As filed with the U.S. Securities and Exchange Commission on July 17, 2025.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Heartflow, Inc.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
331 E. Evelyn Avenue
Mountain View, California 94041
(650) 241-1221
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
John C.M. Farquhar
President and Chief Executive Officer
Heartflow, Inc.
331 E. Evelyn Avenue
Mountain View, California 94041
(650) 241-1221
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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610 Newport Center Drive, 17th Floor | Mountain View, California 94041 | |
Newport Beach, California 92660 | | |
| | 3 Embarcadero Center, 20th Floor |
| | San Francisco, California 94111 |
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following
box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| | Smaller reporting company | |
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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 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further
amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as
amended, or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
Subject to Completion, dated July 17, 2025
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed
with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Preliminary prospectus
shares
Common stock
This is an initial public offering of shares of common stock of Heartflow, Inc. We are offering shares of
our common stock to be sold in this offering. The initial public offering price is expected to be between $
and $ per share.
Prior to this offering, there has been no public market for our common stock. We have applied to list our common
stock on the Nasdaq Global Select Market under the trading symbol “HTFL,” and this offering is contingent upon
obtaining such approval.
Upon completion of this offering, our executive officers, directors, owners of 5% or more of our capital stock and
their respective affiliates will own, in the aggregate, approximately % of our common stock (assuming no
exercise of the underwriters’ option to purchase additional shares and no purchases of shares in this offering by
anyone in this group). These stockholders will be able to exercise significant control over matters requiring
stockholder approval, including the election of directors, amendment of our organizational documents, and
approval of any merger, sale of assets, and other major corporate transactions.
We are an “emerging growth company” as defined under the U.S. federal securities laws and, as such, have
elected to comply with certain reduced public company reporting requirements in this prospectus and may elect to
do so in future filings. See the section titled “Prospectus summary—Implications of being an emerging growth
company.”
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Initial public offering price ................................................................................................... | | | | |
Underwriting discounts and commissions(1) .................................................................... | | | | |
Proceeds to Heartflow, Inc., before expenses ................................................................. | | | | |
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(1)See the section titled “Underwriting” for a description of the compensation payable to the underwriters.
We have granted the underwriters an option for a period of 30 days to purchase up to additional
shares of common stock.
Investing in our common stock involves a high degree of risk. Please see “Risk factors” beginning on Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of common stock to the purchasers on or about , 2025.
, 2025
Table of contents
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Prospectus summary ..................................................................................................................................... | |
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Risk factors ...................................................................................................................................................... | |
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Market and industry data............................................................................................................................... | |
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Use of proceeds ............................................................................................................................................. | |
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Dividend policy ................................................................................................................................................ | |
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Capitalization .................................................................................................................................................. | |
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Dilution ............................................................................................................................................................. | |
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Business .......................................................................................................................................................... | |
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Management ................................................................................................................................................... | |
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Principal stockholders .................................................................................................................................... | |
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Description of capital stock ........................................................................................................................... | |
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Underwriting .................................................................................................................................................... | |
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Legal matters .................................................................................................................................................. | |
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Experts ............................................................................................................................................................. | |
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Through and including , 2025 (the 25th day after the date of this prospectus), all dealers effecting
transactions in our common stock, whether or not participating in this offering, may be required to deliver
a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or subscription.
We have not, and the underwriters have not, authorized anyone to provide you any information or to
make any representations other than those contained in this prospectus or in any free writing prospectus
prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters take
responsibility for, or provide any assurance as to the reliability of, any other information others may give
you. We and the underwriters are offering to sell only the shares offered hereby, and only under
circumstances and in jurisdictions where it is lawful to do so. We are not, and the underwriters are not,
making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or any sale of the shares of our common stock. Our business,
financial condition, and results of operations may have changed since that date.
For investors outside the United States: We have not, and the underwriters have not, done anything that
would permit this offering or the possession or distribution of this prospectus or any free writing
prospectus in connection with this offering in any jurisdiction where action for that purpose is required,
other than in the United States. Persons outside the United States who come into possession of this
prospectus must inform themselves about, and observe any restrictions relating to, the offering of the
shares of common stock and the distribution of this prospectus outside the United States. “Heartflow,” the
Heartflow logos, and other trade names, trademarks, or service marks of Heartflow appearing in this
prospectus are the property of Heartflow. Other trade names, trademarks, or service marks appearing in
this prospectus are the property of their respective holders. We do not intend our use or display of other
companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or
sponsorship of us, by these other companies. Solely for convenience, trade names, trademarks, and
service marks referred to in this prospectus appear without the ®, ™, and SM symbols, but those
references are not intended to indicate, in any way, that we will not assert, to the fullest extent under
applicable law, our rights or that the applicable owner will not assert its rights, to these trade names,
trademarks, and service marks.
Prospectus summary
This summary highlights select information contained in greater detail elsewhere in this prospectus. This
summary is not complete and does not contain all of the information you should consider in making your
investment decision. Before investing in our common stock, you should carefully read this entire
prospectus. You should carefully consider, among other things, the sections titled “Risk factors,” “Special
note regarding forward-looking statements,” “Business,” and “Management’s discussion and analysis of
financial condition and results of operations” and our consolidated financial statements and the related
notes included elsewhere in this prospectus before making an investment decision. Unless the context
otherwise requires, the terms “Heartflow,” “the Company,” “we,” “us,” and “our” in this prospectus refer to
Heartflow, Inc. and its wholly owned subsidiaries, or either or both of them as the context may require.
Overview
We have pioneered the use of software and AI to deliver a more accurate and clinically effective non-
invasive solution for diagnosing and managing coronary artery disease (“CAD”), a leading cause of death
worldwide. As of March 31, 2025, our Heartflow Platform has been used to assess CAD in more than
400,000 patients, including 132,000 in 2024 alone. We believe that we are the most widely adopted AI-
powered test for CAD. Our novel platform leverages AI and advanced computational fluid dynamics to
create a personalized 3D model of a patient’s heart from a single coronary computed tomography
angiography (“CCTA”), a specialized type of scan that provides detailed images of the heart’s arteries.
Our Heartflow Platform delivers actionable insights on blood flow, stenosis, plaque volume and plaque
composition thereby overcoming the limitations of traditional non-invasive imaging tests which rely on
indirect measures of coronary disease and lead to higher false negative and false positive rates, as
demonstrated by our PRECISE trial. We believe the differentiated accuracy and clinical utility of our
Heartflow Platform, along with its ability to enhance workflows, will continue to support our growth and
advance the “CCTA + Heartflow” pathway as the definitive standard for the non-invasive diagnosis and
management of CAD.
Cardiovascular disease is the leading cause of death worldwide, with CAD being the most lethal form.
CAD occurs when plaque—a buildup of cholesterol, fat, calcium and other substances—accumulates on
the walls of the coronary arteries, restricting blood flow and increasing the risk of heart attack or stroke.
This condition is responsible for half of all cardiovascular-related deaths globally. In the United States
alone, the Centers for Disease Control (“CDC”) estimates that approximately 805,000 people suffer a
heart attack each year. Despite significant advancements in therapeutic and interventional treatments,
CAD remains a leading cause of death globally because healthcare systems generally lack scalable
methods to efficiently detect, diagnose and quantify CAD at a personalized level.
Based on our analyses using Clarivate’s ProcedureFinder data repository, we estimate that there were
approximately 9.5 million non-invasive tests (“NITs”) in the United States in 2023 for patients experiencing
stable or acute chest pain, which we refer to as symptomatic CAD patients. These NITs primarily include
stress tests, such as single-photon emission computed tomography (“SPECT”), echocardiography and
positron emission tomography (“PET”), which infer the presence of heart disease based on how well
blood is supplied to the heart, and do not measure the actual disease itself. Accordingly, these tests have
been shown to be unreliable and inconsistent.
CCTA has emerged as a leading non-invasive imaging method for evaluating CAD, offering direct and
detailed visualization of the coronary arteries. Unlike traditional stress-based NITs, CCTA enables
physicians to identify the presence and extent of coronary blockage. As a result, CCTA has become the
preferred first-line test for patients with suspected CAD, as evidenced by the AHA and ACC guidelines
elevating CCTA to Class 1, Level A. However, while CCTA provides superior anatomical imaging, it does
not independently quantify the severity of CAD, assess blood flow limitations, or characterize plaque
composition—critical factors for determining the most appropriate, personalized course of treatment for a
patient.
Our Heartflow Platform builds upon the well established strengths of CCTA by going beyond its limitations
and providing new quantified insights and compelling visualizations of data. By applying our advanced AI-
powered technology to a single CCTA scan, we generate a precise, patient-specific analysis that
quantifies blood flow, measures plaque burden, and characterizes plaque composition—at every point in
the major coronary arteries.
To date, we have developed three software products (with a fourth product expected to launch in 2026)
under the Heartflow Platform that provide physicians with the critical insights needed to effectively
diagnose and manage CAD:
•Heartflow RoadMap Analysis offers a highly intuitive anatomic visualization of the coronary arteries,
helping physicians quickly identify clinically relevant areas to focus their review. We provide Heartflow
RoadMap Analysis to accounts as an integrated feature to enhance the efficiency of their CCTA
program and it is not a stand-alone product.
•Heartflow FFRCT Analysis calculates blood flow and pinpoints clinically significant CAD, which is CAD
with a fractional flow reserve (“FFR”) value of 0.80 or below, at every point in the major coronary
arteries. FFR measures the severity of blood flow restriction in the coronary arteries on a scale of 1.0
(no restriction) to 0.0 (complete blockage) by assessing pressure differences across a stenosis during
induced stress, guiding decisions on whether a patient requires invasive revascularization.
•Heartflow Plaque Analysis provides a comprehensive assessment of coronary plaque, enabling
optimized medical treatment strategies.
•Heartflow PCI Planner, which we expect to launch in 2026, will provide advanced visualization and
clinical insights to optimize revascularization strategies, guide device selection, enhance procedural
efficiency, and improve patient care. We plan to provide Heartflow PCI Planner to accounts as an
integrated feature to enhance procedural efficiency, not as a stand-alone product.
We believe we are the first and most widely-adopted AI-powered test for CAD. With over a decade of
commercial presence, we have established a competitively differentiated data set of approximately 110
million annotated images, which is primarily sourced from our commercial relationships with customers,
driving training and refinement of our algorithms for over 10 years and the ability to train new AI models
for future products.
We believe our Heartflow Platform delivers the following key benefits:
•More accurate non-invasive test for CAD, clinically validated to provide superior assessment of
blood flow, plaque volume and plaque characterization compared to traditional non-invasive methods.
•More informed assessments, personalized care, and better risk stratification, positively
impacting physician decisions on which patients should receive an intervention, supporting more
efficient intervention planning and driving more personalized medical management.
•Superior economic efficiency and enhanced interventional treatment planning, accurately
identifying more patients who need interventional treatment while reducing unnecessary invasive
procedures—significantly improving the efficiency of the catheterization lab and therefore hospital
economics.
•Proprietary, secure bi-directional data communication with customers that feeds a growing
database of approximately 110 million annotated CCTA images that we leverage to improve the
Heartflow Platform’s accuracy, automation and clinical utility and seamlessly deliver new features and
workflow efficiencies to our customers.
•Improved workflow through our Heartflow RoadMap Analysis that, as demonstrated in our SMART-
CT study, reduces CCTA interpretation times by approximately 25% and reduces variability between
reviewing physicians by approximately 40%, leading to more consistent diagnoses and standardized
patient care.
•Better patient and provider experience, by leveraging a single CCTA for all of our products,
patients complete their test in approximately 20 minutes with significantly lower radiation exposure
compared to nuclear imaging tests such as SPECT and PET that take multiple hours and require
radioactive tracers to be injected into the bloodstream. By providing a definitive diagnosis upfront, the
Heartflow Platform eliminates the need for layered testing, streamlining the patient journey and
reducing anxiety associated with uncertain or inconclusive results.
We estimate our current market opportunity in the United States for our Heartflow FFRCT Analysis and
Heartflow Plaque Analysis is approximately $5 billion. Based on our analyses using Clarivate’s
ProcedureFinder data repository, we estimate that approximately 9.5 million unique stable chest pain
patients receive NITs in the United States annually. In addition, based on our FORECAST randomized
trial, we further estimate that 33% of patients have stenosis levels between 40% and 90%, which results
in approximately 2.8 million patients eligible for our Heartflow FFRCT Analysis in the stable setting. Based
on the Martin paper, where there were approximately 577,000 hospital discharges in the United States in
2020 due to a principal diagnosis of acute chest pain, and the Bhatt paper, where No ST Elevation
(“NSTE”) related acute chest pain accounted for approximately 70% of acute chest pain, we further
estimate that the annual incidence of patients who have acute chest pain with NSTE is approximately 0.4
million patients. Of these approximately 0.4 million patients, we estimate based on the Kofoed paper that
approximately 70% have obstructive disease and are eligible for our Heartflow FFRCT Analysis, which
results in approximately 0.3 million acute chest pain patients eligible for our Heartflow FFRCT Analysis.
Therefore, we believe there is a market opportunity of approximately 3.1 million patients eligible for our
Heartflow FFRCT Analysis, which, at a U.S. average sales price of $1,067, translates to an estimated
market opportunity of approximately $3.3 billion in the United States.
In addition, we believe our Heartflow Plaque Analysis is applicable to approximately 60% of those 9.5
million NIT patients annually and the majority of patients experiencing acute chest pain. Based on our
PROMISE trial and the Hoffmann paper, we estimate that approximately 60% of CCTA patients have
plaque and are eligible for plaque analysis, which translates to approximately 5.1 million patients eligible
for our Heartflow Plaque Analysis in a stable setting. Based on our internal analysis and the findings in the
Wang paper, where less than 5% of patients were expected to be contraindicated for CCTA, we also
estimate that all of the approximately 0.4 million patients with acute chest pain with NSTE referred to
above will be eligible for our Heartflow Plaque Analysis. Therefore, we believe there is a market
opportunity of approximately 5.5 million patients eligible for our Heartflow Plaque Analysis, which, at an
estimated U.S. sales price of $300, translates to an estimated market opportunity of approximately an
incremental $1.7 billion in the United States.
Beyond the commercialization of Heartflow FFRCT Analysis and Heartflow Plaque Analysis in symptomatic
CAD, we see a significant market opportunity for our technologies in at-risk individuals who show no
symptoms, a segment comprised of approximately 200 million people globally, based on data from the
U.S. Census Bureau, CDC, Eurostat, United Kingdom Office of National Statistics, the Yang paper and
the MacDonald paper. To unlock this potential, we are continuing to evaluate new product opportunities
and appropriate clinical evidence supporting eventual regulatory approval, payor coverage and
commercialization.
We believe the Heartflow Platform is the most extensively studied AI-enabled test for CAD. Our belief is
grounded in our analysis, including that the Heartflow Platform and its accuracy, clinical utility and
economic benefits have been evaluated in over 100 clinical studies and more than 130,000 patients,
including our PRECISE and FORECAST trials, each a large randomized controlled trial, with results
published in over 600 peer-reviewed clinical publications. Our studies, including the PRECISE, NXT and
PACIFIC trials, have consistently demonstrated that the Heartflow Platform is more accurate than
traditional non-invasive tests and highly concordant to invasive testing, reduces unnecessary invasive
testing, and enables physicians to optimize treatment and ultimately provide more efficient care.
We have developed a highly scalable, capital efficient commercial model that combines Territory Sales
Managers (“TSMs”) who drive new account adoption with Territory Account Managers (“TAMs”) who focus
on increasing utilization by educating referring physicians. Our commercial team does not cover cases or
otherwise spend time in an operating room or lab setting, which enables them to focus solely on driving
commercial adoption and educational activities.
Our technology is simple and intuitive and does not require the purchase of any capital equipment. Our
onboarding process seamlessly integrates the Heartflow Platform into the customer’s daily workflow.
These unique attributes of our business model afford our commercial organization a differentiated level of
efficiency and scalability.
Current clinical guidelines strongly support the adoption of the Heartflow Platform. The CCTA + Heartflow
FFRCT Analysis pathway is supported by the American Heart Association (“AHA”) and American College of
Cardiology (“ACC”) guidelines, with CCTA identified as a Class 1, Level A test and Heartflow FFRCT
Analysis identified as a Class 2a, Level B test for the diagnosis of CAD in certain patients with stable or
acute chest pain and no known CAD. The AHA and ACC guidelines utilize Classes and Levels to indicate
the strength of a recommendation and the quality of supporting evidence, respectively. Class 1 represents
the strongest recommendation, followed by Class 2a, which represents a moderate recommendation.
Similarly, Level A signifies the highest quality of evidence, while Level B indicates moderate quality.
We believe current reimbursement policies support the adoption of the Heartflow Platform. Our Heartflow
FFRCT Analysis is reimbursed under a dedicated Category I Current Procedural Terminology (“CPT”)
code, effective as of January 1, 2024, and has established coverage policies representing approximately
99% of covered lives in the United States. A Category I CPT code was recently established for Heartflow
Plaque Analysis. It will go into effect on January 1, 2026, and is covered by all seven Medicare
administrative contractor (“MACs”). A Category I CPT code designates a procedure or service that uses
device(s) with Food and Drug Administration (“FDA”) clearance or approval (when required), is performed
by many physicians across the United States for its intended clinical use, aligns with current medical
practice, and has documented efficacy in literature. The Category I CPT status for our Heartflow FFRCT
Analysis and Heartflow Plaque Analysis validates their widespread use and distinguish them from
emerging technologies that are assigned Category III CPT codes.
We primarily generate revenue on a “pay-per-click” basis each time a physician chooses to review either
our Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both. Heartflow FFRCT Analysis has served
as our commercial foundation, representing 99% of our total revenue as of March 31, 2025. In the second
half of 2023, we initiated limited market education efforts for Heartflow Plaque Analysis, our second
commercial product. Our Heartflow RoadMap Analysis is generally provided as a workflow efficiency tool
to drive customer retention and loyalty and is not a stand-alone product. We expect to launch our next
product, Heartflow PCI Planner, in 2026 as an integrated feature to enhance procedural efficiency, not as
a stand-alone product.
We have experienced significant revenue growth since we began commercializing the Heartflow Platform
in 2015. We recognized revenue of $125.8 million for the year ended December 31, 2024, compared to
revenue of $87.2 million for the year ended December 31, 2023, representing 44% year-over-year growth.
We recognized revenue of $37.2 million for the three months ended March 31, 2025, compared to
revenue of $26.8 million for the three months ended March 31, 2024, representing 39% growth over the
prior year period. The software-based nature of our Heartflow Platform produces an attractive gross
margin profile, which continues to expand as we leverage AI to automate an increasing portion of our
“human-in-the loop” quality control process, where learnings are fed back into our algorithms to make
them smarter and more efficient. For the twelve months ended December 31, 2024, we generated gross
margins of 75%, an increase of 8 percentage points year-over-year from December 31, 2023. Our net
losses were $95.7 million and $96.4 million for the years ended December 31, 2023 and 2024,
respectively. Our accumulated deficit was $874.5 million and $971.0 million as of December 31, 2023 and
2024, respectively. Our net losses were $20.9 million and $32.3 million for the three months ended March
31, 2024 and 2025, respectively. Our accumulated deficit was $1.0 billion as of March 31, 2025. For the
three months ended March 31, 2025, we generated gross margins of 75%, an increase of 3 percentage
points over the three months ended March 31, 2024.
Market overview and opportunity
Overview of CAD
Cardiovascular disease is the leading cause of death worldwide, with CAD being the most lethal form.
CAD occurs when plaque—a buildup of cholesterol, fat, calcium and other substances—accumulates on
the walls of the coronary arteries, restricting blood flow and increasing the risk of heart attack or stroke.
This condition is responsible for half of all cardiovascular-related deaths globally.
Key risk factors, including high cholesterol, hypertension, smoking, diabetes, obesity, physical inactivity,
and genetic predisposition, accelerate plaque formation and destabilization. In the United States alone,
the CDC estimates that approximately 805,000 people suffer a heart attack each year. CAD can be
effectively treated with well-established therapeutics designed to reduce plaque progression and change
its composition, or interventional procedures used to open the arteries and restore blood flow. However,
achieving an accurate diagnosis for the condition has historically been the primary roadblock for the
effective care and management of CAD.
NITs are the first line approach for detecting CAD in symptomatic patients. Based on our analyses using
Clarivate’s ProcedureFinder data repository, with 9.5 million tests performed for the diagnosis of CAD in
the United States in 2023, NITs are by far the most widely used method to diagnose CAD. However,
traditional NITs are not able to measure lesion-specific blood flow and are not an efficient or effective way
to calculate plaque volume and composition. As a result, they lack the key metrics physicians need to
guide treatment decisions and have been clinically shown to be unreliable and inconsistent for diagnosing
CAD.
Limitations of traditional non-invasive tests for CAD
There are two primary types of NITs: (i) stress tests, which infer the presence of CAD based on blood
perfusion, and (ii) CCTA, which directly images the patient’s coronary arteries.
Stress-based NITs include SPECT, PET and stress echocardiography. Stress-based NITs rely on
surrogate markers of CAD to deduce the disease in the coronary artery without actually assessing the
coronary arteries or the disease itself. As a result, approximately 20–50% of patients who undergo stress-
based NITs go home with false negatives, or undetected CAD that should have required an intervention,
based on the Nakanishi paper and the Yokota paper. In addition, based on the 2014 Patel paper, up to
55% of patients receive false positives and are sent to the cardiac catheterization lab for an invasive
diagnostic angiography when an intervention was never needed exposing patients to unnecessary risks
including vascular injury and bleeding complications. This results in significant additional costs to the
healthcare system and poor patient experience.
CCTA is a high-resolution 3D imaging method that uses X-rays to produce detailed pictures of the heart's
arteries and other structures. The analyses performed by our Heartflow Platform rely on CCTA images
from third-party CT manufacturers. Because CCTA images are used across multiple medical practices, by
different medical professionals and others, CT scanners have historically and currently output CCTA
images in standard file formats rather than proprietary formats. Unlike stress tests that rely on indirect
measures to infer heart disease, CCTA provides direct visualization of the patient’s anatomy and can
allow for a comprehensive visual assessment of coronary stenosis and plaque burden. CCTA has been
clinically demonstrated in the SCOT-HEART trial to have the highest diagnostic performance of all
traditional non-invasive imaging tests for CAD. In recognition of its superior diagnostic accuracy, in
October 2021 the AHA and ACC elevated CCTA to a first line Class 1, Level A test in the guidelines for
certain patients with stable or acute chest pain and no known CAD, above stress testing which is Class 1,
Level B. While CCTA accurately identifies stenosis in the coronary arteries, it does not calculate the blood
flow through the arteries to identify whether the stenosis is clinically significant and does not provide
plaque quantification or composition without significant and time-consuming and variable manual
calculations.
Our Heartflow Platform, which requires a CCTA image from a CT scanner to perform its analysis,
significantly improves the clinical utility of CCTA and addresses the limitations of traditional non-invasive
CAD testing by combining existing CCTA images with our AI algorithms to provide actionable data on
blood flow, stenosis, plaque volume and plaque composition. This delivers superior clinical utility relative
to other NITs and compelling economic benefits, which are supported by extensive clinical evidence. As a
result, we believe the CCTA + Heartflow pathway will become the standard of care for the non-invasive
diagnosis of CAD over time.
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Traditional NITs vs. Heartflow |
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Figure 1: A comparison of the visual output of traditional non-invasive tests. Left: Stress echocardiogram.
Center: SPECT and PET. Right: CCTA image. Far Right: Heartflow FFRCT Analysis image which color
codes coronary blood flow to identify clinically significant blockages.
Our symptomatic CAD market opportunity
We estimate our current market opportunity in the United States for our Heartflow FFRCT Analysis and
Heartflow Plaque Analysis is approximately $5 billion. Based on our analyses using Clarivate’s
ProcedureFinder data repository, we estimate that there were approximately 9.5 million NITs in the United
States for the diagnosis of CAD in 2023. In addition, based on our FORECAST randomized trial and the
Wang paper, we believe there were approximately 8.6 million patients that were addressable with CCTA
after accounting for layered testing and contraindications to CCTA. CCTA testing volumes have grown
rapidly, and we believe they will continue to outpace the broader market growth driven by the recently
established Class 1, Level A guidelines, superior clinical utility to stress tests and improved
reimbursement.
Our Heartflow FFRCT Analysis is reimbursed for use on any CCTA showing 40% to 90% stenosis, which,
based on our FORECAST randomized trial, we estimate to be approximately 33% of all CCTAs annually.
We believe that CCTA + Heartflow FFRCT Analysis therefore is applicable to 33% of the NIT market and a
majority of patients experiencing acute chest pain, which represents 3.1 million patients and an estimated
market opportunity of approximately $3.3 billion in the United States. Our Heartflow Plaque Analysis is
reimbursed for plaque identified on CCTA with 1% to 69% stenosis, which, based on our PROMISE trial
and the Hoffmann paper, we estimate to cover approximately 60% of all CCTAs annually and a majority of
patients experiencing acute chest pain. We believe that CCTA + Heartflow Plaque Analysis is therefore
applicable to 60% of the NIT market, which represents 5.5 million patients and an estimated market
opportunity of an incremental approximately $1.7 billion in the United States.
While our current focus is on the United States and the Heartflow Platform has been cleared by the FDA
(K213857), our Heartflow FFRCT Analysis has commercial presence and regulatory approval in the United
Kingdom, European Union, Australia, Canada and Japan. The Heartflow Platform has also been cleared
by the equivalent regulatory authorities in Israel, Saudi Arabia, United Arab Emirates, and licensed in
Bahrain. In the future we may expand our international presence beyond these markets and extend our
platform to additional indications.
Our technology
Heartflow enhances CCTA, the most advanced non-invasive imaging modality for assessing CAD, with
AI-powered analysis to deliver more accurate and clinically actionable insights for diagnosing and
managing CAD. The Heartflow Platform applies deep learning, an advanced form of AI, and
computational fluid dynamics to CCTA images to create a personalized 3D model of a patient’s heart
based on a single CCTA image. This model provides actionable insights into blood flow, stenosis, plaque
volume and plaque composition allowing precise diagnosis, risk stratification, and treatment planning –
without the need for an invasive procedure.
The CCTA + Heartflow pathway addresses the limitations of traditional non-invasive tests that only assess
indirect measures for coronary disease and therefore result in higher rates of false negative and false
positive CAD diagnoses, as demonstrated by our PRECISE trial. We believe the differentiated accuracy
and clinical utility of the CCTA + Heartflow pathway will continue to support our growth and advance the
standard for the non-invasive diagnosis and management of CAD.
We designed our AI-powered software platform to be highly scalable, seamlessly integrate into existing
physician workflows for diagnosing CAD, and improve as we ingest more data over time. By leveraging AI
to process massive volumes of cases and a “human-in-the loop” quality control process, where learnings
are fed back into our algorithms to improve their performance and efficiency, we have rapidly scaled our
platform to deliver accurate, timely results to benefit physicians and patients alike.
Figure 2: The CCTA + Heartflow pathway
Our product portfolio
To date, we have created three software products (with a fourth product expected to launch in 2026) in a
unified platform and user experience that provide the critical data physicians need to effectively manage
patients with suspected CAD.
Heartflow RoadMap Analysis: The Heartflow RoadMap Analysis provides
a highly intuitive anatomic visualization of the patient’s coronary anatomy
based on CCTA images. It rapidly orients the imaging physician to clinically
relevant areas of the patient anatomy and provides a preview of what they
will review in the native CCTA images to aid the physician in accurately,
efficiently and consistently identifying stenosis in the coronary arteries.
Heartflow RoadMap Analysis supports more efficient radiology workflow,
improving CCTA read times by 25% and increasing consistency between
reviewing physicians by approximately 40%, as demonstrated in our
SMART-CT study. Physicians use Heartflow Roadmap Analysis as a first-
line assessment tool along with CCTA interpretation to determine whether
to order our more detailed Heartflow FFRCT Analysis or Heartflow Plaque
Analysis reports. We generally provide Heartflow RoadMap Analysis to
accounts as an integrated feature to enhance the efficiency and
consistency of their CCTA programs and it is not a stand-alone product.
We believe the efficiency that Heartflow RoadMap Analysis provides our
customers has resulted in enhanced customer loyalty and retention.
Heartflow FFRCT Analysis: Our flagship product, Heartflow FFRCT
Analysis, consists of a patient-specific, interactive, 3D anatomical
reconstruction of the coronary anatomy that identifies clinically significant
CAD at every point in the major coronary arteries to determine the need
for intervention. Our Heartflow FFRCT Analysis has the highest diagnostic
accuracy for a non-invasive CAD test and has demonstrated a high level
of concordance to invasive FFR, as seen in our PRECISE, NXT and
PACIFIC trials. Current AHA and ACC guidelines designated CCTA as a
Class 1, Level A test for CAD in certain patients with stable or acute chest
pain and no known CAD, and Heartflow FFRCT Analysis as a Class 2a,
Level B test to help physicians guide patient treatment decisions. As of
March 31, 2025, Heartflow FFRCT Analysis represented 99% of our total
revenue.
Heartflow Plaque Analysis: Heartflow Plaque Analysis transforms
coronary plaque assessment from a time-consuming and variable manual
process, which is seldom clinically used, into a rapid, automated, and
highly precise AI-driven solution. The Heartflow Plaque Analysis
automatically provides a comprehensive 3D assessment of a patient’s
coronary plaque, including a characterization of plaque types and
quantification of plaque volumes at every point in the major coronary
arteries. The Heartflow Plaque Analysis has been validated against the
reference standard of invasive intravascular ultrasound (“IVUS”) and
shown to have a 95% agreement with IVUS in quantifying total coronary
plaque volume in our REVEALPLAQUE study. Moreover, our current
findings from the DECIDE registry show the Heartflow Plaque Analysis
led to medical management change in over half of patients beyond CCTA
alone. Because coronary plaque volume is a strong predictor of a
patient’s risk of having a heart attack, this data offers incremental
predictive power over risk factors and stenosis alone and can aid the physician in optimizing medical
management. Our Heartflow Plaque Analysis was cleared by the FDA in October 2022. We began our
limited market education efforts in the second half of 2023, and we expect to broaden our market
education efforts as payor coverage for Heartflow Plaque Analysis increases. We also anticipate our
Heartflow Plaque Analysis to be included in updated cardiac imaging guidelines by radiology benefit
manager EviCore by Evernorth, which provides coverage guidelines to leading commercial health
insurers, effective October 1, 2025.
Heartflow PCI Planner: Heartflow PCI Planner, which we expect to launch in 2026, will enable pre-
percutaneous coronary intervention (“PCI”) assessment of coronary anatomy, lesion-specific physiology
and plaque localization through an interactive 3D model, combined in a single interface. The tool will
provide interventional cardiologists with advanced visualization and clinical insights to help answer critical
questions for revascularization strategies, such as which lesions to treat, how to treat them, the
complexity of PCI, the need for calcium modification, what ancillary tool to use and how to optimize stent
quantity, size and placement. We expect Heartflow PCI Planner to offer procedural efficiency through
advanced preparation, improved patient care by ensuring optimal treatment at the right time and
increased clinician confidence with detailed pre-procedure knowledge. We plan to provide Heartflow PCI
Planner to accounts as an integrated feature to enhance procedural efficiency, not as a stand-alone
product.
Key benefits of our Heartflow Platform
We believe the unique features of our technology allow us to offer superior clinical utility and economic
value to our customers and the broader healthcare system. The key benefits offered by our Heartflow
Platform include:
•More accurate non-invasive test for CAD: Our Heartflow products provide a more accurate non-
invasive assessment of blood flow, plaque characterization and plaque volume compared to
traditional non-invasive tests. Our clinical trials have demonstrated that Heartflow FFRCT Analysis and
Heartflow Plaque Analysis have a high level of concordance to the invasive reference standards of
FFR and IVUS, respectively, and that Heartflow FFRCT Analysis has superior diagnostic accuracy to
CCTA alone as well as both SPECT and PET.
•More informed assessments and personalized care: Our Heartflow FFRCT Analysis and Heartflow
Plaque Analysis have been clinically demonstrated to improve physician decisions on intervention
and treatment planning. Multiple studies and registries have demonstrated that physicians changed
their treatment approach after reviewing our AI-powered reports.
•Superior economic efficiency: Our PRECISE prospective randomized controlled trial demonstrated
that our Heartflow FFRCT Analysis was 78% more likely to identify patients in need of
revascularization and showed a 69% reduction in unnecessary invasive tests as compared to a “usual
care” pathway. The net effect of this pathway was 2x the yield of invasive coronary angiography
leading to a revascularization procedure. As a result, our internal analysis based on the PRECISE
data demonstrated a 20% increase in net revenue for the cardiac catheterization lab, on average.
•Improved workflow: Our Heartflow RoadMap Analysis offers significant workflow benefits, including
improving workflow efficiency by reducing CCTA interpretation times by approximately 25%, as
demonstrated in our SMART-CT study.
•Enhanced interventional treatment planning: The additional detail on individual patient anatomy
and disease state provided by our Heartflow Platform allows for pre-operative selection of appropriate
tools. We believe this saves valuable cardiac catheterization lab time and facilitates a more efficient
procedure.
•Better patient and provider experience: By leveraging a single CCTA for all of our products,
patients complete their test in approximately 20 minutes with significantly lower radiation exposure
compared to nuclear imaging tests such as SPECT and PET that take multiple hours and require
radioactive tracers to be injected into the bloodstream. By providing a definitive diagnosis upfront, the
Heartflow Platform eliminates the need for layered testing, streamlining the patient journey and
reducing anxiety associated with uncertain or inconclusive results.
We believe the benefits of our Heartflow Platform add significant value across all the subspecialties that
impact cardiovascular care including referring cardiologists, imaging physicians and interventionalists. We
have structured our sales force to efficiently call on these key physician stakeholders, with a primary
focus on the imaging physicians who are instrumental in new account adoption and the referring
physicians who are critical to driving volume growth at our existing accounts.
Our success factors
We believe the continued growth of our company will primarily be driven by the following success factors:
•Differentiated approach to the non-invasive diagnosis and management of CAD
•Market leader in AI-powered quantitative CAD analysis with strong customer relationships
•Attractive revenue model with significant operating leverage potential
•Large addressable market opportunity with a significant unmet need
•Robust and compelling portfolio of clinical evidence
•Established reimbursement coverage and favorable society support
•Unique and scalable AI, data and R&D capabilities
•Experienced leadership team
Our growth strategies
We believe the following key strategies will play a critical role in our continued growth:
•Expand adoption of our Heartflow Platform by new accounts
•Broaden awareness of the CCTA + Heartflow pathway to drive volume at existing accounts
•Launch and drive adoption of our Heartflow Plaque Analysis product
•Invest in additional clinical evidence to support adoption and expand our indications
•Extend our technology leadership through continued investment in our platform
•Leverage our platform to pursue adjacent and international markets
Recent developments
Preliminary estimated consolidated financial results as of and for the three months ended June
30, 2025
Our consolidated financial results as of and for the three months ended June 30, 2025 are not yet
complete and will not be available until after the completion of this offering. Accordingly, we are presenting
below certain preliminary estimated and unaudited consolidated data as of and for the three months
ended June 30, 2025. Actual results remain subject to the completion of our financial close processes and
management’s final reviews of our consolidated financial data. Such estimated and unaudited
consolidated data constitute forward-looking statements based solely on information available to us as of
the date of this prospectus and may differ from actual results. This data should not be considered a
substitute for the consolidated financial information to be filed with the SEC in our Quarterly Report on
Form 10-Q for the quarter ended June 30, 2025, when it is due after the completion of our initial public
offering. For additional information, see “Special note regarding forward-looking statements” and “Risk
factors.”
The preliminary consolidated financial data included in this registration statement as of and for the three
months ended June 30, 2025, has been prepared by, and is the responsibility of, Heartflow, Inc.'s
management. PricewaterhouseCoopers LLP has not audited, reviewed, examined, compiled, nor applied
agreed-upon procedures with respect to the preliminary consolidated financial data. Accordingly,
PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect
thereto.
After our quarter-end financial closing process is completed, we may report consolidated financial results
and other data that could differ, although we do not expect the actual results to differ materially from those
reflected in the preliminary estimates. While we believe that such information and estimates are based on
reasonable assumptions, our actual results may vary. Factors that could cause the preliminary estimated
and unaudited consolidated data to differ include, but are not limited to: additional adjustments arising
from discovery of new information that affects accounting estimates, management judgment, or impacts
valuation methodologies underlying these estimated results.
The following preliminary estimated and unaudited consolidated data as of and for the three months
ended June 30, 2025 is presented below:
| | | | | |
| Three months ended June 30, |
| | | | | |
| | | | | |
Consolidated statements of operations data: | | | | | |
Revenue ........................................................................................ | | | | | |
Gross margin ................................................................................ | | | | | |
| | | | | |
As of June 30, 2025, our cash and cash equivalents balance is expected to be $ million as compared to
$109.8 million as of March 31, 2025.
Information regarding comparisons to prior quarters is provided below for additional context.
We expect preliminary unaudited revenue for the three months ended June 30, 2025 to be approximately
$ million to $ million, as compared to $31.1 million for the same period in 2024, an increase of %
to %, and our gross margin to be between % and % for the three months ended June 30, 2025, as
compared to 77% for the same period in 2024. The estimated increase in revenue is primarily attributable
to a % increase in revenue case volume. We expect the number of revenue cases to be
approximately in the three months ended June 30, 2025 as compared to 33,039 for the same period in
2024, an increase of %. The estimated decrease in our gross margin for the three months ended June
30, 2025 was primarily attributable to our investment in the hiring and training of additional personnel in
our production team to support our increasing revenue case volume. Although we expect to continue to
invest in the hiring and training of additional personnel in our production team, we expect our gross
margin will increase over the longer term.
Risk factors summary
Our business is subject to a number of risks and uncertainties, as more fully described in the section titled
“Risk factors” immediately following this prospectus summary. You should read these risks before you
invest in our common stock. These risks include, among others, the following:
•We have incurred significant net losses since our inception, we expect to incur additional substantial
losses in the foreseeable future and we may not be able to achieve or sustain profitability.
•Our revenue is currently generated almost entirely from the sales of only one product, Heartflow
FFRCT Analysis, and we are therefore highly dependent on the success of this product, which makes
it difficult to evaluate our current business, predict our future prospects and forecast our financial
performance and any growth.
•If healthcare providers are unwilling to change their standard practice regarding the evaluation of
CAD, our business, financial condition, results of operations and prospects will be adversely affected.
•If third-party payors, including government payors, do not cover and provide adequate, or any,
reimbursement for the Heartflow Platform, or if existing payment amounts are reduced or coding
changes, adoption of the Heartflow Platform by healthcare providers will be negatively impacted, and
our business, financial condition, results of operations and prospects will be adversely affected.
•We face risks associated with a concentrated customer base.
•We face significant competition in an environment of rapid technological change, and there is a
possibility that our competitors may develop products that are more effective, accurate, reliable, cost-
effective or more advanced than ours, which may harm our financial condition. If we are unable to
compete successfully or our potential market share is reduced, we may be unable to increase or
sustain our revenue or achieve profitability.
•The commercialization of the Heartflow Plaque Analysis product is nascent, and we may not be able
to achieve or maintain sufficient market acceptance or the levels of utilization we expect from the
Heartflow Plaque Analysis product or any other future product.
•We face risks associated with our use and development of artificial intelligence models, which may
result in operational challenges, legal liability, reputational concerns and competitive risks.
•If we fail to properly manage our future growth, our business could suffer.
•Our business could be disrupted by catastrophic events.
•We depend on our information technology systems, and any failure of these systems could harm our
business and adversely affect our business and operating results.
•Our networks and those of our third-party service providers may become the target of bad actors or
security breaches that we cannot anticipate or successfully defend, which could have an adverse
impact on our business.
•We face extensive, regulatory requirements to bring our products to market, and our failure to receive
and maintain regulatory clearances or approvals of our current and future products in the United
States or abroad or to comply with medical device regulatory requirements could adversely affect our
business.
•If we are unable to obtain and maintain sufficient intellectual property rights, or the scope of our rights
is not sufficiently broad, third parties could develop and commercialize technology and products
similar or identical to ours, and our ability to successfully commercialize our technology and products
may be adversely affected.
•Our credit agreement contains certain restrictions that may limit our ability to operate our business. If
we raise additional capital through debt financing, the terms of any new debt could further restrict our
ability to operate our business.
The summary risk factors described above should be read together with the text of the full risk factors in
the section titled “Risk factors” and the other information set forth in this prospectus, including our
consolidated financial statements and the related notes. The risks summarized above or described in full
elsewhere in this prospectus are not the only risks that we face. Additional risks and uncertainties not
presently known to us, or that we currently deem to be immaterial, may also materially adversely affect
our business, financial condition, results of operations, and prospects.
Corporate information
We were incorporated under the laws of the State of Delaware in 2007. On March 1, 2021, we completed
an internal reorganization in which a newly formed parent holding company was put in place. The
previous holders of our common stock and preferred securities became holders of common stock and
preferred securities of HeartFlow Holding, Inc. The equity incentive plan, outstanding equity awards,
outstanding warrants and certain other equity-related agreements of HeartFlow, Inc. were assumed by
HeartFlow Holding, Inc. Our operations and business activities remained at HeartFlow, Inc., and the
wholly-owned non-U.S. subsidiaries of HeartFlow, Inc. remained in place. On July 17, 2025, we
consolidated HeartFlow Holding, Inc. into HeartFlow, Inc. and the previous holders of HeartFlow Holding,
Inc. common stock and preferred securities became holders of our common stock and preferred
securities, and the equity incentive plan, outstanding equity awards, outstanding warrants and certain
other equity-related agreements of HeartFlow Holding, Inc. were assumed by us. In connection with this
consolidation, we changed our name to Heartflow, Inc., whose name appears on the cover of this
prospectus. Our principal executive offices are located at 331 E. Evelyn Avenue, Mountain View,
California 94041, and our telephone number is (650) 241-1221. Our corporate website address is
www.heartflow.com. Information contained on, or accessible through, our website shall not be deemed
incorporated into and is not a part of this prospectus or the registration statement of which it forms a part.
We have included our website in this prospectus solely as an inactive textual reference.
Implications of being an emerging growth company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of
2012 (the “JOBS Act”). We will remain an emerging growth company until the earliest of: (i) the last day of
the fiscal year following the fifth anniversary of the completion of this offering; (ii) the last day of the fiscal
year in which we have total annual gross revenue of at least $1.235 billion; (iii) the last day of the fiscal
year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market
value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of
the second fiscal quarter of such year; or (iv) the date on which we have issued more than $1.0 billion in
non-convertible debt securities during the prior three-year period. An emerging growth company may take
advantage of specified reduced reporting requirements and is relieved of certain other significant
requirements that are otherwise generally applicable to public companies. As a result, the information that
we provide to our stockholders may be different than you might receive from other public reporting
companies in which you hold equity interests.
As an emerging growth company, we have elected to take advantage of certain reduced disclosure
obligations in the registration statement that this prospectus is a part of, and may elect to take advantage
of other reduced reporting requirements in future filings. In particular:
•we will present in this prospectus only two years of audited financial statements, plus any required
unaudited financial statements, and related management’s discussion and analysis of financial
condition and results of operations;
•we will avail ourselves of the exemption from the requirement to obtain an attestation and report from
our independent registered public accounting firm on the assessment of our internal control over
financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
•we will avail ourselves of relief from compliance with the requirements of the Public Company
Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s
report on the financial statements;
•we will provide less extensive disclosure about our executive compensation arrangements; and
•we will not be required to hold stockholder non-binding advisory votes on executive compensation or
golden parachute arrangements.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended
transition period for complying with new or revised accounting standards. This provision allows an
emerging growth company to delay the adoption of some accounting standards until those standards
would otherwise apply to private companies. We have elected to use the extended transition period for
any other new or revised accounting standards during the period in which we remain an emerging growth
company; however, we may adopt certain new or revised accounting standards early. As a result of these
elections, the information that we provide in this prospectus, including our financial statements, may be
different than the information you may receive from other public companies in which you hold equity
interests. In addition, it is possible that some investors will find our common stock less attractive as a
result of these elections, which may result in a less active trading market for our common stock and
higher volatility in our share price.
Basis of presentation
Certain monetary amounts, percentages, and other figures included elsewhere in this prospectus have
been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may
not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages
in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation
of the percentages that precede them.
The consolidated financial statements include the accounts of HeartFlow Holding, Inc. and its
subsidiaries. On July 17, 2025, we consolidated HeartFlow Holding, Inc. into HeartFlow, Inc., and the
previous holders of HeartFlow Holding, Inc. common stock and preferred securities became holders of
our common stock and preferred securities and the equity incentive plan, outstanding equity awards, the
outstanding warrants and other equity agreements of HeartFlow Holding, Inc. have been assumed by us.
The consolidation did not have a material effect on our consolidated financial statements included
elsewhere in this prospectus. The consolidated financial statements of HeartFlow Holding, Inc. are that of
Heartflow, Inc., the registrant whose name appears on the cover of this prospectus.
