,904 shares of the Compute Health Class A Common Stock exercised their redemption rights for their pro rata share (approximately $10.72 per share) of the funds in the Trust Account, giving effect to Compute Health Class A Common Stock redemptions for aggregate redemption payments of $60.6 million using a $10.72 per share redemption price. Refer to note 5(a) below. |
| B. | Immediately prior to the transactions contemplated by the Sponsor Contribution Agreement, pursuant to the Sponsor Support Agreement: |
| 1. | 21,442,500 shares of Compute Health Class B Common Stock and 12,833,333 Compute Health Private Warrants owned by the Sponsor were exchanged and converted into an aggregate of 2,088,327 shares of Compute Health Class A Common Stock. Refer to notes 5(d), and 6(b) below; and |
| 2. | 90,000 shares of Compute Health Class B Common Stock owned, in the aggregate, by the Additional Class B Holders were exchanged and converted into, in the aggregate, 63,360 shares of Compute Health Class A Common Stock. Refer to note 5(e) below. |
| C. | On May 2, 2023, the Sponsor and Compute Health entered into the Sponsor Contribution Agreement, pursuant to which, among other things, the Sponsor agreed to contribute to Compute Health, as a contribution to capital, a number of shares of Class A Common Stock equal to: (a) 200,000 plus a number of shares equal to one-third of the Additional Hunter Shares divided by (b) 1.420455. The Sponsor’s contribution of the Sponsor Contributed Shares was effective immediately following the Sponsor Recapitalization and immediately prior to the CPUH Merger. Refer to note 5(g) below; and |
| D. | Upon the CPUH Merger Closing: |
| 1. | Pursuant to the Non-Redemption Agreement, Medtronic waived the redemption rights associated with its 700,000 shares of Compute Health Class A Common Stock, in connection to Medtronic’s and Allurion’s entry into the Medtronic Sales Agency Agreement in accordance with the terms of the Non-Redemption Agreement. These 700,000 shares of Compute Health Class A Common Stock were converted into 994,318 shares of New Allurion Common Stock issued to Medtronic upon the consummation of the CPUH Merger, as a result of applying the CPUH Exchange Ratio. Refer to note 5(f) below; |
| 2. | Each then-outstanding share of Compute Health Class A Common Stock (other than the Compute Health Cancelled Shares, shares that was redeemed in connection with the Business Combination and the Compute Health Dissenting Shares, the treatment of which is described in the Business Combination Agreement), including those converted from the Sponsor’s Compute Health Class B Common Stock and Compute Health Private Warrants (to the extent not contributed to the capital |
7
| of Compute Health in connection with the Sponsor Contribution Agreement), and those converted from the Additional Class B Holder’s Compute Health Class B Common Stock, were automatically cancelled and converted into 1.420455 shares of New Allurion Common Stock. Refer to note 5(g) below and note 1.I.C. above; and |
8
| 3. | Each then-outstanding Compute Health Public Warrant was assumed and converted automatically into 0.6125 New Allurion Public Warrant pursuant to the Consent Solicitation and the Warrant Assumption Agreement on substantially the same terms as were in effect immediately prior to the CPUH Merger. |
| II. | The Intermediate Merger |
| 1. | Allurion was required to use reasonable best efforts to obtain gross cash proceeds up to $15.0 million of Incremental Financing pursuant to one or more private sales by Allurion of Allurion Common Stock or other equity interests which, in accordance with their terms and without any action or consent of any holder thereof or any other person, automatically converted into shares of Allurion Common Stock immediately prior to the Intermediate Merger Closing, by no later than April 30, 2023. From February 15, 2023 until August 1, 2023, Allurion issued an aggregate principal amount of $28.7 million of Bridge Notes to various investors pursuant to a convertible note purchase agreement, dated as of February 15, 2023 and June 14, 2023, including the Bridge Note sold to HVL on February 15, 2023, in connection with the Initial Financing. Refer to note 5(n) below; |
| 2. | Following the consummation of the Initial Financing, Compute Health, Allurion and New Allurion refinanced the Initial Financing and, pursuant to the Termination Agreements entered into by Allurion with each of the Side Letter Holders, the Side Letters were terminated, effective as of May 2, 2023. HVL’s Termination Agreement also provides, upon the terms and subject to the conditions set forth therein, Allurion with the right to prepay, in one or more transactions, all or a portion of the outstanding principal amount, plus accrued interest, under the HVL Bridge Note, including by way of (a) a $2 million Prepayment in cash by Allurion to HVL on May 2, 2023, $1.5 million of which is deemed a prepayment penalty and (b) immediately prior to the consummation of the Mergers, an Additional Payment of at least $6 million, up to the then- outstanding principal amount, plus accrued interest, under the HVL Bridge Note by way of (i) payment in cash by Allurion and/or (ii) the sale and transfer of all or any portion of the HVL Bridge Note, equivalent in value to the portion of the Additional Payment to be repaid, to any person or persons designated in writing by Allurion. As of August 1, 2023, Allurion repaid $10.8 million principal amount of the Bridge Notes sold to HVL, resulting in an aggregate principal amount of $18.0 million of Bridge Notes outstanding as of August 1, 2023. |
In addition, under HVL’s Termination Agreement, upon the terms and subject to the conditions set forth therein, HVL received 831,526 shares of New Allurion Common Stock, of which, 443,830 shares were issued by New Allurion, 229,232 shares were related to the Sponsor Contribution Agreement, and 158,464 shares were related to the Gaur Contribution Agreement and RSU Forfeiture Agreement. Refer to note 5(n) below;
| 3. | Pursuant to the Backstop Agreement, upon the terms and subject to the conditions set forth therein, each Backstop Purchaser agreed that, to the extent any portion of the HVL Bridge Notes remained outstanding following the Determination Date, such Backstop Purchaser would, at the Backstop Closing and on the Backstop Closing Date, purchase up to its $2 million Maximum Purchase Amount of the HVL Bridge Note from HVL. On August 1, 2023, each Backstop Purchaser purchased $2 million Maximum Purchase Amount of the HVL Bridge Note from HVL. In consideration of each Backstop Purchaser’s commitment to purchase its Backstop Purchase Amount, New Allurion issued to each Backstop Purchaser 700,000 Backstop Shares. Refer to note 5(n) below; |
| 4. | Pursuant to the Amended and Restated RTW Side Letter, which amended and restated the Existing RTW Side Letter in its entirety, any Conditional Additional New Allurion Shares issuable to RTW under the Amended and Restated RTW Side Letter, if any, were calculated net of any Backstop Shares issuable to RTW under the Backstop Agreement. On August 1, 2023, RTW purchased $2 million Maximum Purchase Amount of the HVL Bridge Note from HVL. In consideration of RTW’s commitment to purchase its Backstop Purchase Amount, New Allurion issued to RTW 700,000 Backstop Shares. Upon the Closing, Net Closing Cash was greater than $100 million, and no Conditional Additional New Allurion Shares were issued; |
9
| 5. | Pursuant to the Fortress Letter Agreement, any Conditional Additional New Allurion Shares issuable to Fortress under the Term Loan Credit Agreement, if any, were calculated net of any Backstop Shares issuable to the Fortress Investor under the Backstop Agreement. On August 1, 2023, Fortress purchased $2 million Maximum Purchase Amount of the HVL Bridge Note from HVL. In consideration of Fortress’ commitment to purchase its Backstop Purchase Amount, New Allurion issued to Fortress 700,000 Backstop Shares. Upon the Closing, Net Closing Cash was greater than $100 million, and no Conditional Additional New Allurion Shares were issued; |
| 6. | Pursuant to the Gaur Contribution Agreement, upon the terms and subject to the conditions set forth therein, the Gaur Trust agreed to contribute to New Allurion, as a contribution of capital, 79,232 Gaur Trust Contributed Shares. The Gaur Trust’s contribution of the Gaur Trust Contributed Shares was effective immediately following the consummation of the Mergers and the issuance of New Allurion Common Stock to the Gaur Trust pursuant to the terms of the Business Combination Agreement. Refer to notes 2 and 4, and note 5(u); and |
| 7. | Pursuant to the RSU Forfeiture Agreement, upon the terms and subject to the conditions set forth therein, Krishna Gupta agreed to forfeit 79,232 Forfeited RSUs. The Forfeited RSUs were terminated and cancelled without consideration therefore, effective as of immediately following the consummation of the transactions contemplated by the Business Combination Agreement. Refer to notes 2 and 4, and notes 5(l) and 5(u). |
| A. | Immediately prior to the Intermediate Merger: |
| 1. | The outstanding balance and unpaid interest of the Allurion Convertible Notes automatically converted into the applicable number of shares of Allurion Common Stock in accordance with the original terms of such convertible note agreements. Refer to notes 5(m) and 5(n) below. |
| B. | Upon the Intermediate Merger Closing: |
| 1. | Each then-outstanding share of Allurion Preferred Stock and Allurion Common Stock (including shares of Allurion Common Stock resulting from the Allurion Convertible Notes Conversion but excluding the Allurion Dissenting Shares and Allurion Cancelled Shares) were canceled and converted into the right to receive shares of New Allurion Common Stock, subject to the Intermediate Merger Exchange Ratio of 0.9780. Refer to notes 4 and 5(u) below; |
| 2. | Each of the outstanding Allurion Options and Allurion Warrants immediately prior to the Intermediate Merger Closing, whether or not vested or exercisable, were assumed by New Allurion and converted a Rollover Option or Rollover Warrant, as the case may be; |
| 3. | Each then-outstanding Allurion RSU Award was assumed by New Allurion and converted into a Rollover RSU Award. Subsequent to the Intermediate Merger, pursuant to the RSU Forfeiture Agreement, Krishna Gupta agreed to forfeit 81,014 Allurion RSUs. Refer to notes 5(l), 5(u) and 6(f) below; |
| 4. | Allurion closed the transactions contemplated pursuant to the Revenue Interest Financing with RTW, pursuant to which, RTW made an upfront payment of $40.0 million to New Allurion. In return, New Allurion will remit revenue interest payments on all current and future products and digital solutions developed and to be developed by New Allurion at a rate up to 6.0% of annual net sales prior to December 31, 2026, subject to the terms and conditions within the Revenue Interest Financing. On or after January 1, 2027, New Allurion will remit revenue interest payments at a rate up to 10.0% of annual net sales, subject to the terms and conditions within the Revenue Interest Financing. New Allurion will continue to make revenue interest payments to RTW until December 31, 2030. Refer to note 5(o) below; |