The offering
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Common stock offered by us ....... | | |
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Option to purchase additional shares ................................................. | | We have granted the underwriters an option for a period of 30 days to purchase up to additional shares of common stock from us at the public offering price, less underwriting discounts and commissions on the same terms as set forth in this prospectus. |
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Common stock to be outstanding after this offering ............................. | | shares (or shares if the underwriters exercise in full their option to purchase additional shares). |
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Use of proceeds ............................... | | We estimate that the net proceeds from this offering will be approximately $ million (or approximately $ million if the underwriters exercise in full their option to purchase up to additional shares of common stock), based on the assumed initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. In connection with the completion of this offering, we are obligated to use certain of the net proceeds from this offering to repay $50.0 million (or $55.0 million if the underwriters exercise any portion of their option to purchase additional shares of common stock) of the indebtedness outstanding under the amended credit agreement and guaranty (as amended, the “2024 Credit Agreement”) with Hayfin Services, LLP (“Hayfin”) and to pay approximately $ million of fees in connection therewith. In connection with the issuance of the 2025 Convertible Notes (as defined below) in January 2025, we entered into Amendment No. 1 to the 2024 Credit Agreement, pursuant to which entities affiliated with Hayfin converted $23.0 million of outstanding indebtedness under the 2024 Credit Agreement in connection with the 2024 Term Loan Conversion (as defined in the section titled “Certain relationships and related-party transactions”) and became holders of 5% or more of our capital stock as of March 31, 2025. We expect to use the remainder of the net proceeds from this offering, together with our existing cash and cash equivalents, to fund our sales and marketing efforts, fund research and product development activities and for other general corporate purposes, including working capital, operating expenses, and capital expenditures. |
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| | We may also use a portion of the net proceeds from this offering to acquire complementary businesses, products, services, or technologies. We periodically evaluate strategic opportunities; however, we have no current understandings or commitments to enter into any such acquisitions or make any such investments. We will have broad discretion in the way that we use the net proceeds of this offering. See the section titled “Use of proceeds” for additional information. |
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Risk factors ....................................... | | You should read the section titled “Risk factors” for a discussion of factors to consider carefully, together with all the other information included in this prospectus, before deciding to invest in our common stock. |
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Proposed Nasdaq trading symbol | | |
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Lock-up agreements ....................... | | In connection with this offering, we, our directors, our executive officers, and the holders of substantially all of our common stock, stock options, and other securities convertible into or exercisable or exchangeable for our common stock, have agreed that, without the prior written consent of J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Piper Sandler & Co. on behalf of the underwriters, subject to certain exceptions more fully described under the section titled “Underwriting”, we and they will not, among other things, sell or otherwise transfer or dispose of any of our securities during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus. See the section titled “Underwriting” for additional information. |
The number of shares of our common stock to be outstanding after this offering is based on
shares of our common stock outstanding as of March 31, 2025 and excludes:
•25,066,625 shares of our common stock issuable upon the exercise of outstanding stock options as
of March 31, 2025 under our HeartFlow Holding, Inc. Amended and Restated 2009 Equity Incentive
Plan (the “2009 Equity Incentive Plan”), with a weighted-average exercise price of $1.71 per share;
•621,827 shares of our common stock issuable upon the exercise of outstanding stock options granted
subsequent to March 31, 2025 under our 2009 Equity Incentive Plan, with a weighted-average
exercise price of $4.67 per share;
•4,811,190 shares of our common stock issuable upon the exercise of warrants outstanding as of
March 31, 2025 held by Hayfin, with an exercise price of $0.01 per share;
•939,911 shares of our common stock reserved for future issuance under our 2009 Equity Incentive
Plan;
• shares of our common stock to be reserved for future issuance under our 2025 Performance
Incentive Plan (the “2025 Plan”), which will become effective upon the commencement of trading of
our common stock on the Nasdaq Global Select Market, from which we will grant restricted stock
units (“RSUs”) covering approximately shares of common stock concurrently with this
offering (based on the assumed initial public offering price of $ per share, which is the midpoint
of the price range set forth on the cover page of this prospectus), as well as any future increases in
the number of shares of common stock reserved for issuance under the 2025 Plan; and
• shares of our common stock reserved for future issuance under our 2025 Employee Stock
Purchase Plan (the “ESPP”), which will become effective upon the commencement of trading of our
common stock on the Nasdaq Global Select Market, as well as any future increases in the number of
shares of common stock reserved for issuance under the ESPP.
Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:
•the adoption, filing, and effectiveness of our amended and restated certificate of incorporation, to be
in effect upon the completion of this offering, and the adoption of our amended and restated bylaws,
to be in effect upon the effectiveness of the amended and restated certificate of incorporation;
•the automatic conversion of 122,231,454 outstanding shares of our Series A, Series B-1, Series B-2,
Series C, Series D, Series E, Series F and Series F-1 redeemable convertible preferred stock
(collectively, our “redeemable convertible preferred stock”) as of March 31, 2025 into an aggregate
of 149,581,128 shares of our common stock, the conversion of which will occur immediately prior to
the completion of this offering (the “Preferred Stock Conversion”);
•the automatic conversion of $98.3 million of convertible promissory notes with original maturity dates
of 48 months from the dates of issuance into an aggregate of shares of our common stock,
which amount includes the $23.0 million aggregate principal amount of notes issued in the 2024 Term
Loan Conversion (collectively, the “2025 Convertible Notes”), assuming the assumed initial public
offering price of $ per share, which is the midpoint of the estimated price range set forth on the
cover page of this prospectus, issued by us in January and March 2025, which will be automatically
converted upon the completion of this offering into an aggregate of shares of our common
stock without interest (the “Convertible Notes Conversion”);
•a -for- reverse stock split of our common stock, which we effected on , 2025 and a
corresponding adjustment to the Preferred Stock Conversion and adjustment to our outstanding
warrants;
•no exercise, settlement or termination of the outstanding options or warrants described above; and
•no exercise by the underwriters of their option to purchase up to additional shares of our
common stock in this offering.
Summary consolidated financial data
The following tables summarize our consolidated financial data for the periods and as of the dates
indicated. The following summary consolidated statements of operations data for the years ended
December 31, 2023 and 2024 have been derived from our audited consolidated financial statements and
related notes included elsewhere in this prospectus. The following summary interim consolidated
statements of operations data for the three months ended March 31, 2024 and 2025, and the summary
interim consolidated balance sheet data as of March 31, 2025, have been derived from our unaudited
interim consolidated financial statements included elsewhere in this prospectus. Our audited consolidated
financial statements and unaudited interim consolidated financial statements included elsewhere in this
prospectus have been prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”). Our unaudited interim consolidated financial statements were prepared on a basis consistent
with our audited consolidated financial statements and include, in our opinion, all adjustments of a normal
and recurring nature that are necessary for the fair statement of the financial information set forth in those
statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of
the results that may be expected for any period in the future and results for the three months ended
March 31, 2025 are not necessarily indicative of results to be expected for the year ended December 31,
2025. You should read the following summary consolidated financial data together with our audited
consolidated financial statements and unaudited interim consolidated financial statements and the related
notes included elsewhere in this prospectus and the section titled “Management’s discussion and analysis
of financial condition and results of operations.” The summary consolidated financial data included in this
section are not intended to replace the consolidated financial statements and the related notes included
elsewhere in this prospectus and are qualified in their entirety by the consolidated financial statements
and the related notes thereto included elsewhere in this prospectus.
| | | | | | | | |
| | | | Three months ended March 31, |
(in thousands, except share and per share amounts) | | | | | | | | |
Consolidated statements of operations data: | | | | | | | | |
Revenue ......................................................... | | | | | | | | |
Cost of revenue ............................................. | | | | | | | | |
Gross profit .................................................... | | | | | | | | |
Operating expenses: .................................... | | | | | | | | |
Research and development ................... | | | | | | | | |
Selling, general and administrative ....... | | | | | | | | |
Total operating expenses .................. | | | | | | | | |
Loss from operations ................................... | | | | | | | | |
Interest expense, net ............................... | | | | | | | | |
Other expense, net .................................. | | | | | | | | |
Loss before provision from income taxes . | | | | | | | | |
(Provision for) benefit from income taxes ........................................................... | | | | | | | | |
Net loss ........................................................... | | | | | | | | |
Cumulative dividends on Series C redeemable convertible preferred stock ........................................................... | | | | | | | | |
Deemed dividend upon down round of redeemable convertible preferred stock ........................................................... | | | | | | | | |
Net loss attributable to common stockholders ................................................... | | | | | | | | |
Net loss per share attributable to common stockholders, basic and diluted(1) .......................................................... | | | | | | | | |
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted(1) .......................................................... | | | | | | | | |
Pro forma net loss per share attributable to common stockholders, basic and diluted(2) .......................................................... | | | | | | | | |
Pro forma weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted(2) ........................................ | | | | | | | | |
| | | | | | | | |
(1)See Notes 2 and 16 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculation
of our basic and diluted net loss per share attributable to common stockholders and the weighted-average number of shares used in the
computation of the per share amounts.
(2)Unaudited pro forma net loss per share attributable to common stockholders, basic and diluted, for the year ended December 31, 2024
and for the three months ended March 31, 2025 is calculated by giving effect to (i) removal of the effect of interest expense related to
the 2024 Term Loan Conversion of $23.0 million and the $50.0 million partial repayment of the indebtedness outstanding, (ii) the
Preferred Stock Conversion, as if the shares resulting from the Preferred Stock Conversion were outstanding as of January 1, 2024, (iii)
the Convertible Notes Conversion at the assumed initial public offering price of $ per share, which is the midpoint of the
estimated price range set forth on the cover page of this prospectus, as if the shares resulting from the Convertible Notes Conversion
were outstanding as of January 1, 2024, (iv) the removal of other expense, net related to the change in fair value of the derivative
liability, and (v) stock-based compensation expense related to the grant of RSUs concurrent with this offering at the assumed
initial public offering price of $ per share, which is the midpoint of the estimated price range set forth on the cover page of this
prospectus, as if the RSUs had been granted on January 1, 2024. The total stock-based compensation expense related to the
concurrent RSU award is estimated to be $ million. The RSUs will be settled in shares of common stock and vest over four years in
annual equal increments, subject to continued service, on the anniversary of the grant date. The following table summarizes our
unaudited pro forma net loss per share for the year ended December 31, 2024 and the three months ended March 31, 2025:
| | | | |
(in thousands, except share and per share amounts) | | Year ended December 31, 2024 | | Three months ended March 31, 2025 |
| | | | |
Net loss attributable to common stockholders, basic and diluted .................. | | | | |
Pro forma adjustment to remove interest expense related to debt conversion and repayment ................................................................................... | | | | |
Pro forma adjustment to remove other expense, net related to the change in fair value of derivative liability .......................................................................... | | | | |
Pro forma adjustment to add stock-based compensation expense related to the RSUs ............................................................................................................ | | | | |
Pro forma net loss attributable to common stockholders ................................ | | | | |
| | | | |
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted .................................. | | | | |
Pro forma adjustment to reflect the Preferred Stock Conversion .................. | | | | |
Pro forma adjustment to reflect the Convertible Notes Conversion .............. | | | | |
Pro forma weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted ................ | | | | |
Pro forma net loss per share attributable to common stockholders, basic and diluted .............................................................................................................. | | | | |
| | | | |
| | | | | | |
| | |
| | | | | | Pro forma as adjusted(2)(3) |
Consolidated balance sheet data: | | | | | | |
Cash and cash equivalents ....................................................... | | | | | | |
Working capital(4) ........................................................................ | | | | | | |
Total assets .................................................................................. | | | | | | |
2024 Term Loan .......................................................................... | | | | | | |
2025 Convertible Notes ............................................................. | | | | | | |
Derivative liability ........................................................................ | | | | | | |
Redeemable convertible preferred stock ................................ | | | | | | |
Accumulated deficit .................................................................... | | | | | | |
Total stockholders’ equity (deficit) ............................................ | | | | | | |
| | | | | | |
(1)The pro forma column above reflects (a) the Preferred Stock Conversion, which will occur immediately prior to the completion of this
offering, as if it had occurred on March 31, 2025, (b) the Convertible Notes Conversion at the assumed initial public offering price of
$ per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus and the resultant
reclassification of our derivative liability to additional paid-in capital, a component of stockholders’ equity (deficit), which will occur upon
the completion of this offering, as if each had occurred as of March 31, 2025, and (c) the adoption, filing, and effectiveness of our
amended and restated certificate of incorporation, to be in effect upon or following the completion of this offering.
(2)The pro forma as adjusted column gives effect to (a) the pro forma adjustments set forth in (1) above, (b) the issuance and sale
of shares of our common stock in this offering at the assumed initial public offering price of $ per share, which is the
midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts
and commissions and estimated offering expenses payable by us, and (c) the assumed repayment of $50.0 million of the indebtedness
outstanding under the 2024 Credit Agreement and payment of approximately $ million of fees in connection therewith.
(3)The pro forma as adjusted information above is illustrative only and will depend on the actual initial public offering price and other terms
of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $ per share
of our common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase
or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, total stockholders’ equity (deficit), and total
capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this
prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares of common stock offered by
us would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, total stockholders’ equity
(deficit), and total capitalization by approximately $ million, assuming the assumed initial public offering price of $ per
share of our common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, remains
the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(4)Working capital is defined as current assets less current liabilities. See our unaudited interim consolidated financial statements and
related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.
Risk factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks
described below, as well as the other information in this prospectus, including our financial statements
and the related notes and “Management’s discussion and analysis of financial condition and results of
operations,” before deciding whether to invest in our common stock. The occurrence of any of the events
or developments described below could have a material adverse effect on our business, financial
condition, results of operations and prospects. In such an event, the market price of our common stock
could decline, and you may lose all or part of your investment. Additional risks and uncertainties not
presently known to us or that we currently believe are not material may also impair our business, financial
condition, results of operations and prospects. Please also see the sections titled “Special note regarding
forward-looking statements” and “Market and industry data.”
Risks related to our business and industry
We have incurred significant net losses since our inception, we expect to incur additional
substantial losses in the foreseeable future and we may not be able to achieve or sustain
profitability.
We have incurred significant net losses since our inception in 2007, and we expect to incur additional
substantial losses in the foreseeable future. For the fiscal years ended December 31, 2023 and 2024, and
the three months ended March 31, 2025, we incurred net losses of $95.7 million, $96.4 million and $32.3
million, respectively. As of December 31, 2023 and 2024, we had an accumulated deficit of $874.5 million
and $971.0 million, respectively. As of March 31, 2025, we had an accumulated deficit of $1.0 billion.
Since inception, we have spent significant amounts of cash to develop the Heartflow Platform, to fund
research and development, including our preclinical research and development activities and clinical trials
related to our products, to scale our commercial operations and to recruit and retain key talent.
The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a
period-to-period comparison of our results of operations may not be a good indication of our future
performance. We expect to continue to incur significant research and development, sales and marketing,
regulatory and other expenses as we expand our marketing efforts to increase adoption of our products,
expand existing relationships with our customers, obtain regulatory clearances or approvals for our
planned or future products, conduct clinical trials to extend applicability of our platform into new
indications or to develop new products or add new features to our existing products. The investments in
our business may be more costly than we expect, and if we do not achieve the benefits anticipated from
these investments, or if the realization of these benefits is delayed, they may not result in increased
revenue or growth in our business. In addition to the anticipated costs of growing our business, we expect
our general and administrative expenses to increase following this offering due to the additional costs of
being a public company. If our revenue growth does not increase to more than offset the anticipated
increases in our operating expenses, we may not be able to achieve or sustain profitability and our
business, financial condition, results of operations and prospects will be harmed.
In addition, our revenue may decline or our revenue growth, if any, may be constrained. Our ability to
increase sales is uncertain, and we may never be able to achieve or sustain profitability for many
reasons, including that: our Heartflow FFRCT Analysis may not achieve widespread adoption among
healthcare providers and we may be unable to increase revenue generated from sales of our Heartflow
FFRCT Analysis; our Heartflow Plaque Analysis may not achieve widespread adoption among healthcare
providers and we may be unable to generate sufficient revenue from sales of our Heartflow Plaque
Analysis; payors, such as insurance companies and government insurance programs, may decide not to
reimburse for our products, may set the amount of such reimbursement too low or reduce the amount of
such reimbursement; healthcare industry trends, including growth in CCTA usage, may move in directions
that do not allow for adoption of our products or that do not provide adequate incentives for the adoption
of our products; competitors may develop or acquire a product that successfully competes with ours;
manufacturers of CT scanners may partner with our competitors or develop or acquire a competing
product and integrate one or more products that successfully competes with ours; we may not be able to
obtain regulatory approval for future versions of our products (including improved versions of our AI
algorithms), new indications for use of our products or other future products; and there may be changes in
existing or anticipated clinical guidelines, including the current ACC and AHA Class 1, Level A guidelines
for CCTA and Class 2a, Level B guidelines for Heartflow FFRCT Analysis for certain patients with stable or
acute chest pain and no known CAD, or the timing of adoption of positive clinical guidelines that support
the use of the Heartflow FFRCT Analysis.
Because of these and the other risks and uncertainties described in this prospectus, we are unable to
predict the extent to which we will be able to increase sales, if at all, or the timing for when or the extent to
which we will become profitable, if ever. We will need to generate significant additional revenue to achieve
and sustain profitability, and even if we do achieve profitability, we may not be able to sustain or increase
profitability. Our failure to become and remain profitable would depress the value of our company and our
stock price and could impair our ability to raise capital, fund our research and development efforts,
expand our business, diversify our product offerings or continue our operations. A decline in the value of
our company could cause you to lose all or part of your investment.
Our revenue is currently generated almost entirely from the sales of only one product, Heartflow
FFRCT Analysis, and we are therefore highly dependent on the success of this product, which
makes it difficult to evaluate our current business, predict our future prospects and forecast our
financial performance and any growth.
As of March 31, 2025, our Heartflow FFRCT Analysis represented 99% of our total revenue. In the second
half of 2023, we began limited market education efforts of our second product, Heartflow Plaque Analysis.
Over the next several years, we expect to continue to devote a substantial amount of resources to
increase sales of our Heartflow FFRCT Analysis and also expand our commercialization efforts and drive
increased adoption of our Heartflow Plaque Analysis. However, we may not succeed in increasing sales
of our Heartflow FFRCT Analysis or in increasing adoption of our Heartflow Plaque Analysis. We expect to
continue to derive almost all of our revenue from sales of Heartflow FFRCT Analysis for the foreseeable
future, so we are highly dependent on its success.
In addition, because we plan to devote substantial resources to increase sales of Heartflow FFRCT
Analysis and rely on it as our main source of revenue, any factors that negatively impact these efforts, our
Heartflow Plaque Analysis commercialization efforts or our ability to diversify our products would have a
material adverse effect on our business, financial condition, results of operations and prospects.
Therefore, it is difficult to predict our future prospects and forecast our financial performance and any
growth, and any such forecasts are inherently limited and subject to a number of uncertainties. If our
assumptions regarding the risks and uncertainties we face, which we use to plan our business, are
incorrect or change due to circumstances in our business or our markets, or if we do not address these
risks successfully, our operating and financial results could differ materially from our expectations and our
business, financial condition, results of operations and prospects could suffer.
If healthcare providers are unwilling to change their standard practice regarding the evaluation of
CAD, our business, financial condition, results of operations and prospects will be adversely
affected.
Our success depends on physicians, hospitals and other healthcare providers adopting and using the
Heartflow Platform to aid in the evaluation of CAD. While we have had some recent success in achieving
broader adoption of the Heartflow Platform, we have in the past faced, and may in the future face,
challenges in achieving higher rates of adoption. Many healthcare providers have extensive experience
with existing non-invasive tests for CAD and have established relationships with the companies that
provide these tests or in some instances own or manage the equipment for these tests in their offices.
Existing tests are performed in a high enough volume that healthcare providers generate sufficient
revenue from their use and are well versed in their use, reimbursement and outcomes. The outcomes and
workflow efficiencies that we believe our Heartflow Platform provides may not be valued by healthcare
providers as highly as we expect or at all. In addition, healthcare providers have been, and may continue
to be, slower to adopt or recommend our products because we have a more limited commercial track
record and healthcare providers may feel they can generate more revenue from existing tests. Healthcare
providers also may not find our clinical data compelling and may not recommend or use our products until
they receive additional recommendations from other healthcare providers that our products have a clinical
benefit, or at all.
In addition, the Heartflow Platform relies on healthcare providers following the ACC and AHA guidelines
by referring certain patients with stable or acute chest pain and no known CAD to undergo a CCTA, with
the CCTA images to be analyzed by our Heartflow FFRCT Analysis. Although the ACC and AHA guidelines
support CCTA plus our Heartflow FFRCT Analysis as the preferred pathway for diagnosing and managing
CAD in certain patients with stable or acute chest pain and no known CAD, these guidelines may not be
widely adopted by healthcare providers. Moreover, healthcare providers may choose not to adopt the
Heartflow Platform if they are not able to obtain an adequate CCTA. Further, if future studies and trials or
other events, including reimbursement rates of CCTA, adversely impact the rate of use of CCTAs in
practice, then healthcare providers may be less willing to adopt a technology that uses CCTAs.
Also, the Heartflow Platform may be more difficult than we expect to integrate into standard practice
because a provider may be resistant to introduce our embedded information technology and workflow
infrastructure. Due to different laws, policies and preferences of healthcare providers regarding patient
privacy both in the United States and abroad, they may be averse to sending data externally (outside of
their facility) or abroad. Furthermore, if healthcare providers using the Heartflow Platform experience what
they perceive to be false negative result or imprecise readings, including due to user error, they may
determine not to continue using our platform going forward.
We expect that addressing these and similar issues will require a significant amount of our time and
resources, and if we are unsuccessful, we would be unable to achieve broader adoption of the Heartflow
Platform by healthcare providers. If our products do not gain broader acceptance by healthcare providers,
our business, financial condition, results of operations and prospects will be adversely affected.
If third-party payors, including government payors, do not cover and provide adequate
reimbursement for the Heartflow Platform, or if existing payment amounts are reduced or coding
policies change, adoption of the Heartflow Platform by healthcare providers may be negatively
impacted, and our business, financial condition, results of operations and prospects will be
adversely affected.
Our ability to grow sales and revenue from our Heartflow FFRCT Analysis and to successfully
commercialize our Heartflow Plaque Analysis depend, in large part, on whether third-party payors,
including private health insurers, managed care plans and government healthcare programs, such as
Medicare and Medicaid, cover and adequately reimburse for the use of the Heartflow Platform and the
underlying CCTA. Patients generally rely on payors to reimburse all or a significant part of the costs
associated with their treatment. As a result, appropriate coding, coverage determinations, and
reimbursement levels are critical to the commercial success of the Heartflow Platform. Reimbursement is
obtained from a variety of sources, including government sponsored and private health insurance plans,
and varies by country and by region within some countries. These payors determine whether to provide
coverage and payment for specific products and procedures.
In addition, payors continually review new technologies and can, without notice, change coverage
parameters, deny coverage, bundle services, or reduce payment amounts. As a result, the coverage
determination process is often time consuming and costly, with no assurance that coverage and adequate
reimbursement will be obtained or maintained if obtained. If payors change their reimbursement policies,
or if the current Category I CPT codes related to our Heartflow FFRCT Analysis or future Category I CPT
codes related to our Heartflow Plaque Analysis are not favorably categorized or priced, reimbursement for
the Heartflow Platform could be reduced to an amount that would make adoption of our Heartflow
Platform challenging.
Moreover, physicians, hospitals and other healthcare providers may decline to adopt or reduce usage of
the Heartflow Platform due to the economic impact a negative change in reimbursement may have on
their business and, as a result, we may experience a significant loss of revenue, which would have a
material adverse effect on our business, financial condition, results of operations and prospects.
Reimbursement for our Heartflow Platform, which includes the separately billable services, Heartflow
FFRCT Analysis and Heartflow Plaque Analysis, is subject to periodic changes to reimbursement levels by
government payors and private health insurers. For example, the Centers for Medicare and Medicaid
Services (“CMS”) adopts changes to reimbursement policies during the annual Medicare rulemaking
process, which includes updates to Medicare payment levels to hospitals under the Medicare Hospital
Outpatient Prospective Payment System (“OPPS”) rule, and updates to Medicare payment rates to
physician offices, independent diagnostic testing facilities, and freestanding imaging centers under the
Medicare Physician Fee Schedule (“MPFS”) rule. In addition to risks associated with government
reimbursement, our Heartflow FFRCT Analysis and Heartflow Plaque Analysis technologies face
reimbursement uncertainty from commercial payors, such as UnitedHealthcare, Aetna, Cigna, Anthem,
and regional Blue Cross Blue Shield plans. Such commercial payors routinely reassess their medical
policies, coverage criteria and payment policies and rates, and may choose to deny coverage or payment,
impose restrictive utilization management protocols (such as prior authorization), or reduce or bundle
payment amounts based on internal cost-effectiveness assessments or evolving clinical guidelines. Even
if Medicare maintains favorable reimbursement, commercial payors may independently determine
whether Heartflow FFRCT Analysis or Heartflow Plaque Analysis meets their plans’ medical necessity
standards, which may vary among commercial payors.
As part of their participation in the Medicare program and in support of the annual rulemaking process,
hospitals submit Medicare cost reports and report their charges for specific services provided in the
hospital setting. These cost and charge data reported from hospitals can impact reimbursement rates
because CMS uses that data to determine future Medicare reimbursement levels on an annual basis. In
the aggregate, when costs associated with a specific service reported by the hospitals decrease, there is
a risk that CMS will reduce the reimbursement rate proportionately. These lower reported costs can be a
result of coding errors or erroneous denials of claims, the inclusion of lower-cost services within the APC,
reductions in costs for services within the APC, or other similar issues. For example, in July 2025, CMS
issued the proposed 2026 OPPS rule, which, if finalized as proposed, could result in a reduction of up to
15% in the Medicare reimbursement rate for the clinical APC that includes our Heartflow FFRCT Analysis,
along with other hospital services. CMS publishes final OPPS and MPFS rules in the fourth quarter each
year. We cannot be sure at this time whether the proposed hospital reimbursement rate for Heartflow
FFRCT Analysis for 2026 will be finalized, modified, or if CMS will increase the rate back to 2025 levels.
There is a risk that similar or other coding or claims issues may occur and lead CMS to lower the
reimbursement rate for the Heartflow Platform for 2027 or in future years. In addition, we may not become
aware of any such issues early enough to prevent any adverse impacts to the reimbursement for our
products, and our ability to remedy any such issues may be limited by applicable laws, regulations or
policies.
Given the evolving nature of the healthcare industry and ongoing healthcare cost reforms, we are and will
continue to be subject to effects of changes in the level of reimbursement for our products. We cannot be
sure that third-party payors will maintain the current level of coverage and payment to our customers for
use of our existing products. A reduction in coverage or payment or change in policy by the Medicare
program could cause some commercial third-party payors to implement similar reductions in their
coverage or payment amounts for the Heartflow Platform. Unfavorable coverage or payment
determinations at the national or local level could adversely affect our business, financial condition,
results of operations and prospects.
We face risks associated with a concentrated customer base.
Our Heartflow Platform had an installed base of more than 1,100 accounts in the United States as of
December 31, 2024. We define an “account” as any individual facility that orders a Heartflow FFRCT
Analysis, Heartflow Plaque Analysis, or both. We define an account as “new” if a unique facility begins
generating revenue cases for our FFRCT Analysis, Plaque Analysis, or both. Accounts may have more
than one reading physician or CT machine. Conversely, a “customer” can be either an individual account
or a health or hospital system with multiple accounts. While a single customer may include multiple
accounts, no single customer accounted for 10% or more of our revenue during the years ended
December 31, 2023 and 2024 or for the three months ended March 31, 2024 and 2025. However, the
decision-making function for some of these accounts is concentrated in a relatively small number of
customers, such that the loss of one customer could result in a disproportionate loss across our accounts.
For example, for the year ended December 31, 2024, our top two largest customers, both large health
systems with multiple accounts, collectively represented approximately 8% of our revenue.
We cannot guarantee that that we will continue to generate revenue from these customers, whether due
to increase in competition, new technologies, our customers’ ability to terminate their contracts with us or
reduce order volumes, or other factors outside of our control. If we do not increase the number of our
customers and drive increased use of the Heartflow Platform as the preferred non-invasive testing
method for assessing CAD, we will continue to face risks associated with a more concentrated customer
base.
Revenue from these customers may fluctuate from time to time due to demand for the Heartflow Platform,
the timing of which may be affected by seasonality or other factors outside of our control such as CT
scanner capacity, contrast availability and staffing availability. These customers could also potentially
pressure us to reduce the prices we charge for the Heartflow Platform, which could have a material
adverse effect on our margins and business. For example, during the year ended December 31, 2024,
our average sales price was impacted by customer pricing contracts that included utilization and volume
rebates and by changes in the mix of customer accounts, which trend we expect to continue in the near
term, and it is possible that similar trends in customer pricing contracts may continue to have a negative
impact on our average sales price in the future. In addition, if any of our largest customers terminates its
relationship with us or otherwise reduces its FFRCT Analysis volumes for any reason, we may be unable
to replace them with a customer who refers a similar number of patients for the Heartflow Platform, and
such termination or reduction in volume could have a material adverse effect on our business, financial
condition, results of operations and prospects.
We face significant competition in an environment of rapid technological change, and there is a
possibility that our competitors may develop products that are more effective, accurate, reliable,
cost-effective or more advanced than ours, which may harm our financial condition. If we are
unable to compete successfully or our potential market share is reduced, we may be unable to
increase or sustain our revenue or achieve profitability.
The medical technology industry is highly competitive, subject to rapid change and significantly affected
by the introduction of new products and technologies and other activities of industry participants. Because
of the size of the market opportunity for the treatment of CAD, we believe current and potential future
competitors will dedicate significant resources to aggressively promote their products or develop new
products or treatments. Our principal competition comes from companies that provide traditional non-
invasive tests that aid physicians in the evaluation of CAD, such as SPECT, stress echocardiography and
PET. Established, traditional non-invasive tests for CAD have been used for many years and are therefore
difficult to change or supplement. Many of the companies that sell these traditional non-invasive tests or
the equipment they require have established relationships with healthcare providers. One of the major
hurdles to adoption of our products is overcoming established testing patterns, which requires education
of physicians and supportive clinical data.
The companies that sell the traditional non-invasive tests for CAD include companies that offer: (i) cardiac
specific tests to primary care and cardiology offices, such as manufacturers of capital equipment for
stress echocardiography and SPECT, including GE Healthcare, Siemens Healthineers AG and Koninklijke
Philips N.V.; and (ii) products used for the invasive FFR testing market.
With the greater resources of some of these competitors and their more diversified product offerings, it is
possible that they or other entrants into the market may develop competing products or technologies that
could be more effective, accurate, reliable, cost-effective, more advanced or otherwise improved relative
to the Heartflow Platform, which could render our products obsolete or less competitive. In addition, one
or more competitors could develop and market an on-premise solution, which may be more appealing
than our cloud-based offering. Moreover, new treatments, such as GLP-1s, may indirectly reduce stenosis
or plaque build-up, which could reduce the market opportunity for non-invasive CAD tests and, as a
result, our Heartflow Platform. In addition, we currently target our Heartflow Platform for use only on
symptomatic patients and expanding the Heartflow Platform for asymptomatic patients may take years,
with potential delays due to the high-risk nature of the effort. Our competitors who offer traditional non-
invasive tests offer those tests to both symptomatic and asymptomatic patients, and this increased market
penetration could create additional price pressure for our products.
In addition, the field of cardiovascular genomics is subject to rapidly changing technology, and others may
invent and commercialize technology platforms such as next generation sequencing approaches that
could compete with our products or could make our products or any product we may sell in the future
obsolete. We also face competition and price pressure from companies that have developed or are
developing AI-based platforms that leverage CCTA to diagnose CAD, including earlier-stage companies
such as Cleerly, Inc., Elucid Bioimaging Inc. and Keya Medical Technology Co., Ltd. We may also face
competition from companies developing AI-based platforms, even if they are not currently in the CAD
market and recent and future advances in AI may allow other companies to quickly create competing
products, and they may be able to create such products less expensively and benefit from FDA and
reimbursement approvals we and others have obtained. For us to remain competitive, we must
continuously work on our products’ design and features, improve our algorithms, and invest in and
develop new technologies, including in the rapidly evolving area of AI. If we are unable to introduce
products, features and improvements aimed at increasing the value proposition of the Heartflow Platform
for our customers, or if the products, features and improvements we introduce are viewed less favorably
than our competitors’ products, we may be unable to compete successfully. If we are unable to compete
successfully against our current or future competitors, we may be unable to increase market acceptance
for our products, which could prevent us from increasing or sustaining our revenue or achieving
profitability and could cause the market price of our common stock to decline.
In addition, the Heartflow Platform relies on a CCTA first being performed, as the Heartflow Platform
requires a CT image from a CT scanner to perform its analysis. A number of companies manufacture CT
scanners, including, among others, GE Healthcare, Hitachi, Ltd., Koninklijke Philips N.V., Samsung
Electronics Co., Ltd., Siemens Healthineers AG and Canon Medical Systems Corporation. These
companies are more diversified than we are and have substantial financial, manufacturing, sales and
marketing distribution and other resources. Any of these companies or others could determine to develop,
partner with or acquire and offer a product that competes with ours or manufacture CT scanners that are
no longer compatible with our Heartflow Platform. Further, these larger companies have market
penetration in the CT scanner market and understand the market for CAD and, if they are able to develop,
partner with or acquire a competing product, they may offer it as a bundle with the purchase of a CT
scanner, which could prevent us from increasing or sustaining our revenue or achieving profitability. In the
past, three of these companies, Siemens Healthineers AG, Koninklijke Philips N.V. and Canon Medical
Systems Corporation, considered development of a local workstation-based technology prototype aimed
at deriving CT-based blood flow data without an invasive procedure. If these companies decide to further
pursue this technology and obtain regulatory approval or clinical validation, it may become competitive
with our products. In addition, we are reliant on these third-party CCTAs and CT scanners continuing to
support standard output file formats that our Heartflow Platform supports. If a CT manufacturer were to
change to a proprietary format or develop a novel method of performing CT scans, we would need to
further develop our existing technology to accommodate the images its scanners output, which could
materially affect the ability of physicians to use the Heartflow Platform, increase our R&D expenses, and
could adversely affect our business, financial condition, results of operations and prospects.
The size and expected growth of our addressable market may be smaller than we estimate.
Our estimate of the addressable market for our current products and any future products is subject to
significant uncertainty and is based on assumptions and estimates, including our internal analysis and
industry experience. While we believe our assumptions and the data underlying our estimates are
reasonable, these assumptions and estimates may not be correct. As a result, our estimates of the
addressable market for our current or future products may prove to be incorrect. Moreover, our ability to
serve a significant portion of this estimated market is subject to many factors, including our success in
promoting the use of CCTA as a non-invasive diagnostic test that can be combined with the Heartflow
Platform, which is subject to many risks and uncertainties, and relies on the availability and proximity of
healthcare facilities with active CCTA programs to the patients in our estimated market. Accordingly, if we
are unable to increase the use of CCTA at the rates we estimate, if the actual number of patients who
would benefit from our products is less than we estimate, or if the price at which we can sell future
products or the reimbursement rate received by healthcare providers is less than we estimate, the size
and expected growth of our addressable market would be smaller than our estimates, which could have a
material adverse effect on our business, financial condition, results of operations and prospects.
We may not be successful in updating or otherwise enhancing the Heartflow Platform.
A part of our strategy is bringing new enhancements to our customers through updates to the Heartflow
Platform, which may include offering new products, additional features, applications and improvements to
our technology. We expect to make significant investments to advance these efforts, and enhancing the
Heartflow Platform is a complex and time-consuming endeavor. New products, additional features,
applications and improvements to our technology that initially show promise may fail to achieve the
desired results or may not achieve acceptable levels of analytical accuracy, utility or user friendliness.
Product development and improvement is expensive, may take months or years to complete and can
have uncertain outcomes. Failure can occur at any stage of the development or improvement process
and may occur only after substantial work has been completed, or after completion.
Even if, after development, an updated product appears successful, we may, depending on the nature of
the update, need to obtain regulatory clearances, authorizations or approvals before we can market the
updated product. Such regulatory clearances, authorizations or approvals are likely to require significant
time and expenditures and the applicable regulatory authority may not clear, authorize or approve any
product, update or new product we develop. Obtaining such clearances, authorizations or approvals may
require data from clinical trials, which can be costly and time-consuming to obtain. In certain jurisdictions
or in certain cases, clinical data may also be required in order to obtain reimbursement coverage, and this
clinical data may be in addition to data required to obtain regulatory clearances, authorizations or
approvals. Some clinical studies may fail to meet their endpoints, introducing risk or delay in the ability to
commercialize a new feature or product. In light of these requirements, we may choose to limit the scope
of any new products, additional features, applications and improvements we seek to develop.
Even if we develop a product update or new product that receives regulatory clearance, authorization or
approval, and for which we obtain sufficient commercial third party and government reimbursement
coverage, we would need to commit substantial resources to commercialize and market the updated
product, new product or new application of our existing product, which may never achieve market
acceptance among various stakeholders or be commercially successful. Further, the applicable
regulations or the application of those regulations could change in ways that would impact the Heartflow
Platform and our ability to successfully manufacture or market our products. The expenses or losses
associated with unsuccessful updates to or expansion of the Heartflow Platform could adversely affect our
business, financial condition, results of operations and prospects.
The commercialization of Heartflow Plaque Analysis is nascent, and we may not be able to
achieve or maintain sufficient market acceptance or the levels of utilization we expect from
Heartflow Plaque Analysis or any other future product.
We began limited market education efforts for our Heartflow Plaque Analysis in the second half of 2023,
and we have generated very minimal revenue from this product. Heartflow Plaque Analysis has taken
time and significant resources to develop, and we may not be able to achieve customer acceptance or
broad commercial reimbursement coverage, which could limit its adoption.
The market for alternative plaque analysis products is competitive in terms of development, availability,
pricing, product quality and time-to-market. We face competition from companies that provide or are
developing similar plaque analysis products, which may distinguish themselves from us through, among
other things, perceived product quality, style and visuals, sleek design, enhanced user-friendliness and
innovative features. In addition, some of these competitors are agile, early-stage companies that may be
able to respond more quickly and effectively than we can to new or changing opportunities, technologies,
standards or customer requirements in the plaque analysis category. Some of these competitors
commercially launched competing plaque analysis products prior to our launch of Heartflow Plaque
Analysis and may have a first-mover advantage as a result. For more information on risks related to our
competition, see the risk factor titled “We face significant competition in an environment of rapid
technological change, and there is a possibility that our competitors may develop products that are more
effective, accurate, reliable, cost-effective or more advanced than ours, which may harm our financial
condition. If we are unable to compete successfully or our potential market share is reduced, we may be
unable to increase or sustain our revenue or achieve profitability.”
Our competitors may also be able to offer plaque analysis products similar or superior to ours at a more
attractive price than we can or may be better positioned to serve certain segments of our market, which
could create additional price pressure. For example, our competitors have in the past, and may in the
future, offer plaque analysis and other products at a more attractive price than we can such that current or
potential customers may select our competitors’ products in lieu of purchasing and using our Heartflow
Plaque Analysis. Moreover, our competitors have in the past, and may in the future, suggest that their
plaque analysis and other products could replace both our Heartflow Plaque Analysis and our Heartflow
FFRCT Analysis, which would adversely affect our ability to achieve sufficient market acceptance for our
Heartflow Plaque Analysis, could affect sales of our Heartflow FFRCT Analysis and could cause our
Heartflow FFRCT Analysis to lose market share. While we believe Heartflow Plaque Analysis represents a
significant long-term opportunity for us, there can be no assurances that we will successfully compete in
such market and our business, financial condition, results of operations and prospects could be materially
and adversely affected.
We face risks associated with our use and development of AI models, which may result in
operational challenges, legal liability, reputational concerns and competitive risks.
We use and develop AI and automated analysis and decision-making technologies, including proprietary
AI algorithms and models and computational fluid dynamics (collectively, “AI Technologies”) to power the
Heartflow Platform. In addition, we use AI Technologies to drive improvements in the performance of the
Heartflow Platform. We expect that significant increased investment will be required in the future to
improve our use and development of AI Technologies.
As with many technological innovations, there are significant risks involved in developing, maintaining and
deploying these technologies. In particular, if the AI Technologies underlying our Heartflow Platform are
incorrectly designed or implemented; trained or reliant on incomplete, inadequate, inaccurate or otherwise
poor quality data; used without sufficient oversight and quality control; misused or used outside of scope
of applicable regulatory authorizations; and/or adversely impacted by unforeseen bugs, defects, technical
challenges, cybersecurity threats or material performance issues, the performance of our Heartflow
Platform and business, as well as our reputation and the reputations of our customers, could suffer or we
could incur liability resulting from the violation of laws or contracts to which we are a party, regulatory
enforcement actions or civil claims. This could result in fines, penalties and damage awards and
disgorgement of any output, development or technology developed as a result of such violations.
In addition, we leverage a human-in-the-loop AI system that combines advanced algorithms with an
analyst-based quality inspection and monitoring process to create patient-specific reports based on CCTA
images. While we constantly work to improve our Heartflow Platform and algorithms, the AI Technologies
we work with are novel and complex, and we cannot assure you that our AI Technologies will be able to
perform as intended under all circumstances, or that our analyst-based review process will identify and
correct any errors in the outputs of our AI Technologies.
The regulatory framework for AI Technologies is rapidly evolving as many federal, state and foreign
government bodies and agencies have introduced or are currently considering additional laws, regulations
and guidance. For example, the FDA has issued guidance documents relating to the incorporation of AI
Technologies into medical devices and marketing submissions for AI-enabled devices. Specifically, draft
guidance issued on January 7, 2025, titled Artificial Intelligence-Enabled Device Software Functions:
Lifecycle Management and Marketing Submission Recommendations, proposes recommendations for the
design, development and implementation of AI-enabled devices that FDA encourages manufacturers
consider using throughout the total product lifecycle. In addition, the California Privacy Protection Agency
has approved for rulemaking regulations under the CCPA regarding the use of automated decision-
making that may require risks and providing notice and rights to opt-out and access to information
underlying the logic and outputs. Colorado passed the Colorado AI Act, which will go into effect in
February 2026. This law creates duties for developers and deployers to use reasonable care to protect
consumers from any known or reasonably foreseeable risks of “algorithmic discrimination” arising from
the intended and contracted uses of “high-risk AI systems,” including those that impact healthcare
services. Such additional laws, regulations and guidance may impact our ability to develop, use and
commercialize AI Technologies in the future.
It is possible that further new laws and regulations will be adopted in the United States and in other non-
U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be
interpreted in ways that would limit our ability to use AI Technologies for our business, or require us to
change the way we use AI Technologies in a manner that negatively affects the performance of our
Heartflow Platform and the way in which we use AI Technologies. We may need to expend resources to
adjust our Heartflow Platform in certain jurisdictions if the laws, regulations or decisions are not consistent
across jurisdictions. Further, the cost to comply with such laws, regulations or decisions and/or guidance
interpreting existing laws, could be significant and would increase our operating expenses (such as by
imposing additional reporting obligations regarding our use of AI Technologies). Such an increase in
operating expenses, as well as any actual or perceived failure to comply with such laws and regulations,
could materially and adversely affect our business, financial condition, results of operations and
prospects.
Our Heartflow Platform and the data and models it generates could have bugs, defects or errors,
including human quality control errors, or otherwise fail to meet the expectations of patients,
physicians and third-party payors, which could adversely affect our reputation, business and
operating results.
We cannot provide assurance that the proprietary technology and algorithms used in our Heartflow
Platform do not contain undetected bugs, defects or errors or that our analyst-based review process will
identify and correct any errors in the outputs of our AI Technologies. We cannot provide assurance that
limitations of the inbound CCTA images and image quality will always allow a true representation of the
patient anatomy, and any such limitations in CCTA images could affect the results of our analyses. We
have in the past, and may in the future, experience defects or errors in our Heartflow Platform or the data
and models it generates that remain undetected by our analyst-based review process, our reputation,
business and operating results could be adversely affected.
Furthermore, the success of the Heartflow Platform depends in part on patients’, physicians’ and third-
party payors’ confidence that our platform can provide reliable, high-quality actionable data and analysis
that will improve clinical decision making. We believe that patients, physicians and third-party payors are
likely to be sensitive to product defects and errors in the use of our products, including if the defects and
errors affect a physician’s ability to use the CCTA imaging results or result in a misdiagnosis. In the past,
we have experienced software code defects and software release process defects that have resulted in
intermittent interruptions to the physician’s ability to use our Heartflow Platform, and we may experience
such defects in the future. A subset of these defects were reported as part of the FDA’s Manufacturer and
User Facility Device Experience (“MAUDE”) disclosure. For more information, see the risk factor titled
“The Heartflow Platform may be subject to recalls, which could be costly and could harm our reputation
and business.” As a result, the failure of our Heartflow Platform to perform as expected, including to
reduce unnecessary invasive testing or fail to enable physicians to optimize treatment planning or provide
more efficient care, could significantly impact a physician’s willingness to use and rely on the Heartflow
Platform, which would impair our operating results and our reputation. In addition, we may be subject to
legal claims arising from any such failures.
Bugs, defects or errors in the Heartflow Platform or the failure of third-party service providers we rely on,
such as AWS or other cloud storage and telecommunications services providers, to block a virus or
prevent a security breach could harm our reputation and adversely impact our results of operations.
Defects may cause our products to be vulnerable to security attacks, cause them to fail to produce
accurate results or temporarily interrupt our commercial operations. Because the techniques used by
computer hackers to access or sabotage networks change frequently and generally are not recognized
until launched against a target, we or our third-party services providers may be unable to anticipate these
techniques and provide a corrective measure in time to protect the Heartflow Platform and our networks.