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| 5. | In connection with Allurion entering in the Revenue Interest Financing, if, at any time beginning 12 months and ending 24 months following the Intermediate Merger Closing, the VWAP per share of New Allurion Common Stock is less than $7.04 for the average of 20 trading days within any 30 trading day period (“Stock Price Drop”); and the absolute value of the percentage decrease of such Stock Price Drop measured from a reference price of $10.00 per share of New Allurion Common Stock is greater than the absolute value of the percentage decrease in the VWAP of a comparable publicly traded peer index as defined in the Amended and Restated RTW Side Letter over the same time period, then RTW may elect to convert up to $7.5 million of its PIPE Investment into additional revenue interest financing by forfeiting a number of shares of New Allurion Common Stock acquired by it in the PIPE Investment (the “PIPE Conversion Option”). The PIPE Conversion Option has been recorded as a liability at fair value with corresponding recognition as an expense. New Allurion further issued 950,000 shares of New Allurion Common Stock to RTW pursuant to the Business Combination Agreement, the Backstop Agreement and the Amended and Restated RTW Side Letter. Refer to notes 5(o) and 6(h) below; |
| 6. | Allurion entered into the Term Loan Facility with Fortress. Under the terms of the Fortress Financing, New Allurion borrowed an aggregate principal amount of $60.0 million with a maturity date on June 30, 2027. The Fortress Financing accrues interest at a rate of 6.44% plus the greater of (i) the Wall Street Journal Prime Rate and (ii) 3.0% per annum, which is payable in arrears on a monthly basis. An exit payment equal to 3.0% of the Fortress Financing is due upon the prepayment or maturity date of the agreement. Proceeds of the Fortress Financing were used to repay all amounts outstanding under the Runway Loan. New Allurion further issued 950,000 shares of New Allurion Common Stock to an affiliate of Fortress pursuant to the Business Combination Agreement, the Backstop Agreement, the Fortress Letter Agreement, and the Bridging Agreement. Refer to notes 5(p), 6(g), 6(i) and 6(j) below; and |
| 7. | Immediately prior to the Closings, Compute Health had an aggregate principal balance of $6.2 million outstanding under the Sponsor Loans. Of which, $2.5 million was repaid in cash and cash equivalents and the remaining principal balance was converted into 525,568 shares of New Allurion Common Stock, at a price per share of New Allurion Common Stock of $7.04. Refer to notes 5(q) and 6(c) below. |
| III. | The PIPE Investment |
Compute Health and New Allurion entered into PIPE Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors purchased, in aggregate, 5,386,695 shares of New Allurion Common Stock for a net purchase price of $7.04 per share for an aggregate commitment amount of $37.9 million. The purpose of the PIPE Investment is to fund general corporate expenses of New Allurion. Refer to note 5(v) below.
| IV. | The Chardan Equity Facility |
Allurion entered into a commitment letter for the Chardan Equity Facility from and after the Closings whereby New Allurion agreed to issue freely tradable shares of New Allurion Common Stock at 97.0% of the VWAP of the shares of New Allurion Common Stock in exchange for an aggregate Chardan Equity Facility of $100.0 million. New Allurion has a right to require Chardan to purchase shares of New Allurion Common Stock up to the aggregate Chardan Equity Facility of $100.0 million. Pursuant to the terms of the Chardan Equity Facility, upon the consummation of the Mergers, New Allurion paid a structuring fee of $75 thousand in cash, and a commitment fee of $250 thousand in 35,511 shares of New Allurion Common Stock at the PIPE Investment purchase price of $7.04 per share. The Chardan Equity Facility will remain outstanding for three years from the execution date unless terminated upon reasonable notice. The purpose of the execution of the Chardan Equity Facility is to fund general corporate expenses of New Allurion. Refer to notes 5(w) and 6(m) below.
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| V. | The Contingency Shares |
The Eligible Allurion Equity Holders may be entitled to receive the Contingency Shares from New Allurion, on or before the fifth anniversary after the effectiveness of the Resale Registration Statement, in an aggregate, a number of shares of New Allurion Common Stock in accordance with the terms of the Business Combination Agreement as follows: (1) 4,500,000 shares of New Allurion Common Stock if the VWAP of the shares of New Allurion Common Stock equals or exceeds $15.00 in any 20 trading-days within any consecutive 30 trading-day period (the “Trading Period”) on any securities exchange or securities market on which the shares of New Allurion Common Stock are then traded; and (2) an additional 4,500,000 shares of New Allurion Common Stock if the VWAP of the shares of New Allurion Common Stock equals or exceeds $20.00 in the Trading Period on any securities exchange or securities market on which the shares of New Allurion Common Stock are then traded. The Contingency Shares have been accounted for as a contingent consideration liability in accordance with ASC 815, Derivatives and Hedging. The Contingency Shares are not considered indexed to New Allurion Common Stock and are therefore classified as a liability in the unaudited pro forma condensed consolidated combined balance sheet and will be remeasured at fair value at each reporting date until such time as the milestones have been met or the earnout period expires. Refer to note 5(r) below.