Potential defects may further cause the platform to be unavailable for a period of time, affect ability of a
customer to access information, result in a slow or suboptimal user experience, impact turnaround time of
an analysis, or provide other forms of degradation to the overall service.
We depend on our talent to grow and operate our business, and if we are unable to hire, integrate,
develop, motivate and retain our personnel, including highly qualified, technical personnel, we
may not be able to grow effectively and this could adversely affect our business.
To execute our growth plan, we must attract and retain highly qualified, technical personnel. Competition
for these personnel is intense, especially for engineers with high levels of expertise in AI, cloud
architecture, 3D visualization, research scientists and senior sales executives with experience in the
cardiology industry. We may experience difficulty in hiring and retaining employees with appropriate
qualifications. Many of the companies with which we compete for experienced personnel have greater
resources than we have. We also compete with companies that are believed to have high potential growth
opportunities or that have experienced rapid recent growth.
Our future success depends in part on our ability to continue to retain our executive officers and other key
employees and to recruit and hire new employees, including engineers, research scientists, case analysts
and production team members. We do not maintain “key person” insurance for any of our executives or
other employees. The loss of the services of any of these persons could impede the achievement of our
development, research and commercialization objectives. Any of our executive officers and other
employees may terminate employment with us at any time with no advance notice. The replacement of
any of our key personnel likely would involve significant time and costs, may significantly delay or prevent
the achievement of our business objectives and may harm our business.
In addition, job candidates and existing employees often consider the value of the stock awards they
receive in connection with their employment. If the perceived value of our stock awards declines or is
perceived to be less valuable than stock awards of other competing employers, it may adversely affect
our ability to recruit and retain highly skilled employees. In addition, many of our employees have become
or will soon become vested in a substantial amount of stock or number of stock options. Our employees
may be more likely to leave us if the shares they own or the shares underlying their vested options have
significantly appreciated in value relative to the original purchase prices of the shares or the exercise
prices of the options, or if the exercise prices of the options that they hold are significantly below the
market price of our common stock. If we fail to attract new personnel, or fail to retain and motivate our
current personnel, our business and prospects could be adversely affected.
If we fail to properly manage our future growth, our business could suffer.
We intend to continue to grow and may experience periods of rapid growth and expansion, which could
place a significant additional strain on our limited personnel, information technology systems and other
resources. Our future growth will impose significant added responsibilities on management, including the
need to identify, recruit, train and integrate additional employees. In order to manage our operations and
growth we will need to continue to improve our operational and management controls, administrative and
operational infrastructure, reporting and information technology systems and financial internal control
procedures. Due to our limited financial resources and the limited experience of our management team in
managing a company with such future growth expectations, we may not be able to effectively manage the
expected expansion of our operations or recruit and train additional qualified personnel. Moreover, the
expected expansion of our operations may lead to significant costs and may divert our management and
business development resources. Any inability to manage growth could delay the execution of our
business plans or disrupt our operations.
In addition, as demand for the Heartflow Platform increases, we will need to scale our capacity, expand
customer service and enhance our internal quality assurance program. We may fail to implement any
increases in scale, related improvements and quality assurance, and we may fail to find appropriate
personnel to facilitate the growth of our business. Due to our limited resources, we may not be able to
effectively manage this simultaneous execution and expansion of our operations. This may result in
weaknesses in our infrastructure, give rise to operational mistakes, legal or regulatory compliance
failures, loss of business opportunities, loss of employees and reduced productivity among remaining
employees. The expansion of our operations may lead to significant costs and may divert financial
resources from other projects, such as the development of any new products. If our management is
unable to effectively manage our expected development and expansion, our expenses may increase
more than expected, our ability to generate or increase our revenue could be reduced and we may not be
able to implement our business strategy. Our future financial performance and our ability to compete
effectively and commercialize our Heartflow Plaque Analysis or any of our future products will depend in
part on our ability to effectively manage the future growth and expansion of our company. If we are unable
to manage our growth effectively, it may be difficult for us to execute our business strategy and our
business, financial condition, results of operations and prospects may be adversely affected.
Our business could be disrupted by catastrophic events.
The occurrence of any catastrophic event, including earthquake, fire, flood, tsunami or other weather
event, power loss, telecommunications failure, software or hardware malfunctions, pandemics, political
unrest, geopolitical instability, severe or prolonged economic downturn, cyberattack (including a
ransomware attack), war or terrorist attack, could result in lengthy interruptions in our ability to serve our
customers. In addition, acts of terrorism could cause disruptions to the internet or the economy as a
whole and could disproportionately affect us given our reliance on the internet and cloud-based services.
Specifically, our corporate headquarters are located in Mountain View, California and our production
related computers are currently located in our Mountain View office and in Austin, Texas. California is
considered to be an active earthquake zone, is prone to catastrophic fires, severe weather events and the
follow-on effects thereof, including tsunamis, mudslides, flooding, power outages and other events that
could disrupt our business. Texas is also subject to severe weather events, power outages and other
events that could disrupt our business. Any event that prevents our access to such facilities, physically or
virtually, would prevent us from operating our business and have an adverse effect on our business,
financial condition, results of operations and prospects.
In addition, we rely on our network and third-party infrastructure, including our cloud-based infrastructure
which we outsource to Amazon Web Services (“AWS”), and enterprise applications, internal technology
systems and our website, for our development, marketing, operational support hosted services and sales
activities. In the event of a catastrophic event, we may be unable to continue our operations and may
endure system interruptions, delays in our ability to generate reports and output them to physicians,
reputational harm, delays in our product development, breaches of data security and loss of critical data,
all of which could have an adverse effect on our future operating results. If we are unable to develop
adequate plans to ensure that our business functions continue to operate during and after a disaster and
to execute successfully on those plans in the event of a disaster or emergency, our business would be
harmed. Even with our disaster recovery arrangements and insurance coverage, the ability of our
customers to access and utilize our Heartflow Platform could be interrupted, or we could close critical
data, which would have a negative impact on our business.
In addition, the occurrence of a catastrophic event could impact providers of CCTAs, contrast agents for
CCTAs or suppliers of iodinated contrast media or similar supplies that are necessary to perform CCTAs.
For example, in 2022, the shutdown of an iodinated contrast media manufacturing facility led to a
significant shortage of iodinated contrast media, which resulted in the cancellation or rescheduling of non-
urgent contrast-requiring cardiac procedures and imaging. Any of these events could affect demand for
the Heartflow Platform, which could have a material adverse effect on our business, financial condition,
results of operations and prospects.
Consolidation among healthcare providers could have an adverse effect on our business,
financial condition, results of operations and prospects.
In the United States, there has been a trend of consolidation among healthcare providers and purchasers
of medical technology devices, often to gain greater market power. As healthcare providers consolidate,
they may try to use their market power to negotiate price concessions or reductions for the products and
services they purchase and use, including our Heartflow Platform. As result, it is unknown whether such
purchasers will decide to stop purchasing our Heartflow Platform or demand discounts on our prices. If we
reduce our prices in response to these industry trends, our revenue would decrease, which could have a
material adverse effect on our business, financial condition, results of operations and prospects.
We may acquire other companies, solutions or technologies, which could divert our
management’s attention, result in additional dilution to our stockholders and otherwise disrupt
our operations and adversely affect our operating results.
We may in the future seek to acquire or invest in companies, solutions or technologies that we believe
could complement or expand our products, enhance our technical capabilities or otherwise offer growth
opportunities. The pursuit of potential acquisitions or other investment opportunities may divert the
attention of management and cause us to incur various expenses in identifying, investigating and
pursuing suitable transactions, whether or not they are consummated.
If we acquire any businesses, we may not be able to integrate the acquired personnel, operations and
technologies successfully, or effectively manage the combined business following the acquisition. We also
may not achieve the anticipated benefits from the acquired business due to a number of factors,
including: inability to integrate or benefit from acquired technologies or services in a profitable manner;
unanticipated costs or liabilities associated with the acquisition; incurrence of acquisition related costs;
difficulty integrating the accounting systems, operations and personnel of the acquired business;
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure
of the acquired business; diversion of management’s attention from other business concerns; use of
resources that are needed in other parts of our business; adverse effects to our existing business
relationships with business partners and customers as a result of the acquisition; the potential loss of key
employees; and use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of any companies, solutions or technologies that we
may acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed
for impairment at least annually. If our acquisitions do not yield expected returns, we may be required to
take charges to our operating results based on this impairment assessment process, which could
adversely affect our results of operations.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which
could adversely affect our operating results and cause the market price of our common stock to decline. If
an acquired company, solution or technology fails to meet our expectations and does not complement or
expand our products, enhance our technical capabilities or otherwise offer growth opportunities, our
business, financial condition, results of operations and prospects may suffer. In addition, the 2024 Credit
Agreement restricts our ability to pursue certain mergers, acquisitions, amalgamations or consolidations
that we may believe to be in our best interest.
Sales to customers outside the United States or with international operations expose us to risks
inherent in international sales.
In our fiscal years ended December 31, 2023 and 2024 and three months ended March 31, 2024 and
2025, sales to customers outside the United States accounted for approximately 11%, 9%, 9% and 8% of
our revenue, respectively. One element of our growth strategy is to further expand our international
operations and worldwide customer base. Operating in international markets requires significant
resources and management attention and subjects us to regulatory, economic and political risks that are
different from those in the United States.
We have limited operating experience in international markets, and we cannot assure you that our
existing presence in the United Kingdom, Europe and Japan or any expansion efforts into other
international markets will be successful. Our experience in the United States and international markets
may not be relevant to our ability to expand in other markets. Our international expansion efforts may not
be successful in creating further demand for our products outside of the United States or in effectively
selling our products in the international markets we enter. In addition, expansion into other international
markets will be costly and will impose additional burdens on our executive and administrative personnel,
finance and legal teams, sales and marketing teams and general managerial resources. If our efforts to
introduce our products into other international markets are not successful, we may have expended
significant resources without realizing the expected benefit. Ultimately, the investment required for
international expansion could exceed the results of operations generated from this expansion.
In addition, we operate in an industry which is subject to significant enforcement scrutiny by both U.S. and
non-U.S. government authorities. Our international business requires us to comply with U.S. and foreign
laws and regulations, such as various anti-bribery and anti-corruption laws, including the U.S. Foreign
Corrupt Practices Act (“FCPA”), the U.S. Fraud Act and in certain cases the U.K. Bribery Act of 2010.
Compliance with these is costly and exposes us to significant civil and criminal penalties for non-
compliance. Any failure to comply with applicable legal and regulatory obligations could impact us in a
variety of ways that include, but are not limited to, significant criminal, civil and administrative fines,
penalties and disgorgement of profits, including imprisonment of individuals, denial of export privileges,
seizure of shipments, restrictions on certain business activities and exclusion or debarment from
government contracting. Our international operations expose us to risks inherent in operating in foreign
jurisdictions that could adversely affect our business.
If we do not obtain and maintain international regulatory registrations, clearances or approvals for
our Heartflow Platform, we will be unable to market and sell our products outside of the United
States.
Any future sales of our products outside of the United States are subject to foreign regulatory
requirements that vary widely from country to country. While the regulations of some countries may not
impose barriers to marketing and selling our products or only require notification, others require that we
obtain the clearance or approval of a specified regulatory authority or a Certificate of Conformity of a
notified body. Complying with foreign regulatory requirements, including obtaining registrations,
clearances or approvals, can be expensive and time consuming and we may not receive regulatory
clearances or approvals in each country in which we plan to market our products or we may be unable to
do so on a timely basis. The time required to obtain registrations, clearances or approvals, if required by
other countries, may be longer than that required for FDA clearance or approval, and requirements for
such registrations, clearances or approvals may significantly differ from FDA requirements. If we modify
our products, we may need to apply for regulatory clearances or approvals before we are permitted to sell
the modified product.
In addition, AI governing regulations around medical devices evolve rapidly and we may not continue to
meet the quality and safety standards required to maintain the authorizations that we have received. If we
are unable to maintain our authorizations in a particular country, we will no longer be able to sell the
applicable product in that country.
Regulatory registration, clearance, marketing authorization, or approval by the FDA does not ensure
registration, clearance, marketing authorization, or approval by foreign regulatory authorities or authorized
representatives in other countries. Registration, clearance, marketing authorization, or approval by one or
more foreign regulatory authorities or authorized representatives do not ensure registration, clearance,
marketing authorization, or approval by regulatory authorities in other foreign countries or by the FDA.
However, a failure or delay in obtaining registration or regulatory clearance or approval in one country
may have a negative effect on the regulatory process in others.
Risks related to data privacy and information technology
Failure to comply with laws and regulations affecting the transmission, security and privacy of
personal information (including health information) could result in significant penalties.
Federal, state and foreign government bodies and authorities have adopted, are considering adopting, or
may adopt laws and regulations regarding the collection, use, processing, storage and disclosure of
personal information obtained from consumers and individuals. In the United States, federal, state, and
local governments have enacted numerous data privacy and security laws, including data breach
notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal
Trade Commission Act), and other similar laws (e.g., wiretapping laws). Under these laws we may be
required to obtain certain consents to process personal data. For example, some of our data processing
practices have been, and may in the future continue to be, subject to challenges or lawsuits under
privacy, security, and communications laws, including, for example, challenges based on wiretapping laws
for sharing consumer information with third parties through various methods, such as via third-party
marketing pixels or software development kits. Our inability or failure to obtain consent for these practices
could result in adverse consequences, including class action litigation and mass arbitration demands. In
addition, numerous federal and state laws and regulations, including the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic
and Clinical Health Act of 2009 (“HITECH”), govern the collection, dissemination, security, use and
confidentiality of patient identifiable health information. HIPAA and the HITECH Act require us to comply
with standards for the use and disclosure of health information within our company and with third parties.
The Standards for Privacy of Individually Identifiable Health Information (“Privacy Standards”), and the
Security Standards for the Protection of Electronic Protected Health Information (“Security Standards”),
under HIPAA establish a set of basic national privacy and security standards for the protection of
individually identifiable health information by health plans, healthcare clearinghouses and certain
healthcare providers, referred to as covered entities, and the business associates with whom such
covered entities contract for services. As a result, both covered entities and business associates can be
subject to significant civil and criminal penalties for failure to comply with the Privacy Standards or the
Security Standards.
HIPAA, the HITECH Act and the Affordable Care Act (“ACA”) also include standards for common
healthcare electronic transactions and code sets, such as claims information, plan eligibility, payment
information and the use of electronic signatures, unique identifiers, operating rules. Companies that bill
payors for healthcare-related services and device use are required to conform to the transaction
standards. CMS, on behalf of HHS, has the authority to investigate complaints and audit for compliance
with the HIPAA standards for transactions, code sets, unique identifiers and operating rules, including the
Administrative Simplification provisions of HIPAA and the ACA. Failure to comply with these standards,
and any investigation or audit and penalties imposed may have an adverse impact on our business.
HIPAA requires covered entities and business associates to develop and maintain policies and
procedures with respect to protected health information that is used or disclosed, including the adoption of
administrative, physical and technical safeguards to protect such information. The HITECH Act expands
the notification requirement for breaches of patient identifiable health information, restricts certain
disclosures and sales of patient identifiable health information and provides a tiered system for civil
monetary penalties for HIPAA violations. The Final HIPAA Omnibus Rule modifies the breach reporting
standard in a manner that will likely make more data security incidents qualify as reportable breaches.
The HITECH Act also increased the civil and criminal penalties that may be imposed against covered
entities, business associates and possibly other persons and gave state attorneys general new authority
to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek
attorney fees and costs associated with pursuing federal civil actions. Additionally, states have adopted
comparable privacy and security laws and regulations that differ somewhat from federal and other states’
laws, and that govern where more stringent than federal law.
As a business associate under HIPAA, if we do not comply with the requirements of HIPAA, the HITECH
Act or applicable state privacy and security laws, we could be subject to criminal or civil sanctions that
could adversely affect our financial condition. The costs of complying with privacy and security related
legal and regulatory requirements are substantial and could have an adverse effect on our business. In
addition, we are unable to predict what changes to the HIPAA Privacy Standards and Security Standards
might be made in the future or how those changes could affect our business. Any new legislation or
regulation in the area of privacy and security of personal information, including personal health
information, could also adversely affect our business operations. In addition, a security breach could
require reporting to federal and state government entities, notification to affected individuals, expensive
investigation and remediation and mitigation. Government agencies could, in their discretion, impose fines
and penalties relating to the breach, that would have an adverse effect on our business.
Foreign data privacy regulations, such as the General Data Protection Regulation (E.U.) 2016/679
(“GDPR”), the European Union’s Data Protection Directive (Directive 95/46/EC), and the country specific
regulations that implement Directive 95/46/EC, also govern the processing of personally identifiable data,
and a number of these regulations are stricter than U.S. laws.
In addition, many states have laws, regulations and other authorities that govern data privacy, security
and breach notification. While some of these laws exempt protected health information subject to HIPAA,
they may apply to other personal information we collect, including personal information collected from
employees or from visitors to our website. Failure to comply with these authorities may have an adverse
impact on our business.
We expect to expend significant resources to comply with these laws and regulations. The functional and
operational requirements and costs of compliance with such laws and regulations may adversely impact
our business, and failure to enable our solutions to comply with such laws and regulations could lead to
significant fines and penalties imposed by regulators, as well as claims, lawsuits and contractual
indemnification obligations by or for our customers or third parties and significant reputational harm.
We depend on our information technology systems, and any failure of these systems could harm
our business and adversely affect our business and operating results.
Information technology and telecommunications systems are vulnerable to damage from a variety of
sources, including telecommunications or network failures, failures during the processes of upgrading or
replacing software, power outages, hardware failures, user or human errors and natural disasters.
Moreover, despite network security and back up measures, some of our servers are potentially vulnerable
to cybersecurity incidents, including phishing attacks by computer hackers or other malicious human acts,
computer viruses, ransomware, malware and similar disruptive problems or other methods of
compromising employee or customer administrator credentials to access protected health information and
our internal data. Failures or significant downtime of our information technology or telecommunications
systems could prevent us from operating our business. Any disruption or loss of information technology or
telecommunications systems on which critical aspects of our operations depend could have an adverse
effect on our business and our operating results may suffer.
In addition, our brand, reputation and ability to attract, retain and serve our customers are dependent
upon the reliable performance of our Heartflow Platform, including our underlying information technology
systems and infrastructure. Our technical infrastructure may not be adequately designed with sufficient
reliability and redundancy to avoid performance delays or outages that could be harmful to our business.
If our Heartflow Platform is unavailable when physicians attempt to access it, or if it does not load as
quickly as they expect, physicians may not use our Heartflow Platform as often in the future, or at all. As
our customer base continues to grow, we will need an increasing amount of technical infrastructure,
including network capacity and computing power, to continue to satisfy the needs of our users.
We rely upon AWS to operate our cloud offering; any disruption of or interference with our use of
AWS would adversely affect our business, results of operations and financial condition.
We outsource all of our cloud-based infrastructure to AWS. Our customers need to be able to access our
cloud-based infrastructure at any time, without interruption or degradation of performance. AWS runs its
own platform that we access, and we are, therefore, vulnerable to service interruptions at AWS. We may
experience interruptions, delays and outages in service and availability from time to time as a result of
problems with our AWS provided infrastructure. For example, in September 2015, AWS suffered a
significant outage that had a widespread impact on cloud-based software and services companies.
Although our customers were not affected by that outage, a similar outage could render our cloud offering
inaccessible to customers. Additionally, AWS has suffered outages at specific customer locations in the
past, rendering the customer unable to access our offering for periods of time. Lack of availability of our
AWS infrastructure could be due to a number of potential causes including technical failures, natural
disasters, fraud or security attacks that we cannot predict or prevent.
In addition, if the security of the AWS infrastructure is compromised or believed to have been
compromised, our business, results of operations and financial condition could be adversely affected. It is
possible that our customers and potential customers would hold us accountable for any breach of security
affecting the AWS infrastructure and we may incur significant liability from those customers and from third
parties with respect to any breach affecting AWS systems. For more information, see the risk factor titled
“Failure to comply with laws and regulations affecting the transmission, security and privacy of personal
information (including health information) could result in significant penalties.” Because our agreement
with AWS limits AWS’ liability for damages, we may not be able to recover a material portion of our
liabilities to our customers and third parties from AWS. Customers and potential customers may refuse to
do business with us because of the perceived or actual failure of our cloud offering as hosted by AWS and
our operating results could be harmed.
Our agreement with AWS allows AWS to terminate the agreement by providing 30 days’ advance notice,
and allows AWS to terminate in case of a material breach of contract if such breach is uncured for 30
days following receipt of notice of such breach, or to terminate immediately upon notice to us (i) if AWS
has the right to suspend our account; (ii) if AWS’ relationship with a third-party software or technology
provider terminates, expires or requires AWS to change the way it provides its services; or (iii) in order to
comply with the law or requests of governmental entities. Although we expect that we could receive
similar services from other third parties, if any of our arrangements with AWS are terminated, we could
experience interruptions on our platform and in our ability to make our platform available to customers, as
well as delays and additional expenses in arranging alternative cloud infrastructure services.
If we fail to offer high quality customer support, our business and reputation could suffer.
Our customers rely on our customer support teams to resolve technical and operational issues if and
when they arise. We may be unable to respond quickly enough to accommodate short-term increases in
customer demand for customer support. We also may be unable to modify the nature, scope and delivery
of our customer support to compete with changes in customer support services provided by our
competitors or to adapt to product and industry developments. Increased customer demand for customer
support, without corresponding revenue, could increase costs and harm our results of operations. In
addition, as we continue to grow our operations and reach a large global customer base, we need to be
able to provide efficient customer support that meets our customers’ needs globally at scale. The number
of our customers has grown significantly, and that growth has and will continue to put additional pressure
on our support organization. As our business scales, we may need to engage third-party customer
support service providers, which could negatively impact the quality of our customer support if such third
parties are unable to provide customer support that is as effective as that we provide ourselves. Our sales
are highly dependent on our business reputation and on positive recommendations from our existing
customers. Accordingly, high quality customer support is important for the renewal and expansion of our
agreements with existing customers and any failure to maintain such standards of customer support, or a
market perception that we do not maintain high quality customer support, could harm our reputation, our
ability to sell product to existing and prospective customers and our business, financial condition, results
of operations and prospects.
We invest significantly in research and development, and to the extent our research and
development investments do not translate into new products, features or improvements to our
current products, or if we do not use those investments efficiently, our business, financial
condition, results of operations and prospects would be harmed.
A key element of our strategy is to invest significantly in our research and development efforts to
introduce new products, features and improvements aimed at increasing the value proposition of the
Heartflow Platform for our customers. For the years ended December 31, 2023 and 2024 and three
months ended March 31, 2024 and 2025, our research and development expenses were 41%, 35%, 35%
and 37% of our revenue, respectively. If we do not spend our research and development budget efficiently
or effectively on compelling innovation and technologies, our business may be harmed and we may not
realize the expected benefits of our strategy. Moreover, research and development projects can be
technically challenging and expensive. The nature of these research and development cycles may cause
us to experience delays between the time we incur expenses associated with research and development
and the time we are able to offer compelling solutions and generate revenue, if any, from such
investment. For example, investments made to expand the Heartflow Platform to asymptomatic patients
may be expensive, technically challenging, experience delays and may not be successful. Additionally,
anticipated customer demand for a product or feature we are developing could decrease after the
development cycle has commenced, and we would nonetheless be unable to avoid substantial costs
associated with the development of any such product or features. If we expend a significant amount of
resources on research and development and our efforts do not lead to the successful introduction or
improvement of products or features that are competitive in our current or future markets, it would harm
our business, financial condition, results of operations and prospects.
Our networks and those of our third-party service providers may become the target of bad actors
or security breaches that we cannot anticipate or successfully defend, which could have an
adverse impact on our business.
The Heartflow Platform involves the storage and transmission of our customers’ personal information or
identifying information of their patients. Increasingly, we and other companies are subject to a wide variety
of attacks on their networks on an ongoing basis. In addition to attacks from traditional computer
“hackers,” malicious code (such as viruses and worms), employee theft or misuse, ransomware attacks
and denial of service attacks, sophisticated nation state and nation state supported actors now engage in
intrusions and attacks (including advanced persistent threat intrusions), and add to the risks to our
internal networks and the information they store and process. Additionally, such bad actors frequently
attempt to fraudulently induce employees or customers into disclosing sensitive information such as user
names, passwords or other information in order to gain access to our customers’ data, their patient’s data
or our data, including our intellectual property and other confidential business information, or our
information technology systems. Because techniques used to obtain unauthorized access or to sabotage
systems change frequently and generally are not recognized until successfully launched against a target,
we may be unable to anticipate these techniques or to implement adequate preventative measures.
Despite significant efforts to create process and security barriers to such threats, it is virtually impossible
for us to entirely mitigate these risks. Any such breach could compromise our networks, creating system
disruptions or slowdowns and exploiting security vulnerabilities of our products, and the information stored
on our networks could be accessed, publicly disclosed, lost or stolen, which could subject us to liability
and cause us significant financial harm. Such breaches often result in reputational damage, negative
publicity, loss of industry data security certifications, customers and sales, increased costs to remedy any
problem, costly litigation and contractual indemnification obligations by or for impacted customers or third
parties any of which could adversely affect our business. In addition, although we have, and intend to
maintain, insurance with respect to any such indemnification obligations, the coverage limits of our
insurance policies may not be adequate and one or more successful claims brought against us may have
an adverse effect on our business, financial condition, results of operations and prospects.
We also rely on third-party service providers, such as cloud storage and telecommunications services
providers. Such service providers are also potentially vulnerable to cybersecurity incidents that could
result in the interruption of their services to us or unauthorized access, use or disclosure of our
confidential information and confidential information of our customers and protected health information of
their patients.
Our products are also targets for malicious cybersecurity acts. While some of our products contain
encryption or security algorithms to protect third-party content or patient information or other data stored
in our products, these products could still be hacked or targeted by malicious software programs or other
attacks or the encryption schemes could be compromised, breached or circumvented by motivated or
sophisticated hackers, which could harm our business and our reputation. In addition, see the risk factor
titled “Our Heartflow Platform and the data and models it generates could have bugs, defects or errors,
including human quality control errors, or otherwise fail to meet the expectations of patients, physicians
and third-party payors, which could adversely affect our reputation, business and operating results” for
more information on bugs, defects or errors in the Heartflow Platform.
Risks related to legal and regulatory matters
We face extensive, regulatory requirements to bring our products to market, and our failure to
receive and maintain regulatory clearances or approvals of our current and future products in the
United States or abroad or to comply with medical device regulatory requirements could
adversely affect our business.
In order to market any product, we must establish and comply with numerous and varying regulatory
requirements that vary by country and by region within certain countries. Approval, clearance or marketing
authorization in the United States by the FDA or by a regulatory authority or other body in another country
does not ensure approval by the regulatory authorities in other countries or jurisdictions or ensure
approval, clearance or other marketing authorization for the same conditions of use. Approval processes
vary among countries and can involve additional product testing and validation and additional
administrative review periods. In general, unless an exemption applies, in the U.S. current and future
versions of our products must receive pre-market notification (“510(k)”), de novo classification (“de novo”)
or pre-market approval (“PMA”) from the FDA before they can be marketed in the United States. We
cannot provide assurance that any of our future products, to the extent required, will be cleared, approved
or otherwise authorized by the FDA through any of its pre-market review processes, or that the FDA will
provide export certificates that are necessary to export certain products to certain countries. In addition,
the national health or social security organizations of certain foreign countries, including those outside
Europe, require our products to be qualified before they can be marketed in those countries. Failure to
receive, or delays in the receipt of, relevant foreign qualifications in the European Economic Area or other
foreign countries could have an adverse effect on our business.
Pre-market notification, de novo classification request or PMA applications may require support by data
from clinical trials. We are subject to requirements to publicly register and report the results of our clinical
trials. We must also abide by good clinical practice (“GCP”) requirements in the conduct and
documentation of our clinical trials and report to the FDA significant financial interests of investigators in
any clinical trials we submit to support marketing applications for our products. We, the FDA or an
institutional review board (“IRB”), may suspend or terminate clinical trials at any time on various grounds,
including a finding that patients are being exposed to an unacceptable health risk or that the treatment
does not have any effect. If the FDA considers data from our clinical trials to be actually or potentially
biased due to investigators’ financial interests, or unreliable due to GCP noncompliance, it can require us
to implement extensive data analyses or other corrective actions, or exclude data from consideration in
support of our marketing applications. These outcomes could result in delay or denial of FDA clearance or
approval and could result in the need to conduct additional, costly and time-consuming clinical trials.
Additionally, we are required to obtain pre-market clearance or approval to market significantly modified
versions of our currently cleared Heartflow Platform, as well as to market the existing product for new
indications. The FDA requires us to make and document a determination as to whether or not a
modification requires a new 510(k) clearance, de novo classification or PMA approval; however, the FDA
can review and disagree with our decision. Although we have received 510(k) clearance from the FDA for
the current version of the Heartflow Platform, we may not be successful in receiving clearances, de novo
classifications or approvals in the future or the FDA may not agree with our decisions not to seek
clearances, de novo classifications or approvals for any new products or particular product modifications
or updates. The FDA may require us to obtain a new 510(k) clearance, de novo classifications or approval
for any past or future modification or a new indication for our existing products. Such submissions may
require the development and submission of additional data, may be time consuming and costly, and
ultimately may not be cleared or approved by the FDA.
If the FDA requires us to obtain pre-market clearances, de novo classifications or approvals for any
marketed modification to a previously cleared version of the Heartflow Platform, we may be required to
cease manufacturing and marketing of the modified product or to recall the modified product until we
obtain such FDA marketing authorization. The FDA may not clear, grant or approve such submissions in a
timely manner, if at all. The FDA also may change its policies, adopt additional regulations, or revise
existing regulations, each of which could prevent or delay pre-market clearance, de novo classification or
approval of our devices, or could impact our ability to market a device that was previously cleared. Any of
the foregoing could adversely impact our business and financial condition.
In addition, the FDA and other comparable foreign regulatory authorities may delay, limit or deny
clearance, de novo classification or approval of future versions of or future indications for our products or
any other potential product for many reasons, including, among others:
•the results of our clinical trials may not meet the level of statistically significant and clinically
meaningful efficacy with an acceptable safety profile as required by FDA, or other comparable
regulatory authorities in other countries, for marketing approval;
•the FDA or other comparable regulatory authorities in other countries may disagree with the number,
design, size, conduct or implementation of our clinical trials;
•the FDA or other comparable regulatory authorities in other countries may disagree with our
interpretation of data from our clinical trials;
•the FDA or other comparable regulatory authorities in other countries may not accept data generated
at one or more of our clinical trial sites;
•if our 510(k) notifications, de novo classification requests, PMA applications, or similar notifications or
applications, if and when submitted, are reviewed by the FDA or other comparable regulatory
authorities, as applicable, the regulatory authorities may have difficulties scheduling the necessary
review meetings in a timely manner, or may recommend against clearance or approval of our
application; or
•the FDA may determine that our 510(k) notifications for new indications, if and when submitted, must
follow a different regulatory pathway than we have attempted, and there may be potentially extended
standards, timelines, reviews (such as by an FDA Advisory Committee) and costs in order to pursue
approval.
Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain
regulatory clearance, de novo classification or approval for current or future versions of the Heartflow
Platform and could result in difficulties and costs for us. If we fail to comply with regulatory requirements in
international markets or to obtain and maintain required marketing authorizations, or if marketing
authorizations in international markets are delayed, our ability to realize the full market potential of our
new potential products will be limited.
Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare
system could have an adverse effect on our business, financial condition, results of operations
and prospects.
In the United States, there have been and continue to be a number of legislative and regulatory initiatives
to contain healthcare costs. Federal and state lawmakers regularly propose and, at times, enact
legislation that would result in significant changes to the U.S. healthcare system, some of which are
intended to contain or reduce the costs of medical products and services, including our own products. For
example, on July 4, 2025, the annual reconciliation bill, the “One Big Beautiful Bill Act,” or OBBBA, was
signed into law which is expected to reduce Medicaid spending and enrollment by implementing work
requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and
limiting provider taxes used to fund the program. OBBBA also narrows access to ACA marketplace
exchange enrollment and declines to extend the ACA enhanced advanced premium tax credits, set to
expire in 2025, which, among other provisions in the law, are anticipated to reduce the number of
Americans with health insurance. Current and future legislative proposals to further reform healthcare or
reduce healthcare costs may limit coverage of or lower reimbursement for the diagnostic tests associated
with the use of our products. The cost containment measures that payors and providers are instituting and
the effect of any healthcare reform initiative implemented in the future could impact our revenue from the
sale of our products.
We expect additional state and federal healthcare policies and reform measures to be adopted in the
future, particularly in light of the recent changes in the White House and Congress, any of which could
limit reimbursement for healthcare products and services or otherwise result in reduced demand for our
products or additional pricing pressure and have a material adverse effect on our industry generally and
on our customers. We cannot predict what other healthcare programs and regulations will ultimately be
implemented at the federal or state level or whether any future legislation or regulation in the United
States may negatively affect our business, financial condition, results of operations and prospects. The
continuing efforts of the government, insurance companies, managed care organizations and other
payors of healthcare services to contain or reduce costs of healthcare may adversely affect our ability to
set a price that we believe is fair for our products, our ability to generate revenue and achieve or maintain
profitability and the availability of capital.
Any changes of, or uncertainty with respect to, future coverage or reimbursement rates could affect
demand for our products, which may prevent us from being able to generate additional revenue or attain
profitability.
We are subject to many laws and governmental regulations affecting our marketed products, both
domestically and internationally, and any adverse regulatory action may adversely affect our
business, financial condition, results of operations and prospects.
The Heartflow Platform is subject to regulation by numerous government authorities, including the FDA
and comparable foreign authorities, after clearance or approval of current and future versions of the
product. To varying degrees, each of these authorities requires us to comply with laws and regulations
governing the development, design, testing, manufacture, labeling, advertising, promotion, distribution,
import and export of our products. The Heartflow Platform (also referred to as Heartflow Analysis, which
consists of four main functions, the Heartflow FFRCT Analysis, the Heartflow Plaque Analysis, the
Heartflow RoadMap Analysis and the Heartflow PCI Planner (which we expect to launch in 2026)) has
been cleared by the FDA (K213857), and only the Heartflow FFRCT Analysis function of the Heartflow
Platform is CE Marked in the European Economic Area, the United Kingdom and Australia, received
medical device licensing in Canada and has been approved for marketing authorization in Japan by the
Pharmaceuticals and Medical Devices Agency (“PMDA”), all for specific indications for use. The Heartflow
Platform has also been cleared by the equivalent regulatory authorities in Israel, Saudi Arabia, United
Arab Emirates, and licensed in Bahrain.
We currently have ongoing responsibilities under U.S., U.K., European Economic Area, Switzerland,
Canada, Australia, Japan, Saudi Arabia, United Arab Emirates, Bahrain and Israel (registered or licensed
regions) regulations, including requirements related to product and facility registration, device listing,
adverse event reporting, reporting of recalls and field corrective actions, manufacturing, advertising,
promotion, distribution, import, and export. In certain jurisdictions outside of the United States, we
contract with third parties (i.e., notified bodies, authorized representatives, manufacturing authorization
holders) who either oversee regulatory compliance or assume regulatory responsibilities for our products
distributed by those third parties. We are subject to periodic inspections and audits by the FDA, notified
bodies, authorized representatives and comparable foreign authorities to determine compliance with
regulatory requirements, including good manufacturing practices such as the Quality System Regulation
of the FDA, Medical Device Single Auditing Program, ISO 13485:2016, and EN ISO 13485:2021
concerning the EU, establishment registration and device listing, medical device reporting, vigilance
reporting of adverse events, notification of corrections, recalls, field safety corrective actions and product
labeling and marketing. These inspections and audits can result in inspectional observations or reports,
warning letters or other forms of enforcement action. If the FDA or comparable foreign authorities
conclude, as a result of these inspections or audits or from any other source of information, that we are
not in compliance with applicable laws or regulations, or that our products are ineffective or pose an
unreasonable health risk, such authorities could ban these products, suspend or cancel our marketing
authorizations, impose “stop sale” and “stop import” orders, refuse to issue export certificates, detain or
seize adulterated or misbranded products, order a recall, repair, replacement, correction or refund of such
products, require us to conduct post-market surveillance studies or change the labeling for our products,
or require us to notify health professionals and others that the products present unreasonable risks of
substantial harm to the public health. Failure to comply with regulatory requirements may also subject us
to additional administrative and judicially imposed sanctions, warning letters, civil and criminal penalties,
injunctions, interruption of manufacturing or clinical trials, total or partial suspension of production and
resulting adverse publicity.
Discovery of previously unknown problems with our products’ design or manufacture may result in
restrictions on the use of the Heartflow Platform, restrictions placed on us or our suppliers or withdrawal
of the existing regulatory clearance of the Heartflow Platform. The FDA or comparable foreign authorities
may also impose operating restrictions, enjoin and restrain violations of applicable law pertaining to
medical devices, assess civil or criminal penalties against our officers, employees or us or recommend
criminal prosecution of our company. Adverse regulatory action of a certain magnitude may restrict us
from effectively marketing and selling our products. In addition, negative publicity or product liability
claims resulting from any adverse regulatory action could have an adverse effect on our business,
financial condition, results of operations and prospects.
In many of the foreign countries in which we market our products, we are subject to extensive medical
device regulations that are similar to those of the FDA, including those in Europe. The regulation of our
products in Europe falls within the European Economic Area, which consists of the 27 member states of
the European Union, as well as Iceland, Liechtenstein and Norway. Only medical devices that comply with
certain conformity requirements of the Medical Devices Regulation (E.U.) 2017/745 (“MDR”) concerning
Medical Devices, or the E.U. Medical Devices Directive, Directive 2006/114/EC are allowed to be
marketed within the European Economic Area.
Foreign governmental regulations have become increasingly stringent and more extensive, and we may
become subject to even more rigorous regulation by foreign governmental authorities in the future.
Penalties for a company’s noncompliance with foreign governmental regulation could be severe, including
revocation or suspension of a company’s business license and civil or criminal sanctions. In some
jurisdictions, such as Germany, any violation of a law related to medical devices is also considered to be
a violation of unfair competition law. In such cases, governmental authorities, our competitors and
business or consumer associations may then file lawsuits to prohibit us from commercializing the
Heartflow Platform in such jurisdictions. Our competitors may also sue us for damages. Any domestic or
foreign governmental law or regulation imposed in the future may have an adverse effect on our business,
financial condition, results of operations and prospects.
Delays in the commencement or completion of future or ongoing clinical testing could result in
increased costs to us and delay our ability to market the Heartflow Platform for additional
indications.
We are currently enrolling patients for our DECIDE clinical trial to evaluate our Heartflow Plaque Analysis
in a real-world setting. We do not know whether our DECIDE clinical trial will be completed on schedule,
or at all. The commencement or completion of clinical trials can be disrupted for a variety of reasons,
including difficulties in:
•recruiting and enrolling patients to participate in, and investigators to conduct, a clinical trial;
•reaching agreements on acceptable terms with prospective clinical research organizations and trial
sites;
•obtaining approval of an investigational device exemption (“IDE”), application from the FDA or
equivalent authorization from foreign regulatory authorities, if required; or
•obtaining IRB approval to conduct a clinical trial at a prospective site.
A clinical trial may also be suspended or terminated by us, an IRB, the FDA or other regulatory authorities
due to a number of factors, including:
•failure to conduct the clinical trial in accordance with regulatory requirements or in accordance with
our clinical protocols;
•inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting
in the imposition of a clinical hold;
•safety or effectiveness issues; or
•lack of adequate funding to continue the clinical trial.
In addition, changes in regulatory requirements and guidance may occur, and we may need to amend
clinical trial protocols to respond to such changes, which could impact the cost, timing or successful
completion of a clinical trial. If we experience delays in the commencement or completion of our clinical
trials, the commercial prospects for additional indications for our products will be harmed.
Interim, “top-line” and preliminary data from our clinical trials that we announce or publish from
time to time may change as more patient data become available and are subject to audit and
verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim, top-line or preliminary data from our clinical trials,
including our DECIDE clinical trial, which is based on a preliminary analysis of then-available data, and
the results and related findings and conclusions are subject to change following a more comprehensive
review of the data related to the particular trial or additional data collected at a later time. We also make
assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not
have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, top-
line or preliminary results that we report may differ from future results of the same trial, or different
conclusions or considerations may qualify such results, once additional data have been received and fully
evaluated. Interim, top-line or preliminary data also remain subject to audit and verification procedures
that may result in the final data being materially different from the interim, top-line or preliminary data we
previously announced. As a result, interim, top-line and preliminary data should be viewed with caution
until the final data are available. Adverse differences between interim data and final data could
significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors
could result in volatility in our share price.
Further, others, including the FDA and other regulatory authorities or other bodies, may not accept or
agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh
the importance of data differently, which could impact the value of the particular trial, or the approvability
or potential for commercialization of the particular medical device. In addition, the information we choose
to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive
information, and others may not agree with what we determine is material or otherwise appropriate
information to include in our disclosure. The interim, top-line or preliminary data that we report may differ
from final results, and regulatory authorities and other bodies may disagree with the conclusions reached,
which may harm our ability to obtain marketing authorization for, and commercialize, our future products,
which could harm our business, financial condition, results of operations and prospects.
We may face product liability claims that could result in costly litigation and significant liabilities.
We may not be able to maintain adequate product liability insurance.
Development, marketing and clinical testing of our products may expose us to product liability and other
tort claims. Although we have, and intend to maintain, liability insurance, the coverage limits of our
insurance policies may not be adequate and one or more successful claims brought against us may have
an adverse effect on our business, financial condition, results of operations and prospects. For example,
the U.S. Supreme Court declined to hear an appeal where the U.S. Court of Appeals for the Ninth Circuit
ruled that the 1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act did not
preempt state laws in a product liability case involving a medical device company. If other courts in the
United States adopt similar rulings, we may be subject to increased litigation risk in connection with our
products. Product liability claims could negatively affect our reputation, product sales, and our ability to
obtain and maintain regulatory approval for our products.
In addition, although we have product liability and clinical study liability insurance, this insurance is
subject to deductibles and coverage limitations. Our current product liability insurance may not continue to
be available to us on acceptable terms, if at all, and, if available, coverage may not be adequate to protect
us against any future product liability claims. If we are unable to obtain insurance at an acceptable cost,
on acceptable terms with adequate coverage, or at all, or otherwise protect against potential product
liability claims, we will be exposed to significant liabilities, which may harm our business. A product liability
claim, recall or other claim with respect to uninsured liabilities or for amounts in excess of insured
liabilities could have an adverse effect on our reputation, business, financial condition, results of
operations and prospects.
The Heartflow Platform may be subject to recalls, which could be costly and could harm our
reputation and business.
We are subject to ongoing medical device reporting regulations that require us to report to the FDA or
similar governmental authorities in other countries if our products cause, or contribute to, death or serious
injury, or if they malfunction and would be likely to cause, or contribute to, death or serious injury if the
malfunction were to recur. We could voluntarily elect to, or the FDA and similar governmental authorities
in other countries could require us to, perform a correction, field safety corrective action, removal or other
recall of our products in the event of material deficiencies or defects in design, manufacturing or labeling
that could cause harm. Our products have been in the past, and may in the future, be the subject of
medical device reports of adverse events with the MAUDE database, including reports of false negative
results and incorrect or imprecise results or readings. Between 2017 and 2025, 116 Heartflow Platform
MAUDE reports were made, with 104 of those reports due to false negative results, 11 reports due to
incorrect, inadequate or imprecise results or readings, and one report due to an adverse event without an
identified device or use problem. While none of these MAUDE reports resulted in a mandated or voluntary
correction, field safety action, removal or a recall, a government mandated or voluntary correction, field
safety corrective action, removal or other recall could occur as a result of manufacturing errors or design
defects, including defects in labeling. Any correction, field safety corrective action, removal or other recall
would divert managerial and financial resources and could lead to a substantial loss of physician and
patient confidence in our products and, consequently, have an adverse effect on our growth prospects or
operating results. A correction, field safety corrective action, removal or other recall could also result in
substantial litigation, including product liability claims, with liabilities well in excess of our insurance
coverage limits. Any of these events could have an adverse effect on our reputation, business, financial
condition, results of operations and prospects.
Off-label or other unlawful promotion of our products could result in costly investigations and
sanctions from the FDA and other regulatory bodies.
The Heartflow Platform (also referred to as Heartflow Analysis, which consists of four main functions, the
Heartflow FFRCT Analysis, the Heartflow Plaque Analysis, the Heartflow RoadMap Analysis and the
Heartflow PCI Planner (which we expect to launch in 2026)) has been cleared by the FDA (K213857), and
only the Heartflow FFRCT Analysis function of the Heartflow Platform is CE Marked in the European
Economic Area, the United Kingdom and Australia, received medical device licensing in Canada and has
been approved for marketing authorization in Japan by the PMDA, all for specific indications for use. The
Heartflow Platform has also been cleared by the equivalent regulatory authorities in Israel, Saudi Arabia,
United Arab Emirates, and licensed in Bahrain. We may only promote or market our products for their
specifically cleared or approved indications. We train our marketing and sales force against promoting our
products for uses outside of the cleared or approved indications for use (“off-label use”).
If the FDA determines that our promotional materials or training constitute promotion of an off-label use,
or of claims that are not adequately substantiated or that are otherwise false or misleading, it could
request that we modify our training or promotional materials or subject us to regulatory or enforcement
actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine or
criminal penalties. It is also possible that other federal, state or foreign enforcement authorities, including
the Federal Trade Commission or Department of Justice, might take action if they consider our business
activities to constitute promotion of an off-label use or other unlawful promotion, which could result in
significant penalties, including criminal, civil and administrative penalties, damages, fines, disgorgement,
exclusion from participation in government healthcare programs and the curtailment of our operations.