| 2. | Basis of Pro Forma Presentation |
The pro forma financial information was prepared in accordance with Article 11 of Regulation S-X. The transaction accounting adjustments presented in the pro forma financial information are made to provide relevant information necessary for an understanding of the combined company reflecting the accounting for the Mergers, the PIPE Investment, the Revenue Interest Financing, the Fortress Financing, the Incremental Financing, the Chardan Equity Facility, the Backstop Agreement, the RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement.
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Management has made significant estimates and assumptions in its determination of the transaction accounting adjustments. The transaction accounting adjustments are based on certain currently available information and certain assumptions and methodologies that management believes are reasonable under the circumstances. The transaction accounting adjustments, which are described in these notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material.
The pro forma financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Mergers. Compute Health and Allurion have not had any historical relationship prior to the Mergers. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
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The following table summarizes the pro forma number of shares of New Allurion Common Stock outstanding following the consummation of the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement, excluding the potential dilutive effect of (1) the exercise or vesting of stock options or warrants and (2) the Contingency Shares. Please see the subsections entitled “Questions and Answers — What Are the Possible Sources and the Extent of Dilution that the Public Stockholders that Elect Not to Redeem their Shares Will Experience in Connection with the Business Combination and Related Transactions” and “Risk Factors — If the Business Combination is consummated, Compute Health Stockholders will experience dilution” of this current report on Form 8-K for additional information on the potential dilutive effect of the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement.
| Equity Capitalization Summary |
Shares | Ownership Percentage | ||||||
| Allurion equity holders (1) |
27,867,658 | 59 | % | |||||
| Compute Health Public Shareholders (2) |
4,081,379 | 9 | % | |||||
| Medtronic (3) |
994,319 | 2 | % | |||||
| Sponsor and the Additional Class B Holders (4) |
3,352,710 | 7 | % | |||||
| RTW (5) |
950,000 | 2 | % | |||||
| Fortress (6) |
950,000 | 2 | % | |||||
| HVL (7) |
831,526 | 2 | % | |||||
| Other Allurion Convertible Noteholders (7) |
2,857,409 | 6 | % | |||||
| PIPE Investors (8) |
5,386,695 | 11 | % | |||||
| Chardan (9) |
35,511 | 0 | %* | |||||
|
|
|
|
|
|||||
| Total New Allurion Common Stock (10) |
47,307,207 | 100 | % | |||||
|
|
|
|
|
|||||
| * | Less than 1%. |
| (1) | Refer to note 1.II.B.1 and note 5(u). Shares issuable to Allurion equity holders are net of 443,830 shares of New Allurion Common Stock issued to HVL pursuant to the terms of the HVL Bridge Note, 2,857,409 shares of New Allurion Common Stock issued to other Allurion Convertible Noteholders pursuant to the terms of the respective Allurion Convertible Notes, and an aggregate of 158,464 shares of New Allurion Common Stock contributed or forfeited from the Gaur Trust and Krishna Gupta pursuant to the Gaur Contribution Agreement and RSU Forfeiture Agreement. |
| (2) | Refer to note 1.I.A and note 5(a). |
| (3) | Includes 994,318 shares of New Allurion Common Stock issued to Medtronic in exchange for its 700,000 shares of Compute Health Class A Common Stock. Refer to note 5(f) below. |
| (4) | Refer to notes 1.I.B.1 and 1.I.B.2 and notes 5(d), 5(e), 5(g) and 5(q). Shares issued to the Sponsor and the Additional Class B Holders are net of 161,379 shares of Compute Health Class A Common Stock contributed by the Sponsor to Compute Health pursuant to the Sponsor Contribution Agreement. |
| (5) | Refer to notes 1.II.B.5 and 1.II.3, and notes 5(n) and 5(o). |
| (6) | Refer to notes 1.II.B.6 and 1.II.3, and notes 5(n) and 5(p). |
| (7) | Refer to notes 1.II.1 and 1.II.2 and notes 5(n) and 6(k). Shares issued to HVL include 443,830 shares of New Allurion Common Stock issuable to HVL pursuant to the terms of the HVL Bridge Note, and an aggregate of 158,464 shares of New Allurion Common Stock issued pursuant to HVL’s Termination Agreement. |
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| (8) | Refer to note 1.III and note 5(v). |
| (9) | Refer to note 1.IV and note 5(w). |
| (10) | Excludes the equity-classified penny warrants. |
| 3. | Accounting for the Mergers |
Notwithstanding the legal form of the Mergers pursuant to the Business Combination Agreement, the Mergers represent a reverse merger and are accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, although Compute Health is the legal acquirer that acquired all of the outstanding equity interests of Allurion in the Mergers, Compute Health is treated as the “acquired” company and Allurion is treated as the accounting acquirer for financial statement reporting purposes. Accordingly, the Mergers are treated as the equivalent of Allurion issuing stock for the net assets of Compute Health, accompanied by a recapitalization. The net assets of Compute Health and Allurion are stated at historical cost, with no goodwill or other intangible assets recorded. Subsequent to the completion of the Mergers, the results of operations prior to the Mergers are those of Allurion.