Any of these events could significantly harm our business, results of operations, financial condition and
prospects.
Further, the advertising and promotion of our products are subject to European Economic Area Member
States laws implementing the Medical Devices Directive concerning misleading and comparative
advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other European
Economic Area Member State legislation governing the advertising and promotion of medical devices.
European Economic Area Member State legislation may also restrict or impose limitations on our ability to
advertise our products directly to the general public. In addition, voluntary E.U. and national codes of
conduct provide guidelines on the advertising and promotion of our products to the general public and
may impose limitations on our promotional activities with healthcare professionals harming our business,
financial condition, results of operations and prospects.
We are subject to numerous federal, state and foreign healthcare fraud and abuse, compliance,
transparency and privacy laws and regulations, and a failure to comply with such laws and
regulations could have an adverse effect on our business; similarly, an investigation, inquiry or
audit by a government agency that alleges violations of law or regulations may have an adverse
effect on our business.
Our operations are, and will continue to be, directly and indirectly affected by various federal, state and/or
foreign healthcare laws, including those described below. In particular, because the use of our products
are directly or indirectly reimbursed by U.S. federal health care programs, for example Medicare, we are
subject to the federal Anti-Kickback Statute, a criminal law that prohibits, among other things, any person
or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration in cash or
in-kind (including any kickback or bribe, but also common forms of remuneration, such as service or
consulting fees, service fees, meals, travel expenses, discounts or rebates), directly or indirectly, overtly
or covertly, in cash or in kind, in return for or to induce the referring, ordering, leasing, purchasing or
arranging for or recommending the referring, ordering, purchasing or leasing of any good, facility, item or
service, for which payment may be made, in whole or in part, under federal healthcare programs, such as
the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include
anything of value. Although there are a number of statutory exceptions and regulatory safe harbors
protecting certain common activities, the exceptions and safe harbors are drawn narrowly. Failure to meet
all of the requirements of a statutory exception or regulatory safe harbor does not make the conduct per
se illegal under the Anti-Kickback Statute. Instead, the arrangement will be evaluated on a case-by-case
basis based on a cumulative review of all of its facts and circumstances. Several courts have interpreted
the statute’s intent requirement to mean that if any one purpose of an arrangement involving
remuneration is to induce referrals of (or purchases, uses or recommendations of prescriptions, uses or
purchases related to) federal healthcare program covered business, the Anti-Kickback Statute has been
implicated and potentially violated. Our practices may not in all cases meet all of the criteria for safe
harbor protection from Anti-Kickback Statute liability. Further, the ACA, amends the intent requirement of
the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes. A person or entity no
longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, the
government may assert that a claim for payment by a government health care program including items or
services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for
purposes of the false claims laws.
The U.S. civil False Claims Act prohibits, among other things, any person or entity from knowingly
presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal
government or knowingly making, using, or causing to be made or used a false record or statement
material to a false or fraudulent claim to the federal government. A claim includes “any request or
demand” for money or property presented to the U.S. government. The civil False Claims Act also applies
to false submissions that cause the government to not receive a benefit to which it is entitled, such as a
discounted sales price for products covered by federal healthcare programs. Intent to deceive is not
required to establish liability under the civil False Claims Act. In addition, the civil False Claims Act
includes a whistleblower provision that allows private citizens to bring claims on behalf of the U.S.
government alleging violations of the law. Whistleblowers may be entitled to up to as much as thirty
percent (30%) of the government’s financial recovery resulting from such claims. This incentivizes
potential whistleblowers to file complaints in federal court, which complaints are relied upon heavily by the
government to investigate and prosecute allegations of violations of both the civil False Claims Act and
the Anti-Kickback Statute. U.S. enforcement authorities or private whistleblowers acting on behalf of the
U.S. government may file complaints under the civil False Claims Act alleging that we have caused one or
more of our customers to submit false submissions for reimbursement from federal health care programs,
including Medicare, Medicaid, or the Veterans Affairs program due to alleged kickbacks, the sale of
adulterated or misbranded products, or the provision of false or misleading information to our customers
or other third parties.
Additionally, under the federal Civil Money Penalty Statute, the Department of Health and Human
Services (“HHS”) may impose civil money penalties against entities that make offers to transfer or transfer
remuneration, including gifts, payments or routine waivers of co-payments or deductibles, to any
Medicare beneficiary in order to influence such individual to order or receive any item or service for which
payment may be made, in whole or in part, under Medicare and/or a State health care program.
Violations of these laws and regulations may result in significant criminal and/or civil fines and penalties,
as well as potential exclusion from participation in federal health care programs, that could significantly
impact our business and operations.
We are also subject to other federal and state fraud and abuse laws, including HIPAA’s fraud provisions,
which among other things, are criminal laws that prohibit, among other actions, knowingly and willfully
executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program,
including private payors, knowingly and willfully embezzling or stealing from a healthcare benefit program,
willfully preventing, obstructing, misleading, delaying or attempting to delay a criminal investigation of a
healthcare offense and knowingly and willfully falsifying, concealing or covering up a material fact or
making any materially false, fictitious or fraudulent statement or representation in connection with the
delivery of or payment for healthcare benefits, items or services. Many of these state laws closely mirror
the federal Anti-Kickback Statute or civil False Claims Act, but apply more broadly to products and
services that are paid for in any way, whereas the federal law pertains only to those reimbursed by federal
health care programs. In addition, many states have also adopted laws prohibiting fee-splitting (the
sharing of professional fees with non-state licensed persons or entities), restricting marketing activities
with physicians and/or prohibiting the practice of medicine (or the direction of the practice of medicine) by
corporations or others that are not specifically licensed to practice medicine within the state. While under
our model, licensed practitioners independently are providing any and all medical treatment and
diagnostic services for which a state license is required, these state laws still may apply to us.
We also are subject to foreign fraud and abuse laws and regulations, which vary by country, and can
prohibit many of the same activities addressed by U.S. laws.
We are also subject to the federal and state transparency reporting laws and regulations, gift bans and
compliance reporting provisions. The Physician Payments Sunshine Act (also known as Open Payments)
requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available
under Medicare, Medicaid or the State Children’s Health Insurance Program to report annually to the
Centers for Medicare and Medicaid Services information related to payments and other transfers of value
provided directly or indirectly to physicians (defined to include doctors, dentists, optometrists, podiatrists
and chiropractors), other healthcare providers (such as physician assistants and nurse practitioners) and
teaching hospitals. Such manufacturers are also required to annually report certain ownership and
investment interests held by such U.S. physicians and their immediate family members. Certain states,
like Massachusetts and Vermont have similar reporting requirements. Some states, like Vermont, prohibit
gifts and certain benefits from being provided to physicians licensed within that state. Other states, such
as California and Nevada mandate implementation of compliance programs to ensure compliance with
fraud and abuse laws and regulations, as well as with industry codes of conduct, such as the AdvaMed
Code of Ethics on Interactions with Health Care Professionals. Our business is subject to these many
requirements, which can be nuanced and lacking in clear guidance. Our failure to comply with these laws
or regulations could result in substantial fines or penalties. Further, our reports made pursuant to these
laws may be used by enforcement authorities or whistleblowers to raise or substantiate allegations
against us.
We are also subject to the federal physician self-referral prohibitions, commonly known as the Stark Law,
which prohibits, among other things, physicians who have a financial relationship, including an
investment, ownership or compensation relationship with an entity that submits claims for payment to the
Medicare or Medicaid programs, from referring Medicare or Medicaid patients for certain “designated
health services,” which include diagnostic imaging services related to our products, unless an exception
applies. Similarly, entities may not bill Medicare or any other party for services furnished pursuant to a
prohibited referral. Many states have their own self-referral laws as well, which in some cases apply to all
payors, not just Medicare and Medicaid.
If our operations are found to be in violation of any of the laws described above or any other
governmental regulations that apply to us now or in the future, we may be subject to significant penalties,
including civil and criminal penalties, damages, fines, disgorgement, exclusion from governmental
healthcare programs and the curtailment or restructuring of our operations, any of which could adversely
affect our ability to operate our business and our financial results.
We also note that there is risk of our being found in violation of these laws by the fact that many of them
have not been fully, clearly or consistently interpreted by the regulatory authorities or the courts, and their
provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if
we successfully defend against it, could cause us to incur significant legal expenses and divert our
management’s attention from the operation of our business. Moreover, to achieve compliance with
applicable federal and state privacy, security and electronic transaction laws, we may be required to
modify our operations with respect to the handling of patient information. Similarly, to achieve compliance
with other applicable federal and state anti-fraud, open payments or other healthcare regulations, we may
be required to modify our operations. Implementing any of these modifications may prove costly. At this
time, we are not able to determine the full consequences to us, including the total cost of compliance, of
these various federal and state laws.
We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to
our operations and non-compliance with such laws can subject us to criminal and/or civil liability
and harm our business.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the
U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act of 2010 and Proceeds of Crime Act 2002 and
possibly other state and national anti-bribery and anti-money laundering laws in countries in which we
conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their
employees and third-party intermediaries from authorizing, promising, offering or providing, directly or
indirectly, improper payments or benefits to recipients in the public or private sector. We use third-party
representatives to support sales of our products abroad. In addition, as we increase our international
sales and business, we may engage with additional business partners and third-party intermediaries to
sell our products abroad and to obtain necessary permits, licenses and other regulatory approvals. We or
our third-party intermediaries may have direct or indirect interactions with officials and employees of
government agencies or state owned or affiliated entities. We can be held liable for the corrupt or other
illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners
and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower
complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement
of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension or
debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse
media coverage and other collateral consequences. If any subpoenas or investigations are launched, or
governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal
litigation, our business, results of operations and financial condition could be materially harmed. In
addition, responding to any action will likely result in a materially significant diversion of management’s
attention and resources and significant defense and compliance costs and other professional fees. In
certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor,
which can result in added costs and administrative burdens. As a general matter, enforcement actions
and sanctions could harm our business, financial condition, results of operations and prospects.
We are subject to governmental export and import controls that could impair our ability to
compete in international markets due to licensing requirements and subject us to liability if we are
not in compliance with applicable laws.
Our products are subject to export control and import laws and regulations, including the U.S. Export
Administration Regulations, U.S. Customs regulations and various economic and trade sanctions
regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Exports of
our products must be made in compliance with these laws and regulations. If we fail to comply with these
laws and regulations, we and certain of our employees could be subject to substantial civil or criminal
penalties, including: the possible loss of export or import privileges; fines, which may be imposed on us
and responsible employees or managers; and, in extreme cases, the incarceration of responsible
employees or managers. Obtaining the necessary authorizations, including any required license, for a
particular sale may be time consuming, is not guaranteed and may result in the delay or loss of sales
opportunities. In addition, changes in our products or changes in applicable export or import regulations
may create delays in the introduction and sale of our products in international markets, prevent our
customers with international operations from deploying our products or, in some cases, prevent the export
or import of our products to certain countries, governments or persons altogether. Any change in export or
import regulations, shift in the enforcement or scope of existing regulations or change in the countries,
governments, persons or technologies targeted by such regulations, could also result in decreased use of
our products, or in our decreased ability to export or sell our products to existing or potential customers
with international operations. Any decreased use of our products or limitation on our ability to export or
sell our products would likely adversely affect our business.
Furthermore, we incorporate encryption technology into certain of our products. Various countries
regulate the import of certain encryption technology, including through import permitting and licensing
requirements, and have enacted laws that could limit our ability to distribute our products or could limit our
customers’ ability to implement our products in those countries. Encrypted products and the underlying
technology may also be subject to export control restrictions. Governmental regulation of encryption
technology and regulation of imports or exports of encryption products, or our failure to obtain required
import or export approval for our products, when applicable, could harm our international sales and
adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of
our products, including with respect to new releases of our products, may create delays in the introduction
of our products in international markets, prevent our customers with international operations from
deploying our products throughout their globally distributed systems or, in some cases, prevent the export
of our products to some countries altogether.
Moreover, U.S. export control laws and economic sanctions programs prohibit the shipment of certain
products and services to countries, governments and persons that are subject to U.S. economic
embargoes and trade sanctions. Any violations of such economic embargoes and trade sanction
regulations could have negative consequences, including government investigations, penalties and
reputational harm.
Any future litigation against us could be costly and time-consuming to defend.
We have been in the past, and we may become in the future, subject to legal proceedings and claims that
arise in the ordinary course of business, such as claims brought by our third-party vendors, our customers
or their patients in connection with contractual disputes or the use of our Heartflow Platform, claims
brought by us or by competitors related to intellectual property or employment claims made by our current
or former employees. Litigation might result in substantial costs and may divert management’s attention
and resources, which might seriously harm our business, financial condition, results of operations and
prospects. Insurance might not cover such claims, might not provide sufficient payments to cover all the
costs to resolve one or more such claims, and might not continue to be available at all or on terms
acceptable to us (including premium increases or the imposition of large deductible or co-insurance
requirements). A claim brought against us that is uninsured or underinsured could result in unanticipated
costs, potentially harming our business, financial condition, results of operations and prospects. In
addition, we cannot be sure that our existing insurance coverage will continue to be available on
acceptable terms or at all or that our insurers will not deny coverage as to any future claim.
Risks related to our intellectual property
If we are unable to obtain and maintain sufficient intellectual property rights, or the scope of our
rights is not sufficiently broad, third parties could develop and commercialize technology and
products similar or identical to ours, and our ability to successfully commercialize our technology
and products may be adversely affected.
Our commercial success will depend, in part, on our ability to continue obtaining and maintaining
intellectual property protection for our technology and products, in both the United States and certain
other countries, successfully defending this intellectual property against third-party challenges and
successfully enforcing this intellectual property to prevent third-party infringement. We rely upon a
combination of patents, trade secrets, know-how, copyrights, trademarks, license agreements and
contractual provisions to establish our intellectual property rights and protect our products.
Our ability to protect our technologies and products from unauthorized or infringing use by third parties
depends in substantial part on our ability to obtain and maintain valid and enforceable patents in both the
United States and certain other countries. The patent positions of medical technology and software
companies can be highly uncertain and involve complex legal, scientific and factual questions for which
important legal principles remain unresolved. In addition, the patent prosecution process is expensive,
time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce, defend or
license all necessary or desirable patents or patent applications at a reasonable cost or in a timely
manner, or in all jurisdictions.
We cannot guarantee that any patents will issue from any pending or future patent applications owned by
or licensed to us, or if issued, the breadth of such patent coverage. In particular, during prosecution of any
patent application, the issuance of any patents based on the application may depend upon our ability to
generate additional preclinical or clinical data that support the patentability of our proposed claims. We
may not be able to generate sufficient additional data on a timely basis, or at all. It is also possible that we
may fail to identify patentable aspects of inventions made in the course of our development and
commercial activities before it is too late to obtain patent protection on such inventions. If we fail to timely
file for patent protection in any jurisdiction, we may be precluded from doing so at a later date.
The issuance of a patent is not conclusive as to its inventorship, ownership, scope, validity or
enforceability, and our owned or licensed patents may be challenged in the courts or the patent offices of
the United States or abroad. Such challenges may result in a loss of exclusivity or in the patent’s claims
being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop
third parties from using or commercializing similar or identical products, or limit the duration of patent
protection for our technology and products. In addition, changes in either the patent laws, implementing
regulations or interpretations of patent laws in the United States or foreign countries may diminish the
value of our patent rights.
Even if unchallenged, our owned or licensed patents may not provide us with exclusivity or commercial
value for our products or any significant protection against competitive products or prevent others from
designing around our claims. Our competitors might conduct research and development activities in
countries where we do not have patent rights (or in those countries where we do, under safe harbor
provisions) and then use the information learned from such activities to develop competitive products for
sale in our major commercial markets. Further, if we encounter delays in regulatory approvals, the period
of time during which we could market our products under patent protection could be reduced. Any of
these outcomes could impair our ability to prevent competition from third parties, which may have an
adverse impact on our business.
Patent applications are generally maintained in confidence until publication. In the United States, for
example, patent applications are maintained in secrecy for up to 18 months after their filing. Similarly,
publication of discoveries in scientific or patent literature often lag behind actual discoveries.
Consequently, we cannot be certain that we or our licensors were the first to invent, or the first to file
patent applications on our products. There is also no assurance that all of the potentially relevant prior art
relating to our patents and patent applications has been found, which could be used by a third party to
challenge validity of our patents or prevent a patent from issuing from a pending patent application.
In addition to patents, proprietary trade secrets and unpatented know-how are important to our business.
For information about risks related to these intellectual property rights, see the risk factor titled “If we are
unable to protect the disclosure and use of our confidential information and trade secrets, the value of our
products and technologies and our business and competitive position could be harmed” below. We also
rely on the trademarks we own to distinguish our products from the products of our competitors. We
cannot guarantee that any trademark applications filed by us will be approved. Third parties may also
oppose or attempt to cancel our trademark applications or trademarks, or otherwise challenge our use of
the trademarks. In the event that the trademarks we use are successfully challenged, we could be forced
to rebrand our products, which could result in loss of brand recognition, and could require us to devote
resources to advertising and marketing new brands. Competitors or other parties may adopt trade names
or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to
market confusion.
Further, we cannot provide assurance that competitors will not infringe the trademarks we use, or that we
will have adequate resources to enforce these trademarks. If we attempt to enforce our trademarks and
assert trademark infringement claims, a court may determine that the marks we have asserted are invalid
or unenforceable, or that the party against whom we have asserted trademark infringement has superior
rights to the marks in question. In this case, we could ultimately be forced to cease use of such
trademarks. We may license our trademarks and trade names to third parties, such as distributors.
Though these license agreements may provide guidelines for how our trademarks and trade names may
be used, a breach of these agreements or misuse of our trademarks and trade names by our licensees
may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names.
Over the long term, if we are unable to establish name recognition based on our trademarks and trade
names, then we may not be able to compete effectively and our business may be adversely affected.
For information about risks related to our inability to protect our intellectual property rights outside the
United States, see the risk factor titled “We may not be able to adequately protect our intellectual property
rights throughout the world” below.
If we are unable to protect the disclosure and use of our confidential information and trade
secrets, the value of our products and technologies and our business and competitive position
could be harmed.
In addition to patent protection, we also rely on other intellectual property rights, including trade secrets,
know-how, and/or other proprietary information that is not patentable or that we elect not to patent.
However, trade secrets can be difficult to protect, and some courts are less willing or unwilling to protect
trade secrets. Although we have taken steps to protect our trade secrets and unpatented know-how,
including by entering into confidentiality agreements with third parties, and proprietary information and
invention agreements with our employees, consultants and advisors, third parties may still obtain this
information or we may be unable to protect our rights. There can be no assurance that binding
agreements will not be breached, that we would have adequate remedies for any breach, or that our trade
secrets and unpatented know-how will not otherwise become known or be independently discovered by
our competitors. We also seek to preserve the integrity and confidentiality of our data and trade secrets
by maintaining physical security of our premises and physical and electronic security of our information
technology systems. While we have confidence in these individuals, organizations and systems, our
security measures may be breached, and we may not have adequate remedies for any such breach.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we
would have no right to prevent them, or those to whom they communicate it, from using that information to
compete with us. Any exposure of our trade secrets and other proprietary information would impair our
competitive advantages and could have a material adverse effect on our business, financial condition,
results of operations and prospects. In particular, a failure to protect our proprietary rights may allow
competitors to copy our products or technologies, which could adversely affect our pricing and market
share. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products
or technologies that we consider proprietary.
Costly and time-consuming litigation could be necessary to enforce and determine the scope of our trade
secret rights and related confidentiality, non-disclosure and non-use provisions, and outcomes of such
litigation are unpredictable. Enforcing a claim that a party illegally disclosed, used or misappropriated a
trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. While we
use commonly accepted security measures, trade secret claims are often based on a combination of
federal and state law in the United States, and the criteria for protection of trade secrets can vary among
different jurisdictions. If the steps we have taken to maintain our trade secrets are deemed inadequate,
we may have insufficient recourse against third parties for misappropriating the trade secret. In addition,
agreement terms that address non-competition are difficult to enforce in many jurisdictions and might not
be enforceable in certain cases. Even if we were to be successful in the enforcement of our claims, we
may not be able to obtain adequate remedies.
Reliance on third parties requires us to share our trade secrets, which increases the possibility
that a competitor will discover them or that our trade secrets will be misappropriated or disclosed
to others.
Any collaboration or other engagement with third parties for the development of our products may require
us, at times, to share trade secrets with them. We may also conduct joint research and development
programs that may require us to share trade secrets under the terms of our research and development
partnerships or similar agreements. We seek to protect our trade secrets and other proprietary technology
in part by entering into confidentiality agreements with third parties prior to beginning research or
disclosing proprietary information. These agreements typically limit the rights of the third parties to use or
disclose our confidential information, including our trade secrets. Despite the contractual provisions
employed when working with third parties, the need to share trade secrets and other confidential
information increases the risk that such trade secrets become known by our competitors, are
inadvertently incorporated into the technology of others, or are disclosed or used in violation of these
agreements. Given that our proprietary Heartflow Platform is based, in part, on our know-how and trade
secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure could have
an adverse effect on our business, financial condition, results of operations and prospects.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party
contractors and consultants to publish data potentially relating to our trade secrets. Despite our efforts to
protect our trade secrets, we may not be able to prevent the unauthorized disclosure or use of our
technical know-how or other trade secrets by the parties to these agreements. Moreover, we cannot
guarantee that we have entered into such agreements with each party that may have or have had access
to our confidential information or proprietary technology and processes. Monitoring unauthorized uses
and disclosures is difficult, and we do not know whether the steps we have taken to protect our
proprietary technologies will be effective. If any of the collaborators, scientific advisors, employees,
contractors and consultants who are parties to these agreements breaches or violates the terms of any of
these agreements, we may not have adequate remedies for any such breach or violation, and we could
lose our trade secrets as a result. Moreover, if confidential information that is licensed or disclosed to us
by our partners, collaborators, or others is inadvertently disclosed or subject to a breach or violation, we
may be exposed to liability to the owner of that confidential information. Enforcing a claim that a third
party illegally obtained and is using our trade secrets, like patent litigation, is expensive and time
consuming, and the outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets, and we may need to share our trade secrets and
proprietary know-how with current or future partners, collaborators, contractors and others located in
countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or
foreign actors, and those affiliated with or controlled by state actors.
Obtaining and maintaining our patent protection depends on compliance with various procedural,
document submission, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for noncompliance with these
requirements.
The U.S. Patent and Trademark Office (“USPTO”) and various foreign governmental patent agencies
require compliance with a number of procedural, documentary, fee payment and other similar provisions
during the patent application process. In addition, periodic maintenance fees, renewal fees, annuity fees,
and various other government fees on patents and/or applications will be due to be paid to the USPTO
and various governmental patent agencies outside of the United States over the lifetime of our patents
and/or applications and any patent rights we may obtain in the future. We have systems in place to
remind us to pay these fees, and we employ outside firms to remind us to pay annuity fees due to patent
agencies on our patents and pending patent applications. In many cases, an inadvertent lapse can be
cured by payment of a late fee or by other means in accordance with the applicable rules. However, there
are situations in which noncompliance can result in abandonment or lapse of the patent or patent
application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an
event, our competitors might be able to enter the relevant market, which would have an adverse effect on
our business. Noncompliance events that could result in abandonment or lapse of a patent or patent
application include failure to respond to official actions within prescribed time limits, non-payment of fees
and failure to properly legalize and submit formal documents.
Changes in patent law, precedents and policies in the United States and other jurisdictions could
diminish the value of patents in general, thereby impairing our ability to protect our products.
Our ability to obtain patents is highly uncertain because, to date, some legal principles remain unresolved,
and there has not been a consistent policy regarding the breadth or interpretation of claims allowed in
patents in the United States. Furthermore, the specific content of patents and patent applications that are
necessary to support and interpret patent claims is highly uncertain due to the complex nature of the
relevant legal, scientific, and factual issues. The United States Supreme Court has ruled on several
patent cases in recent years, either narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain situations. Changes in either the patent
laws or interpretations of patent laws in the United States or other jurisdictions may diminish the value of
our intellectual property. In the United States, in certain circumstances, court rulings may narrow the
scope of patent protection and weaken the rights of patent owners. We cannot predict how decisions by
the courts, the U.S. Congress, the USPTO or changes in the patent laws of other jurisdictions may impact
the value of our patents. Changes in the laws, regulations, precedents and procedures governing patents
could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce
our intellectual property in the future, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
Further, patent coverage in medical devices and technologies is a subject of evolution and differences
between countries. This is especially true of the definition of patentable subject matter which affects both
computer related inventions and biological inventions. This evolution may cause current granted patents
to be considered non-patent eligible or prevent us from protecting future inventions. U.S. Supreme Court
and Federal Circuit decisions interpreting and/or limiting the scope of patentable subject matter under 35
U.S.C. § 101, in addition to examination guidelines from the USPTO, have made it more difficult for
patentees to obtain and/or maintain patent claims in the United States that are directed to medical
technologies involving computer-implemented applications. Several precedential decisions regarding
patentable subject matter are of particular relevance to patents in the computer-implemented applications
space. Our efforts to seek patent protection for our technologies and products may be impacted by the
evolving case law and guidance or procedures issued by the USPTO or authorities in other jurisdictions
based on such evolving case law.
Similarly, changes in patent laws and regulations in other countries or jurisdictions, changes in the
governmental bodies that enforce them or changes in how the relevant governmental authority enforces
patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we may
obtain in the future. For example, the complexity and uncertainty of European patent laws have also
increased in recent years. In Europe, a new unitary patent system took effect June 1, 2023, which will
significantly impact European patents, including those granted before the introduction of the new unitary
patent system. Under the unitary patent system, European applications have the option, upon grant of a
patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court
(“UPC”). As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty
of any litigation. Patents granted before the implementation of the UPC have the ability to opt out of the
jurisdiction of the UPC and remain as national patents in the UPC countries. The UPC will provide our
competitors with a new forum to centrally revoke European patents, and allow for the possibility of a
competitor to obtain pan-European injunctions, since patents that remain under the jurisdiction of the UPC
will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could
invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the
long-term effects of any potential changes.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the
same manner as the laws of the United States and Europe. As a result, we may encounter significant
problems in protecting and defending our intellectual property both in the United States and abroad. For
example, if the issuance in a given country of a patent covering an invention is not followed by the
issuance in other countries of patents covering the same invention, or if any judicial interpretation of the
validity, enforceability or scope of the claims or the written description or enablement, in a patent issued in
one country is not similar to the interpretation given to the corresponding patent issued in another country,
our ability to protect our intellectual property in those countries may be limited. Changes in either patent
laws or in interpretations of patent laws in the United States and other countries may materially diminish
the value of our intellectual property or narrow the scope of our patent protection.
In addition, on September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”) was
signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law.
Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States,
the first to invent the claimed invention was entitled to the patent, while outside the United States, the first
to file a patent application was entitled to the patent. On or after March 16, 2013, under the Leahy-Smith
Act, the United States transitioned to a first inventor to file system in which, assuming that other
requirements for patentability are met, the first inventor to file a patent application will be entitled to the
patent on an invention regardless of whether a third party was the first to invent the claimed invention.
Under this system, a third party that files a patent application in the USPTO before us could be awarded a
patent covering an invention of ours even if we had made the invention before it was made by such third
party. Since patent applications in the United States and most other countries are confidential for a period
of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i)
file any patent application related to our products or (ii) invent any of the inventions claimed in our or our
licensors’ patents or patent applications.
The Leahy-Smith Act also changed the way patent applications are prosecuted, including by allowing
third-party submission of prior art to the USPTO during patent prosecution and additional procedures to
challenge the validity of a patent by USPTO administered post-grant proceedings to attack the validity of
a patent. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary
standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially
provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the
same evidence might not be sufficient to invalidate the claim if presented in a district court action.
Accordingly, third parties may use USPTO proceedings to invalidate our patent claims that would not have
been invalidated if first challenged in a district court action. Therefore, the Leahy-Smith Act and its
implementation could increase the uncertainties and costs surrounding the prosecution of our patent
applications and the enforcement or defense of our issued patents, which could have a material adverse
effect on our business, financial condition, results of operations and prospects.
We may not be able to adequately protect our intellectual property rights throughout the world.
Our patent portfolio includes patents and patent applications in countries outside of the United States,
including Japan, Korea, China, Canada, Australia, Israel, India and countries in Europe. The requirements
for patentability differ from country to country, the breadth of allowed patent claims can be inconsistent,
the scope of coverage provided by these patents varies and the laws of some foreign countries may not
protect our intellectual property rights to the same extent as laws in the United States. In addition, filing,
prosecuting and defending patents on our products in all countries throughout the world would be
prohibitively expensive. For those countries where we do not have granted patents, we may not have any
ability to prevent the unauthorized sale of our products.
In addition, we may decide to abandon national and regional patent applications before they are granted.
The examination of each national or regional patent application is an independent proceeding. As a result,
patent applications in the same family may issue as patents in some jurisdictions, such as in the United
States, but may issue as patents with claims of different scope or may even be refused in other
jurisdictions. It is also quite common that depending on the country, the scope of patent protection may
vary for the same product or technology. For example, certain jurisdictions do not allow for patent
protection with respect to methods of treatment.
Consequently, we may not be able to prevent third parties from practicing our inventions in all countries
outside the United States. Competitors may use our technologies in jurisdictions where we have not
obtained patent protection to develop their own products and, further, may export otherwise infringing
products to territories in which we have patent protection that may not be sufficient to terminate infringing
activities. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the
world may be inadequate to obtain a significant commercial advantage from the intellectual property that
we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant
licenses to third parties, government agencies or government contractors. In these countries, the patent
owner may have limited remedies, which could materially diminish the value of such patent. If we or any
of our licensors is forced to grant a license to third parties with respect to any patents relevant to our
business, our competitive position may be impaired, and our business, financial condition, results of
operations and prospects may be adversely affected.
We do not seek or have patent rights in certain foreign countries in which a market may exist. Accordingly,
our efforts to protect our intellectual property rights in such countries may be inadequate, which may have
an adverse effect on our ability to successfully commercialize our products in all of our expected
significant foreign markets. Moreover, in foreign jurisdictions where we do have patent rights, proceedings
to enforce such rights could result in substantial costs and divert our efforts and attention from other
aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, and our
patent applications at risk of not issuing. Additionally, such proceedings could provoke third parties to
assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other
remedies awarded, if any, may not be commercially meaningful. Thus, we may not be able to stop a
competitor from marketing and selling in foreign countries products that are the same as or similar to our
products, and our competitive position in the international market would be harmed.
We may be involved in lawsuits to protect or enforce our patents or other intellectual property, or
the patents of our licensors, which could be expensive, time consuming and unsuccessful.
Competitors or other third parties may infringe, misappropriate or otherwise violate our owned or licensed
patents, trade secrets or other intellectual property. To counter infringement or unauthorized use, we may
be compelled to file infringement or misappropriation claims, which can be expensive and time
consuming. We do not carry intellectual property insurance that would cover such claims. In certain
circumstances it may not be practicable or cost effective for us to enforce our intellectual property rights
fully, particularly in certain developing countries or where the initiation of a claim might harm our business
relationships. If we initiate legal proceedings against a third party to enforce a patent covering our
products, the defendant could counterclaim that our patent(s) are invalid and/or unenforceable. In patent
litigation in the United States, counterclaims alleging invalidity and/or unenforceability are common, and
there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent.
In an infringement proceeding, a court may decide that a patent we own or license is not valid, is
unenforceable or is not infringed, or may refuse to stop the other party from using the technology at issue
on the grounds that our patents do not cover the technology in question. The outcome following legal
assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for
example, we cannot be certain that there is no invalidating prior art. If a defendant were to prevail on a
legal assertion of invalidity and/or unenforceability, we may lose some, and perhaps all, of the patent
protection covering our products. An adverse result in any litigation or defense proceeding could put one
or more of our patents at risk of being invalidated or interpreted narrowly, could put our patent
applications at risk of not issuing and could have a material adverse impact on our business.
Our defense of litigation may fail and, even if successful, may result in substantial costs and distract our
management and other employees. Even if we establish infringement, the court may decide not to grant
an injunction against further infringing activity and instead award only monetary damages, which may or
may not be an adequate remedy. For example, the amount of any monetary damages may be inadequate
to compensate us for damage as a result of the infringement and the proceedings. We may not be able to
prevent, alone or with our suppliers, misappropriation of intellectual property rights important to our
business, particularly in countries where the laws may not protect those rights as fully as in the United
States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by
disclosure during this type of litigation. There could also be public announcements of the results of
hearings, motions or other interim proceedings or developments. If securities analysts or investors
perceive these results to be negative, it could have an adverse effect on the price of our common stock.
Third-party defendants may challenge any patent we own or in-license through adversarial proceedings in
the issuing offices, which could result in the invalidation or unenforceability of some or all of the relevant
patent claims. If a third party asserts a substantial new question of patentability against any claim of a
U.S. patent we own or license, the USPTO may grant a request for reexamination, which may result in a
loss of scope of some claims or a loss of the entire patent. The adoption of the Leahy-Smith Act has
established additional opportunities for third parties to invalidate U.S. patent claims, including inter partes
review and post grant review, on the basis of lower legal standards than reexamination and additional
grounds. Outside of the United States, patents we own or license may become subject to patent
opposition or similar proceedings, which may result in loss of scope of some claims or loss of the entire
patent. Participation in adversarial proceedings is very complex, expensive and may divert our
management’s attention from our core business and may result in unfavorable outcomes that could
adversely affect our ability to prevent third parties from competing with us.
We may be subject to claims challenging the inventorship or ownership of our patents and other
intellectual property rights or alleging that we have violated the intellectual property rights or
other proprietary rights of third parties.
Our commercial success depends, in part, upon our ability to develop, manufacture, market and sell our
products and use our proprietary technologies without infringing the proprietary rights and intellectual
property of third parties. The medical device industry is characterized by extensive and complex litigation
regarding patents and other intellectual property rights. We may be exposed to, or threatened with, future
litigation by third parties having patent or other intellectual property rights alleging that our products or
proprietary technologies infringe on their intellectual property rights. There is a risk that third parties may
choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even
if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-
party patents are valid, enforceable and infringed, which could have a negative impact on our ability to
commercialize our products. This includes litigation, or threatened litigation, with non-practicing entities
that have no relevant product revenue and against whom our own patent portfolio may have no deterrent
effect. The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or
proceedings with a low probability of success might be initiated and require significant resources to
defend.
We may also be subject to claims that former employees, collaborators or other third parties have an
ownership interest in our patent rights or other intellectual property, for example, based on conflicting
obligations of consultants or others who are involved in developing our products. Although it is our policy
to require our employees and contractors who may be involved in the conception or development of
intellectual property to execute agreements assigning such intellectual property to us, we may be
unsuccessful in executing such an agreement with each party who, in fact, conceives or develops
intellectual property that we regard as our own, and we cannot be certain that our agreements with such
parties will be upheld in the face of a potential challenge, or that they will not be breached, for which we
may not have an adequate remedy. The assignment of intellectual property rights may not be self-
executing or the assignment agreements may be breached, and litigation may be necessary to defend
against these and other claims challenging inventorship or ownership. If we fail in defending any such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such
as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a
material adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other employees.
We employ individuals who were previously employed at other medical technology companies. In
addition, we use publications that are subject to copyright, as well as proprietary information and
materials from third parties in our research. Some of the information and materials we use from third
parties may be subject to agreements that include restrictions on use or disclosure. Although we strive to
ensure proper safeguards, we cannot guarantee strict compliance with such agreements, nor can we be
sure that our employees, consultants and advisors do not use proprietary information, materials or know-
how of others in their work for us. In addition, we may be subject to claims that we or our employees,
consultants or independent contractors have inadvertently or otherwise used or disclosed alleged trade
secrets or other proprietary information of former employers or other third parties. Although we have
procedures in place that seek to prevent our employees and consultants from using the intellectual
property, proprietary information, know how or trade secrets of others in their work for us, we may in the
future be subject to claims that we caused an employee to breach the terms of his or her non-competition
or non-solicitation agreement, or that we or these individuals have, inadvertently or otherwise, used or
disclosed the alleged trade secrets or other proprietary information of a former employer or competitor.
We may also be subject to claims that former employers or other third parties have an ownership interest
in our future patents. In addition, we may be subject to claims that we are infringing other intellectual
property rights, such as trademarks or copyrights, and to the extent that our employees, consultants or
contractors use intellectual property or proprietary information owned by others in their work for us,
disputes may arise as to the rights in related or resulting know-how and inventions. Litigation may be
necessary to defend against these claims. There is no guarantee of success in defending these claims,
and even if we are successful, litigation could result in substantial cost and be a distraction to our
management and other employees.
An unfavorable outcome for any such claim could require us to cease using the related technology or to
attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing
party does not offer us a license on commercially reasonable terms.
If a third party claims that we infringe its intellectual property rights, we may face a number of issues,
including:
•infringement and other intellectual property claims which, regardless of merit, may be expensive and
time consuming to litigate and may divert our management’s attention from our core business;
•substantial damages for infringement, which we may have to pay if a court decides that the product at
issue infringes or violates the third party’s rights, and if the court finds that the infringement was
willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;
•a court prohibiting us from selling or licensing the product unless the third-party licenses its product
rights to us, which it is not required to do;
•if a license is available from a third party, we may have to pay substantial royalties, upfront fees or
grant cross licenses to intellectual property rights for our products; and
•redesigning our products or processes so they do not infringe, which may not be possible or may
require substantial monetary expenditures and time.
In order to successfully challenge the validity of a U.S. patent in federal court, we would need to
overcome a presumption of validity. As this burden is a high one requiring us to present clear and
convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court
of competent jurisdiction would invalidate the claims of any such U.S. patent. Foreign courts will have
similar burdens to overcome in order to successfully challenge a third-party claim of patent infringement.
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively
than we can because they have substantially greater resources. In addition, any uncertainties resulting
from the initiation and continuation of any litigation could have an adverse effect on our ability to raise
additional funds or on our business, financial condition, results of operations and prospects.
The terms of our patents may not be sufficiently long to effectively protect our products and
business.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20
years after its first effective non-provisional filing date, but can be shorter due to terminal disclaimers or
similar term reductions in other jurisdictions. Although various extensions may be available, the term of a
patent, and the protection it affords, is limited. Even if patents covering our technologies or products are
obtained, once the patent term has expired, we may be open to competition. In addition, although upon
issuance in the United States, a patent’s term can be increased based on certain delays caused by the
USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent
applicant during patent prosecution. Given the amount of time required for the development, testing and
regulatory review of products, patents protecting such potential products might expire before or shortly
after such products are commercialized. If we do not have sufficient patent life to protect our technologies
and products, our business, financial condition, results of operations and prospects will be adversely
affected.
If we do not obtain additional protection under the Hatch-Waxman Amendments or similar foreign
legislation, our business may be materially affected.
Depending upon the timing, duration and specifics of FDA marketing approval for our future products, one
or more of our U.S. patents may be eligible for limited patent term restoration under the Drug Price
Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Amendments”). The Hatch-
Waxman Amendments permit a patent term extension of up to five years beyond the normal expiration of
the patent as compensation for patent term lost during product development and the FDA regulatory
review process, which is limited to the approved indication (or any additional indications approved during
the period of extension). This extension is limited to one patent that covers the approved product, the
approved use of the product, or a method of manufacturing the product. A patent term extension cannot
extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and
only those claims covering such approved product, a method for using it or a method for manufacturing it
may be extended. However, the applicable authorities, including the FDA and the USPTO in the United
States, and any equivalent regulatory authority in other countries or areas, may not agree with our
assessment of whether such extensions are available, and may refuse to grant extensions to our patents,
or may grant more limited extensions than we request. We may not be granted an extension because of,
for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant
patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or
scope of patent protection afforded could be less than we request. If we are unable to obtain patent term
extension or restoration of the term of any such extension is less than we request, our competitors may
obtain approval for competing products following our patent expiration, and our ability to generate
revenues may be adversely affected.
Open-source software licenses often impose unanticipated or unclear restrictions on us or could
expose us to litigation, and using open-source software has inherent risks, any of which could
impair our ability to successfully commercialize the Heartflow Platform.
Our technology platform implements software modules licensed to us by third parties under “open source”
licenses. The terms of many open source licenses have not been interpreted by U.S. courts, and there is
a risk that these licenses could be construed in ways that could impose unanticipated conditions or
restrictions on our ability to commercialize our products. Moreover, we cannot be certain that our
processes for controlling our use of open-source software in connection with our products will be
effective. From time to time, we may face claims from third parties asserting ownership of, or demanding
release of, the open-source software or derivative works that we developed using such software (which
could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable
open source license. These claims could result in litigation. If we are held to have breached the terms of
an open source software license, we could be required to seek licenses from third parties to continue
offering our products on terms that are not economically feasible, to re-engineer our proprietary code, to
discontinue the sale of our products if re-engineering could not be accomplished on a timely or cost
effective basis, or to make generally available, in source code form, our proprietary code, any of which
could adversely affect our business, financial condition, results of operations and prospects.
The use of open-source software may entail greater risks than the use of third-party commercial software,
as open source licensors generally do not provide warranties or other contractual protections regarding
infringement or the quality or ownership of the code. Many of these risks cannot be eliminated, and could,
if not properly addressed, negatively affect our business. We cannot be sure that all open source software
is submitted for approval prior to use in connection with our products.
In addition, some open-source licenses contain requirements that we make available source code for
modifications or derivative works we create based upon the type of open-source software we use. If we
combine our proprietary software with open-source software in a certain manner, we could, under certain
open-source licenses, be required to release portions of the source code of our proprietary software to the
public. This would allow our competitors to create similar products with less development effort and time
and ultimately could result in a loss of sales for us.
Intellectual property rights do not necessarily address all potential threats to our competitive
advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because
intellectual property rights have limitations and may not adequately protect our business or permit us to
maintain our competitive advantage. The following examples are illustrative:
•others may be able to make products that are similar to or otherwise competitive with our potential
products but that are not covered by the claims of our current or future patents;
•an in-license necessary for the manufacture, use, sale, offer for sale or importation of one or more of
our potential products may be terminated by the licensor;
•we or future collaborators might not have been the first to make the inventions covered by our issued
or future issued patents or our pending patent applications;
•we or future collaborators might not have been the first to file patent applications covering certain of
our inventions;
•others may independently develop similar or alternative technologies or duplicate any of our
technologies without infringing our intellectual property rights;
•it is possible that our pending patent applications will not lead to issued patents;
•issued patents that we own or in-license may be held invalid or unenforceable as a result of legal
challenges by our competitors;
•issued patents that we own or in-license may not provide coverage for all aspects of our new potential
products in all countries;
•our competitors might conduct research and development activities in countries where we do not
have patent rights and then use the information learned from such activities to develop competitive
products for sale in our major commercial markets;
•we may not develop additional proprietary technologies that are patentable; and
•the patents of others may have an adverse effect on our business.
Should any of these events occur, they could significantly harm our business, results of operations and
prospects.
Risks related to financing and tax matters
We may require additional capital to support business growth, and this capital might not be
available on terms favorable to us, or at all, and may dilute ownership of our common stock for
our stockholders, including purchasers of common stock in this offering.
We intend to continue to make investments to support our business growth and may require additional
funds to respond to business challenges and opportunities, including the need to develop new products,
enhance our existing products, enhance our operating infrastructure, potentially expand internationally
and potentially acquire complementary businesses and technologies. In order to achieve these objectives,
we may make future commitments of capital resources. Accordingly, we may need to engage in equity or
debt financings to secure additional funds. If we raise additional funds through further issuances of equity
or convertible debt securities, our stockholders, including any purchasers of common stock in this
offering, could suffer significant dilution, and any new equity securities we issue could have rights,
preferences and privileges superior to those of holders of our common stock. In addition, our ability to
incur indebtedness is subject to limitations under the 2024 Credit Agreement and, if incurred, would
increase our fixed obligations and could include covenants or other restrictions that would impede our
ability to manage our operations. Further, if additional financing is needed, we may not be able to obtain
additional financing on terms favorable to us or at all. Our inability to obtain adequate financing or
financing on terms satisfactory to us, when we require it, could significantly limit our ability to continue
supporting our business growth and responding to business challenges and opportunities.
Our operating results may fluctuate significantly, which makes our future operating results
difficult to predict and could cause our operating results to fall below expectations or any
guidance we may provide.
Our quarterly revenue and results of operations may fluctuate from quarter to quarter due to, among
others, the following reasons:
•the level of physicians’ acceptance and adoption of our products, and changes in the rates at which
physicians order our Heartflow FFRCT Analysis or the percentage of CCTA scans for which our
Heartflow FFRCT Analysis is ordered;
•determinations, including the timing of determinations, by payors concerning coverage and
reimbursement of our products;
•changes in coverage amounts or government and payors’ reimbursement policies;
•the timing, expense and results of research and development activities, clinical trials and any
additional regulatory approvals;
•changes in AHA or ACC guidelines, or guidelines in other countries, that lower support for our
products or elevate alternative products as the preferred pathway for diagnosis and management of
CAD;
•fluctuations in our expenses associated with expanding our commercial operations and operating as
a public company;
•patients meeting their annual health insurance deductible later in the calendar year;
•the introduction of new products and technologies by our competitors;
•changes in our pricing policies or in the pricing policies of our competitors;
•the productivity of our sales and marketing teams, and their ability to identify physicians who
consistently refer appropriate patients for CCTAs in accordance with AHA and ACC guidelines;
•quality problems with our products or the Heartflow Platform; and
•the impact of catastrophic events such as a pandemic.