Allurion has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
| • | Allurion’s existing stockholders have the greatest percentage of voting interest in New Allurion; |
| • | Allurion’s existing stockholders have the ability to control decisions regarding election and removal of directors and officers of New Allurion; |
| • | Allurion comprises the ongoing operations of New Allurion; and |
| • | Allurion’s existing senior management is the senior management of New Allurion. |
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| 4. | New Allurion Common Stock Issued to Allurion Stockholders upon the Closings, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, Chardan Equity Facility, the Backstop Agreement, the Contribution Agreements, the RSU Forfeiture Agreement, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement |
The New Allurion Common Stock issued at the Closings is determined as follows:
| Allurion Common Stock outstanding prior to the Closings |
8,741,142 | |||
| Allurion Common Stock issued to Convertible Noteholders outstanding prior to the Closings |
3,375,503 | |||
| Allurion Preferred Stock outstanding prior to the Closings |
19,915,450 | |||
|
|
|
|||
| 32,032,095 | ||||
| Intermediate Merger Exchange Ratio |
0.9780 | |||
|
|
|
|||
| 31,327,361 | ||||
| Less: Shares of New Allurion Common Stock issued to Allurion Convertible Noteholders upon the Closings |
(3,301,239 | ) | ||
| Less: Shares related to the Gaur Contribution Agreement and RSU Forfeiture Agreement |
(158,464 | ) | ||
|
|
|
|||
| Shares of New Allurion Common Stock issued to Allurion Stockholders upon the Closings |
27,867,658 | |||
|
|
|
|||
| 5. | Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet |
The unaudited pro forma condensed combined balance sheet as of March 31, 2023 reflects transaction accounting adjustments that depict the accounting for the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement.
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Balance Sheet Pro forma Transaction Accounting Adjustments:
Compute Health pro forma transaction accounting:
| a) | To reflect Public Stockholders exercised their redemption rights with respect to 5,649,904 shares of Compute Health Class A Common Stock subject to redemption prior to the consummation of the Mergers at a redemption price of approximately $10.72 per share, or $60.6 million in cash. Refer to note 1.I.A. |
| b) | To reflect the forfeiture of 30,000 shares of Compute Health Class B Common Stock by Osama Alswailem, a member of the Compute Health Board, as a result of his resignation from the Compute Health Board on January 29, 2023. |
| c) | To reflect the additional borrowings of $3.1 million of the Sponsor Loans subsequent to March 31, 2023. Refer to note 1.II.B.7. |
| d) | To reflect the exchange and conversion of 21,442,500 shares of Compute Health Class B Common Stock, and 12,833,333 liability-classified Compute Health Private Warrants with a fair value of $5.1 million, held by the Sponsor into 2,088,327 shares of Compute Health Class A Common Stock pursuant to the Sponsor Support Agreement. The corresponding offset has been recorded as an increase in additional paid-in capital. Pursuant to the Sponsor Contribution Agreement, 161,379 shares of Compute Health Class A Common Stock were contributed to Compute Health as a contribution of capital immediately prior to the CPUH Merger Closing. See notes 1.I.B.1 and 1.I.C. |
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| e) | To reflect the exchange and conversion of 90,000 shares of Compute Health Class B Common Stock held in the aggregate by the Additional Class B Holders into an aggregate of 63,360 shares of Compute Health Class A Common Stock pursuant to the Sponsor Support Agreement. The corresponding offset has been recorded as an increase in additional paid-in capital. Refer to note 1.I.B.2. |
| f) | To reflect the reclassification of 700,000 shares of Compute Health Class A Common Stock that was subject to redemption prior to the Closings, or $7.0 million, to permanent equity in connection with the Non-Redemption Agreement. The reclassification of shares has been recorded as a reduction to the Trust Account and an increase to cash. Pursuant to the Non-Redemption Agreement, Medtronic waived the redemption rights associated with 700,000 shares of its Compute Health Class A Common Stock upon the completion of the Mergers, in connection to Medtronic’s and Allurion’s entry into the Medtronic Sales Agency Agreement in accordance with the terms of the Non-Redemption Agreement. These 700,000 shares of Compute Health Class A Common Stock were converted into 994,318 shares of New Allurion Common Stock upon the consummation of the CPUH Merger, as a result of applying the CPUH Exchange Ratio. Refer to note 1.I.D.1. |
| g) | To reflect, upon the CPUH Merger Closing (and taking into account the transactions contemplated by the Sponsor Contribution Agreement) pursuant to the Business Combination Agreement, the conversion and exchange of all then-outstanding shares of Compute Health Class A Common Stock into shares of New Allurion Common Stock based on the CPUH Exchange Ratio. Refer to note 1.I.D.2. |
| h) | To record the cash settlement of $7.1 million, of which $4.0 million was related to deferred legal costs incurred during the IPO and $3.1 million was related to CPUH transaction costs that are deemed to be direct and incremental costs of the Mergers. These amounts were due upon completion of the Mergers. |
| i) | To reflect Compute Health’s total estimated advisory, legal, accounting and other professional fees of $5.3 million that are deemed to be direct and incremental costs of the Mergers as a reduction to cash and cash equivalents, and accumulated deficit. |
| j) | To reflect the release of $35.9 million from the Trust Account to cash and cash equivalents pursuant to the Business Combination Agreement, after giving effect to Public Stockholders exercised their redemption rights to have their Class A Common Stock redeemed for their pro rata share of the Trust Account. Refer to note 1.I.A. |
Allurion pro forma transaction accounting:
| k) | To record the exercise of Allurion Options subsequent to March 31, 2023. |
| l) | To reflect the issuance of 904,336 shares of Allurion Common Stock resulting from the vesting of certain Allurion RSUs and Allurion Options whereby 62.5% of the Allurion RSUs, and 33.33% of the then unvested Allurion Options became vested and exercisable at the Closings (refer to note 6(f) below), in an aggregate amount of $5.0 million recorded in additional paid-in capital. These amounts reflect that pursuant to the RSU Forfeiture Agreement, 81,014 shares of Allurion RSUs were forfeited. The corresponding offset has been recorded as a decrease of $5.0 million in accumulated deficit. These 904,336 shares of Allurion Common Stock are to be converted into 884,440 shares of New Allurion Common Stock upon the consummation of the Intermediate Merger, subject to the Intermediate Merger Exchange Ratio. Refer to notes 1.II.7 and 1.II.B.3. |
| m) | To reflect the issuance of 221,715 shares of Allurion Common Stock upon the conversion of the outstanding principal of $3.1 million and accrued interest of $52.3 thousand of the Allurion Convertible Notes payables pursuant to the terms of the Allurion Convertible Notes issued in 2021. The corresponding offsets related to the conversion have been recorded as an increase of $3.2 million in additional paid-in capital and a decrease of $52.3 thousand in accumulated deficit. Refer to note 1.II.A.1. |
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| n) | To reflect the cash proceeds of $15.1 million subsequent to March 31, 2023, net of a Repayment of $10.8 million and a prepayment penalty of $1.5 million in connection with $28.7 million of Allurion Convertible Notes that were issued prior to the Closings (inclusive of $13.6 million of Allurion Convertible Notes raised as of March 31, 2023), with an interest expense of $0.4 million, the issuance of 3,153,788 shares of Allurion Common Stock upon the conversion of the outstanding balance of these Allurion Convertible Notes pursuant to the terms of the respective convertible notes, and the issuance of 1,400,000 Backstop Shares pursuant to the Backstop Agreement. The corresponding offsets related to the conversion have been recorded as an increase of $18.4 million in additional paid-in capital and a decrease of $1.9 million in accumulated deficit. Refer to notes 1.II.1, 1.II.2 and 1.II.A.1. |
| o) | To reflect the cash proceeds of $40.0 million in connection with the Revenue Interest Financing at the Intermediate Merger Closing, which is accounted for as a debt instrument. The debt instrument has been recorded at fair value, or $40.0 million at issuance. In addition, the PIPE Conversion Option has been recorded as a derivative liability with a fair value of $1.8 million. The PIPE Conversion Option derivative of $1.8 million is considered as transaction costs, which have been recorded as a reduction to accumulated deficit. Upon the Closings, New Allurion issued 250,000 Additional RTW Shares, and 700,000 Backstop Shares to RTW in consideration of RTW’s commitment to purchase its Backstop Purchase Amount. Refer to notes 1.II.3, 1.II.B.4 and 1.II.B.5. |
| p) | To reflect the net cash proceeds of $1.8 million in connection with the Fortress Financing, which is accounted for as a debt instrument. The total cash proceeds of $60.0 million less the related financing costs of $0.5 million, partially offset by the repayment of the Runway Loan of $55.0 million, the prepayment fee of the Runway Loan of $1.1 million, and the final payment fee of the Runway Loan of $1.6 million have been recorded in the pro forma balance sheet. The Runway Loan of $55.0 million, coupled with a discount of $1.5 million, are then derecognized. The issuance of the Fortress Financing of $60.0 million, net of the financing costs of $0.5 million, has been recorded as a non-current liability. The corresponding offset related to the debt extinguishment is a decrease in accumulated deficit of |
18
| $4.1 million related to the cash settlement of the prepayment and final payment fees to Runway of $2.7 million and the loss on extinguishment of debt of $1.5 million. Upon the Closings, New Allurion issued 250,000 Additional Fortress Shares, and 700,000 Backstop Shares to Fortress in consideration of Fortress’ commitment to purchase its Backstop Purchase Amount. Refer to notes 1.II.3 and 1.II.B.6. |
| q) | To record the settlement of $6.2 million of the outstanding principal balance under the Sponsor Loans. Of which, $2.5 million was settled in cash and cash equivalents and the remaining principal balance outstanding was converted into 525,568 shares of New Allurion Common Stock at a price per share of $7.04. The corresponding offsets have been recorded as an increase in New Allurion Common Stock related to 525,568 shares issued, and an increase in additional paid-in capital of $3.7 million. Refer to note 1.II.B.7. |
| r) | To record the contingent consideration of $53.3 million for the estimated fair value of the Contingency Shares to be issued to the Eligible Allurion Equityholders upon the stock price achievements of New Allurion Common Stock pursuant to the Business Combination Agreement. The Contingency Shares are not considered indexed to New Allurion Common Stock and are therefore classified as a liability in the unaudited pro forma condensed combined balance sheet and will be remeasured at fair value at each reporting date until such time as the milestones have been met or the earnout period expires. The corresponding offset has been recorded as a reduction in additional paid-in capital. Refer to note 1.V. |