Because of these and other factors, it is likely that in some future period our operating results will not
meet investor expectations or those of public market analysts. Any unanticipated change in revenue or
operating results is likely to cause our stock price to fluctuate. New information may cause investors and
analysts to revalue our business, which could cause a decline in our stock price.
Our credit agreement contains certain restrictions that may limit our ability to operate our
business. If we raise additional capital through debt financing, the terms of any new debt could
further restrict our ability to operate our business.
The terms of the 2024 Credit Agreement and related collateral documents contain, and any future debt
agreements would likely contain, a number of restrictive covenants that impose significant operating and
financial restrictions on us, including restrictions on our ability, and the ability of our subsidiaries, to take
actions that may be in our best interests, including, among others, disposing of assets, entering into
change of control transactions, mergers or acquisitions, incurring additional indebtedness, granting liens
on our assets and declaring and paying dividends. Our ability to meet covenants can be affected by
events beyond our control, and we may not be able to continue to meet such covenants. We have in the
past, and may in the future, breach our covenants under the 2024 Credit Agreement. In March 2023, we
entered into an agreement with Hayfin to temporarily waive certain covenant requirements that had not
been met pursuant to our prior credit agreement with Hayfin. In the future, a breach of the covenants or
the occurrence of other events (including, among others, a material adverse effect or the inability to
generate cash to service our obligations under our debt agreements) specified in the 2024 Credit
Agreement and/or the related collateral documents or a future debt agreement could result in an event of
default. Upon the occurrence of an event of default, our lenders could elect to declare all obligations
owing under the debt documents, if any, to be immediately due and payable, terminate all commitments to
extend further credit and/or proceed against the collateral, if any, pledged to them to secure such
indebtedness. For example, we have pledged substantially all of our assets, including, among others, our
intellectual property, all of Heartflow’s ownership interests in Heartflow, Inc. and our foreign subsidiaries
as collateral under the 2024 Credit Agreement and related collateral documents. For additional
information on the 2024 Credit Agreement, see the section titled “Management’s discussion and analysis
of financial condition and results of operations—Liquidity and capital resources—Hayfin credit
agreement.” If lenders accelerate the repayment of borrowings, if any, we may not have sufficient funds to
repay our existing debt and the lenders could seize collateral that was pledged as guarantee for the loan,
which would harm our business and financial condition.
Amounts borrowed under the 2024 Credit Agreement can be repaid at any time, subject to applicable
prepayment fees, prior to the June 14, 2028 maturity date, at which time all obligations owing under the
debt documents will be due and payable. The 2024 Credit Agreement contains customary affirmative and
negative covenants, indemnification provisions and events of default. The affirmative covenants include,
among others, covenants requiring us to deliver certain financial reports and to maintain our legal
existence, regulatory authorizations and certain intellectual property rights. The negative covenants
include, among others, restrictions on changing our business activities, incurring additional indebtedness
and creating liens on our assets, requirements to maintain certain levels of liquidity and minimum net
sales, restrictions on making investments, paying dividends, issuing securities, engaging in mergers or
acquisitions, licensing our assets or making other distributions, in each case subject to customary
exceptions. If we default under the 2024 Credit Agreement, Hayfin will be able to declare all obligations
immediately due and payable and take control of our pledged assets, which may require us to renegotiate
our agreement on terms less favorable to us or to immediately cease operations. Any event of default by
us could significantly harm our business, financial condition, results of operations and prospects and
could cause the price of our common shares to decline. Further, if we are liquidated, Hayfin’s right to
repayment would be senior to the rights of the holders of our common shares to receive any proceeds
from the liquidation.
In connection with the completion of this offering, we are obligated to repay indebtedness outstanding
under the 2024 Credit Agreement in an amount equal to the lesser of (i) net cash proceeds in excess of
$150.0 million and (ii) $50.0 million (or $55.0 million if the underwriters exercise any portion of their option
to purchase additional shares). While we currently anticipate paying off $ million of outstanding
indebtedness under the 2024 Credit Agreement immediately following the completion of this offering, a
portion of the indebtedness under the 2024 Credit Agreement will remain outstanding and we will be
subject to the ongoing requirements of the 2024 Credit Agreement and related collateral documents.
We are subject to risks associated with currency fluctuations, and changes in foreign currency
exchange rates could impact our results of operations.
All of our revenue and the majority of our expense and capital purchasing activities through the year
ended December 31, 2024 and the three months ended March 31, 2025 were transacted in U.S. dollars.
Approximately 11% of our 2023 revenue, approximately 9% of our 2024 revenue and approximately 8% of
our revenue for the three months ended March 31, 2025 was generated from customers outside the
United States. However, because a portion of our operations consists of business activities outside of the
United States, we have foreign currency operating expenses as well as asset and liability balances.
During the year ended December 31, 2024, we were exposed to foreign currency risks in connection with
our non-U.S. operations, and we anticipate that, over time, an increasing portion of our international
agreements may provide for payment denominated in foreign currencies. Changes in the exchange rates
between such foreign currencies and the U.S. dollar could therefore materially impact our reported results
of operations and distort period-to-period comparisons. Fluctuations in foreign currency exchange rates
also impact the reporting of our receivables and payables in non-U.S. currencies. As a result of such
foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and
results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our
results of operations to differ from our expectations or the expectations of our investors, the trading price
of our common stock could be adversely affected.
We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations. In
the future, we may engage in exchange rate hedging activities in an effort to mitigate the impact of
exchange rate fluctuations but we may not be successful in doing so. If our hedging activities are not
effective, changes in currency exchange rates may have a more significant impact on our results of
operations.
Our ability to use our net operating losses and tax credits to offset future taxable income and
taxes may be subject to certain limitations.
As of December 31, 2024, we had net operating loss (“NOL”) carryforwards of approximately $542.9
million and $435.5 million for federal and state income tax purposes, respectively, which may be utilized
against future federal and state income taxes. Federal NOL carryforwards we generated in tax years
through December 31, 2017 generally may be carried forward for 20 years and may fully offset taxable
income in the year utilized, and federal NOLs we generated in tax years beginning after December 31,
2017 generally may be carried forward indefinitely but may only be used to offset 80% of our taxable
income annually for tax years beginning after December 31, 2017.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a
corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-
change NOLs, carryforwards and other tax attributes, such as research and development tax credits, to
offset future taxable income and taxes. In general, an ownership change occurs if the aggregate stock
ownership of certain stockholders, generally stockholders beneficially owning five percent or more of our
common stock, applying certain look through and aggregation rules, increases by more than 50% over
such stockholders’ lowest percentage ownership during the testing period, generally three years.
Purchases of our common stock in amounts greater than specified levels, which will be beyond our
control, could create a limitation on our ability to utilize our NOLs for tax purposes in the future. We are
currently completing a Section 382 study of our historic ownership changes through December 31, 2024
to determine whether the use of our NOLs is impaired. We may have previously undergone an “ownership
change.” In addition, this offering or future issuances or sales of our stock, including certain transactions
involving our stock that are outside of our control, could result in future “ownership changes.” “Ownership
changes” that have occurred in the past or that may occur in the future, including in connection with this
offering, could result in the imposition of an annual limit on the amount of pre-ownership change NOLs
and other tax attributes we can use to reduce our taxable income, potentially increasing and accelerating
our liability for income taxes, and also potentially causing those tax attributes to expire unused.
If we are limited in our ability to use our NOLs and tax credits in future years in which we have taxable
income, we will pay more taxes than if we were able to fully utilize our NOLs and tax credits, and we could
be required to pay taxes earlier than we would otherwise be required, which could cause such NOLs to
expire unused. This could adversely affect our results of operations. Furthermore, we may not be able to
generate sufficient taxable income to utilize our pre-2018 NOLs before they expire beginning in 2030. If
any of these events occur, we may not derive some or all of the expected benefits from our NOLs, and
our business, financial condition, results of operations and prospects may be adversely affected as a
result.
Our international operations subject us to potentially adverse tax consequences.
We currently report our taxable income in various jurisdictions based upon our business operations in
those jurisdictions, including in the United States, United Kingdom, and Japan. We may in the future be
subject to reporting requirements in other foreign jurisdictions. The international nature and organization
of our business activities are subject to complex transfer pricing regulations administered by taxing
authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations
as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur,
and our position were not sustained, we could be required to pay additional taxes, interest and penalties,
which could result in one time tax charges, higher effective tax rates, reduced cash flows and lower
overall profitability of our operations. We believe that our consolidated financial statements reflect
adequate reserves to cover such a contingency, but there can be no assurances in that regard.
Our effective tax rate may vary significantly from period to period.
Various internal and external factors may have favorable or unfavorable effects on our future effective tax
rate. These factors include, but are not limited to, changes in tax laws, regulations or rates, both within
and outside the United States, structural changes in our business, new accounting pronouncements or
changes to existing accounting pronouncements, non-deductible goodwill impairments, changing
interpretations of existing tax laws or regulations, changes in the relative proportions of revenue and
income before taxes in the various jurisdictions in which we operate that have different statutory tax rates,
the future levels of tax benefits of equity-based compensation, changes in overall levels of pretax
earnings or changes in the valuation of our deferred tax assets and liabilities. Additionally, we could be
challenged by state and local tax authorities as to the propriety of our sales tax compliance, and our
results could be materially impacted by these compliance determinations.
In addition, our effective tax rate may vary significantly depending on the market price of our common
stock. The tax effects of the accounting for share-based compensation may significantly impact our
effective tax rate from period to period. In periods in which the market price of our common stock is higher
than the grant price of the share-based compensation vesting in that period, we will recognize excess tax
benefits that will decrease our effective tax rate. In future periods in which our stock price is lower than
the grant price of the share-based compensation vesting in that period, our effective tax rate may
increase. The amount and value of share-based compensation issued relative to our earnings in a
particular period will also affect the magnitude of the impact of share-based compensation on our effective
tax rate. These tax effects are dependent on the market price of our common stock, which we do not
control, and a decline in our stock price could significantly increase our effective tax rate and adversely
affect our financial condition.
Taxing authorities may successfully assert that we should have collected or in the future should
collect sales and use, value added or similar taxes, and we could be subject to tax liabilities with
respect to past or future sales, which could adversely affect our results of operations.
We do not collect sales and use, value added and similar taxes in all jurisdictions in which we have sales,
based on our belief that such taxes are not applicable or that we are not required to collect such taxes
with respect to the jurisdiction. Sales and use, value added and similar tax laws and rates vary greatly by
jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are
applicable, which could result in tax assessments, penalties and interest, and we may be required to
collect such taxes in the future. Such tax assessments, penalties and interest or future requirements may
adversely affect our results of operations.
Risks related to our common stock and this offering
There may not be an active trading market for our common stock, which may cause shares of our
common stock to trade at a discount from the initial public offering price and make it difficult to
sell the shares of common stock you purchase.
Prior to this offering, there was no public market for our common stock. It is possible that after this
offering, an active trading market will not develop or, if developed, that any market will not be sustained,
which would make it difficult for you to sell your shares of common stock at an attractive price or at all.
The initial public offering price per share of common stock was determined by agreement among us and
the representatives of the underwriters and may not be indicative of the price at which shares of our
common stock will trade in the public market, if any, after this offering. The market value of our common
stock may decrease from the initial public offering price. It is possible that in one or more future periods
our results of operations may be below the expectations of public market analysts and investors, and, as
a result of these and other factors, the price of our common stock may fall. Furthermore, an inactive
market may also impair our ability to raise capital in the future by selling shares of our common stock.
The market price of our common stock may be volatile, which could cause the value of your
investment to decline and could result in substantial losses for investors purchasing shares in
this offering.
This initial public offering price may vary from the market price of our common stock after the offering. The
market price of our common stock may be highly volatile and could be subject to wide fluctuations.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility,
as well as general economic, market or political conditions, could reduce the market price of our common
stock regardless of our operating performance. These fluctuations may be even more pronounced in the
trading market for our stock shortly following this offering. You may be unable to resell your shares of
common stock at or above the initial public offering price or at all.
We are an emerging growth company, and the reduced reporting requirements applicable to
emerging growth companies could make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. We will remain an “emerging growth
company” until the earliest to occur of:
•the last day of the fiscal year during which our total annual revenue equals or exceeds $1.235 billion
(subject to adjustment for inflation);
•the last day of the fiscal year following the fifth anniversary of this offering;
•the date on which we have, during the previous three-year period, issued more than $1 billion in non-
convertible debt; or
•the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.
As a result of our “emerging growth company” status, we may take advantage of exemptions from various
reporting requirements that would otherwise be applicable to public companies including, but not limited
to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved.
Investors may find our common stock less attractive because we may rely on these exemptions. If some
investors find our common stock less attractive as a result, there may be a less active trading market for
our common stock and the market price of our common stock may be adversely affected and more
volatile.
We will incur increased costs and become subject to additional regulations and requirements as a
result of becoming a public company, which could lower our profits or make it more difficult to
run our business.
As a public company, we will incur significant legal, accounting and other expenses that we have not
incurred as a private company, including costs associated with public company reporting requirements.
We have also incurred and will continue to incur costs associated with the Sarbanes-Oxley Act and
related rules implemented by the SEC and the listing requirements of the Nasdaq Global Select Market.
The expenses generally incurred by public companies for reporting and corporate governance purposes
have been increasing. We expect these rules and regulations to increase our legal and financial
compliance costs and to make some activities more time-consuming and costly, although we are currently
unable to estimate these costs with any degree of certainty. These laws and regulations also could make
it more difficult or costly for us to obtain certain types of insurance, including director and officer liability
insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially
higher costs to obtain the same or similar coverage. These laws and regulations could also make it more
difficult for us to attract and retain qualified persons to serve on our board of directors, on our board
committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a
public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory
action and potentially civil litigation.
If we are unable to design, implement and maintain effective internal control over financial
reporting in the future, investors may lose confidence in the accuracy and completeness of our
financial reports and the market price of our common stock may decline.
As a public company, we will be required to maintain internal control over financial reporting and to report
any material weaknesses in such internal controls. In addition, beginning with our second annual report
on Form 10-K, we will be required to furnish a report by management on the effectiveness of our internal
control over financial reporting, pursuant to the rules and regulations of the SEC regarding compliance
with Section 404 of the Sarbanes-Oxley Act. The process of designing, implementing and testing the
internal control over financial reporting required to comply with this obligation is time consuming, costly
and complicated. We have in the past and may in the future identify control deficiencies, including
material weaknesses in our internal control over financial reporting. In connection with the preparation of
our consolidated financial statements, material weaknesses in our internal control over financial reporting
were identified as of and prior to December 31, 2023, which were remediated in connection with the
preparation of our consolidated financial statements as of and for the year ended December 31, 2024.
Any failure to maintain effective internal control over financial reporting could severely inhibit our ability to
accurately report our financial condition, results of operations or cash flows. Further, if we identify one or
more material weaknesses in our internal control over financial reporting, if we are unable to comply with
the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or if we and, if required,
our auditors, are unable to assert that our internal control over financial reporting is effective, investors
may lose confidence in the accuracy and completeness of our financial reports and the market price of
our common stock could decline, and we could also become subject to investigations by the stock
exchange on which our common stock is listed, the SEC or other regulatory authorities, which could
require additional financial and management resources. Failure to remedy any material weakness in our
internal control over financial reporting, or to implement or maintain other effective control systems
required of public companies, could also restrict our future access to the capital markets.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Upon effectiveness of the registration statement of which this prospectus forms a part, we will become
subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and
procedures are designed to reasonably ensure that information required to be disclosed by us in reports
we file or submit under the Exchange Act is accumulated and communicated to management and
recorded, processed, summarized and reported within the time periods specified in the rules and forms of
the SEC. We believe that our disclosure controls and procedures as well as internal control over financial
reporting, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are and will be met. These inherent limitations include
the realities that judgments in decision making can be faulty and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons,
by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of
the inherent limitations in our control system, misstatements due to error or fraud may occur and not be
detected.
If our estimates or judgments relating to our critical accounting policies are based on
assumptions that change or prove to be incorrect, our operating results could fall below our
publicly announced guidance or the expectations of securities analysts and investors, resulting in
a decline in the market price of our common stock.
The preparation of financial statements in conformity with the United States generally accepted
accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our estimates
on historical experience and various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions and any such differences may be material. If our
assumptions change or if actual circumstances differ from our assumptions, our operating results may be
adversely affected and could fall below our publicly announced guidance or the expectations of analysts
and investors, resulting in a decline in the market price of our common stock.
Our principal stockholders and management own a significant percentage of our stock and will be
able to exert significant control over matters subject to stockholder approval.
Prior to this offering, as of March 31, 2025, our executive officers, directors, owners of more than 5% of
our capital stock and their respective affiliates beneficially owned approximately % of our
outstanding shares and, upon the completion of this offering, that same group will beneficially own
approximately % of our outstanding shares (assuming no exercise of the underwriters’ option to
purchase additional shares). Therefore, even after this offering, these stockholders will have the ability to
influence us through this ownership position. These stockholders may be able to determine all matters
requiring stockholder approval. For example, these stockholders may be able to control elections of
directors, amendments of our organizational documents, or approval of any merger, sale of assets or
other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or
offers for our common stock that you may feel are in your best interest as one of our stockholders.
A significant portion of our total outstanding shares is restricted from immediate resale but may
be sold into the market in the near future, and any sales of a substantial number of shares of our
common stock in the public market could cause our stock price to decline significantly, even if
our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any
time. These sales, or the perception in the market that the holders of a large number of shares of
common stock intend to sell shares, could reduce the market price of our common stock. If our existing
stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public
market after the lock-up agreements, market standoff and other legal restrictions on resale discussed in
this prospectus, including as described under the section titled “Shares eligible for future sale—Lock-up
agreements,” lapse, the trading price of our common stock could decline. Based upon the number of
shares outstanding as of March 31, 2025 and assuming (i) the Preferred Stock Conversion, (ii) the
Convertible Notes Conversion, (iii) no exercise of the underwriters’ option to purchase additional shares of
our common stock, and (iv) no exercise of outstanding options or warrants, upon the completion of this
offering, we will have outstanding a total of shares of common stock. Of these shares, all of the
shares of our common stock sold in this offering, plus any shares sold upon exercise of the underwriters’
option to purchase additional shares, if any, will be freely tradable, without restriction, in the public market
immediately following this offering, other than shares purchased by our “affiliates” (as such term is defined
in Rule 144 under the Securities Act). See the section titled “Shares eligible for future sale” in this
prospectus for restrictions applicable to our affiliates.
We and each of our directors, our executive officers and substantially all of our other securityholders have
entered or will enter into lock-up agreements with the underwriters prior to the completion of this offering,
which are described, including certain exceptions to such agreements, in the section titled “Underwriting”.
After the expiration of the lock-up agreements, as of March 31, 2025, up to approximately million
additional shares of common stock will be eligible for sale in the public market, approximately % of
which shares are owned by directors, executive officers and other owners of more than 5% of our
outstanding common stock, stock options, warrants and securities convertible into our common stock and
will be subject to Rule 144 under the Securities Act.
Furthermore, an additional approximately % of our outstanding common stock, stock options,
warrants and other securities convertible into or exercisable or exchangeable for our common stock are
subject to market standoff restrictions with us that include restrictions on the sale, transfer or other
disposition of shares, among other things and subject to certain exceptions, for a period of 180 days
commencing on the date of this prospectus. As a result of the foregoing, substantially all of our
outstanding common stock, stock options, warrants and other securities convertible into or exercisable or
exchangeable for our common stock are subject to a lock-up agreement or market standoff provisions for
a period of 180 days commencing on the date of this prospectus. See the section titled “Shares eligible
for future sale” for additional information.
After this offering, based upon the number of shares outstanding as of March 31, 2025, the holders of
approximately million shares of our common stock, or approximately % of our total outstanding
common stock, will be entitled to rights with respect to the registration of their shares under the Securities
Act, subject to the lock-up agreements and market standoff restrictions described above. Registration of
these shares under the Securities Act would result in the shares becoming freely tradable without
restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by
these stockholders or any perception that these shares may be sold could have a material adverse effect
on the trading price of our common stock. In addition, a security holder who is not subject to market
standoff restrictions with us nor a lock-up agreement with the underwriters may be able to sell, short sell,
transfer, pledge or otherwise dispose of their equity interests at any time.
Our amended and restated certificate of incorporation will provide that the Court of Chancery of
the State of Delaware (or, if such court does not have jurisdiction, Delaware federal district court)
will be the exclusive forum for certain disputes between us and our stockholders, which could
limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our
directors, officers or employees.
Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the
selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the
Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) is the
exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a
claim of breach of fiduciary duty owed by any of our current or former directors, officers, employees or
stockholders to us or to our stockholders, any action asserting a claim against us arising pursuant to the
Delaware General Corporation Law, our amended and restated certificate of incorporation, or our
amended and restated bylaws (as either may be amended from time to time) or as to which the Delaware
General Corporation Law confers jurisdiction on the Delaware Court of Chancery, or any action asserting
a claim against us that is governed by the internal affairs doctrine of the State of Delaware. Our amended
and restated certificate of incorporation will also provide that the federal district courts of the United States
will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under
the Securities Act. Further, our amended and restated certificate of incorporation will provide that the
foregoing choice of forum provisions 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 courts of the United States have exclusive
jurisdiction.
Our amended and restated certificate of incorporation will also provide that any person or entity
purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have
notice of and consented to the foregoing provisions of the amended and restated certificate of
incorporation. Although our amended and restated certificate of incorporation will contain the choice of
forum provision described above, it is possible that a court could find that such a provision is inapplicable
for a particular claim or action or that such provision is unenforceable.
We believe these provisions may benefit us by providing increased consistency in the application of
Delaware law and federal securities laws by chancellors and judges, as applicable, particularly
experienced in resolving corporate disputes, efficient administration of cases on a more expedited
schedule relative to other forums, and protection against the burdens of multi-forum litigation. However,
this choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or any of our directors, officers, other employees or stockholders,
which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed
to have waived our compliance with federal securities laws and the rules and regulations thereunder.
Furthermore, 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 a court could find these
types of provisions to be inapplicable or unenforceable. While the Delaware courts have determined that
such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in
a venue other than those designated in the exclusive forum provisions, and there can be no assurance
that such provisions will be enforced by a court in those other jurisdictions. If a court were to find the
choice of forum provision that will be contained in our amended and restated certificate of incorporation to
be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving
such action in other jurisdictions, which could adversely affect our business, financial condition, results of
operations and prospects.
General risk factors
We will have broad discretion in the use of net proceeds to us from this offering and may not use
them effectively.
In connection with the completion of this offering, we are obligated to use certain of the net proceeds from
this offering to repay approximately $ million of the indebtedness outstanding under the 2024
Credit Agreement and to pay approximately $ million of fees in connection therewith. We expect to
use the remainder to fund our sales and marketing efforts, fund research and product development
activities and for other general corporate purposes, including working capital, operating expenses, and
capital expenditures. We may also use a portion of the net proceeds from this offering to acquire
complementary businesses, products, services, or technologies. See the section titled “Use of proceeds”
for additional information. We periodically evaluate strategic opportunities; however, we have no current
understandings or commitments to enter into any such acquisitions or make any such investments. The
expected use of net proceeds from this offering represents our intentions based upon our present plans
and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this
offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our
management will have broad discretion in applying the net proceeds of this offering, including for any of
the purposes described in the section titled “Use of proceeds,” and you will not have the opportunity as
part of your investment decision to assess whether the net proceeds are being used appropriately. The
timing and amount of our actual expenditures will be based on many factors, including cash flows from
operations and the anticipated growth of our business. Pending their use, we intend to invest the net
proceeds of this offering in a variety of capital-preservation investments, including government securities
and money market funds.
If we do not use the net proceeds that we receive in this offering effectively, our business, financial
condition, results of operations and prospects could be harmed, and the market price of our common
stock could decline. Pending their use, we intend to invest the net proceeds of this offering in a variety of
capital-preservation investments, including government securities and money market funds. These
investments may not yield a favorable return to our investors.
Investors in this offering will experience immediate and substantial dilution.
The initial public offering price of our common stock is substantially higher than the pro forma as adjusted
net tangible book value per share of our common stock. Therefore, if you purchase shares of our common
stock in this offering, you will pay a price per share that substantially exceeds our pro forma as adjusted
net tangible book value per share after this offering. Based on the initial public offering price of $ per
share, you will experience immediate dilution of $ per share, representing the difference between
our pro forma as adjusted net tangible book value per share after giving effect to this offering and the
initial public offering price. In addition, purchasers of common stock in this offering will have
contributed % of the aggregate price paid by all purchasers of our common stock but will own only
approximately % of our total equity outstanding after this offering. Furthermore, you will experience
additional dilution if the underwriters exercise their option to purchase additional shares, outstanding
options and warrants are exercised, upon the vesting of outstanding restricted stock awards or when we
otherwise issue additional shares of common stock. For a further description of the dilution that you will
experience immediately after this offering, see the section titled “Dilution” included elsewhere in this
prospectus.
We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a
return on your investment will depend on appreciation in the market price of our common stock.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all
available funds and any future earnings, if any, to fund the development and expansion of our business,
and we do not anticipate paying any cash dividends in the foreseeable future. Any future determinations
regarding the declaration and payment of dividends, if any, will be at the discretion of our board of
directors, subject to applicable law, and will depend upon then-existing conditions, including our financial
condition, results of operations, contractual restrictions, general business conditions, capital
requirements, and other factors our board of directors may deem relevant. In addition, our ability to pay
cash dividends is currently restricted by the terms of the 2024 Credit Agreement. Our ability to pay cash
dividends on our capital stock in the future may also be limited by the terms of any preferred securities we
may issue or agreements governing any additional indebtedness we may incur.
If our operating and financial performance in any given period does not meet any guidance that
we provide to the public, the market price of our common stock may decline.
We may, but are not obligated to, provide public guidance on our expected operating and financial results
for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks
and uncertainties described in this prospectus, including in the section titled “Risk factors,” and in our
future public filings and public statements. Our actual results may not always be in line with or exceed any
guidance we have provided, especially in times of economic uncertainty. If actual circumstances differ
from those in our assumptions, our operating and financial results could fall below our publicly announced
guidance or the expectations of investors. If, in the future, our operating or financial results for a particular
period do not meet any guidance we provide or the expectations of investment analysts or investors
generally, or if we reduce our guidance for future periods, the market price of our common stock may
decline. Even if we do issue public guidance, there can be no assurance that we will continue to do so in
the future.
If securities or industry analysts do not publish research or reports about our business, or if they
issue an adverse or misleading opinion regarding our stock, our stock price and trading volume
could decline.
The trading market for our common stock will be influenced by the research and reports that industry or
securities analysts publish about us or our business. We do not currently have and may never obtain
research coverage by securities and industry analysts. If no or few securities or industry analysts
commence coverage of us, the market price for our stock would be negatively impacted. In the event we
obtain securities or industry analyst coverage, if any of the analysts who cover us downgrade their
evaluations of our stock or issue an adverse opinion regarding us, our business model, our intellectual
property or our stock performance, or if our results of operations fail to meet the expectations of analysts,
our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to
publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
We may be subject to securities litigation, which is expensive and could divert management
attention.
In the past, following periods of volatility in the overall market and the market price of a company’s
securities, securities class action litigation has often been instituted against these companies. Because of
the potential volatility of our stock price, we may become the target of securities litigation in the future.
These events may also result in or be concurrent with investigations by the SEC. We may be exposed to
such litigation or investigation even if no wrongdoing occurred. Such litigation, if instituted against us,
could result in substantial costs and a diversion of our management’s attention and resources, which
could seriously harm our business.
Provisions in our charter documents and under Delaware law could discourage a takeover that
stockholders may consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation, to be in effect upon the completion of this offering,
and our amended and restated bylaws, to be in effect upon the effectiveness of the amended and
restated certificate of incorporation, will contain provisions that could delay or prevent changes in control
or changes in our management without the consent of our board of directors. These provisions will
include the following:
•a classified board of directors with three-year staggered terms, which may delay the ability of
stockholders to change the membership of a majority of our board of directors;
•our directors may be removed by our stockholders only for cause;
•no cumulative voting in the election of directors, which limits the ability of minority stockholders to
elect director candidates;
•the exclusive right of our board of directors to change the size of the board of directors and to elect a
director to fill a new directorship created by the expansion of the board of directors or a vacancy
created by the resignation, death or removal of a director, which prevents stockholders from being
able to change the board’s size or fill new directorships and vacancies on our board of directors;
•the ability of our board of directors to authorize the issuance of shares of preferred stock and to
determine the price and other terms of those shares, including preferences and voting rights, without
stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror or
adopt a stockholder rights plan;
•the ability of our board of directors to alter our amended and restated bylaws without obtaining
stockholder approval;
•the required approval of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all
then-outstanding shares of capital stock entitled to vote generally in the election of directors to
remove directors or to adopt, amend, alter or repeal our amended and restated bylaws and certain
provisions of our amended and restated certificate of incorporation;
•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at
an annual or special meeting of our stockholders;
•the requirement that a special meeting of stockholders may be called only by our secretary at the
request of our board of directors, the chairman of our board of directors, or our chief executive officer,
which may delay the ability of our stockholders to force consideration of a proposal or to take action,
including the removal of directors; and
•advance notice procedures that stockholders must comply with in order to nominate candidates to our
board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may
discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s
own slate of directors or otherwise attempting to obtain control of us.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General
Corporation Law (“Section 203”). Under Section 203, a corporation may not, in general, engage in a
business combination (as defined in Section 203) with any interested stockholder (generally defined by
Section 203 to include holders of 15% or more of our capital stock) unless the interested stockholder has
held the stock for three years or, among other exceptions and exclusions, the board of directors has
approved the business combination transaction or the transaction that resulted in the stockholder
becoming an interested stockholder. For a description of our capital stock, see the section titled
“Description of capital stock.”
Special note regarding forward-looking statements
This prospectus, including the sections titled “Prospectus summary,” “Risk factors,” “Management’s
discussion and analysis of financial condition and results of operations,” and “Business,” contains express
or implied forward-looking statements about us and our industry that involve substantial risks and
uncertainties. All statements other than statements of historical facts contained in this prospectus,
including statements regarding our strategy, future financial condition, future operations, projected costs,
prospects, plans, objectives of management, and expected market growth, are forward-looking
statements. In some cases, you can identify forward-looking statements by words such as “may,” “will,”
“shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,”
“believes,” “estimates,” “predicts,” “potential,” “goal,” “objective,” “seeks,” or “continue” or the negative of
these words or other similar terms or expressions that concern our expectations, strategy, plans, or
intentions. Forward-looking statements contained in this prospectus include, but are not limited to,
statements about:
•our business model and strategic plans for our products, technologies and business, including our
implementation thereof;
•our ability to continue improving our products and technologies, including our AI Technologies;
•our expectations regarding government and third-party payor coverage and reimbursement;
•the implementation of our business model and strategic plans;
•our ability to commercialize, manage and grow our business by increasing our sales to existing
customers or introducing our products to new customers;
•our ability to compete with other companies engaged in the development of products, including
algorithm-based diagnostic analysis products, that provide existing non-invasive tests that aid in the
evaluation of CAD;
•our expectations regarding the potential addressable market size for our products;
•our expectation about market trends;
•our ability to attract, hire and retain key personnel and additional qualified personnel;
•our ability to effectively manage our growth;
•FDA or other U.S. or foreign regulatory actions affecting us or the healthcare industry generally,
including potential effects of evolving and/or extensive government regulation;
•our ability to obtain, maintain and expand regulatory clearances for our products and any new
products we create;
•our ability to establish and maintain intellectual property protection for our products or avoid claims of
infringement;
•our expectations regarding the use of the net proceeds from this offering and our existing cash and
cash equivalents;
•estimates of our expenses, future revenue, capital requirements, needs for additional financing and
our ability to obtain additional capital;
•our ability to expand internationally;
•general economic, industry, and market conditions, including rising interest rates and inflation;
•our future financial performance; and
•other risks and uncertainties, including those listed under the caption “Risk factors.”
You should not rely on forward-looking statements as predictions of future events. We have based the
forward-looking statements contained in this prospectus primarily on our current expectations, estimates,
forecasts, and projections about future events and trends that we believe may affect our business,
financial condition, results of operations, and prospects. Although we believe that we have a reasonable
basis for each forward-looking statement contained in this prospectus, we cannot guarantee that the
future results, levels of activity, performance, or events and circumstances reflected in the forward-looking
statements will be achieved or occur at all. The outcome of the events described in these forward-looking
statements is subject to risks, uncertainties, and other factors described in the section titled “Risk factors”
and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict
all risks and uncertainties that could have an impact on the forward-looking statements contained in this
prospectus. The results, events, and circumstances reflected in the forward-looking statements may not
be achieved or occur, and actual results, events, or circumstances could differ materially from those
described in the forward-looking statements.
The forward-looking statements made in this prospectus relate only to events as of the date on which the
statements are made. We undertake no obligation to update any forward-looking statements made in this
prospectus to reflect events or circumstances after the date of this prospectus or to reflect new
information or the occurrence of unanticipated events, except as required by law. We may not actually
achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should
not place undue reliance on our forward-looking statements. Our forward-looking statements do not
reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments
we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the
relevant subject. These statements are based upon information available to us as of the date of this
prospectus, and while we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read to indicate that we have
conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These
statements are inherently uncertain, and you are cautioned not to unduly rely on these statements.
You should read this prospectus and the documents that we reference in this prospectus and have filed
as exhibits to the registration statement, of which this prospectus is a part, completely and with the
understanding that our actual future results may be materially different from what we expect. We qualify
all of the forward-looking statements in this prospectus by these cautionary statements.
Market and industry data
This prospectus contains estimates, projections, and other information concerning our industry and our
business, as well as data regarding market research, estimates, and forecasts prepared by our
management or third parties, including but not limited to, Clarivate and the publications listed below.
Information that is based on estimates, forecasts, projections, market research, or similar methodologies
is inherently subject to uncertainties, and actual events or circumstances may differ materially from events
and circumstances that are assumed in this information. These data and the industry in which we operate
is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in
the section titled “Risk factors.” These and other factors could cause results to differ materially from those
expressed in these estimates, publications, and reports made by third parties or us.
Unless otherwise expressly stated, we obtained such industry, business, market, and other data from
reports, research surveys, studies, and similar data prepared by market research firms and other third
parties, industry and general publications, government data, and similar sources. In some cases, we do
not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or
more sources of this type of data in any paragraph, you should assume that other data of this type
appearing in the same paragraph is derived from sources which we paid for, sponsored, or conducted,
unless otherwise expressly stated or the context otherwise requires. The content of these third-party
sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this
prospectus and is not incorporated herein.
The sources of certain statistical data, estimates and forecasts contained in this prospectus are from the
following publications:
•Martin et al., Circulation 149:e347, 2024 (the “Martin paper”);
•Bhatt et al., JAMA 327:662, 2022 (the “Bhatt paper”);
•Kofoed et al., Journal of the American College of Cardiology 77:1044, 2021 (the “Kofoed paper”);
•Hoffmann et al., Circulation 135:2320, 2017 (the “Hoffman paper”);
•Yang et al., BMJ Open 2017;7:e011684, 2017 (the “Yang paper”);
•MacDonald, Current Developments in Nutrition 6:925, 2022 (the “MacDonald paper”);
•Nakanishi et al., The International Journal of Cardiovascular Imaging 33: 2067, 2017 (the “Nakanishi
paper”);
•Yokota et al., Netherlands Heart Journal 26:192, 2018 (the “Yokota paper”);
•Patel et al., American Heart Journal 167:846, 2014 (the “2014 Patel paper”);
•Patel et al., New England Journal of Medicine 362:886, 2010 (the “2010 Patel paper”);
•Wang et al., American Journal of Roentgenology 191:409, 2008 (the “Wang paper”); and
•Ni et al., American Heart Journal 157:46, 2009 (the “Ni paper”).
Forecasts and other forward-looking information with respect to industry, business, market, and other data
are subject to the same qualifications and additional uncertainties regarding the other forward-looking
statements in this prospectus. See the section titled “Special note regarding forward-looking statements.”
Use of proceeds
We estimate that the net proceeds from this offering will be approximately $ million (or
approximately $ million if the underwriters exercise in full their option to purchase up
to additional shares of common stock), based on the assumed initial public offering price of
$ per share, which is the midpoint of the estimated price range set forth on the cover page of this
prospectus, after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share of our
common stock, which is the midpoint of the estimated price range set forth on the cover page of this
prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by
approximately $ million, assuming the number of shares offered by us, as set forth on the cover
page of this prospectus, remains the same, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0
million shares in the number of shares of common stock offered by us would increase or decrease, as
applicable, the net proceeds to us from this offering by approximately $ million, assuming the
assumed initial public offering price of $ per share of our common stock, which is the midpoint of
the estimated price range set forth on the cover page of this prospectus, remains the same, and after
deducting estimated underwriting discounts and commissions and estimated offering expenses payable
by us.
In connection with the completion of this offering, we are obligated to use certain of the net proceeds from
this offering to repay $50.0 million (or $55.0 million if the underwriters exercise any portion of their option
to purchase additional shares of common stock) of the indebtedness outstanding under the 2024 Credit
Agreement and to pay approximately $ million of fees in connection therewith. In connection with
the issuance of the 2025 Convertible Notes in January 2025, we entered into Amendment No. 1 to the
2024 Credit Agreement, pursuant to which entities affiliated with Hayfin converted $23.0 million of
outstanding indebtedness under the 2024 Credit Agreement in connection with the 2024 Term Loan
Conversion and became holders of 5% or more of our capital stock as of March 31, 2025. The 2024
Credit Agreement bears interest equal to the sum of (i) 7.0% (or 6.0% if the alternative base rate is in
effect) plus (ii) the greater of (x) the forward-looking term rate based on the Secured Overnight Financing
Rate (“SOFR”) for a respective tenor (or the alternative base rate, if applicable), and (y) 2.0%. The
alternative base rate equals to the sum of (i) 6.0% plus (ii) the greater of (1) the Wall Street Journal Prime
Rate, plus 0.5%, (2) the Federal Reserve Bank of New York rate plus 0.5% or (3) CBA Term SOFR for
one month tenor plus 1.0%. The 2024 Credit Agreement matures on June 14, 2028. Borrowings under the
2024 Credit Agreement were used to refinance outstanding indebtedness.
We expect to use the remainder of the net proceeds from this offering, together with our existing cash and
cash equivalents, to fund our sales and marketing efforts, fund research and product development
activities and for other general corporate purposes, including working capital, operating expenses, and
capital expenditures. With respect to funding research and product development activities, we plan to
deploy net proceeds from this offering into three main areas of research and development: (i) new
products to drive greater efficiency and reduce manual involvement by the imaging physician, including
software tools that reduce imager time spent reading and reporting on CCTA images; (ii) new features
that enhance the clinical utility and ease of use of our existing products, including a more intuitive and
simplified user interface; and (iii) new clinical evidence to support expanded indications of our Heartflow
Platform into high risk asymptomatic patients and longer term, lower risk asymptomatic patients.
We may also use a portion of the net proceeds from this offering to acquire complementary businesses,
products, services, or technologies. We periodically evaluate strategic opportunities; however, we have no
current understandings or commitments to enter into any such acquisitions or make any such
investments.
Based on our current operating plan, we estimate that our existing cash and cash equivalents as of the
date of this prospectus, together with the estimated net proceeds from this offering, will be sufficient to
fund our planned operations through . We have based this estimate on our current
assumptions, which may prove to be wrong, and we may exhaust our available capital resources sooner
than we expect. The expected use of net proceeds from this offering represents our intentions based
upon our present plans and business conditions. We cannot predict with certainty all of the particular uses
for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above.
Accordingly, our management will have broad discretion in applying the net proceeds of this offering, and
investors will be relying on the judgment of our management regarding the application of these net
proceeds. The timing and amount of our actual expenditures will be based on many factors, including
cash flows from operations and the anticipated growth of our business. Pending their use, we intend to
invest the net proceeds of this offering in a variety of capital-preservation investments, including
government securities and money market funds.
Dividend policy
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all
available funds and any future earnings, if any, to fund the development and expansion of our business,
and we do not anticipate paying any cash dividends in the foreseeable future. Any future determinations
regarding the declaration and payment of dividends, if any, will be at the discretion of our board of
directors, subject to applicable law, and will depend upon then-existing conditions, including our financial
condition, results of operations, contractual restrictions, general business conditions, capital
requirements, and other factors our board of directors may deem relevant. In addition, our ability to pay
cash dividends is currently restricted by the terms of our 2024 Credit Agreement. Our ability to pay cash
dividends on our capital stock in the future may also be limited by the terms of any preferred securities we
may issue or agreements governing any additional indebtedness we may incur.
Capitalization
The following table sets forth our cash and cash equivalents and our capitalization, as of March 31, 2025:
•on an actual basis;
•on a pro forma basis, giving effect to (i) the Preferred Stock Conversion, which will occur immediately
prior to the completion of this offering, (ii) shares issuable in connection with the Convertible
Notes Conversion at the assumed initial public offering price of $ per share, which is the
midpoint of the estimated price range set forth on the cover page of this prospectus, and the resultant
reclassification of our derivative liability to additional paid-in capital, a component of stockholders’
equity (deficit), which will occur upon the completion of this offering, as if each had occurred as of
March 31, 2025, and (iii) the adoption, filing, and effectiveness of our amended and restated
certificate of incorporation, to be in effect upon the completion of this offering; and
•on a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments discussed above, (ii)
the issuance and sale of shares of common stock in this offering at the assumed initial public
offering price of $ per share, which is the midpoint of the estimated price range set forth on the
cover page of this prospectus, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, and (iii) the assumed repayment of $50.0 million of the
indebtedness outstanding under the 2024 Credit Agreement and payment of approximately
$ million of fees in connection therewith.
You should read this table together with the sections titled “Summary consolidated financial data,”
“Management’s discussion and analysis of financial condition and results of operations” and our
consolidated financial statements and the related notes included elsewhere in this prospectus. The pro
forma as adjusted information below is illustrative only and our capitalization following the completion of
this offering will depend on the actual initial public offering price and other terms of this offering
determined at pricing.
| | | | | | |
| | |
(in thousands, except share and per share amounts) | | | | | | |
Cash and cash equivalents ....................................................... | | | | | | |
2024 Term Loan .......................................................................... | | | | | | |
2025 Convertible Notes ............................................................. | | | | | | |
Derivative liability ........................................................................ | | | | | | |
Redeemable convertible preferred stock, $0.001 par value; 122,231,454 shares authorized; 122,231,454 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted ................................................................ | | | | | | |
Stockholders’ equity (deficit): | | | | | | |
Preferred stock, $0.001 par value; no shares authorized, issued and outstanding, actual; shares authorized, no shares issued or outstanding, pro forma; shares authorized and shares issued and outstanding, pro forma as adjusted .................................... | | | | | | |
Common stock, $0.001 par value; 210,300,000 shares authorized, 18,259,138 shares issued and outstanding, actual; shares authorized and shares issued and outstanding, pro forma; shares authorized and shares issued and outstanding, pro forma as adjusted .................................................................. | | | | | | |
Additional paid-in capital ........................................................... | | | | | | |
Accumulated deficit .................................................................... | | | | | | |
Total stockholders’ equity (deficit) ............................................ | | | | | | |
Total capitalization ...................................................................... | | | | | | |
| | | | | | |
(1)Each $1.00 increase or decrease in the assumed initial public offering price of $ per share of our common stock, which is the
midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, each of
our pro forma as adjusted cash and cash equivalents, additional paid-in-capital, total stockholders’ equity (deficit), and total
capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this
prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares of common stock offered by
us would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, additional paid-in-capital,
total stockholders’ equity (deficit), and total capitalization by approximately $ million, assuming the assumed initial public offering
price of $ per share of our common stock remains the same, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
If the underwriters exercise in full their option to purchase up to additional shares of common
stock, pro forma as adjusted cash and cash equivalents, 2024 Term Loan, additional paid-in capital, total
stockholders’ equity (deficit), total capitalization, and shares of common stock outstanding as of March 31,
2025 would be $ , $ , $ , $ , $ , and shares, respectively.
The number of shares of our common stock to be outstanding after this offering, pro forma and pro forma
as adjusted, in the table above is based on shares of our common stock outstanding as of
March 31, 2025, after giving effect to (i) the Preferred Stock Conversion, which will occur immediately
prior to the completion of this offering, (ii) the Convertible Notes Conversion, which will occur upon the
completion of this offering, and (iii) the adoption, filing, and effectiveness of our amended and restated
certificate of incorporation, to be in effect upon the completion of this offering, as if each had occurred as
of March 31, 2025, and excludes:
•25,066,625 shares of our common stock issuable upon the exercise of outstanding stock options as
of March 31, 2025 under our 2009 Equity Incentive Plan, with a weighted-average exercise price of
$1.71 per share;
•621,827 shares of our common stock issuable upon the exercise of outstanding stock options granted
subsequent to March 31, 2025 under our 2009 Equity Incentive Plan, with a weighted-average
exercise price of $4.67 per share;
•4,811,190 shares of our common stock issuable upon the exercise of warrants outstanding as of
March 31, 2025 held by Hayfin, with an exercise price of $0.01 per share;
•939,911 shares of our common stock reserved for future issuance under our 2009 Equity Incentive
Plan;
• shares of our common stock to be reserved for future issuance under the 2025 Plan, which
will become effective upon the commencement of trading of our common stock on the Nasdaq Global
Select Market, from which we will grant RSUs covering approximately shares of common
stock concurrently with this offering (based on the assumed initial public offering price of $
per share, which is the midpoint of the price range set forth on the cover page of this
prospectus), as well as any future increases in the number of shares of common stock reserved for
issuance under the 2025 Plan; and
• shares of our common stock reserved for future issuance under the ESPP, which will
become effective upon the commencement of trading of our common stock on the Nasdaq Global
Select Market, as well as any future increases in the number of shares of common stock reserved for
issuance under the ESPP.