| s) | To reflect Allurion’s total estimated advisory, legal, accounting and other professional fees of $13.9 million that are deemed to be direct and incremental costs of the Mergers as a reduction to additional paid-in capital. The reduction of $13.9 million to additional paid-in capital was reflected as a payment of $13.2 million in cash, a reduction of $1.6 million to accrued expenses and other current liabilities, a reduction of $3.1 million to accounts payable, and a reduction of $5.4 million to other long-term assets for deferred offering costs. |
| t) | To record the derecognition of the warrant liabilities with respect to Allurion Common Stock and Allurion Preferred Stock, as well as a corresponding increase in additional paid-in capital, to reflect the conversion of the respective outstanding Allurion Warrants to purchase Allurion Common Stock and Allurion Preferred Stock becoming New Allurion Warrants pursuant to the Business Combination Agreement. Refer to note 1.II. |
| u) | To reflect, in the Intermediate Merger pursuant to the Business Combination Agreement, the conversion and exchange of all outstanding shares of capital stock of Allurion (including shares of Allurion Common Stock resulting from the conversions of Allurion Convertible Notes, Bridge Notes, and Allurion RSU Awards) based on the Intermediate Merger Exchange Ratio into 31,327,361 shares of New Allurion Common Stock (refer to note 4), and the elimination of the accumulated deficit of Compute Health, the accounting acquiree. As a result of the recapitalization in connection with the Intermediate Merger, the carrying value of Allurion Common Stock of $51.6 thousand, and Compute Health’s accumulated deficit of $28.8 million are derecognized. The shares of New Allurion Common Stock issued in exchange for Allurion’s capital have been recorded to New Allurion Common Stock of $3.1 thousand and additional paid-in capital in amount of $68.4 million. Refer to notes 1.II.6, 1.II.7, 1.II.B.1, and 1.II.B.3. |
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Pro forma adjustments directly attributable to the PIPE Investment and Chardan Equity Facility:
| v) | To reflect the issuance of an aggregate of 5,386,695 shares of New Allurion Common Stock in the PIPE Investment at a purchase price of $7.04 per share, for an aggregate issue price of $37.9 million. Refer to note 1.III. |
| w) | To reflect the issuance of 35,511 shares of New Allurion Common Stock, or $250 thousand as a commitment fee, recorded within additional paid-in capital, and a cash payment of $75 thousand, as the structuring fees in connection with the Chardan Equity Facility. The corresponding offset has been recorded as a decrease in accumulated deficit. Refer to note 1.IV. |
| 6. | Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the Three Months Ended March 31, 2023 and the Year Ended December 31, 2022 |
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro forma Transaction Accounting Adjustments:
| a) | To reflect an adjustment to eliminate Compute Health’s monthly fee of $10.0 thousand for administrative support services. |
| b) | To reflect an adjustment to eliminate the impact of the change in the fair value of the 12,833,333 liability-classified Compute Health Private Warrants as it is assumed that the derivative warrant liability would have been extinguished upon the conversion and exchanged by the Sponsor on January 1, 2022 under the Sponsor Support Agreement. Refer to note 1.I.B.1. |
| c) | To reflect an adjustment to eliminate the impact of the change in the fair value of the Sponsor Loans due to the Sponsor and its affiliates as it is assumed that the Sponsor Loans would have been extinguished upon the cash settlement pursuant to the Business Combination Agreement as if the Mergers had occurred on January 1, 2022. |
| d) | To reflect the derecognition of investment income related to the investments held in the Trust Account as if the Mergers had occurred on January 1, 2022. |
| e) | To reflect Compute Health’s total estimated advisory, legal, accounting and other professional fees that are deemed to be direct and incremental costs of the Mergers as an adjustment to general and administrative expense as if the Mergers had occurred on January 1, 2022. |
| f) | To recognize the stock-based compensation expense associated with certain Allurion RSU Awards and Allurion Options which contain vesting conditions whereby 62.5% of the Allurion RSU Awards and 33.33% of the then unvested Allurion Options will vest and become exercisable as if the Mergers had occurred on January 1, 2022. Refer to note 5(l) above. |
| g) | To reflect the derecognition of interest expense related to the Allurion Convertible Notes and Runway Loan entered into by Allurion as it is assumed the outstanding principal and accrued interest on these liabilities would have been extinguished upon the respective settlement pursuant to the Business Combination Agreement as if the Mergers had occurred on January 1, 2022. |
| h) | To reflect the expense associated with the cash settlement for the transaction fees and the PIPE Conversion Option derivative related to the Revenue Interest Financing within general and administrative expense as if the Mergers had occurred on January 1, 2022. Refer to note 5(o) above. |
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| i) | To reflect a transaction adjustment to record the expense related to the cash settlement of the prepayment and final payment fees to Runway and the loss on extinguishment of debt as if the Mergers had occurred on January 1, 2022. Refer to note 5(p) above. |
| j) | To reflect the interest expense related to the Fortress Financing to be entered into by New Allurion as if the Mergers had occurred on January 1, 2022. |
| k) | To reflect the prepayment penalty of $1.5 million incurred related to the HVL Bridge Note as pursuant to HVL’s Termination Agreement. |
| l) | To reflect an adjustment to eliminate the impact of the change in the fair value of Allurion Warrant liabilities related to the Allurion liability-classified Allurion Warrants exchanged for an equivalent amount of New Allurion Warrants to acquire shares of New Allurion Common Stock, which are expected to be equity classified, as if the Mergers had occurred on January 1, 2022. Refer to note 5(t) above. |
| m) | To record an expense for the transaction costs related to the Chardan Equity Facility to be entered into by Allurion within general and administrative expense as if the Mergers had occurred on January 1, 2022. Refer to note 5(w) above. |
| n) | The pro forma basic and diluted net loss per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of New Allurion shares outstanding as if the Mergers, the PIPE Investment, the Revenue Interest Financing, the Fortress Financing, the Incremental Financing, the Chardan Equity Facility, the Backstop Agreement, the RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement occurred on January 1, 2022. The calculation of weighted-average shares outstanding for pro forma basic and diluted net loss per share assumes that the shares issuable in connection with the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement have been outstanding for the entirety of the period presented. Pro forma basic and diluted net loss per share is calculated as follows: |
| Three Months Ended March 31, 2023 |
Year Ended December 31, 2022 |
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| Numerator: |
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| Net loss |
$ | (22,943 | ) | $ | (50,307 | ) | ||
| Net loss attributable to common stockholders - basic and diluted |
$ | (23,660 | ) | $ | (53,214 | ) | ||
| Denominator: |
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| Weighted average common shares outstanding used in basic and diluted net loss per share (1) |
47,380,556 | 47,380,556 | ||||||
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| Net loss per share attributable to common stockholders - basic and diluted |
$ | (0.50 | ) | $ | (1.12 | ) | ||
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| (1) | Represents the total number of outstanding shares of New Allurion Common Stock that New Allurion would issue as of the consummation of the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, Chardan Equity Facility, the Backstop Agreement, the |
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RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement. The numbers of outstanding New Allurion Warrants of 18,759,839, New Allurion Options of 4,125,593, New Allurion RSU Awards of 530,664, and New Allurion Warrants of 427,664 to be issued upon the consummation of the Mergers have been excluded from the computation of diluted net loss per share attributable to common stockholders for the three months ended March 31, 2023 and for the year ended December 31, 2022 because including them would have been antidilutive. Shares outstanding exclude the Contingency Shares to be issued as they are issuable upon the occurrence of specified events. Refer to note 1.V. Because the necessary conditions for issuance of the shares had not been met as of March 31, 2023, these shares are excluded from the table above and from the computation of the basic and diluted net loss per share attributable to common stockholders.
Please see the subsections entitled “Questions and Answers — What Are the Possible Sources and the Extent of Dilution that the Public Stockholders that Elect Not to Redeem their Shares Will Experience in Connection with the Business Combination and Related Transactions” and “Risk Factors — If the Business Combination is consummated, Compute Health Stockholders will experience dilution” of this current report on Form 8-K for additional information on the potential dilutive effect of the Mergers, the PIPE Investment, the Incremental Financing, the Revenue Interest Financing, the Fortress Financing, the Chardan Equity Facility, the Backstop Agreement, the RSU Forfeiture Agreement, the Contribution Agreements, the Termination Agreements, the Amended and Restated RTW Side Letter, and the Fortress Letter Agreement.
The weighted average common share outstanding — basic and diluted for the three months ended March 31, 2023 and for the year ended December 31, 2022 is calculated as the sum of: a) 27,867,658 shares of New Allurion Common Stock held by Allurion Stockholders, b) 4,081,380 shares of New Allurion Common Stock held by Public Stockholders, c) 994,318 shares of New Allurion Common Stock held by Medtronic, d) 3,352,710 shares of New Allurion Common Stock held by the Sponsor and the Additional Class B Holders, e) 950,000 shares of New Allurion Common Stock held by RTW, f) 950,000 shares of New Allurion Common Stock held by an affiliate of Fortress, g) 831,526 shares of New
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Allurion Common Stock held by HVL, h) 2,857,409 shares of New Allurion Common Stock held by other Allurion Convertible Noteholders, i) 5,386,695 shares of New Allurion Common Stock held by the PIPE Investors, j) 35,511 shares of New Allurion Common Stock issued in connection with the Chardan Equity Facility, and k) 73,349 equity-classified penny warrants outstanding.
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