Dilution
If you purchase shares of our common stock in this offering, your ownership interest will be immediately
and substantially diluted to the extent of the difference between the initial public offering price per share of
our common stock and the pro forma as adjusted net tangible book value per share of our common stock
immediately after this offering.
As of March 31, 2025, our historical net tangible book value (deficit) was $(939.9) million, or $(51.47) per
share of our common stock. Our historical net tangible book value (deficit) is the amount of our total
tangible assets less our total liabilities and the carrying values of our redeemable convertible preferred
stock. Our historical net tangible book value (deficit) per share represents historical net tangible book
value (deficit) divided by the aggregate number of shares of our common stock outstanding as of March
31, 2025. Total tangible assets represents total assets less capitalized internal-use software, capitalized
contract costs, unamortized debt discount and issuance costs, and deferred initial public offering costs.
Our pro forma net tangible book value (deficit) as of March 31, 2025 was $ million, or $ per
share. Pro forma net tangible book value per share represents total tangible assets, less total liabilities,
divided by the total aggregate number of shares of our common stock outstanding as of March 31, 2025,
after giving effect to:
•the Preferred Stock Conversion, which will occur immediately prior to the completion of this offering,
as if it had occurred as of March 31, 2025;
•the Convertible Notes Conversion, which will occur upon the completion of this offering, as if it had
occurred as of March 31, 2025; and
•the adoption, filing, and effectiveness of our amended and restated certificate of incorporation, to be
in effect upon the completion of this offering.
After giving further effect to the issuance and sale by us of shares of our common stock in this
offering at the assumed initial public offering price of $ per share, which is the midpoint of the
estimated price range set forth on the cover page of this prospectus, and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable by us and the
assumed repayment of $50.0 million of the indebtedness outstanding under the 2024 Credit Agreement
and to pay approximately $ million of fees in connection therewith, our pro forma as adjusted net
tangible book value (deficit) as of March 31, 2025 would have been $ million, or $ per share.
This represents an immediate increase in pro forma net tangible book value to existing stockholders of
$ per share and an immediate dilution in pro forma net tangible book value to new investors of
$ per share. Dilution per share represents the difference between the price per share to be paid by
new investors for the shares of our common stock sold in this offering and the pro forma as adjusted net
tangible book value per share immediately after this offering.
The following table illustrates this dilution on a per share basis:
| | | |
Assumed initial public offering price per share ................................................... | | | |
Historical net tangible book value (deficit) per share as of March 31, 2025 .. | | | |
Pro forma increase in net tangible book value per share as of March 31, 2025 attributable to the pro forma adjustments described above.................................................................................................................... | | | |
Pro forma net tangible book value per share as of March 31, 2025 .......... | | | |
Increase in pro forma net tangible book value per share attributable to new investors participating in this offering ..................................................... | | | |
Pro forma as adjusted net tangible book value per share after this offering . | | | |
Dilution per share to new investors participating in this offering ..................... | | | |
| | | |
The dilution information discussed above is illustrative only and may change based on the actual initial
public offering price, the number of shares we sell, and other terms of this offering that will be determined
at pricing.
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is
the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or
decrease, as applicable, our pro forma as adjusted net tangible book value per share after this offering by
$ per share and the dilution per share to investors participating in this offering by $ per share,
assuming that the number of shares of common stock offered by us, as set forth on the cover page of this
prospectus, remains the same, and after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us. Similarly, each 1.0 million share increase in the number
of shares offered by us would increase our pro forma as adjusted net tangible book value per share after
this offering by $ per share and decrease the dilution per share to investors participating in this
offering by $ per share, and each 1.0 million share decrease in the number of shares offered by us
would decrease our pro forma as adjusted net tangible book value per share after this offering by
$ per share and increase the dilution per share to investors participating in this offering by
$ per share, in each case assuming the initial public offering price of $ per share remains the
same, and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
If the underwriters exercise in full their option to purchase up to additional shares of common
stock, the pro forma as adjusted net tangible book value (deficit) per share of our common stock after this
offering would be $ per share, and the dilution per share to investors participating in this offering
would be $ per share, assuming the assumed initial public offering price of $ per share, which
is the midpoint of the estimated price range set forth on the cover page of this prospectus.
The following table summarizes, as of March 31, 2025, on a pro forma as adjusted basis as described
above, the number of shares of our common stock, the total consideration and the average price per
share (i) paid to us by existing stockholders and (ii) to be paid by new investors acquiring our common
stock in this offering at the assumed initial public offering price of $ per share, the midpoint of the
estimated price range set forth on the cover page of this prospectus, before deducting estimated
underwriting discounts and commissions and estimated offering expenses payable by us. As the table
below shows, investors participating in this offering will pay an average price per share substantially
higher than our existing stockholders paid.
| | | | | | | | | |
| | | | | Weighted- average price per share |
| | | | | | | | |
Existing stockholders ...................... | | | | | | | | | |
New investors ................................... | | | | | | | | | |
Total ................................................... | | | | | | | | | |
| | | | | | | | | |
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is
the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase or
decrease, as applicable, the total consideration paid by new investors and total consideration paid by all
stockholders by approximately $ million, assuming that the number of shares of common stock
offered by us, as set forth on the cover page of this prospectus, remains the same, before deducting
estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Similarly, each 1.0 million share increase or decrease in the number of shares offered by us would
increase or decrease, as applicable, the total consideration paid by new investors and total consideration
paid by all stockholders by $ million, assuming the assumed initial public offering price of
$ per share of common stock remains the same, before deducting estimated underwriting discounts
and commissions.
Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’
option to purchase additional shares. If the underwriters exercise in full their option to purchase up
to additional shares of common stock, our existing stockholders would own %, and our new
investors would own % of the total number of shares of our common stock outstanding upon the
completion of this offering.
The foregoing tables and calculations (other than historical net tangible book value) are based
on shares of our common stock outstanding as of March 31, 2025, after giving effect to (i) the
Preferred Stock Conversion, which will occur immediately prior to the completion of this offering, (ii) the
Convertible Notes Conversion, which will occur upon the completion of this offering, as if it had occurred
as of March 31, 2025 and (iii) the adoption, filing, and effectiveness of our amended and restated
certificate of incorporation, to be in effect upon the completion of this offering, and excludes:
•25,066,625 shares of our common stock issuable upon the exercise of outstanding stock options as
of March 31, 2025 under our 2009 Equity Incentive Plan, with a weighted-average exercise price of
$1.71 per share;
•621,827 shares of our common stock issuable upon the exercise of outstanding stock options granted
subsequent to March 31, 2025 under our 2009 Equity Incentive Plan, with a weighted-average
exercise price of $4.67 per share;
•4,811,190 shares of our common stock issuable upon the exercise of warrants outstanding as of
March 31, 2025 held by Hayfin, with an exercise price of $0.01 per share;
•939,911 shares of our common stock reserved for future issuance under our 2009 Equity Incentive
Plan;
• shares of our common stock to be reserved for future issuance under the 2025 Plan, which
will become effective upon the commencement of trading of our common stock on the Nasdaq Global
Select Market, from which we will grant RSUs covering approximately shares of common
stock concurrently with this offering (based on the assumed initial public offering price of $
per share, which is the midpoint of the price range set forth on the cover page of this
prospectus), as well as any future increases in the number of shares of common stock reserved for
issuance under the 2025 Plan; and
• shares of our common stock reserved for future issuance under the ESPP, which will
become effective upon the commencement of trading of our common stock on the Nasdaq Global
Select Market, as well as any future increases in the number of shares of common stock reserved for
issuance under the ESPP.
To the extent that any outstanding options are exercised, new options or other equity awards are issued
under our equity incentive plans, or we issue additional shares in the future, there will be further dilution to
new investors participating in this offering. In addition, we may choose to raise additional capital because
of market conditions or strategic considerations, even if we believe that we have sufficient funds for our
current or future operating plans. If we raise additional capital through the sale of equity or convertible
debt securities, the issuance of these securities could result in further dilution to our stockholders.
Management’s discussion and analysis of financial condition
and results of operations
You should read the following discussion and analysis of our financial condition and results of operations
in conjunction with our consolidated financial statements and the related notes and other financial
information included elsewhere in this prospectus. This discussion and analysis and other parts of this
prospectus contain forward-looking statements based upon our current plans and expectations that
involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives,
expectations, intentions and beliefs. Our actual results and the timing of events could differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those
set forth under the section titled “Risk factors” and elsewhere in this prospectus. You should carefully read
the section titled “Risk factors” to gain an understanding of the important factors that could cause actual
results to differ materially from our forward-looking statements. Please also see the section titled “Special
note regarding forward-looking statements.” Our historical results are not necessarily indicative of the
results that may be expected for any period in the future.
Overview
We have pioneered the use of software and AI to deliver a more accurate and clinically effective non-
invasive solution for diagnosing and managing coronary artery disease (“CAD”), a leading cause of death
worldwide. As of March 31, 2025, our Heartflow Platform has been used to assess CAD in more than
400,000 patients, including 132,000 in 2024 alone. We believe that we are the most widely adopted AI-
powered test for CAD. Our novel platform leverages AI and advanced computational fluid dynamics to
create a personalized 3D model of a patient’s heart from a single coronary computed tomography
angiography (“CCTA”), a specialized type of scan that provides detailed images of the heart’s arteries.
Our Heartflow Platform delivers actionable insights on blood flow, stenosis, plaque volume and plaque
composition thereby overcoming the limitations of traditional non-invasive imaging tests which rely on
indirect measures of coronary disease and lead to higher false negative and false positive rates as
demonstrated by our PRECISE trial. We believe the differentiated accuracy and clinical utility of our
Heartflow Platform, along with its ability to enhance workflows, will continue to support our growth and
advance the “CCTA + Heartflow” pathway as the definitive standard for the non-invasive diagnosis and
management of CAD.
To date, we have developed three software products (with a fourth product expected to launch in 2026)
under the Heartflow Platform that provide physicians with the critical insights needed to effectively
diagnose and manage CAD:
•Heartflow RoadMap Analysis offers a highly intuitive anatomic visualization of the coronary arteries,
helping physicians quickly identify clinically relevant areas to focus their review. We provide Heartflow
RoadMap Analysis to accounts as an integrated feature to enhance the efficiency of their CCTA
program and it is not a stand-alone product.
•Heartflow FFRCT Analysis calculates blood flow and pinpoints clinically significant CAD, which is CAD
with a fractional flow reserve (“FFR”) value of 0.80 or below, at every point in the major coronary
arteries. FFR measures the severity of blood flow restriction in the coronary arteries on a scale of 1.0
(no restriction) to 0.0 (complete blockage) by assessing pressure differences across a stenosis during
induced stress, guiding decisions on whether a patient requires invasive revascularization.
•Heartflow Plaque Analysis provides a comprehensive assessment of coronary plaque, enabling
optimized medical treatment strategies.
•Heartflow PCI Planner, which we expect to launch in 2026, will provide advanced visualization and
clinical insights to optimize revascularization strategies, guide device selection, enhance procedural
efficiency, and improve patient care. We plan to provide Heartflow PCI Planner to accounts as an
integrated feature to enhance procedural efficiency, not as a stand-alone product.
The Heartflow Platform has an existing commercial presence and regulatory approval in the United
States, United Kingdom, European Union, Australia, Canada and Japan. We have developed a highly
scalable, capital efficient commercial model that combines Territory Sales Managers (“TSMs”) who drive
new account adoption with Territory Account Managers (“TAMs”) who focus on increasing utilization by
educating referring physicians. Our commercial team does not cover cases or otherwise spend time in an
operating room or lab setting, which enables them to focus solely on driving commercial adoption and
educational activities. We also have small, direct commercial teams in our international markets. In the
future, we may expand our international presence beyond these markets.
Our technology is simple and intuitive and does not require the purchase of any capital equipment. Our
onboarding process seamlessly integrates the Heartflow Platform into the customer’s daily workflow.
These unique attributes of our business model afford our commercial organization a differentiated level of
efficiency and scalability.
We have experienced considerable revenue growth since we began commercializing the Heartflow
Platform in 2015, driven primarily by growth in our account base and increasing test volumes at accounts
in our installed base. We recognized revenue of $87.2 million for the year ended December 31, 2023,
compared to revenue of $125.8 million for the year ended December 31, 2024. For the three months
ended March 31, 2024 and 2025, we recognized revenue of $26.8 million and $37.2 million, respectively.
Substantially all of our revenue is generated on a “pay-per-click” basis each time a physician chooses to
review either our Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both and we recognize usage-
driven fee revenue upon delivery of the requested analysis to the physician. Heartflow FFRCT Analysis
has served as our commercial foundation, representing 99% of our total revenue as of March 31, 2025. In
the second half of 2023, we initiated limited market education efforts for Heartflow Plaque Analysis, our
second commercial product. Our Heartflow RoadMap Analysis is generally provided as a workflow
efficiency tool to drive customer retention and loyalty and is not a stand-alone product.
To date, we have primarily funded our operations with proceeds from sales of shares of our redeemable
convertible preferred stock, common stock and convertible promissory notes, borrowings under our term
loans and revenue received from our customers. As of March 31, 2025, we had $109.8 million in cash and
cash equivalents. In January and March 2025, we issued $98.3 million in aggregate principal amount of
the 2025 Convertible Notes to investors, including related parties, with original maturity dates of 48
months from the dates of issuance. The consideration for the issuance of the 2025 Convertible Notes was
comprised of $74.0 million in cash, $1.3 million in aggregate principal amount of notes issued in lieu of
cash compensation to certain employees, and the exchange of $23.0 million of outstanding indebtedness
under the 2024 Credit Agreement (as defined below).
We have incurred significant operating losses and negative cash flows since our inception and we expect
to continue to incur losses as we grow and transition to operating as a public company. Our net loss for
the years ended December 31, 2023 and 2024 was $95.7 million and $96.4 million, respectively. For the
three months ended March 31, 2024 and 2025, our net loss was $20.9 million and $32.3 million,
respectively. As of December 31, 2023 and 2024, we had an accumulated deficit of $874.5 million and
$971.0 million, respectively. As of March 31, 2025, we had an accumulated deficit of $1.0 billion.
Based on our current operating plan, we believe that the expected cash generated from revenue
transactions with customers and our existing cash and cash equivalents will be sufficient to fund our
planned operating expenses and capital expenditure requirements for at least the next 12 months. We
have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital
resources sooner than we expect. We may experience lower than expected cash generated from
operating activities or greater than expected capital expenditures, cost of revenue, or operating expenses,
and may need to raise additional capital to fund operations, further research and development activities,
or acquire, invest in, or in-license other businesses, assets, or technologies.
Key factors affecting our results of operations and performance
We believe there are several important factors that have impacted and that we expect will continue to
impact our operating performance and results of operations for the foreseeable future. These factors
include, among others:
•Rate of adoption of CCTA in the market and our ability to increase adoption of the CCTA + Heartflow
pathway among both referring and reading physicians.
•Ability to successfully introduce our Heartflow Plaque Analysis and other new products and the rate at
which they are adopted by physicians.
•Ability to automate an increasing number of the manual components of our production process and
the rate at which we hire and train analysts to full productivity.
•We experience seasonality throughout the year based on a number of factors, including staff
availability, vacations, weather and other macro economic events.
•Publications of clinical results by us and third parties.
Heartflow revenue cases
We regularly review a number of operating and financial metrics to evaluate our business, measure our
performance, identify trends affecting our business, formulate our business plan and make strategic
decisions. Substantially all of our revenue is generated on a “pay-per-click” basis each time a physician
chooses to review either our Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both and we
recognize usage-driven fee revenue upon delivery of the requested analysis to the physician. We define a
“Heartflow revenue case” as each time an account orders and we deliver the requested analysis to the
physician. For example, the ordering of both an Heartflow FFRCT Analysis and a Heartflow Plaque
Analysis from a single CCTA counts as two revenue cases. We define an “account” as any individual
facility that orders a Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both. Accounts may have
more than one reading physician or CT machine. The following table lists these revenue cases in each of
the three month periods as indicated:
The period-to-period change in Heartflow revenue cases is an indicator of our ability to drive adoption and
generate sales revenue, and is helpful in tracking the progress of our business. We believe that Heartflow
revenue cases are representative of our current business; however, we anticipate this metric may be
substituted for additional or different metrics as our business grows.
Components of our results of operations
Revenue
Substantially all of our revenue comprises usage-driven fees from accounts who order either our
Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both. We recognize usage-driven fee revenue
upon delivery of the requested analysis to the physician. Key factors that drive our revenue include
revenue case growth from our installed base and the success of our sales force in expanding adoption of
the Heartflow Platform to new accounts and expanding the utilization of our system by accounts in our
installed base. We consider an account that has our Heartflow solution deployed with the ability to send
us CCTA images for processing as being part of our installed base. New accounts generally take 12
months to reach steady state revenue case volumes. We consider steady state case volumes to be
attained once the account reaches FFRCT utilization rates approaching 33% of CCTAs occurring at the
account—a level that is generally sustained over time based on historical trends. Our Heartflow FFRCT
Analysis is indicated for patients with stenosis levels between 40% and 90% and we believe
approximately 33% of patients have this level of stenosis. For purposes of managing our business, we do
not separately track increases in revenue solely attributable to new accounts. Revenue cases generated
from clinic or office-based accounts typically carry a lower pricing than hospital-based accounts,
commensurate with their lower reimbursement levels. We expect the percentage of our revenue cases
generated from clinic or office-based accounts to continue to increase over time. For the years ended
December 31, 2023 and 2024, the percentage of our U.S. revenue cases attributable to office and clinic-
based accounts was 22% and 28%, respectively. For the three months ended March 31, 2024 and 2025,
the percentage of our U.S. revenue cases attributable to office and clinic-based accounts was 28% and
30%, respectively.
While a single customer may include multiple accounts, no single customer accounted for 10% or more of
our revenue during the years ended December 31, 2023 and 2024 or for the three months ended March
31, 2024 and 2025. However, the decision-making function for some of these accounts is concentrated in
a relatively small number of customers, such that the loss of one customer could result in a
disproportionate loss across our accounts. For example, for the year ended December 31, 2024, our top
two largest customers, both large health systems with multiple accounts, collectively represented
approximately 8% of our revenue. As we expand the adoption of the Heartflow Platform, we expect a
majority of new accounts to come from new customers, decreasing our customer concentration risk.
Our revenue has fluctuated, and we expect it to continue to fluctuate from quarter-to-quarter due to a
variety of factors including the number of accounts in our installed base, the volume of Heartflow Platform
usage by accounts in our installed base, changes in the mix of customer accounts and seasonality. We
may experience fluctuations in the volume of Heartflow Platform usage by our customers based on
seasonal factors that impact the number of radiologists and support staff available to conduct CCTAs at
customer accounts.
Cost of revenue and gross margin
Cost of revenue consists of personnel and related expenses, including stock-based compensation costs,
primarily related to our production team. Additional costs include third-party hosting fees, amortization of
capitalized internal-use software, amortization of contract fulfillment costs as well as royalties associated
with technology licenses used in connection with the delivery of our product and allocated overhead,
which includes facilities expenses, equipment, depreciation and technology services. The role of the
production team is to support our patient case volume revenue by performing defined quality-related
activities on CCTA scans submitted by our customers for analysis. The portion of these costs that
supports patient case volume revenue is recorded as cost of revenue. The production team also supports
activities in our clinical trials and research and development, which are allocated as research and
development expense. We expect cost of revenue to increase as we hire additional personnel in our
production team to support our increasing patient case volume.
We calculate gross margin as gross profit divided by revenue. Our gross margin has been and will
continue to be affected by a variety of factors, primarily by our production team costs, the timing of hiring
new production team members and training them to full productivity, the timing of our acquisition of new
customers and pricing and commercialization of Heartflow Plaque Analysis and other new products.
Although, we expect our gross margin to fluctuate from period to period, based upon the factors described
above, we believe our gross margin will increase over the long term as we leverage the AI-based nature
of our software platform to automate an increasing number of the manual components of our production
teams’ process, thereby lowering the cost of revenue per analysis. We also expect increased revenues
from our Heartflow Plaque Analysis, to positively impact our gross margin, as it runs on the same CCTA
scan as Heartflow FFRCT Analysis. In the short term, we expect gross margin to decrease as we hire and
train additional personnel in our production team to support our increasing patient case volume.
Operating expenses
Research and development
Research and development expenses are incurred in connection with the advancement of the Heartflow
Platform with the goal to introduce products, features and improvements aimed at increasing the value
proposition for our customers by expanding its applicability to additional disease states and patient
populations. Research and development expenses consist primarily of engineering, product development,
consulting services, clinical studies to develop and support our products, regulatory activities, medical
affairs, and other costs associated with products and technologies that are in development. Research and
development expenses consist of personnel and related expenses, including stock-based compensation
costs, clinical trials, third-party consulting costs, the portion of the costs incurred by our production team
to support clinical trials and research and development efforts, and allocated overhead, including facilities
expenses, equipment and depreciation. Our research and development team is comprised of PhD
research scientists with expertise in AI-based algorithms and medical imaging, alongside software
engineers skilled in cloud architecture, AI algorithms, machine and deep learning and 3D visualization, as
well as product managers and designers who ensure optimal customer experience and design. We record
research and development expenses in the periods in which they are incurred. We expect our research
and development expenses to increase as we conduct clinical studies for expanded indications for use
and to hire additional personnel to develop new product offerings and product enhancements.
Selling, general and administrative
Selling, general and administrative expenses consist of personnel and related expenses, including stock-
based compensation costs, related to selling and marketing, commercial operations, reimbursement,
finance, legal, information technology and human resources functions. Other expenses include sales
commission, marketing initiatives, professional service fees (including legal, audit, accounting and tax
fees), market access work to secure reimbursement for our technologies, travel expenses, conferences
and trade shows, and allocated overhead, which includes facilities expenses, software licenses,
depreciation and other miscellaneous expenses.
We expect that our selling, general and administrative expenses will increase in the future as a result of
expanding our operations, including hiring personnel, to both drive and support anticipated growth as well
as various incremental costs associated with operating as a public company. We expect that our costs will
increase related to legal, audit, accounting fees, consulting fees, regulatory and tax-related services
associated with maintaining compliance with exchange listing and SEC requirements, director and officer
insurance costs, investor and public relations costs and other expenses that we did not incur as a private
company. However, we expect selling, general and administrative expenses to decrease as a percentage
of revenue primarily as, and to the extent, our revenue grows.
Interest expense, net
Interest expense, net consists primarily of interest expense on our 2024 Term Loan and related
amortization of debt discount and debt issuance costs. Interest income is primarily interest earned on our
cash and cash equivalents.
Other expense, net
Other expense, net consists primarily of changes in fair value related to our Convertible Notes, common
stock warrant and derivative liability as well as foreign exchange transaction gains or losses from
transactions and asset and liability balances denominated in currencies other than the U.S. dollar. We will
continue to record adjustments to the estimated fair value of the common stock warrant liability until the
warrants are exercised or expire and to the estimated fair value of the derivative liability until the
convertible notes are repaid or converted.
Provision for income taxes
Provision for income taxes consists of income tax expense in foreign jurisdictions. To date, we have not
recorded any U.S. federal or state income tax expense. We have net deferred tax assets for U.S. federal
income taxes for which we provide a full valuation allowance. Due to our history of net operating losses
since inception, we expect to maintain a full valuation allowance in the foreseeable future due to
uncertainties regarding our ability to realize these assets.
Results of operations
Comparison of three months ended March 31, 2024 and 2025
The following table summarizes our results of operations for the three months ended March 31, 2024 and
2025:
| | | | | | | |
| Three months ended March 31, | | |
| | | | | | | |
Revenue ............................................................. | | | | | | | |
Cost of revenue ................................................ | | | | | | | |
Gross profit ........................................................ | | | | | | | |
| | | | | | | |
Research and development ............................ | | | | | | | |
Selling, general and administrative ............... | | | | | | | |
Total operating expenses ................................ | | | | | | | |
Loss from operations ....................................... | | | | | | | |
Interest expense, net ....................................... | | | | | | | |
Other expense, net ........................................... | | | | | | | |
Loss before provision for income taxes ........ | | | | | | | |
(Provision for) benefit from income taxes ..... | | | | | | | |
Net loss .............................................................. | | | | | | | |
| | | | | | | |
*: Not Meaningful
Revenue
Revenue increased $10.4 million, or 39%, to $37.2 million during the three months ended March 31,
2025, compared to $26.8 million during the three months ended March 31, 2024. The increase in revenue
was primarily attributable to a 40% increase in revenue case volume.
Cost of revenue and gross margin
Cost of revenue increased $1.8 million, or 25%, to $9.3 million during the three months ended March 31,
2025, compared to $7.4 million during the three months ended March 31, 2024. This increase was
attributable to $0.7 million in personnel and related expenses, $0.3 million in amortization of capitalized
internal-use software, $0.3 million in allocated overhead, and a net change of $0.2 million in capitalized
and amortized contract fulfillment costs. Personnel and related expenses included $0.1 million and $0.1
million of stock-based compensation costs during the three months ended March 31, 2025 and 2024,
respectively. Gross margin for the three months ended March 31, 2025 increased to 75% as compared to
72% for the three months ended March 31, 2024. The gross margin increase during the three months
ended March 31, 2025 was primarily driven by increased revenue cases as compared to the three months
ended March 31, 2024. The three months ended March 31, 2025 also benefited from efficiency
improvements that were introduced throughout 2024 and were in place during the entire three months
ended March 31, 2025, which lowered the cost of revenue per analysis.
Research and development expenses
Research and development expenses increased $4.5 million, or 47%, to $13.9 million during the three
months ended March 31, 2025, compared to $9.4 million during the three months ended March 31, 2024.
The increase in research and development expenses was primarily attributable to an increase of
$2.9 million in personnel and related expenses directly associated with an increase in headcount,
$0.7 million in clinical trial expenses, $0.6 million in consulting and professional fees, and $0.1 million in
software-related costs. Personnel and related expenses included $0.5 million and $0.5 million of stock-
based compensation costs during the three months ended March 31, 2025 and 2024, respectively.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $5.5 million, or 21%, to $31.5 million during the
three months ended March 31, 2025, compared to $26.0 million during the three months ended March 31,
2024. The increase in selling, general and administrative expenses was primarily attributable to an
increase of $2.8 million in personnel and related expenses directly associated with an increase in
headcount, $2.6 million in professional fees, including legal, audit and consulting fees, and $0.9 million in
marketing expenses, partially offset by a decrease of $0.3 million in allocated overhead and $0.6 million
of capitalized commission costs. Personnel and related expenses included $1.9 million and $2.1 million of
stock-based compensation costs for the three months ended March 31, 2025 and 2024, respectively.
Interest expense, net
Interest expense, net decreased to an expense of $4.6 million during the three months ended March 31,
2025, compared to an expense of $4.7 million during the three months ended March 31, 2024. This
decreased expense was attributable to a lower aggregate outstanding principal balance under our 2024
Term Loan related to the conversion of $23.0 million in principal to convertible notes in January 2025
offset by lower interest rates earned on money market funds. As of March 31, 2025 and 2024, the
aggregate outstanding principal balance (including interest paid-in-kind) under our 2024 Term Loan was
$115.1 million and $138.1 million, respectively.
Other expense, net
Other expense, net increased to an expense of $10.3 million during the three months ended March 31,
2025, compared to an expense of $215,000 during the three months ended March 31, 2024. The increase
was primarily attributable to the remeasurement and recognition of the change in fair value related to our
common stock warrant liability of $1.6 million and the remeasurement and recognition of $9.0 million
related to the derivative liability during the three months ended March 31, 2025.
(Provision for) benefit from income taxes
Benefit from income taxes was $72,000 for the three months ended March 31, 2024 related to our foreign
taxes. There was no provision for income taxes during the three months ended March 31, 2025.
Comparison of years ended December 31, 2023 and 2024
The following table summarizes our results of operations for the years ended December 31, 2023 and
2024:
| | | | | | | |
| | | |
| | | | | | | |
Revenue ............................................................. | | | | | | | |
Cost of revenue ................................................ | | | | | | | |
Gross profit ........................................................ | | | | | | | |
| | | | | | | |
Research and development ............................ | | | | | | | |
Selling, general and administrative ............... | | | | | | | |
Total operating expenses ................................ | | | | | | | |
Loss from operations ....................................... | | | | | | | |
Interest expense, net ....................................... | | | | | | | |
Other expense, net ........................................... | | | | | | | |
Loss before provision for income taxes ........ | | | | | | | |
Provision for income taxes .............................. | | | | | | | |
Net loss .............................................................. | | | | | | | |
| | | | | | | |
Revenue
Revenue increased $38.6 million, or 44%, to $125.8 million during the year ended December 31, 2024,
compared to $87.2 million during the year ended December 31, 2023. The increase in revenue was
primarily attributable to a 51% increase in revenue case volume, partially offset by a reduction in average
sales price due to a higher percentage of revenue cases generated from clinic and office-based accounts.
Cost of revenue and gross margin
Cost of revenue increased $2.2 million, or 8%, to $31.4 million during the year ended December 31, 2024,
compared to $29.1 million during the year ended December 31, 2023. This increase was attributable to
$0.8 million in allocated overhead, $0.5 million in personnel and related expenses, $0.5 million in
amortization of capitalized internal-use software, $0.4 million in third-party hosting fees and a net change
of $0.3 million in capitalized and amortized contract fulfillment costs, partially offset by a $0.6 million
decrease in royalties. Personnel and related expenses included $0.3 million and $0.4 million of stock-
based compensation costs during the year ended December 31, 2024 and 2023, respectively. Gross
margin for the year ended December 31, 2024 increased to 75% as compared to 67% for the year ended
December 31, 2023. The gross margin increase during the year ended December 31, 2024 was primarily
driven by increased revenue cases over the prior year and was aided by efficiency improvements, which
lowered the cost of revenue per analysis. The efficiency improvements included the release of new
algorithms that automated the modeling of significant components of the coronary anatomy reducing
manual components of our production teams’ process, updated software that improved analyst efficiency,
improved coaching and training, and other one-time efficiency projects. These improvements resulted in
an approximate 50% reduction to average per analyst case processing time, which lowered the cost of
revenue per analysis. Gross margin during the year ended December 31, 2024, also benefited from a
temporary 100 basis point reduction in royalty rates. We expect that future new algorithm launches will
have significantly less impact on automation increases and associated gross margin expansion.
Research and development expenses
Research and development expenses increased $7.7 million, or 21%, to $43.5 million during the year
ended December 31, 2024, compared to $35.9 million during the year ended December 31, 2023. The
increase in research and development expenses was primarily attributable to an increase of $3.7 million
in personnel and related expenses directly associated with an increase in headcount, $2.0 million in
consulting and professional fees, $1.2 million in software-related costs, $0.5 million in clinical trial
expenses and $0.5 million of capitalized internal-use software costs, partially offset by a $0.6 million
decrease in allocated overhead. Personnel and related expenses included $2.2 million and $3.3 million of
stock-based compensation costs during the year ended December 31, 2024 and 2023, respectively.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $17.0 million, or 18%, to $112.2 million during the
year ended December 31, 2024, compared to $95.1 million during the year ended December 31, 2023.
The increase in selling, general and administrative expenses was primarily attributable to an increase of
$13.5 million in personnel and related expenses directly associated with an increase in headcount,
$5.3 million in professional fees, including legal, audit and consulting fees, and $1.7 million in marketing
expenses, partially offset by a decrease of $1.0 million in software-related costs and $2.9 million of
capitalized commission costs. Personnel and related expenses included $7.8 million and $8.7 million of
stock-based compensation costs for the year ended December 31, 2024 and 2023, respectively.
Interest expense, net
Interest expense, net decreased to an expense of $18.7 million during the year ended December 31,
2024, compared to an expense of $19.2 million during the year ended December 31, 2023. This
decreased expense was attributable to more favorable interest rates under the 2024 Term Loan. As of
December 31, 2024 and 2023, the aggregate outstanding principal balance (including interest paid-in-
kind) under our 2024 Term Loan was $138.1 million and $138.1 million, respectively.
Other expense, net
Other expense, net increased to an expense of $16.4 million during the year ended December 31, 2024,
compared to an expense of $3.0 million during the year ended December 31, 2023. The increase was
primarily attributable to the remeasurement and recognition of the change in fair value related to our
common stock warrant liability of $14.1 million. Other expense, net also included the remeasurement and
recognition of the changes in fair value related to our Convertible Notes through their conversion in March
2023 and to the derivative liability through the 2024 Term Loan Refinancing (as defined below) in June
2024.
Provision for income taxes
Provision for income taxes was $547,000 and $53,000 for the years ended December 31, 2023 and 2024,
respectively, related to our foreign taxes.
Selected quarterly results of operations data
The following table sets forth selected unaudited quarterly consolidated statements of operations data for
each of the four fiscal quarters during the years ended December 31, 2023 and 2024 and the fiscal
quarter ended March 31, 2025. The unaudited information for each of these quarters has been prepared
in accordance with U.S. generally accepted accounting principles (“GAAP”), on the same basis as our
audited annual consolidated financial statements included elsewhere in this prospectus and includes, in
the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary
for the fair statement of the results of operations for these periods. This data should be read in
conjunction with our consolidated financial statements and related notes included elsewhere in this
prospectus. These historical quarterly operating results are not necessarily indicative of our operating
results for the full year or any future period.
| | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | | | | | | | |
Revenue ........................................... | | | | | | | | | | | | | | | | | |
Gross profit ...................................... | | | | | | | | | | | | | | | | | |
Total operating expenses .............. | | | | | | | | | | | | | | | | | |
Loss from operations ..................... | | | | | | | | | | | | | | | | | |
Net loss ............................................ | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Quarterly trends
Revenue
Our quarterly revenue increased sequentially in each of the periods presented primarily due to revenue
growth from the expansion of revenue cases volume within our existing installed base and the addition of
new customers.
Cost of revenue and gross margin
With the exception of the three months ended September 30, 2023, cost of revenue generally increased
sequentially in each of the quarters presented, driven by increased sales. During the three months ended
September 30, 2023, cost of revenue decreased as we introduced the automation of certain manual
components of our production teams process thereby resulting in decreased personnel and related
expenses and allocated overhead.
Our quarterly gross margins have fluctuated between 60% and 77% in each period presented.
Operating expenses
Total operating expenses have generally increased sequentially in each period presented with the
exception of the three months ended September 30, 2023 and March 31, 2024. Operating expenses
fluctuated primarily due to timing of consulting projects, legal and professional expenses, clinical studies,
stock-based compensation and the capitalization of internal-use software costs.
Liquidity and capital resources
Sources of liquidity
As of March 31, 2025, we had $109.8 million in cash and cash equivalents and an accumulated deficit of
$1.0 billion, compared to $51.4 million in cash and cash equivalents and an accumulated deficit of $971.0
million as of December 31, 2024. Since inception, we have primarily funded our operations with proceeds
from sales of shares of our redeemable convertible preferred stock, common stock and convertible
promissory notes, borrowings under our term loans and revenue received from our customers, which we
expect to be our primary source of future liquidity. During the years ended December 31, 2023 and 2024,
we incurred significant operating losses and net cash outflows from our operations, which resulted in an
increase in stockholders’ deficit, a reduction in working capital, and a net liabilities position as of
December 31, 2024. On January 24, 2025 and January 31, 2025, we reduced our outstanding
indebtedness under our 2024 Term Loan by $23.0 million, decreased our accrued cash compensation
within accrued expenses and other current liabilities to certain employees by $1.3 million, and also
received $24.0 million in cash in exchange for the issuance of $48.3 million in aggregate principal amount
of 2025 Convertible Notes, as described below. In March 2025, we issued an additional $50.0 million in
aggregate principal of 2025 Convertible Notes to an investor. As of March 31, 2025, we had $98.3 million
outstanding under our 2025 Convertible Notes and $115.1 million outstanding under our 2024 Term Loan
which have respective maturities of 48 months from their issue date and June 14, 2028.
Hayfin credit agreement
On June 14, 2024, we entered into a Credit Agreement and Guaranty for a $138.1 million term loan to
refinance the outstanding obligations under the initial credit agreement we entered into with Hayfin on
January 19, 2021 and the additional term loans entered into with Hayfin on March 17, 2022 in exchange
for the payment of exit fees and early prepayment fees in the aggregate amount of $8.3 million payable in
sixteen equal quarterly installments, or immediately upon the occurrence of a financing event, including
but not limited, to the completion of this offering. On January 24, 2025, in connection with the issuance of
the 2025 Convertible Notes as further described below, we entered into Amendment No. 1 to the Credit
Agreement and Guaranty (as amended, the “2024 Credit Agreement”) to amend the terms and conditions
governing the term loan outstanding thereunder (as amended, the “2024 Term Loan”). In connection with
the refinancing of the original 2021 Credit Agreement with Hayfin with the 2024 Term Loan (the “2024
Term Loan Refinancing”), we remeasured the fair value of the derivative liability immediately before the
2024 Term Loan Refinancing and recognized a $0.2 million loss from the change in fair value in the
consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.
The associated current fair value of the derivative liability of $1.1 million, as remeasured at the date of
2024 Term Loan Refinancing, was derecognized and recorded as a debt discount to the 2024 Term Loan
on the consolidated balance sheet.
The 2024 Term Loan matures on June 14, 2028 and bears interest equal to the sum of (i) 7.0% (or 6.0% if
the alternative base rate (“ABR”) is in effect) plus (ii) the greater of (x) the forward-looking term rate based
on Secured Overnight Financing Rate (“SOFR”) for a respective tenor in effect on such day (or the
alternative base rate, if applicable), and (y) 2.0%. The ABR equals to the sum of (i) 6.0% plus (ii) the
greater of (1) the Wall Street Journal Prime Rate, plus 0.5%, (2) the Federal Reserve Bank of New York
rate plus 0.5% or (3) CBA Term SOFR for one month tenor plus 1.0%. We have an option to pay interest
in-kind at the rate equal to the cash interest rate plus 1.0% through the last interest period ending before
the 18th month anniversary of the 2024 Credit Agreement. We have an option to prepay the 2024 Term
Loan subject to a prepayment fee of 1.5% for prepayments after the second anniversary but on or prior to
the third anniversary of the 2024 Term Loan and a prepayment fee of 3% for prepayments thereafter. The
2024 Term Loan must be repaid in full immediately upon the occurrence of a change in control. In
connection with the completion of this offering, we are obligated to use certain of the net proceeds from
this offering to repay the 2024 Term Loan in an amount equal to the lesser of (i) the net cash proceeds of
this offering in excess of $150.0 million and (ii) $50.0 million (or $55.0 million if the underwriters exercise
any portion of their option to purchase additional shares).
The 2024 Credit Agreement contains customary representations and warranties, events of default and
affirmative and negative covenants, including, among others, covenants that limit or restrict our (and our
subsidiaries) ability to incur additional indebtedness, grant liens, merge or consolidate, make acquisitions,
pay dividends or other distributions or repurchase equity, make investments, dispose of assets and enter
into certain transactions with affiliates, in each case subject to certain exceptions. Financial covenants
require us to maintain a $15.0 million minimum liquidity balance in cash and cash equivalents at all times
and minimum net sales for twelve consecutive month periods ending on the last day of a fiscal quarter,
which is not tested as long as the we maintain minimum liquidity of at least $60.0 million and there has
been no decline in net sales for two-consecutive fiscal quarters at the end of such fiscal quarter. The
minimum twelve months trailing net sales covenant increases each quarter and is $78.8 million for the
quarter ended June 30, 2024 up to a minimum net sales amount of $110.0 million for the quarter ended
June 30, 2025 and each quarter thereafter. Events of default in the 2024 Credit Agreement include,
among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of
representations and warranties, bankruptcy and insolvency events, material judgments, cross-defaults to
material contracts and events constituting a change of control. Upon the occurrence of an event of
default, the interest rate applicable to the 2024 Term Loan shall increase by 3.0% per annum and the
outstanding principal balance, along with any accrued interest, shall become immediately due and
payable. As of March 31, 2025, the aggregate outstanding principal balance under the 2024 Term Loan
was $115.1 million and the effective interest rate was 15.2%. As of March 31, 2025, we were in
compliance with the 2024 Credit Agreement covenants.
Convertible notes
During the period from September 2022 through December 2022, we issued convertible promissory notes
(the “2022 Convertible Notes”) to certain investors (the “2022 Convertible Notes Investors”), with an
aggregate principal amount of $40.0 million. The 2022 Convertible Notes bore interest at a rate of 8% per
annum, compounded monthly. The aggregate principal amount and interest accrued on the 2022
Convertible Notes was due September 30, 2026, and could not be prepaid by us without the consent of a
majority of the 2022 Convertible Notes Investors.
In March 2023, we completed a Qualified Financing (as defined in the 2022 Convertible Notes) and all of
the 2022 Convertible Notes, including principal and interest, were converted into 21,465,064 shares of our
Series F-1 redeemable convertible preferred stock. In connection with the conversion of the 2022
Convertible Notes into the shares of our Series F-1 redeemable convertible preferred stock, we
derecognized the 2022 Convertible Notes in our consolidated balance sheet. We remeasured the fair
value of the 2022 Convertible Notes immediately before the conversion and recognized a $5.1 million loss
from the change in fair value in the consolidated statements of operations and comprehensive loss for the
year ended December 31, 2023.
In January and March 2025, we issued convertible promissory notes to various investors and certain
employees (the “Requisite Holders”) in the aggregate amount of $98.3 million, which was comprised of
$74.0 million in aggregate principal amount of notes issued for cash consideration, $1.3 million in
aggregate principal amount of notes issued in lieu of cash compensation to certain employees and $23.0
million in aggregate principal amount of notes issued in the 2024 Term Loan Conversion (collectively, the
“2025 Convertible Notes”). The 2025 Convertible Notes are due and payable in full 48 months from the
issue date. Upon completion of an IPO transaction, the 2025 Convertible Notes shall automatically
convert into shares of our common stock at the IPO price per share at the lower of a 20% discount and a
valuation cap of $2.0 billion on a pre-money basis. In the event we complete a sale of shares of our
preferred stock, the Requisite Holders may elect to convert the outstanding 2025 Convertible Notes into
shares of such series of preferred stock at the same terms. Further, upon a change of control transaction,
the Requisite Holders may elect to convert the outstanding 2025 Convertible Notes into shares of our
common stock at the lower of a 20% discount to the implied price per share of common stock in the
change of control transaction and a valuation cap of $2.0 billion on a pre-money basis, or receive
payment of all principal and any accrued but unpaid 2025 Convertible Notes paid in-kind (“PIK”) interest.
The 2025 Convertible Notes do not accrue interest for one year following the date of issuance. Following
the one-year anniversary of the issue date and for the remainder of the term, the 2025 Convertible Notes
interest will accrue on an annual basis at the rate of 7.0% per annum. All PIK interest accrued and
payable will be paid by capitalizing such interest on an annual basis and adding it to the outstanding
principal amount of the 2025 Convertible Notes.
In connection with the issuance of the 2025 Convertible Notes, we entered into Amendment No.1 to the
2024 Credit Agreement, in which our lender, Hayfin, converted $23.0 million of principal under the 2024
Term Loan to 2025 Convertible Notes under the same terms as the other purchasers of the 2025
Convertible Notes.
The issuance date estimated fair values of the derivative liability was $11.1 million and $20.8 million in
January and March 2025, respectively, which were recorded as debt discounts. The derivative liability was
remeasured to fair value of $40.9 million as of March 31, 2025, resulting in a loss of $9.0 million within the
consolidated statements of operations and comprehensive loss.
Cash flows
The following table summarizes our cash flows for each of the periods presented:
| | | | | | | |
| | | Three months ended March 31, |
| | | | | | | |
Net cash used in operating activities ............. | | | | | | | |
Net cash used in investing activities ............. | | | | | | | |
Net cash provided by financing activities ..... | | | | | | | |
| | | | | | | |
Net cash used in operating activities
Net cash used in operating activities was $76.4 million for the year ended December 31, 2023,
attributable to a net loss of $95.7 million and a net change in operating assets and liabilities of $8.5
million, partially offset by non-cash charges of $27.8 million. Non-cash charges primarily consisted of
$11.9 million in stock-based compensation expense, $5.1 million of change in fair value of convertible
note, $4.7 million of depreciation and amortization, $2.8 million of amortization of debt discount and debt
issuance costs, $2.3 million of change in fair value of common stock warrant and $0.9 million of non-cash
interest charges, partially offset by $4.2 million of change in fair value of derivative liability. The net
changes in operating assets and liabilities primarily consisted of an increase of $9.4 million in accounts
receivable and a decrease of $1.8 million in operating lease liabilities, partially offset by an increase of
$3.8 million in accrued expenses and other current liabilities.
Net cash used in operating activities for the year ended December 31, 2024 was $69.0 million,
attributable to a net loss of $96.4 million and a net change in operating assets and liabilities of
$10.9 million, partially offset by non-cash charges of $38.3 million. The non-cash charges primarily
consisted of $10.2 million in stock-based compensation expense, $16.4 million of change in fair value of
common stock warrant, $5.4 million of depreciation and amortization, $2.7 million of amortization of right-
of-use asset, $2.0 million of non-cash interest charges and $1.6 million of amortization of debt discount
and debt issuance costs. The increase in net operating assets was primarily due to an increase of $3.8
million in accounts receivable, a $1.0 million increase in prepaid expenses and other current assets, a
$2.7 million increase in other non-current assets and a $3.2 million decrease in operating lease liabilities.
Net cash used in operating activities during the three months ended March 31, 2024 was $22.1 million,
attributable to a net loss of $20.9 million and a net change in operating assets and liabilities of
$6.8 million, partially offset by non-cash charges of $5.6 million. The non-cash charges primarily consisted
of $2.7 million in stock-based compensation expense, $1.2 million of depreciation and amortization, $0.7
million of amortization of right-of-use asset, $0.7 million of amortization of debt discount and debt
issuance costs, and $0.2 million of non-cash interest charges. The decrease in net operating assets was
primarily due to a $0.7 million increase in prepaid expenses and other current assets, a $0.3 million
increase in other non-current assets, a decrease of $1.5 million in accounts receivable, a $0.4 million
decrease in accounts payable, a decrease of $6.0 million in accrued expenses and other current
liabilities, and a $0.7 million decrease in operating lease liabilities.
Net cash used in operating activities during the three months ended March 31, 2025 was $13.2 million,
attributable to a net loss of $32.3 million and a net change in operating assets and liabilities of
$2.5 million, partially offset by non-cash charges of $16.7 million. The non-cash charges primarily
consisted of $2.5 million in stock-based compensation expense, $9.0 million of change in fair value of
derivative liability, $1.6 million of change in fair value of common stock warrant, $1.4 million of
depreciation and amortization, $0.7 million of amortization of right-of-use asset, $0.5 million of non-cash
interest charges and $1.0 million of amortization of debt discount and debt issuance costs. The increase
in net operating assets was primarily due to an increase of $3.6 million in accounts receivable, a $0.4
million increase in prepaid expenses and other current assets, a $0.3 million increase in other non-current
assets, a $9.3 million increase in accrued expenses and other current liabilities, a $1.6 million decrease in
accounts payable and a $0.9 million decrease in operating lease liabilities.
Net cash used in investing activities
Net cash used in investing activities for the year ended December 31, 2023 was $6.1 million consisting of
purchases of property and equipment.
Net cash used in investing activities for the year ended December 31, 2024 was $4.4 million consisting of
purchases of property and equipment.
Net cash used in investing activities for the three months ended March 31, 2024 was $1.7 million
consisting of purchases of property and equipment.
Net cash used in investing activities for the three months ended March 31, 2025 was $1.1 million
consisting of purchases of property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities for the year ended December 31, 2023 was $169.3 million,
primarily attributable to net proceeds of $169.0 million from the issuance of our Series F redeemable
convertible preferred stock.
Net cash provided by financing activities for the year ended December 31, 2024 was $2.2 million primarily
attributable to $4.6 million in proceeds from the exercise of stock options offset by payments of $2.3
million in exit, prepayment penalty and lender fees related to our 2024 Term Loan Refinancing.
Net cash provided by financing activities during the three months ended March 31, 2024 consisted
primarily of $77,000 in proceeds from the exercise of stock options.
Net cash provided by financing activities during the three months ended March 31, 2025 consisted
primarily of $73.9 million in net proceeds from the issuance of our 2025 Convertible Notes, $0.6 million in
proceeds from the exercise of stock options, offset by $0.5 million in exit and prepayment penalty fees
related to our 2024 Term Loan and $1.0 million in payments of deferred IPO offering costs.
Future funding requirements
Based on our current operating plan, we believe that the expected cash generated from revenue
transactions with customers and our cash and cash equivalents of $109.8 million as of March 31, 2025,
which includes the $75.3 million in proceeds from our January and March 2025 convertible promissory
notes offering, will be sufficient to fund our planned operating expenses and capital expenditure
requirements for at least the next 12 months. Our losses primarily resulted from the costs incurred in the
development and sales and marketing of our products and providing general and administrative support
for our operations. We expect to continue to incur losses and to expend significant amounts of cash in the
foreseeable future as we continue to scale our business, invest in research and development activities,
increase sales and marketing efforts to support commercial expansion, and increase general and
administrative expenses to support being a publicly-traded company. Our ability to meet our short term
requirements and plans for cash do not include the net proceeds from this offering. We have based our
estimate of future funding requirements on assumptions that may prove to be wrong, and we could
deplete our capital resources sooner than we expect. We may experience lower than expected cash
generated from operating activities or greater than expected capital expenditures, cost of revenue, or
operating expenses, and may need to raise additional capital to fund operations, further research and
development activities, or acquire, invest in, or in-license other businesses, assets, or technologies.
In the long term, our ability to support our working capital and capital expenditure requirements will
depend on many factors, including the following:
•the market acceptance of our products;
•the timing, scope, rate of progress, results and costs of our research and development activities;
•the number, scope and duration of current or future clinical studies and additional regulatory
clearances or approval;
•the effect of competing technological and market developments;
•the costs and timing of future commercialization activities, including marketing and sales, for
Heartflow Plaque Analysis and any other new products;
•the amount of revenue, if any, received from commercial sales of our Heartflow Plaque Analysis and
any other new products;
•the impact of competitors’ products and technological advances and other market developments;
•the expenses needed to attract and retain skilled personnel;
•the size of the markets and degree of market acceptance of any products in territories in which we
receive regulatory approval, including product pricing, product coverage, and the adequacy of
reimbursement by third-party payors;
•Whether we acquire third-party companies, products or technologies;
•Restructuring, refinancing or repayment of debt;
•the increase in the number of our employees to support growth initiatives;
•the cost of attaining, defending and enforcing our patents and other intellectual property rights;
•the timing of when we pay our operating expenses;
•the costs associated with being a public company; and
•other factors, including economic uncertainty, geopolitical tensions, healthcare reform and changes in
administration, which may exacerbate the magnitude of the factors discussed above.
Furthermore, our operating plans may change, and we may need additional funds to meet operational
needs and capital requirements for clinical trials and other research and development expenditures.
Should we obtain additional equity or debt financing to satisfy our liquidity needs, the issuance of
additional debt or equity securities could be dilutive to existing stockholders. Furthermore, any new
securities could have rights that are senior to existing stockholders and could contain covenants that
would restrict operations. There can be no assurance that we will generate sufficient future cash flows
from operations or that financing will be available on terms commercially acceptable to us or at all. If we
are unable to obtain future funding, we would curtail expenses by reducing some of our research and
development programs and commercialization efforts in order to maintain liquidity, if necessary.
Contractual obligations and commitments
Our contractual commitments will have an impact on our future liquidity. These commitments include
future payments on non-cancellable facility leases, purchase obligations related to research and
development and professional services under non-cancellable contracts, royalty obligations for exclusive
technology licensing agreements and future payments on our 2024 Term Loan and 2025 Convertible
Notes. Where applicable, we calculate our obligation based on termination fees that can be paid to exit
the contract.
Lease agreements
We have operating lease arrangements for office space in Mountain View, California, Santa Rosa,
California, San Francisco, California, Austin, Texas, and Tokyo, Japan. As of March 31, 2025 we had total
lease payment obligations under non-cancelable leases of $27.5 million, including $4.2 million payable
through December 31, 2025. See Note 6 to our consolidated financial statements included elsewhere in
this prospectus.
Royalty payments
We entered into various exclusive technology licensing agreements that requires us to make annual
royalty payments in fixed amounts as well as certain milestone and revenue-based payments. As of
March 31, 2025, the remaining aggregate royalty obligations under these agreements is $0.3 million, of
which minimum royalty obligations have been met for 2025. See Note 7 to our consolidated financial
statements included elsewhere in this prospectus.
2024 Term Loan
The principal balance on debt outstanding under our 2024 Term Loan as of March 31, 2025 was
$115.1 million and approximately $10.0 million of interest is payable through December 31, 2025. See
Note 8 to our consolidated financial statements included elsewhere in this prospectus.
2025 Convertible Notes
The principal balance outstanding under our 2025 Convertible Notes as of March 31, 2025 was
$98.3 million. The 2025 Convertible Notes do not accrue interest for one year following the date of
issuance. See Note 9 to our consolidated financial statements included elsewhere in this prospectus.
Recently issued accounting pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial
position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements
included elsewhere in this prospectus.
Critical accounting policies and estimates
Our management’s discussion and analysis of our financial condition and results of operations is based
on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The
preparation of these consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. Our
estimates are based on our historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions and any such differences may be
material.
While our significant accounting policies are described in more detail in Note 2 to our consolidated
financial statements included elsewhere in this prospectus, we believe that the following discussion
addresses our most critical accounting policies, which are those most important to our financial condition
and results of operations and require our most difficult, subjective and complex judgments.
Common stock warrants
We have issued freestanding warrants to purchase shares of common stock in connection with our 2024
Term Loan. We classify these warrants as a liability because they do not meet the equity indexation
criteria. We record the fair value of the warrant on the consolidated balance sheet upon issuance and is
subject to remeasurement at each balance sheet date. The changes in the fair value of the warrants are
recorded in the consolidated statements of operations and comprehensive loss. We utilize the Black-
Scholes option-pricing model, which incorporates assumptions and estimates, to value the common stock
warrant liability. Significant estimates and assumptions impacting fair value include the stock price,
contractual term, expected volatility and weighted average risk-free interest rate.
The estimated aggregate fair value of the warrants issued in connection with the 2024 Term Loan in
January 2021 and March 2022 was $4.3 million and $3.5 million, respectively. We recognized a $2.3
million and $16.4 million loss from the change in fair value in the consolidated statements of operations
and comprehensive loss during the years ended December 31, 2023 and 2024, respectively. We
recognized a $1,000 gain and $1.6 million loss from the change in fair value in the consolidated
statements of operations and comprehensive loss during the three months ended March 31, 2024 and
2025, respectively.
Derivative liability
Term Loan
Prior to the 2024 Term Loan Refinancing in June 2024, we determined that our 2024 Term Loan contained
certain prepayment features, default put option and default interest adjustment features that were
determined to be embedded derivatives requiring bifurcation and separate accounting as a single
compound derivative. The impact of bifurcation of the embedded derivative on the date of issuance was
reflected as a debt discount. The instrument was classified as a liability on the consolidated balance sheet
and is subject to remeasurement at each balance sheet date. Any change in fair value of the derivative
liability is recognized in the consolidated statements of operations and comprehensive loss.
We utilize both the Black-Scholes-Merton and option-pricing method, which incorporates certain
assumptions and estimates, to value the derivative liability. These include the estimated time and
probability of a business combination or IPO, default, change of control and incurrence of new debt,
weighted common stock value, debt yield, expected volatility and risk-free interest rate.
The estimated fair value of the derivative liability was $2.1 million at the issuance date in January 2021.
We recognized a $4.2 million gain and $0.2 million loss from the change in fair value in the consolidated
statements of operations and comprehensive loss during the years ended December 31, 2023 and 2024,
respectively. In connection with the 2024 Term Loan Refinancing on June 14, 2024, the associated
current fair value of the derivative liability of $1.1 million, as remeasured at the date of 2024 Term Loan
Refinancing, was derecognized and recorded as a debt discount to the 2024 Term Loan.
2025 Convertible Notes
The 2025 Convertible Notes were determined to contain certain settlement features and conversion put
options which require bifurcation and separate accounting as a single compound embedded derivative.
The fair value of the derivative liability was recorded at the issuance dates as debt discounts and
reductions to the carrying value of the 2025 Convertible Notes on the consolidated balance sheet. The
derivative liability is remeasured to fair value at each reporting period and the related changes in fair
value are recorded on the consolidated statements of operations and comprehensive loss.
The fair value of the derivative liability was estimated using a scenario-based analysis comparing the
probability-weighted present value of the 2025 Convertible Notes with and without the bifurcated features.
We utilize both the Monte Carlo Simulation and option-pricing method, which incorporates certain
assumptions and estimates, to value the derivative liability. These include the estimated time and
probability of an IPO and change of control, with resulting cash flows discounted using appropriate
discount rates.
The issuance date estimated fair values of the derivative liability was $11.1 million and $20.8 million in
January and March 2025, respectively, which were recorded as debt discounts. The derivative liability was
remeasured to fair value of $40.9 million as of March 31, 2025, resulting in a loss of $9.0 million within the
consolidated statements of operations and comprehensive loss.
Stock-based compensation
Stock-based compensation related to share-based awards granted to employees, consultants and to
members of our board of directors is measured at fair value. Compensation expense for those awards is
recognized on a straight-line basis over the requisite service period, which is generally the vesting period.
For performance-based stock options, we assess the probability of performance conditions being
achieved in each reporting period. The amount of stock-based compensation expense recognized in any
one period related to performance-based stock options can vary based on the achievement or anticipated
achievement of the performance conditions. We account for forfeitures of stock-based awards as they
occur.
We estimate the fair value of each option award on the date of grant using the Black-Scholes option -
pricing model. This model requires the use of highly subject assumptions to determine the fair value,
including:
•Fair value of common stock. See the subsection titled “—Determination of fair value of common
stock” below.
•Expected term. The expected term represents the period that the stock-based awards are expected to
be outstanding. The expected term for our stock options was calculated based on the weighted-
average vesting term of the awards and the contract period, or simplified method.
•Expected volatility. Since we are not yet a public company and do not have any trading history for our
common stock, the expected volatility was estimated based on the average historical volatilities of
common stock of comparable publicly traded entities over a period equal to the expected term of the
stock option grants. The comparable companies were chosen based on their size, stage of their life
cycle or area of specialty.
•Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the
time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected
term of the awards.
•Expected dividend yield. The expected dividend yield is zero as we have not paid dividends nor do we
anticipate paying any dividends on our common stock.
We expect to continue to grant equity-based awards in the future, and to the extent that we do, our stock-
based compensation expense recognized in future periods will likely increase.
Based on the assumed initial public offering price per share of $ , which is the midpoint of the
estimated offering price range set forth on the cover page of this prospectus, the aggregate intrinsic value
of our outstanding stock options as of March 31, 2025 was $ million, with $ million related to vested
stock options.
See Note 14 to our consolidated financial statements included elsewhere in this prospectus for further
details.
Determination of fair value of common stock
As there has been no public market for our common stock to date, the estimated fair value of our common
stock underlying our share-based awards was estimated on each grant date by our management and
approved by our board of directors. Our board of directors exercised reasonable judgment and
considered a number of objective and subjective factors, as well as valuations prepared by independent
third-party valuation firms. The methodologies used to estimate the enterprise value are performed using
methodologies, approaches and assumptions consistent with the American Institute of Certified Public
Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities
Issued as Compensation (the Practice Aid).
In addition to considering the results of independent third-party valuations, our board of directors
considered various objective and subjective factors to determine the fair value of common stock as of
each grant date, including:
•contemporaneous valuations performed by independent third-party specialists;
•the prices, rights, preferences and privileges of our redeemable convertible preferred stock relative to
those of our common stock;
•the prices of common or preferred stock sold to third-party investors by us and in secondary
transactions or repurchased by us in arms-length transactions;
•lack of marketability of our common stock;
•our actual operating and financial performance;
•current business conditions and projections;
•our stage of development;
•likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of
our company given prevailing market conditions;
•the market performance of comparable publicly traded companies; and
•the U.S. and global capital market conditions.
For our valuations performed, the allocation of these enterprise values to each our share classes utilized
the hybrid method. The hybrid method considered the stay private scenario and IPO exit scenario. In the
stay private scenario, three market methodologies were employed including (i) a market indexing
valuation analysis based on the Series F Preferred financing round, (ii) a guideline public company
analysis based on historical and forecast operating metrics for us, and (iii) a guideline transaction analysis
based on historical and forecast operating metrics for us. In the IPO exit scenario, the total equity value
was estimated based on the expected timing, offering size and pre-money valuation.
The assumptions underlying these valuations represented management’s best estimate, which involved
inherent uncertainties and the application of management’s judgment. As a result, if we had used
significantly different assumptions or estimates, the fair value of our common stock and our stock-based
compensation expense could be materially different.
Once a public trading market for our common stock has been established in connection with the
completion of this offering, it will no longer be necessary for our board of directors to estimate the fair
value of our common stock in connection with our accounting for share-based payments, as the fair value
of our common stock will be based on the quoted market price of our common stock.
Off-balance sheet arrangements
During the periods presented we did not have, nor do we currently have, any off-balance sheet
arrangements as defined in the rules and regulations of the SEC.
Quantitative and qualitative disclosures about market risks
Interest rate risk
As of March 31, 2025, we had cash and cash equivalents of $109.8 million. Our cash and cash
equivalents are held for working capital purposes. We do not enter into investments for trading or
speculative purposes. Due to the short-term nature of our cash equivalents, we have not been exposed
to, nor do we anticipate being exposed to, material risks due to changes in interest rates.
Our exposures to market risk for changes in interest rates relate primarily to our 2024 Term Loan
(described above) which bears floating interest rates and a rising interest rate environment will increase
the amount of interest paid on these loans. Each 100 basis point increase in these initial rates would
increase annual interest expense by approximately $1.2 million assuming the 2024 Term Loan remain
outstanding for the annual period.
Credit risk
Our cash and cash equivalents, which at times may exceed federally insured limits, is maintained with
large financial institutions. As of the issuance date of the financial statements included in this report, we
have not experienced any losses on our deposits and all of our cash deposits have been accessible to us.
Our accounts receivable primarily relate to revenue from the sale of our products to medical providers. No
customer represented 10% or more of our accounts receivable as of December 31, 2023, 2024 and
March 31, 2025.
Foreign currency exchange risk
The vast majority of our cash generated from revenue is denominated in U.S. dollars, with a small amount
denominated in other foreign currencies. Our expenses are generally denominated in the currencies of
the jurisdictions in which we conduct our operations, which are primarily in the United States, United
Kingdom and Japan. Our results of operations and cash flows are, therefore, subject to fluctuations due to
changes in foreign currency exchange rates. The effect of a hypothetical 10% change in foreign currency
exchange rates applicable to our business would not have had a material impact on our consolidated
financial statements during any of the periods presented. As the impact of foreign currency exchange
rates has not been material to our historical operating results, we have not entered into derivative or
hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more
significant.
Effects of inflation
Inflation generally affects us by increasing our cost of labor and overhead costs. We do not believe that
inflation has had a material impact on our business, results of operations, or financial condition, or on our
consolidated financial statements included elsewhere in this prospectus.
Emerging growth company status
We are an “emerging growth company” under the JOBS Act, which permits us to take advantage of an
extended transition period to comply with new or revised accounting standards applicable to public
companies. We have elected to use this extended transition period until we are no longer an emerging
growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a
result, our consolidated financial statements may not be comparable to companies that comply with new
or revised accounting pronouncements applicable to public companies. The JOBS Act also exempts us
from having to provide an attestation and report from our independent registered public accounting firm
on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of
2002.
We will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year
following the fifth anniversary of the completion of this offering; (ii) the last day of the fiscal year in which
we have total annual gross revenue of at least $1.235 billion; (iii) the last day of the fiscal year in which
we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which
would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of
the last business day of the second fiscal quarter of such year; or (iv) the date on which we have issued
more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Business
Overview
We have pioneered the use of software and AI to deliver a more accurate and clinically effective non-
invasive solution for diagnosing and managing coronary artery disease (“CAD”), a leading cause of death
worldwide. As of March 31, 2025, our Heartflow Platform has been used to assess CAD in more than
400,000 patients, including 132,000 in 2024 alone. We believe that we are the most widely adopted AI-
powered test for CAD. Our novel platform leverages AI and advanced computational fluid dynamics to
create a personalized 3D model of a patient’s heart from a single coronary computed tomography
angiography (“CCTA”), a specialized type of scan that provides detailed images of the heart’s arteries.
Our Heartflow Platform delivers actionable insights on blood flow, stenosis, plaque volume and plaque
composition thereby overcoming the limitations of traditional non-invasive imaging tests which rely on
indirect measures of coronary disease and lead to higher false negative and false positive rates, as
demonstrated by our PRECISE trial. We believe the differentiated accuracy and clinical utility of our
Heartflow Platform, along with its ability to enhance workflows, will continue to support our growth and
advance the “CCTA + Heartflow” pathway as the definitive standard for the non-invasive diagnosis and
management of CAD.
Cardiovascular disease is the leading cause of death worldwide, with CAD being the most lethal form.
CAD occurs when plaque—a buildup of cholesterol, fat, calcium and other substances—accumulates on
the walls of the coronary arteries, restricting blood flow and increasing the risk of heart attack or stroke.
This condition is responsible for half of all cardiovascular-related deaths globally. In the United States
alone, the Centers for Disease Control (“CDC”) estimates that approximately 805,000 people suffer a
heart attack each year. Despite significant advancements in therapeutic and interventional treatments,
CAD remains a leading cause of death globally because healthcare systems generally lack scalable
methods to efficiently detect, diagnose and quantify CAD at a personalized level.
Based on our analyses using Clarivate’s ProcedureFinder data repository, we estimate that there were
approximately 9.5 million non-invasive tests (“NITs”) in the United States in 2023 for patients experiencing
stable or acute chest pain, which we refer to as symptomatic CAD patients. These NITs primarily include
stress tests, such as single-photon emission computed tomography (“SPECT”), echocardiography and
positron emission tomography (“PET”), which infer the presence of heart disease based on how well
blood is supplied to the heart, and do not measure the actual disease itself. Accordingly, these tests have
been shown to be unreliable and inconsistent.
CCTA has emerged as a leading non-invasive imaging method for evaluating CAD, offering direct and
detailed visualization of the coronary arteries. Unlike traditional stress-based NITs, CCTA enables
physicians to identify the presence and extent of coronary blockage. As a result, CCTA has become the
preferred first-line test for patients with suspected CAD, as evidenced by the AHA and ACC guidelines
elevating CCTA to Class 1, Level A. However, while CCTA provides superior anatomical imaging, it does
not independently quantify the severity of CAD, assess blood flow limitations, or characterize plaque
composition—critical factors for determining the most appropriate, personalized course of treatment for a
patient.
Our Heartflow Platform builds upon the well established strengths of CCTA by going beyond its limitations
and providing new quantified insights and compelling visualizations of data. By applying our advanced AI-
powered technology to a single CCTA scan, we generate a precise, patient-specific analysis that
quantifies blood flow, measures plaque burden, and characterizes plaque composition—at every point in
the major coronary arteries.
To date, we have developed three software products (with a fourth product expected to launch in 2026)
under the Heartflow Platform that provide physicians with the critical insights needed to effectively
diagnose and manage CAD:
•Heartflow RoadMap Analysis offers a highly intuitive anatomic visualization of the coronary arteries,
helping physicians quickly identify clinically relevant areas to focus their review. We provide Heartflow
RoadMap Analysis to accounts as an integrated feature to enhance the efficiency of their CCTA
program and it is not a stand-alone product.
•Heartflow FFRCT Analysis calculates blood flow and pinpoints clinically significant CAD, which is CAD
with a fractional flow reserve (“FFR”) value of 0.80 or below, at every point in the major coronary
arteries. FFR measures the severity of blood flow restriction in the coronary arteries on a scale of 1.0
(no restriction) to 0.0 (complete blockage) by assessing pressure differences across a stenosis during
induced stress, guiding decisions on whether a patient requires invasive revascularization.
•Heartflow Plaque Analysis provides a comprehensive assessment of coronary plaque, enabling
optimized medical treatment strategies.
•Heartflow PCI Planner, which we expect to launch in 2026, will provide advanced visualization and
clinical insights to optimize revascularization strategies, guide device selection, enhance procedural
efficiency, and improve patient care. We plan to provide Heartflow PCI Planner to accounts as an
integrated feature to enhance procedural efficiency, not as a stand-alone product.
We believe we are the first and most widely-adopted AI-powered test for CAD. With over a decade of
commercial presence, we have established a competitively differentiated data set of approximately 110
million annotated images, which is primarily sourced from our commercial relationships with customers,
driving training and refinement of our algorithms for over 10 years and the ability to train new AI models
for future products.
We believe our Heartflow Platform delivers the following key benefits:
•More accurate non-invasive test for CAD, clinically validated to provide superior assessment of
blood flow, plaque volume and plaque characterization compared to traditional non-invasive methods.
•More informed assessments, personalized care, and better risk stratification, positively
impacting physician decisions on which patients should receive an intervention, supporting more
efficient intervention planning and driving more personalized medical management.
•Superior economic efficiency and enhanced interventional treatment planning, accurately
identifying more patients who need interventional treatment while reducing unnecessary invasive
procedures—significantly improving the efficiency of the catheterization lab and therefore hospital
economics.
•Proprietary, secure bi-directional data communication with customers that feeds a growing
database of approximately 110 million annotated CCTA images that we leverage to improve the
Heartflow Platform’s accuracy, automation and clinical utility and seamlessly deliver new features and
workflow efficiencies to our customers.
•Improved workflow through our Heartflow RoadMap Analysis that, as demonstrated in our SMART-
CT study, reduces CCTA interpretation times by approximately 25% and reduces variability between
reviewing physicians by approximately 40%, leading to more consistent diagnoses and standardized
patient care.
•Better patient and provider experience, by leveraging a single CCTA for all of our products,
patients complete their test in approximately 20 minutes with significantly lower radiation exposure
compared to nuclear imaging tests such as SPECT and PET that take multiple hours and require
radioactive tracers to be injected into the bloodstream. By providing a definitive diagnosis upfront, the
Heartflow Platform eliminates the need for layered testing, streamlining the patient journey and
reducing anxiety associated with uncertain or inconclusive results.
We estimate our current market opportunity in the United States for our Heartflow FFRCT Analysis and
Heartflow Plaque Analysis is approximately $5 billion. Based on our analyses using Clarivate’s
ProcedureFinder data repository, we estimate that approximately 9.5 million unique stable chest pain
patients receive NITs in the United States annually. In addition, based on our FORECAST randomized
trial, we further estimate that 33% of patients have stenosis levels between 40% and 90%, which results
in approximately 2.8 million patients eligible for our Heartflow FFRCT Analysis in the stable setting. Based
on the Martin paper, where there were approximately 577,000 hospital discharges in the United States in
2020 due to a principal diagnosis of acute chest pain, and the Bhatt paper, where No ST Elevation
(“NSTE”) related acute chest pain accounted for approximately 70% of acute chest pain, we further
estimate that the annual incidence of patients who have acute chest pain with NSTE is approximately 0.4
million patients. Of these approximately 0.4 million patients, we estimate based on the Kofoed paper that
approximately 70% have obstructive disease and are eligible for our Heartflow FFRCT Analysis, which
results in approximately 0.3 million acute chest pain patients eligible for our Heartflow FFRCT Analysis.
Therefore, we believe there is a market opportunity of approximately 3.1 million patients eligible for our
Heartflow FFRCT Analysis, which, at a U.S. average sales price of $1,067, translates to an estimated
market opportunity of approximately $3.3 billion in the United States.
In addition, we believe our Heartflow Plaque Analysis is applicable to approximately 60% of those 9.5
million NIT patients annually and the majority of patients experiencing acute chest pain. Based on our
PROMISE trial and the Hoffmann paper, we estimate that approximately 60% of CCTA patients have
plaque and are eligible for plaque analysis, which translates to approximately 5.1 million patients eligible
for our Heartflow Plaque Analysis in a stable setting. Based on our internal analysis and the findings in the
Wang paper, where less than 5% of patients were expected to be contraindicated for CCTA, we also
estimate that all of the approximately 0.4 million patients with acute chest pain with NSTE referred to
above will be eligible for our Heartflow Plaque Analysis. Therefore, we believe there is a market
opportunity of approximately 5.5 million patients eligible for our Heartflow Plaque Analysis, which, at an
estimated U.S. sales price of $300, translates to an estimated market opportunity of approximately an
incremental $1.7 billion in the United States.
Beyond the commercialization of Heartflow FFRCT Analysis and Heartflow Plaque Analysis in symptomatic
CAD, we see a significant market opportunity for our technologies in at-risk individuals who show no
symptoms, a segment comprised of approximately 200 million people globally, based on data from the
U.S. Census Bureau, CDC, Eurostat, United Kingdom Office of National Statistics, the Yang paper and
the MacDonald paper. To unlock this potential, we are continuing to evaluate new product opportunities
and appropriate clinical evidence supporting eventual regulatory approval, payor coverage and
commercialization.
We believe the Heartflow Platform is the most extensively studied AI-enabled test for CAD. Our belief is
grounded in our analysis, including that the Heartflow Platform and its accuracy, clinical utility and
economic benefits have been evaluated in over 100 clinical studies and more than 130,000 patients,
including our PRECISE and FORECAST trials, each a large randomized controlled trial, with results
published in over 600 peer-reviewed clinical publications. Our studies, including the PRECISE, NXT and
PACIFIC trials, have consistently demonstrated that the Heartflow Platform is more accurate than
traditional non-invasive tests and highly concordant to invasive testing, reduces unnecessary invasive
testing, and enables physicians to optimize treatment and ultimately provide more efficient care.
We have developed a highly scalable, capital efficient commercial model that combines Territory Sales
Managers (“TSMs”) who drive new account adoption with Territory Account Managers (“TAMs”) who focus
on increasing utilization by educating referring physicians. Our commercial team does not cover cases or
otherwise spend time in an operating room or lab setting, which enables them to focus solely on driving
commercial adoption and educational activities.
Our technology is simple and intuitive and does not require the purchase of any capital equipment. Our
onboarding process seamlessly integrates the Heartflow Platform into the customer’s daily workflow.
These unique attributes of our business model afford our commercial organization a differentiated level of
efficiency and scalability.
Current clinical guidelines strongly support the adoption of the Heartflow Platform. The CCTA + Heartflow
FFRCT Analysis pathway is supported by the American Heart Association (“AHA”) and American College of
Cardiology (“ACC”) guidelines, with CCTA identified as a Class 1, Level A test and Heartflow FFRCT
Analysis identified as a Class 2a, Level B test for the diagnosis of CAD in certain patients with stable or
acute chest pain and no known CAD. The AHA and ACC guidelines utilize Classes and Levels to indicate
the strength of a recommendation and the quality of supporting evidence, respectively. Class 1 represents
the strongest recommendation, followed by Class 2a, which represents a moderate recommendation.
Similarly, Level A signifies the highest quality of evidence, while Level B indicates moderate quality.
We believe current reimbursement policies support the adoption of the Heartflow Platform. Our Heartflow
FFRCT Analysis is reimbursed under a dedicated Category I Current Procedural Terminology (“CPT”)
code, effective as of January 1, 2024, and has established coverage policies representing approximately
99% of covered lives in the United States. A Category I CPT code was recently established for Heartflow
Plaque Analysis. It will go into effect on January 1, 2026, and is covered by all seven Medicare
administrative contractor (“MACs”). A Category I CPT code designates a procedure or service that uses
device(s) with Food and Drug Administration (“FDA”) clearance or approval (when required), is performed
by many physicians across the United States for its intended clinical use, aligns with current medical
practice, and has documented efficacy in literature. The Category I CPT status for our Heartflow FFRCT
Analysis and Heartflow Plaque Analysis validates their widespread use and distinguish them from
emerging technologies that are assigned Category III CPT codes.
We primarily generate revenue on a “pay-per-click” basis each time a physician chooses to review either
our Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both. Heartflow FFRCT Analysis has served
as our commercial foundation, representing 99% of our total revenue as of March 31, 2025. In the second
half of 2023, we initiated limited market education efforts for Heartflow Plaque Analysis, our second
commercial product. Our Heartflow RoadMap Analysis is generally provided as a workflow efficiency tool
to drive customer retention and loyalty and is not a stand-alone product. We expect to launch our next
product, Heartflow PCI Planner, in 2026 as an integrated feature to enhance procedural efficiency, not as
a stand-alone product.
We have experienced significant revenue growth since we began commercializing the Heartflow Platform
in 2015. We recognized revenue of $125.8 million for the year ended December 31, 2024, compared to
revenue of $87.2 million for the year ended December 31, 2023, representing 44% year-over-year growth.
We recognized revenue of $37.2 million for the three months ended March 31, 2025, compared to
revenue of $26.8 million for the three months ended March 31, 2024, representing 39% growth over the
prior year period. The software-based nature of our Heartflow Platform produces an attractive gross
margin profile, which continues to expand as we leverage AI to automate an increasing portion of our
“human-in-the loop” quality control process, where learnings are fed back into our algorithms to make
them smarter and more efficient. For the twelve months ended December 31, 2024, we generated gross
margins of 75%, an increase of 8 percentage points year-over-year from December 31, 2023. Our net
losses were $95.7 million and $96.4 million for the years ended December 31, 2023 and 2024,
respectively. Our accumulated deficit was $874.5 million and $971.0 million as of December 31, 2023 and
2024, respectively. For the three months ended March 31, 2025, we generated gross margins of 75%, an
increase of 3 percentage points over the three months ended March 31, 2024. Our net losses were $20.9
million and $32.3 million for the three months ended March 31, 2024 and 2025, respectively. Our
accumulated deficit was $1.0 billion as of March 31, 2025.
Our success factors
We believe the continued growth of our company will primarily be driven by the following success factors:
•Differentiated approach to the non-invasive diagnosis and management of CAD: We are the
first medical technology company authorized for marketing in the United States to leverage software
and AI to accurately and non-invasively diagnose and manage CAD using a single CCTA. As of
March 31, 2025, our Heartflow Platform has been used to assess CAD in more than 400,000 patients,
including 132,000 in 2024 alone. Our Heartflow Platform applies AI and advanced computational fluid
dynamics to generate a personalized 3D model of a patient’s heart, delivering actionable data on
blood flow, stenosis, plaque volume and plaque composition. This enables physicians to diagnose
CAD, assess risk and develop individualized care plans without requiring an invasive procedure.
Unlike traditional NITs that use surrogate measures to diagnose heart disease, which results in higher
rates of false negatives and false positives, as demonstrated by our PRECISE trial, the Heartflow
Platform measures and quantifies the actual disease and has been proven to more accurately
diagnose CAD. Our proprietary database of approximately 110 million annotated CCTA images, which
is primarily sourced from our commercial relationships with customers and growing daily, has fueled
ongoing AI-driven algorithm refinement for over a decade—enhancing our platform’s value for
patients, physicians, and payors. Our standard commercial agreements provide us with the right to
use submitted images for product support and development. We perform regular updates and
upgrades to the Heartflow Platform and don’t charge customers for the rollout of those
enhancements. We believe the unique software technology attributes of our Heartflow Platform will
continue to support our commercial presence and help us establish the CCTA + Heartflow pathway as
the standard of care for the non-invasive diagnosis and management of CAD.
•Market leader in AI-powered quantitative CAD analysis with strong customer relationships: We
believe our Heartflow Platform is the most widely adopted AI-powered test for CAD, to date, with an
installed base of more than 1,100 accounts in the United States as of December 31, 2024, reflecting a
CAGR of 44% from December 31, 2021, including leading academic institutions, integrated delivery
networks, physician offices and outpatient imaging centers. Our value proposition resonates across
multiple subspecialties, including radiology, cardiology, and interventional cardiology. Our deep
integration into customer workflows and IT infrastructure, including electronic medical record systems,
ensures seamless utilization and efficiency. We believe our long-standing customer relationships,
continuously improving AI-powered software and the highly embedded nature of our customer
integrations will continue to support the rapid adoption of our Platform. Additionally, as we expand our
AI capabilities, introduce new applications such as Heartflow Plaque Analysis, and further optimize
workflow integration, we expect our Platform’s value proposition to grow—deepening customer
reliance on our solutions and accelerating broader market penetration.
•Attractive revenue model with significant operating leverage potential: We primarily generate
revenue on a scalable “pay-per-click” model, in which we charge per physician review of our
Heartflow FFRCT Analysis, Heartflow Plaque Analysis, or both. Utilization rates for Heartflow FFRCT
Analysis typically scale rapidly after onboarding, approaching approximately 33% of CCTA tests within
an account—a level that is generally sustained over time. Utilization rates for an account are
calculated as the number of Heartflow FFRCT Analysis ordered divided by the total number of CCTA
tests performed at an account. Our TAMs measure this utilization rate in the first twelve months
following the onboarding of a new account to ensure onboarding was successful. As CCTA +
Heartflow referral volumes increase, these stable utilization rates translate into increasing Heartflow
revenue cases. These aspects of our revenue model afford us significant predictability and
consistency. Additionally, the AI-based nature of our software platform produces an attractive gross
margin profile that has improved over time as we have leveraged AI to automate an increasing
number of the manual components of our “human-in-the loop” quality control process thereby
lowering the cost of revenue per analysis. For the twelve months ended December 31, 2024, we
generated gross margins of 75%, an increase of 8% year-over-year from December 31, 2023. For the
three months ended March 31, 2025, we generated gross margins of 75%, an increase of 3
percentage points over the three months ended March 31, 2024. Given our established relationships
and bi-directional data sharing infrastructure with customers, we also have the opportunity to add and
rapidly scale revenue streams from new software products or indications, such as Heartflow Plaque
Analysis, with minimal additional setup and installation cost and effort for our customers. Since
Heartflow Plaque Analysis runs on the same CCTA scan as Heartflow FFRCT Analysis, we expect
favorable operating and gross margin leverage as its adoption increases. We have also developed a
highly scalable enterprise commercial model that combines TSMs who focus on driving new account
adoption with TAMs who educate referring physicians and drive increased volumes at accounts in our
installed base. Unlike traditional medical technology companies, our software is fully cloud-based,
simple to implement, and does not require case coverage or on-site support. This streamlined,
capital-light model enables us to scale efficiently while maintaining a lean commercial footprint. We
believe these structural advantages will enable us to continue investing in growth while advancing
towards profitability.
•Large addressable market opportunity with a significant unmet need: CAD is a leading cause of
death and a highly prevalent condition worldwide with well-established pathways for diagnosis,
primarily through NITs. In the United States alone, based on our analyses using Clarivate’s
ProcedureFinder data repository, we estimate approximately 9.5 million NITs were performed for the
diagnosis of CAD in 2023. However, the majority of these tests measure only surrogate markers for
CAD and are therefore often inaccurate leading to missed diagnosis or unnecessary invasive
procedures. By contrast, CCTA imaging combined with our Heartflow Platform provides a more
accurate and actionable NIT for CAD, driving rapid adoption. We believe this approach will ultimately
become the standard of care. Accordingly, based on our FORECAST randomized trial, our PROMISE
trial, the Wang paper and the Hoffman paper, we believe our market opportunity represents the
approximately 8.6 million patients non-invasively tested for CAD in 2023 that are indicated for our
Heartflow FFRCT Analysis and Heartflow Plaque Analysis products based on their stenosis and plaque
levels, respectively, representing a market value of approximately $5 billion in the United States
alone. While we have rapidly scaled the adoption of our Heartflow Platform to achieve $125.8 million
of revenue in 2024, we believe the Heartflow Platform analyzed only approximately 10% of U.S.
CCTA volumes and represented less than 1% of all NITs in 2023, highlighting a substantial runway for
growth. Looking ahead, we see the potential to expand both our geographic footprint and clinical
applications. Beyond symptomatic CAD, we believe our technology can play a pivotal role in risk
stratification and preventive therapy optimization for the approximately 200 million asymptomatic
individuals globally considered high risk for a cardiac event, based on data from the U.S. Census
Bureau, CDC, Eurostat, United Kingdom Office of National Statistics, the Yang paper and the
MacDonald paper.
•Robust and compelling portfolio of clinical evidence: We believe the Heartflow Platform is the
most extensively studied AI-enabled test for CAD. Our belief is grounded on our analyses, including
that the Heartflow Platform and its accuracy, clinical utility and economic benefits have been
evaluated in over 100 clinical studies and more than 130,000 patients, including our PRECISE and
FORECAST trials, each a large randomized controlled trial, with results published in over 600 peer-
reviewed clinical publications. Our studies, including the PRECISE, NXT and PACIFIC trials, have
consistently demonstrated that the Heartflow Platform is more accurate than traditional non-invasive
tests and highly concordant to invasive testing, reduces unnecessary invasive testing, and enables
physicians to optimize treatment and ultimately provide more efficient care. As a result, the clinical
evidence demonstrates that the Heartflow Platform reduces unnecessary invasive testing, and
enables physicians to make more informed revascularization decisions, delivering more efficient,
cost-effective care. For example, our PRECISE randomized controlled trial showed that our Heartflow
FFRCT Analysis was 78% more likely than traditional testing to identify patients in need of intervention
and 69% less likely to progress patients to unnecessary invasive testing, leading to 2x the yield of ICA
leading to revascularization such as percutaneous coronary intervention (“PCI”) or coronary artery
bypass grafting (“CABG”), compared to standard care. This reduction in unnecessary diagnostic
procedures and higher rate of revascularization procedures represents a clinical benefit for patients
and significant economic benefit for providers. We believe that our extensive body of clinical evidence
will drive continued adoption, and we expect to continue to invest in evidence generation that will
expand the applicability of our Heartflow Platform into new indications.
•Established reimbursement coverage and favorable society support: Our rapid growth is
underpinned by a favorable reimbursement landscape and strong clinical guidelines that drive
adoption of the Heartflow Platform. Our Heartflow FFRCT Analysis is reimbursed under a dedicated
Category I CPT code, effective as of January 1, 2024, and has established coverage policies
encompassing approximately 99% of covered lives in the United States. In addition, a Category I CPT
code was also recently established for our Heartflow Plaque Analysis, set to take effect in January
2026. Heartflow Plaque Analysis is already covered by all seven local MAC regions, with five of the
seven MACs issuing final local coverage determinations (“LCD”). We expect to leverage our
experience in establishing commercial policies for Heartflow FFRCT Analysis to efficiently establish
commercial coverage for our Heartflow Plaque Analysis. In addition, CCTA combined with our
Heartflow FFRCT Analysis is supported by the AHA and ACC guidelines, with CCTA a Class 1, Level A
test and FFRCT a Class 2a, Level B test for the diagnosis of CAD in certain patients with stable or
acute chest pain and no known CAD. We believe our favorable reimbursement and society support
provides a strong foundation and tailwind for our continued growth.
•Unique and scalable AI, data and R&D capabilities: We designed our AI-powered software
platform to be high quality, highly scalable, integrate seamlessly with physician workflows and
improve as we ingest more data, and leverage that data to improve our algorithms’ performance and
our business efficiency. Our proprietary technology stack includes secure data transfer software, a
scalable cloud database, a web and mobile interface, quality review tools and an AI algorithm pipeline
that delivers diagnostic accuracy, utility, workflow efficiency, and operational scalability. By harnessing
AI to process massive volumes of cases while maintaining a “human-in-the loop” quality control
process, where learnings are fed back into our algorithms to improve their performance and
efficiency, we have been able to rapidly grow our platform while delivering accurate, timely results for
physicians and patients. We have also built a substantial and growing data asset that has driven
ongoing refinement of our algorithms for more than 10 years with approximately 110 million annotated
CCTA images. Additionally, our bi-directional data sharing relationship with our customers enables us
to deliver even greater value by ensuring they benefit from ongoing feature additions, workflow
enhancements and performance improvements. Unlike traditional CAD diagnostic tools, our AI
platform can be updated with improved features, better performance and can improve from one of the
largest CCTA datasets globally, creating a competitive advantage that continues to grow over time.
We believe our differentiated AI, data and R&D capabilities and proven dedication to improvement
ensures that Heartflow remains at the forefront of precision coronary care.
•Experienced leadership team: Our senior management team consists of seasoned executives with
deep industry expertise across various disciplines, including biomedical and software engineering,
clinical evidence, medical technology and medical imaging, AI, data science and sales and marketing.
With backgrounds at leading medical technology companies, our leadership has a proven track
record of scaling businesses, securing market adoption and driving innovation.
The convergence of AI advancements, cutting-edge imaging technologies, and broad-based guideline
adoption is accelerating a shift toward more precise, personalized approaches to cardiovascular care. By
integrating anatomical and physiological insights, our technology enables physicians to tailor therapies
more effectively, optimizing treatment decisions and improving patient outcomes. With Heartflow FFRCT
Analysis reimbursement firmly established, growing physician acceptance, and a proven track record of
real-world impact, Heartflow is well-positioned to lead the transformation of coronary care on a global
scale.
Our growth strategies
We believe the following strategies will play a critical role in our continued growth:
•Expand adoption of our Heartflow Platform by new accounts: We believe that all accounts with
an active CCTA program would benefit from adopting the Heartflow Platform into their workflow in
order to improve efficiency and patient care. We estimate that as of December 31, 2023, there were
approximately 2,700 hospitals and outpatient facilities in the United States that perform CCTA, and
this target account base has grown at a 10% CAGR from 2018 to 2023, based on our analyses using
Clarivate’s ProcedureFinder data repository. As of December 31, 2024, we have successfully
deployed our Heartflow Platform in more than 1,100 accounts in the United States. Our TSMs are
responsible for acquiring new accounts. Our TSMs engage with physicians to communicate the value
proposition of the Heartflow Platform, leveraging our large base of clinical evidence to extoll its clinical
and economic benefits. Once onboarded, providers typically reach utilization rates approaching 33%
of CCTAs eligible for Heartflow FFRCT Analysis. Unlike traditional sales models, our TSMs are not
required to support case coverage or ongoing account maintenance, allowing them to focus on new
account acquisition efficiently. We intend to drive further adoption by leveraging our existing 44 TSMs,
as of March 31, 2025, while selectively expanding our team to capture additional geographic
opportunities.
•Broaden awareness of the CCTA + Heartflow pathway to drive volume at existing accounts:
While we have achieved significant commercial adoption to date, including 132,000 patients on our
Heartflow Platform in 2024 alone, we believe this represented less than 1% of our overall market
opportunity of 9.5 million total NITs, and approximately 10%, of current U.S. CCTA volumes. To
expand adoption, we are actively educating physicians on the AHA and ACC chest pain guidelines
that support CCTA plus Heartflow FFRCT Analysis as the preferred pathway for diagnosis and
management of CAD. Our commercial team includes TAMs who are responsible for educating the
cardiologists who refer patients to accounts in our installed base and driving increasing Heartflow
Platform volumes. These TAMs utilize our extensive clinical compendium to educate and train
physicians on the benefits of our platform. Similar to our TSMs, our TAM model is highly efficient and
scalable. We also invest in robust medical education, including peer-to-peer discussions,
symposiums, podium presentations, and other educational events. These initiatives, combined with
strong society support, our leading field presence, and continued technology investment, contribute to
the expansion of both the CCTA market and the CCTA + Heartflow pathway.
•Launch and drive adoption of our Heartflow Plaque Analysis product: We initiated limited market
education efforts for our second product, Heartflow Plaque Analysis, in the second half of 2023. We
believe there is broad recognition among the cardiology physician community of the importance of
quantifying and characterizing plaque composition as a key indicator of cardiovascular risk. Existing
clinical trials have demonstrated plaque volume and plaque composition correlate with heart attack
risk. There are also multiple pharmaceutical therapies that have proven to slow or halt plaque
progression and reduce the risk of cardiovascular events. However, current non-invasive risk
assessment methods are often inadequate due to their reliance on manual, time-consuming, or
largely visual assessments, leaving physicians with limited actionable data for prescribing optimal
therapies. Our Heartflow Plaque Analysis fills this critical gap in care by enabling rapid and precise
quantification of plaque volume and composition at the vessel and patient level, down to the cubic
millimeter. We believe that broad commercial reimbursement coverage will be important for
widespread adoption of Heartflow Plaque Analysis and are working to secure coverage. In 2024, CMS
assigned Heartflow Plaque Analysis a Category I CPT Code, which will be effective as of January
2026, and as of December 2024, Heartflow Plaque Analysis is covered by all MACs. We intend to
leverage our learnings from the successful reimbursement coverage expansion and commercial
launch of Heartflow FFRCT Analysis to drive commercial coverage and adoption of Heartflow Plaque
Analysis. Since Heartflow Plaque Analysis runs on the same CCTA scan as Heartflow FFRCT
Analysis, we expect favorable operating and gross margin leverage as its adoption increases.
•Invest in additional clinical evidence to support adoption and expand our indications: We
believe we have developed the largest clinical evidence base supporting a non-invasive AI-powered
diagnostic for CAD and that our extensive evidence demonstrates the superior accuracy, clinical utility
and economic benefits of our Heartflow Platform relative to other non-invasive methods. We expect to
continue to invest in clinical evidence to extend our leadership position. For example, we are currently
conducting the DECIDE registry, a 20,000-patient study which aims to demonstrate how Heartflow
Plaque Analysis impacts physician decision-making. Beyond the commercialization of Heartflow
FFRCT Analysis and Heartflow Plaque Analysis in symptomatic CAD, we see a significant market
opportunity for our technologies in at-risk individuals who show no symptoms, a segment comprised
of approximately 200 million people globally, based on data from the U.S. Census Bureau, CDC,
Eurostat, United Kingdom Office of National Statistics, the Yang paper and the MacDonald paper. To
unlock this potential, we are continuing to evaluate new product opportunities and appropriate clinical
evidence supporting eventual regulatory approval, payor coverage and commercialization.
•Extend our technology leadership through continued investment in our platform: Our ongoing
research and development initiatives are focused on introducing products, features and
improvements to maximize customer value. We prioritize advancements in four key areas including:
improving our algorithms by leveraging extensive clinical data to improve accuracy and efficiency;
optimizing clinical utility to better support physicians in diagnosis, patient management, and treatment
planning; enhancing ease of use through seamless workflow integration to improve operational
efficiency; and expanding our platform’s applications to serve a broader patient population. By
executing on these priorities, we aim to deepen engagement with existing customers, attract new
ones, and further solidify our leadership in AI-driven cardiovascular diagnostics.
•Leverage our platform to pursue adjacent and international markets: We believe our installed
base and deeply integrated platform technology approach allows us to add on new analysis and
insights within the same product experience. Our relationships with referring and imaging physicians
provide us with insights into unmet clinical and workflow needs, while our extensive database of
CCTA images and AI capabilities enable us to develop and integrate new algorithm-based solutions.
Additionally, while our current commercial focus is on the U.S. market, we have an existing presence
in the United Kingdom, European Union, Australia, Canada and Japan. In the future we may choose
to selectively expand our geographic footprint by strengthening our presence in existing international
markets, entering new international markets, or exploring adjacent market opportunities in the U.S.
and abroad.
Market overview and opportunity
Overview of CAD
Cardiovascular disease is the leading cause of death worldwide, with CAD being the most lethal form.
CAD occurs when plaque—a buildup of cholesterol, fat, calcium and other substances—accumulates on
the walls of the coronary arteries, restricting blood flow and increasing the risk of heart attack or stroke.
This condition is responsible for half of all cardiovascular-related deaths globally. Key risk factors,
including high cholesterol, hypertension, smoking, diabetes, obesity, physical inactivity, and genetic
predisposition, accelerate plaque formation and destabilization. In the United States alone, the CDC
estimates that approximately 805,000 people suffer a heart attack each year. The CDC estimates that
approximately 1 in 20 adults over the age of 20 have CAD, which is approximately 12.5 million individuals
with CAD in the United States. The CDC also estimates that CAD killed 371,506 people in 2022. Given its
morbidity and mortality, CAD places a significant cost burden on the healthcare system and is projected to
reach $215 billion by 2035.
CAD is caused by the build-up of calcified and non-calcified plaque in the coronary arteries. This plaque
build-up results in a narrowing of the arteries, or stenosis, which may require an intervention if the
reduction in blood flow caused by the stenosis is determined to be clinically significant. Effectively
diagnosing CAD in order to inform the optimal treatment pathway requires a measurement of the blood
flow through the stenosis as well as quantifying the amount and type of plaque causing the stenosis. For
example, the foundational FAME 1 and FAME 2 randomized controlled trials showed that deferring
intervention is superior when blood flow, as measured by FFR, was greater than 0.80 but that when FFR
was below this same level, intervention was superior to optimal medical therapy. Similarly, a follow-up
analysis to the foundational SCOT-HEART trial showed that plaque volumes greater than 238 mm3
resulted in a 7x greater risk of heart attack than lower plaque volumes and higher concentrations of low-
attenuation plaque burden were associated with a nearly 5x greater risk of heart attack. This is due to the
unstable nature of low-attenuation plaque, which can result in a higher risk of rupture leading to occlusion
of coronary blood flow. Based on these trials, the cardiology community has recognized the importance of
accurately measuring FFR values and characterizing plaque, and has supported this perspective with
clinical guidelines that stratify treatment recommendations based on FFR values and plaque metrics.
Traditional methods for the non-invasive diagnosis of CAD and their limitations
When patients present with symptoms of CAD, such as chest pain, they are typically referred for a NIT.
There are two primary types of NITs: stress-based tests, which measure surrogate markers for CAD to
infer the presence of heart disease based on blood perfusion, or CCTA, which directly images the
patient’s coronary arteries. Based on the output of a patient’s NIT, the imaging physician and managing
physician determine the appropriate next step which can include sending the patient home with only
lifestyle modifications if the disease is not determined to be significant, initiating pharmaceutical therapy if
there is assumed plaque burden without significant stenosis, or sending the patient to catheterization lab
for intervention if there is significant stenosis.
When appropriately diagnosed and managed, CAD can be effectively treated with well-established
therapeutics and devices. These therapeutics, which include statins, PCSK-9s and GLP-1s, among
others, have been proven to effectively manage CAD by reducing plaque progression, changing plaque
composition, and reducing the risks of a major adverse cardiovascular event. Similarly, when indicated,
procedures to open the arteries, including percutaneous coronary intervention with intravascular
lithotripsy, atherectomy and/or stenting, and coronary artery bypass grafting, have been shown over
decades to be highly efficacious in reducing mortality risk and relieving the symptoms of CAD.
Stress tests
Stress-based NITs include SPECT, PET and stress echocardiography. These tests use imaging to
evaluate heart function under exercise or pharmacologically-induced stress. The tests image the heart
muscles and identify the differences in blood perfusion to the myocardium between the rest and stress
state images to infer the presence of CAD. Stress-based NITs rely on surrogate markers of CAD to
deduce the disease in the coronary artery without actually assessing the coronary arteries or the disease
itself. According to the 2010 Patel paper, which determined patterns of non-invasive testing and the
diagnostic yield of catheterization among patients with suspected coronary artery disease, these NITs are
inaccurate a majority of the time, and often result in either missed CAD diagnoses or unnecessary
invasive procedures as demonstrated by our PRECISE trial. In the PRECISE trial, among those who
underwent invasive catheterization, in the Usual Care arm (in which most patients initially underwent NIT)
there was 60% incidence of finding no obstructive coronary disease upon catheterization, whereas in the
Precision Care arm this incidence was only 20%. Finding no obstructive disease indicates that, in
retrospect, the procedure was avoidable. As for missed CAD diagnoses, 5.2% of patients in the Usual
Care arm had diagnosis made of CAD requiring revascularization, where 9.2% of patients in the Precision
Care arm had such diagnosis made. This indicates missed diagnosis of significant CAD in 4% of Usual
Care patients, and in approximately 43% of patients with significant CAD.
As a result, approximately 20–50% of patients who undergo stress-based NITs go home with false
negatives, or undetected CAD that should have required an intervention, based on the Nakanishi paper
and the Yokota paper. In addition, based on the 2014 Patel paper, up to 55% of patients receive false
positives and are sent to the cardiac catheterization lab for an invasive diagnostic angiography when an
intervention was never needed exposing patients to unnecessary risks including vascular injury and
bleeding complications. This results in significant additional costs to the healthcare system and poor
patient experience.
Figure 3: Traditional non-invasive tests. Left: Stress echocardiogram. Right: SPECT and PET
CCTA
CCTA is a high-resolution 3D imaging method that uses X-rays to produce detailed pictures of the heart’s
arteries and other structures. CT imaging itself has been widely available and its use in cardiology is
growing rapidly. The analyses performed by our Heartflow Platform rely on CCTA images from third-party
CT manufacturers. Because CCTA images are used across multiple medical practices, by different
medical professionals and others, CT scanners have historically and currently output CCTA images in
standard file formats rather than proprietary formats. In October 2021, the AHA and ACC elevated CCTA
to a first line Class 1, Level A test in the guidelines for certain patients with stable or acute chest pain and
no known CAD, above stress testing which is Class 1, Level B. This made CCTA a first line test for CAD
owing to the strong evidence supporting its differentiated clinical utility. As of December 31, 2023, we
estimate there were approximately 2,700 sites with an active CCTA program in the United States.
Similarly, CCTA now has guideline support from the European Society of Cardiology Clinical Practice
guidelines on Chronic Coronary Syndromes (1B), is included in the National Institute for Health and Care
Excellence guidelines in the United Kingdom, and in the Japanese Circulation Society 2022 Guidelines in
Japan. We believe these guidelines further support the growth of CCTA tests outside the United States
and specifically in the European Union, United Kingdom and Japan.
Unlike stress-based NITs that rely on indirect functional assessments of heart muscle activity to infer
CAD, CCTA enables direct visualization of the patient’s coronary anatomy and can allow for a
comprehensive assessment of coronary stenosis and plaque burden. CCTA has been clinically
demonstrated in the SCOT-HEART trial to have the highest diagnostic performance of all traditional non-
invasive imaging tests for CAD.
The foundational SCOT-HEART randomized controlled trial, highlighted the clinical superiority of CCTA
over traditional stress-based NITs. The study found a significant 41% reduction in the rate of death or
non-fatal heart attacks after five years in patients who underwent CCTA evaluations. The study also
demonstrated that patients in the CCTA group were more likely to be started on lipid lowering, anti-
hypertensive, anti-platelet, and anti-anginal medication, which improved outcomes in patients with
disease that may not have been detected with stress-based testing alone.
Figure 4: CCTA image
With the elevation of CCTA to a Class 1, Level A guideline recommendation by the AHA and ACC
guidelines in 2021, CCTA test volumes have grown at a 22% CAGR from 2018 to 2023 while SPECT
volumes have grown at a 2% CAGR over the same time period, based on our analyses using Clarivate’s
ProcedureFinder data repository. We believe CCTA test volumes will continue to grow rapidly, ultimately
replacing other NIT methods based on increasing awareness of the superior diagnostic accuracy,
workflow efficiencies and clinical guideline recommendations. Furthermore, favorable reimbursement
trends are expected to accelerate adoption. In 2025, CMS reimbursement levels for hospital outpatient
CCTA are set to increase by 104% based on the OPPS final rule, published in the Federal Register on
November 27, 2024.
Catheterization lab-based invasive diagnostics for CAD
Invasive methods of diagnosing CAD are typically performed in the catheterization lab and provide highly
accurate assessments of blood-flow and plaque. However, they are not practical or cost-effective as a
first-line diagnostic due to procedural risks, patient discomfort, as well as cost and availability of
catheterization lab time. As a result, these technologies are utilized downstream in the catheterization lab
after a patient has been identified as having suspected CAD based on an NIT and referred for an
interventional procedure. Because of the invasive nature of these tests, they serve as valuable reference
points for validating the accuracy of our technology, however, we do not directly compete with them.
These invasive catheter-based procedures, which include FFR and Intravascular ultrasound (“IVUS”),
have been the reference standard for obtaining FFR values and assessing plaque burden for decades.
FFR requires inserting a pressure wire into the coronary arteries under stress conditions to assess the
severity of blood flow restriction and IVUS uses a catheter-based ultrasound probe to directly image
plaque within the arteries.
Our symptomatic CAD market opportunity
We estimate our current market opportunity in the United States for our Heartflow FFRCT Analysis and
Heartflow Plaque Analysis is approximately $5 billion. Based on our analyses using Clarivate’s
ProcedureFinder data repository, we estimate that there were approximately 9.5 million NITs performed
for the diagnosis of CAD in the United States in 2023. This includes an estimated 6.8 million SPECTs, 0.8
million PETs, 1.2 million stress echocardiograms, and 0.7 million CCTAs, based on our analyses using
Clarivate’s ProcedureFinder data repository.
(1)Clarivate’s ProcedureFinder data repository; ~73,000 U.S. Heartflow tests billed in FY23
(2)ZS NIT for CAD Market Assessment, Survey of 246 HCPs and 81 administrators, December 2024
Figure 5: Pie chart of U.S. non-invasive test market
CCTA testing volumes have grown 22% between 2018 and 2023, based on our analyses using Clarivate’s
ProcedureFinder data repository, and we believe they will continue to outpace the broader NIT market
growth driven by the recently established Class 1, Level A guidelines, due to superior clinical utility
compared to stress-based tests, and improved reimbursement. Of the approximately 9.5 million NITs
performed for the diagnosis of CAD in the United States in 2023, we believe, based on our FORECAST
randomized trial and the Wang paper, there were approximately 8.6 million patients that were addressable
for CCTA after accounting for layered testing due to the inconclusive nature of traditional tests and the
need for multiple re-tests and contraindications to CCTA.
Our Heartflow Platform, which requires a CCTA image from a CT scanner to perform its analysis,
significantly improves the clinical utility of CCTA and addresses the limitations of traditional non-invasive
CAD testing by combining existing CCTA images with our AI algorithms to provide actionable data on
blood flow, stenosis, plaque volume and plaque composition. This delivers superior clinical utility relative
to other NITs and compelling economic benefits, which are supported by extensive clinical evidence. As a
result, we believe the CCTA + Heartflow pathway will become the standard of care for the non-invasive
diagnosis of CAD over time.
Addressing the limitations of traditional CAD testing
Figure 6: Image of SPECT test result on left; image of Heartflow FFRCT Analysis result on right
Our Heartflow FFRCT Analysis is reimbursed for use on any CCTA showing 40% to 90% stenosis, which,
based on our FORECAST randomized trial, we estimate to be approximately 33% of all CCTAs annually.
We believe that CCTA + Heartflow FFRCT Analysis therefore is applicable to 33% of the NIT market and a
majority of patients experiencing acute chest pain, which represents 3.1 million patients and an estimated
market opportunity of approximately $3.3 billion in the United States. Our Heartflow Plaque Analysis is
reimbursed for plaque identified on CCTA with 1% to 69% stenosis, which, based on our PROMISE trial
and the Hoffmann paper, we estimate to cover approximately 60% of all CCTAs annually and a majority of
patients experiencing acute chest pain. We believe that CCTA + Heartflow Plaque Analysis is therefore
applicable to 60% of the NIT market, which represents 5.5 million patients and an estimated market
opportunity of an incremental approximately $1.7 billion in the United States.
While our current focus is on the United States and the Heartflow Platform has been cleared by the FDA
(K213857), our Heartflow FFRCT Analysis has commercial presence and regulatory approval in the United
Kingdom, European Union, Australia, Canada and Japan. The Heartflow Platform has also been cleared
by the equivalent regulatory authorities in Israel, Saudi Arabia, United Arab Emirates, and licensed in
Bahrain. In the future we may expand our international presence beyond these markets and extend our
platform to additional indications.
Asymptomatic CAD market opportunity
For asymptomatic patients, current clinical practice guidelines (Class 1, Level B) recommend using risk
factors such as age, sex, smoking status, hyperlipidemia, hypertension, and diabetes, among others, to
calculate a risk score, called an ASCVD score, for assessing overall cardiovascular event risk and guiding
preventive therapy. However, this approach does not account for the actual disease state of an
individual’s arteries leading to imprecise risk assessment and suboptimal management. As a result,
despite the widespread availability of proven, preventative pharmaceutical treatments, up to 25% of heart
attacks occur in those with no symptoms and approximately 50% of sudden heart deaths occur without
any prior diagnosis or testing according to the Ni paper.
We believe there is a significant opportunity for our Heartflow Platform to materially improve risk
stratification and patient management. Clinical data supports our belief that AI-based risk calculation
predicated on the combination of individual-specific CAD measures enables more accurate and effective
management and preventative measures as compared to those based on an ASCVD score alone. For
example, our EMERALD 2 study showed that combining certain CCTA-derived quantitative features from
coronary physiology via Heartflow FFRCT Analysis and from plaque metrics via Heartflow Plaque Analysis
predicted future plaque rupture more accurately than CCTA alone. Serial AI-based risk assessment of
asymptomatic patients can also capture temporal changes in disease state and cardiovascular risk, which
can be used to personalize preventative medical therapy over time. We estimate that there are
approximately 200 million patients globally with a high risk of cardiovascular events, of which 71 million
live in the United States, based on data from the U.S. Census Bureau, CDC, Eurostat, United Kingdom
Office of National Statistics, the Yang paper and the MacDonald paper. In the future, we believe certain
sub-segments of this population may be appropriate candidates for our platform.
Beyond the commercialization of Heartflow FFRCT Analysis and Heartflow Plaque Analysis in symptomatic
CAD, we see a significant market opportunity for our technologies in at-risk individuals who show no
symptoms, a segment comprised of approximately 200 million people globally. To unlock this potential, we
are continuing to evaluate new product opportunities and appropriate clinical evidence supporting
eventual regulatory approval, payor coverage and commercialization.
Our technology
Heartflow enhances CCTA, the most advanced non-invasive imaging modality for assessing CAD, with
AI-powered analysis to deliver more accurate and clinically actionable insights for diagnosing and
managing CAD. The Heartflow Platform applies deep learning, an advanced form of AI, and
computational fluid dynamics to CCTA images to create a personalized 3D model of a patient’s heart
based on a single CCTA image. This model provides actionable insights into blood flow, stenosis, plaque
volume and plaque composition allowing precise diagnosis, risk stratification, and treatment planning –
without the need for an invasive procedure.
The CCTA + Heartflow pathway addresses the limitations of traditional non-invasive tests that only assess
indirect measures for coronary disease and therefore result in higher rates of false negative and false
positive CAD diagnoses, as demonstrated by our PRECISE trial. We believe the differentiated accuracy
and clinical utility of the CCTA + Heartflow pathway will continue to support our growth and advance the
standard for the non-invasive diagnosis and management of CAD.
We designed our AI-powered software platform to be highly scalable, seamlessly integrate into existing
physician workflows for diagnosing CAD, and improve as we ingest more data over time. By leveraging AI
to process massive volumes of cases and a “human-in-the loop” quality control process, where learnings
are fed back into our algorithms to improve their performance and efficiency, we have rapidly scaled our
platform to deliver accurate, timely results to benefit physicians and patients alike. Our cloud-based
technology has enabled us to rapidly scale to an installed base of more than 1,100 accounts in the United
States as of December 31, 2024, reflecting a CAGR of 44% from December 31, 2021. We have also built
a substantial and growing data asset that has driven refinement of our algorithms for over 10 years and
as of March 31, 2025, we have analyzed and annotated approximately 110 million annotated CCTA
images. Additionally, through our bi-directional data sharing relationship with our customers we ensure
platform enhancements, delivering immediate and tangible benefits through new features, workflow
efficiencies, and improved performance.
The CCTA + Heartflow pathway
When a patient presents with symptoms of CAD and their physician follows the AHA and ACC Class 1,
Level A chest pain guidelines by referring the patient for a CCTA, the patient will undergo standard CCTA
imaging at the relevant hospital or outpatient facility. At Heartflow-enabled accounts, CCTA images are
securely transmitted directly to our cloud-based platform through our embedded software in the hospital
or outpatient imaging center. Leveraging proprietary AI and advanced computational fluid dynamics, we
create a personalized, 3D digital model of the patient’s coronary arteries, unlocking critical insights
beyond what is visible on standard imaging.
Figure 7: The CCTA + Heartflow pathway
Our Heartflow Platform includes a suite of innovative, AI-powered products designed to deliver
comprehensive coronary artery assessment:
1)Heartflow RoadMap Analysis: Coronary anatomy modeling that enables clinicians to interpret CCTA
accurately, efficiently and consistently while identifying whether the patient requires further evaluation
with our other products.
2)Heartflow FFRCT Analysis: Accurate 3D model of blood flow that identifies clinically-significant CAD
at the lesion level to inform whether the patient requires revascularization and identifies which lesions
should be addressed.
3)Heartflow Plaque Analysis: Precise quantification of plaque volume and plaque composition down
to the cubic millimeter to help assess risk and determine optimal medical treatment.
4)Heartflow PCI Planner: Will provide advanced visualization and clinical insights to optimize
revascularization strategies, guide device selection, enhance procedural efficiency, and improve
patient care. We expect to launch this product in 2026.
These analyses provide the critical complementary data that are lacking from other non-invasive tests but
that we believe physicians need to diagnose, assess risk and make optimal, patient-specific decisions
about medical and interventional therapies.
Figure 8: The Heartflow Portfolio
Our Heartflow Platform seamlessly integrates into our customer workflows, providing clinically actionable
insights directly to the account in a median turnaround time of 1.6 hours, which we believe is sufficient for
the workflows of our customers. We deliver the Heartflow RoadMap Analysis automatically to the imaging
cardiologist or radiologist for every acceptable CCTA patient at our accounts to help drive more efficient
CCTA interpretation, workflows and revascularization strategies. In conjunction with the Heartflow
RoadMap Analysis, we also provide physicians with a case list that catalogs all their CCTAs and identifies
the cases where our Heartflow FFRCT Analysis, Heartflow Plaque Analysis or both would enable them to
accurately diagnose clinically significant CAD and plan treatment. With a single click, Physicians can
access these analyses on-demand, and we bill the account directly for each product selected. Because
Heartflow FFRCT Analysis and Heartflow Plaque Analysis have distinct clinical indications and dedicated
billing codes, our workflow helps ensure physicians can order the most appropriate analyses for each
patient, supporting both high-quality care and efficient reimbursement processes.
Figure 9: The Heartflow Platform and workflow
The Heartflow Platform portfolio
Heartflow RoadMap Analysis: The Heartflow RoadMap Analysis provides a
highly intuitive anatomic visualization of the patient’s coronary anatomy based
on CCTA images. It rapidly orients the imaging physician to clinically relevant
areas of the patient anatomy and provides a preview of what they will review in
the native CCTA images to aid the physician in accurately, efficiently and
consistently identifying stenosis in the coronary arteries. Heartflow RoadMap
Analysis supports more efficient radiology workflow, improving CCTA read
times by 25% and increasing consistency between reviewing physicians by
approximately 40%, as demonstrated in our SMART-CT study. Physicians use
Heartflow Roadmap Analysis as a first-line assessment tool along with CCTA
interpretation to determine whether to order our more detailed Heartflow
FFRCT Analysis or Heartflow Plaque Analysis reports. The Heartflow RoadMap
Analysis was cleared by the FDA in October 2022, and we began providing it
to our customers in the second quarter of 2023. We generally provide
Heartflow RoadMap Analysis to accounts as an integrated feature to enhance
the efficiency and consistency of their CCTA programs and it is not a stand-
alone product. We believe the efficiency that Heartflow RoadMap Analysis provides our customers has
resulted in enhanced customer loyalty and retention.
Heartflow FFRCT Analysis: Our flagship product, Heartflow FFRCT Analysis,
consists of a patient-specific, interactive, 3D anatomical reconstruction of the
coronary anatomy that identifies clinically significant CAD at every point in the
major coronary arteries to determine the need for intervention. The model is
color-coded along vessel length, indicating Heartflow FFRCT Analysis values
which assist the physician in rapidly and precisely assessing blood flow
through the coronary arteries. Our Heartflow FFRCT Analysis has the highest
diagnostic accuracy for a non-invasive CAD test and has demonstrated a high
level of concordance to invasive FFR, as seen in our PRECISE, NXT and
PACIFIC trials. Our product can measure the FFR value and determine
whether a lesion is clinically significant – a “clinically significant lesion” means
an FFR value of 0.80 or below. Because FFR values are the guideline directed
measure to determine the need for invasive revascularization, this data offers
a more clinically accurate, non-invasive basis for determining the need for
interventional treatment.
Current AHA and ACC guidelines support CCTA + Heartflow FFRCT Analysis as a more efficient care
pathway. The guidelines designate CCTA as a Class 1, Level A test for CAD in certain patients with stable
or acute chest pain and no known CAD, with our Heartflow FFRCT Analysis given a Class 2a, Level B
recognition to help physicians guide patient treatment decisions. This CCTA + Heartflow FFRCT Analysis
pathway enables physicians to identify lesions that require revascularization in less than two hours, and
guidelines recommend patients with positive Heartflow FFRCT Analysis findings be sent directly to the
cardiac catheterization lab for possible treatment. Comparatively, AHA and ACC guidelines provide stress-
based testing a Class 1, Level B recommendation, suggesting patients with suspected CAD and positive
stress-based test findings first initiate guideline directed medical therapy. Only if symptoms are not
resolved by medical therapy, which can last weeks or months, are patients then sent to the cardiac
catheterization lab.
Figure 10: AHA and ACC chest pain guidelines
Our Heartflow FFRCT Analysis is indicated for patients with stenosis levels between 40% and 90% in any
vessel because a physician’s review of a CCTA alone may not appropriately identify the need for
treatment in these cases. For example, in the figure below, two patients with >70% stenosis based on
CCTA alone would likely be referred for invasive coronary angiography (“ICA”). However, Heartflow FFRCT
Analysis reveals that while Patient A has an FFRCT value >0.80—indicating no need for intervention—
Patient B has an FFRCT value <0.80 and should be referred for revascularization. As of March 31, 2025,
Heartflow FFRCT Analysis represented 99% of our total revenue.
Figure 11: Heartflow FFRCT Analysis Significantly Improves CCTA – anatomy from CCTA + Physiology
from Heartflow FFRCT Analysis better informs clinical decisions
Heartflow Plaque Analysis: Heartflow Plaque Analysis transforms coronary
plaque assessment from a time-consuming and variable manual process,
which is seldom clinically used, into a rapid, automated, and highly precise AI-
driven solution. The Heartflow Plaque Analysis automatically provides a
comprehensive 3D assessment of a patient’s coronary plaque, including a
characterization of plaque types and quantification of plaque volumes at every
point in the major coronary arteries. The Heartflow Plaque Analysis has been
validated against the reference standard of invasive IVUS and shown to have
a 95% agreement with IVUS in quantifying total coronary plaque volume in
our REVEALPLAQUE study. Moreover, our current findings from the DECIDE
registry show the Heartflow Plaque Analysis led to medical management
change in over half of patients beyond CCTA alone. Because coronary plaque
volume is a strong predictor of a patient’s risk of having a heart attack
regardless of ASCVD risk score, coronary artery calcium (“CAC”) score, or
stenosis, this data offers incremental predictive power over risk factors and
stenosis alone and can aid the physician in optimizing medical management. Furthermore, only quantified
plaque analysis based on CCTA can assess non-calcified plaque, which has a higher risk for causing a
heart attack as compared to calcified plaque. In contrast, while CAC scores also use a CT scan to
measure plaque, they estimate CAD risk based solely on calcified plaque. We believe that our Heartflow
Plaque Analysis is applicable to the approximately 60% of CCTA patients identified as having 1% to 69%
stenosis and adds significant value over review of CCTA alone, which is unable to precisely quantify or
characterize the type or volume of plaque that would impact a physician’s treatment plan.
Heartflow Plaque Analysis guides medical management
Figure 12: Plaque is critical to guide medical management, regardless of FFRCT results
In addition to its comprehensive plaque assessment capabilities, Heartflow Plaque Analysis incorporates
a nomogram derived from an extensive international cohort of over 11,000 patients. This nomogram
stratifies coronary atherosclerotic plaque volumes by age and sex, providing physicians with a valuable
reference to contextualize individual patient data against population-based benchmarks. By leveraging
this tool, clinicians can more precisely assess a patient's CAD risk, facilitating personalized treatment
strategies. This integration of large-scale data enhances the actionable insights delivered by Heartflow
Plaque Analysis, supporting more informed clinical decision-making.
Our Heartflow Plaque Analysis was cleared by the FDA in October 2022. We began our limited market
education efforts in the second half of 2023, and we expect to broaden our market education efforts as
payor coverage for Heartflow Plaque Analysis increases. We also anticipate our Heartflow Plaque
Analysis to be included in updated cardiac imaging guidelines by radiology benefit manager EviCore by
Evernorth, which provides coverage guidelines to leading commercial health insurers, effective October 1,
2025.
Heartflow PCI Planner: Heartflow PCI Planner, which we expect to launch in 2026, will enable pre-PCI
assessment of coronary anatomy, lesion-specific physiology and plaque localization through an
interactive 3D model, combined in a single interface. The tool will provide interventional cardiologists with
advanced visualization and clinical insights to help answer critical questions for revascularization
strategies, such as which lesions to treat, how to treat them, the complexity of PCI, the need for calcium
modification, what ancillary tool to use and how to optimize stent quantity, size and placement. We expect
Heartflow PCI Planner to offer procedural efficiency through advanced preparation, improved patient care
by ensuring optimal treatment at the right time and increased clinician confidence with detailed pre-
procedure knowledge. We plan to provide Heartflow PCI Planner to accounts as an integrated feature to
enhance procedural efficiency, not as a stand-alone product.
Key benefits of our Heartflow Platform
We believe the unique features of our technology allow us to offer superior clinical utility and economic
value to our customers and the broader healthcare system. The key benefits offered by our Heartflow
Platform include:
•More accurate non-invasive test for CAD: Our Heartflow products have been clinically validated to
provide a more accurate non-invasive assessment of blood flow, plaque characterization and plaque
volume compared to traditional non-invasive tests, parameters that have been established to be
highly clinically relevant. Our prospective, core-lab adjudicated NXT trial demonstrated that Heartflow
FFRCT Analysis is able to accurately calculate lesion-specific FFR values with a high level of
concordance to the invasive reference standard of FFR. In addition, our retrospective, core-lab
adjudicated PACIFIC trial demonstrated that our Heartflow FFRCT Analysis offered superior diagnostic
accuracy relative to CCTA alone as well as SPECT and PET. Individually and collectively, these
studies support the differentiated level of precision that Heartflow FFRCT Analysis offers relative to
other non-invasive tests as well as its clinical reliability. Similarly, our prospective REVEALPLAQUE
study validated our Heartflow Plaque Analysis relative to the invasive reference standard of IVUS,
demonstrating 95% agreement for overall plaque volume and excellent agreement in identifying
plaque volume and sub-types at the lesion level.
•More informed assessments and personalized care: Our Heartflow FFRCT Analysis has been
clinically demonstrated in multiple studies to positively impact physician decisions on intervention and
patient management. The ADVANCE prospective registry which included over 5,000 patients globally
showed that in 67% of cases physicians changed their patient management plans, predominantly with
respect to revascularization, based on review of Heartflow FFRCT Analysis relative to CCTA alone.
Similarly, our DECODE study, which included 100 patients, demonstrated that in 66% of cases
physicians changed preventative medical therapy plans based on a review of Heartflow Plaque
Analysis relative to CCTA alone. Further supporting the value of our Heartflow Plaque Analysis
product, among patients with a CAC score of 0, physicians revised their management plan to a more
aggressive therapy approach in nearly 50% of cases after reviewing our Heartflow Plaque Analysis
report. In 63% of cases in the DECODE study, physicians increased the dosage of the patient’s
medication, indicating that patients were being under-treated based on conventional non-invasive
testing methods that fail to both quantify and characterize plaque volumes.
•Superior economic efficiency: Our Heartflow FFRCT Analysis has been clinically demonstrated to
reduce rates of false positive CAD diagnoses relative to other non-invasive tests and more accurately
identify the patients that actually need an invasive procedure. Our PRECISE prospective randomized
controlled trial which enrolled over 2,100 patients and compared Heartflow FFRCT Analysis with
standard of care, demonstrated that our Heartflow FFRCT Analysis was 78% more likely to identify
patients in need of revascularization and showed a 69% reduction in false positives, or unnecessary
ICA tests. It also showed 2x the yield of ICA leading to a revascularization procedure such as a PCI or
CABG. These are economically important procedures for our customers which, when done in place of
a diagnostic only catheterization, result in more efficient use of valuable cardiac catheterization lab
facilities and staff time. As a result, our calculations based on the PRECISE trial indicate that net
average cardiac catheterization lab revenue increased 20%.
•Improved workflow: Our Heartflow RoadMap Analysis offers significant workflow benefits, including
improving workflow efficiency by reducing CCTA interpretation times. Our SMART-CT study
demonstrated that the use of our Heartflow RoadMap Analysis reduced read time by approximately
25%. In addition to reducing read times, our Heartflow RoadMap Analysis enhances consistency
across a radiology program resulting in a more than 40% increase in inter-reader agreement. Given
the intense demands on radiologist time resulting from an increasing number of images to review on a
daily basis, we believe this added efficiency and consistency strengthens the competitive
differentiation of our platform.
•Enhanced interventional treatment planning: Once the patient is diagnosed with clinically
significant CAD and referred to the catheterization lab for an intervention, our Heartflow Platform
provides information that is useful to interventional cardiologists in planning for the most efficient
treatment based on individual anatomy and disease state. The Heartflow Platform enables early,
detailed pre-operative planning, allowing physicians to triage patients to the most appropriate site of
service—whether a hospital-based catheterization lab or an outpatient interventional center. By
identifying the complexity and severity of disease in advance, our technology ensures that high-risk
patients receive care in fully equipped facilities, while lower-risk cases can be efficiently managed in
outpatient settings, reducing strain on hospital resources. Heartflow’s 3D model provides a precise
preview of the anatomy corresponding to specific views used in invasive catheterizations. Heartflow
FFRCT Analysis and Heartflow Plaque Analysis provide quantitative and visual insights on lesion
severity, plaque burden and type, and hemodynamic significance, which enable more precise pre-
selection of interventional tools. This allows catheterization labs to be better prepared with the
necessary guidewires, catheters, and adjunctive devices before the procedure, thereby reducing
inefficiencies. With growing demand for complex structural heart procedures—such as transcatheter
aortic valve replacement, left atrial appendage closure, and transcatheter mitral interventions—
catheterization lab capacity is increasingly a constraint for hospitals. By reducing unnecessary
diagnostic angiograms and increasing the efficiency of PCI planning, we believe the Heartflow
Platform frees up catheterization lab time for these higher-acuity, resource-intensive procedures.
•Better patient and provider experience: By leveraging a single CCTA for all of our products,
patients complete their test in approximately 20 minutes with significantly lower radiation exposure
compared to nuclear imaging tests such as SPECT and PET that take multiple hours and require
radioactive tracers to be injected into the bloodstream. A fundamental challenge with traditional
stress-based testing is the lack of a definitive diagnosis, which often results in a cascade of follow-up
tests. Stress tests frequently produce inconclusive or false-positive results, requiring additional
imaging studies such as cardiac catheterization to confirm or rule out disease. This layered testing
approach prolongs the diagnostic journey, delays appropriate treatment, and adds unnecessary costs
and inconvenience for patients. The Heartflow Platform offers an entirely digital and non-invasive
experience that better serves both patients and providers. The CCTA + Heartflow Pathway provides a
fulsome array of insights with only a single patient exam. All results can then be viewed and
distributed digitally to all of the patient’s care providers. In addition, our platform offers the flexibility to
add new visualizations, insights and updates as the technology evolves, and physicians can receive
the benefits of these updates conveniently through the same software platform. For example, when
Heartflow RoadMap Analysis and Heartflow Plaque Analysis were introduced, our accounts were able
to access these technologies through the same connection infrastructure and platform that they
utilized for Heartflow FFRCT Analysis without the need to buy new equipment or establish new
connections.
Our production process
Our production process involves a sophisticated and highly refined system that combines advanced
machine learning algorithms with “human-in-the loop” quality control process, where learnings are fed
back into our algorithms to improve their performance and efficiency. After the CCTA test is complete, the
patient’s images are securely transferred to our cloud-based system through our established software that
integrates directly into the account’s infrastructure.
When the images arrive, we leverage multiple machine learning algorithms which have been trained from
a database of millions of annotated CCTA images to precisely segment CCTA data and extract patient-
specific 3D anatomy, which includes the coronary tree, myocardium and other anatomic features. The
quality of CT images and the anatomy extracted by our algorithms is inspected through propriety software
that guides quality-oriented production analysts through each step to review and potentially correct the
segmentation, as needed. Our machine learning algorithms then utilize any analyst inputs to generate a
final 3D model of the coronary vessels. Our algorithms then compute stenosis, plaque volumes and
plaque characteristics as well as blood flow simulation with computational fluid dynamics over the entire
coronary tree. The simulated blood flow and pressures allow calculation of quantitative Heartflow FFRCT
Analysis values at every point on the coronary tree. Once complete, our Heartflow RoadMap Analysis,
Heartflow FFRCT Analysis and Heartflow Plaque Analysis are securely delivered directly to the physician in
multiple formats: an interactive web experience where they can explore the data in detail, PDF
summaries, and direct delivery into the electronic medical record.
The corrections and changes from the analyst quality inspection step are stored in a database as labels
for training our algorithms. New and improved versions of our algorithms using the latest machine
learning methodologies are trained with incrementally more labels and released over time and
incorporated into our platform. The core algorithms for the 3D coronary anatomic model and Heartflow
FFRCT Analysis are now on their 3rd generation with improvements over time. This iterative approach of
combining improved algorithms with human quality control processes continues to enhance the accuracy
and efficiency of our technology.
We have also invested significantly in automating our production process through improved algorithm
performance, visualization, and internal workflow enhancements, which have materially reduced our
analyst processing times from 69 minutes in 2021 to 26 minutes in the fourth quarter of 2024, significantly
enhancing our margin profile.
Our data security
Our Heartflow Platform relies on industry-leading security controls, including encryption at rest and in
transit, multi-factor and single-sign on authentication, granular authorization and a secure development
lifecycle. We have designed the Heartflow Platform to de-identify data for processing, ensuring the most
identifiable sensitive data (including PHI) remains segregated, encrypted, and within source regions,
limiting privacy and security risk. Our commitment to information security is demonstrated by our
HITRUST, ISO 27001, and SOC 2 Type II certifications.
Our clinical results and economic evidence
We believe the Heartflow Platform is the most studied AI-enabled test for CAD. The accuracy, clinical
utility and economic benefits of our Heartflow Platform have been evaluated in over 100 clinical studies
and more than 130,000 patients, including our PRECISE and FORECAST trials, each a large randomized
controlled trial, with results published in over 600 peer-reviewed clinical publications. Collectively, this
extensive body of clinical evidence has supported regulatory approvals for our products, established
broad payor coverage and society guideline inclusion for our Heartflow FFRCT Analysis, and is driving
rapid commercial adoption of our portfolio of products. We have sponsored 50 of the 100 clinical studies
and are continuing to invest in evidence that highlights the clinical utility and economic benefits of our
Heartflow Plaque Analysis to support expansion of payor coverage and commercial adoption. In the future
we may also invest in clinical studies of the Heartflow Platform to expand indications to broader
populations.
Our clinical programs have been focused on (i) validating the accuracy and reproducibility of our product
offerings relative to invasive reference standards and non-invasive alternatives, (ii) establishing the
differentiated clinical utility of our products relative to non-invasive alternatives, and (iii) demonstrating the
economic benefits associated with our products including reduced costs for payors and improved
efficiency for providers. Our studies, including the PRECISE, NXT and PACIFIC trials, have consistently
demonstrated that the Heartflow Platform is more accurate than traditional non-invasive tests and highly
concordant to invasive testing, reduces unnecessary invasive testing, and enables physicians to optimize
treatment and ultimately provide more efficient care. The “p-values” noted below indicate the measure of
the study’s “statistical significance,” which refers to the likelihood that a result or relationship is caused by
something other than random chance or error. The “p-value” indicates the probability value that the
results observed in a study were due to chance alone. A p-value of < 0.05 is generally considered
statistically significant, meaning that the probability of the results occurring by chance alone is less than
five percent. The lower the p-value, the less likely that the results observed were random.
None of the studies discussed below that collected adverse event data related to the Heartflow Platform
reported adverse events related to the Heartflow Platform.
Our Heartflow FFRCT Analysis
Accuracy and reproducibility: Numerous foundational clinical trials in cardiology, including the FAME 1
and FAME 2 RCTs have demonstrated that FFR values are the most accurate predictors of the need for
intervention in patients with CAD. Key clinical studies that have supported the accuracy and
reproducibility of Heartflow FFRCT Analysis relative to invasive FFR testing and non-invasive alternatives
include:
•NXT (2014): Our Company-sponsored NXT trial was the was the basis for de novo 510(k) FDA
clearance of Heartflow FFRCT Analysis. It was a prospective, blinded, core-lab adjudicated trial in
which CCTA was performed prior to non-emergent ICA in stable patients with suspected CAD.
Heartflow FFRCT Analysis values based on the CCTA were compared to invasive FFR values. The trial
also compared the efficacy of Heartflow FFRCT Analysis relative to CCTA alone for predicting FFR
values. NXT studied 254 patients who were scheduled to undergo clinically indicated ICA and who
had CCTA performed within 60 days before ICA or who agreed to undergo CCTA within 60 days
before ICA and studied 484 vessels at 10 centers in Europe, the United Kingdom, Japan, Korea, and
Australia. The results showed that Heartflow FFRCT Analysis is highly accurate compared to the
reference standard of invasive FFR, with a per vessel accuracy of 86% compared with 65% for CCTA
alone (p < 0.001).
•PACIFIC (2019): The PACIFIC trial was an investigator-initiated, prospective study funded by the
Company to evaluate in a head-to-head manner the diagnostic performance of several non-invasive
tests commonly used to identify functionally significant CAD. At a single site in the Netherlands, a total
of 208 patients with suspected stable CAD underwent CCTA, SPECT and PET, and then used ICA
with invasive FFR as the reference standard. The Heartflow FFRCT Analysis was not initially included
in the PACIFIC study, but the investigators subsequently undertook a retrospective PACIFIC FFRCT
sub-study to evaluate the diagnostic performances of Heartflow FFRCT Analysis compared to CCTA,
SPECT, and PET. Using invasive FFR as the reference standard, the Heartflow FFRCT Analysis
demonstrated the highest diagnostic performance for vessel-specific ischemia of all tested
noninvasive tests, with an AUC (Area Under the Curve) of 0.94 compared with PET (0.87), CTA
(0.83), and SPECT (0.70) (p < 0.001 for all).
Differentiated utility, improved clinical and economic outcomes: Numerous studies have demonstrated
that use of Heartflow FFRCT Analysis favorably impacts clinical management, supporting physicians in
making more informed and better patient-specific decisions about intervention which drives more efficient
use of resources. Key company-sponsored clinical studies that demonstrated the impact of Heartflow
FFRCT Analysis on clinical decision-making, outcomes and provider and payor economics include:
•ADVANCE (2018): Our Company-sponsored ADVANCE prospective registry studied 5,083 patients
at 38 centers across the United States, United Kingdom, Europe, and Japan whose CCTA showed
CAD, in order to determine whether the incremental addition of Heartflow FFRCT Analysis resulted in a
change in patient management. Results at 90 days showed that Heartflow FFRCT Analysis findings
drove a change in management plan for 67% of patients and that Heartflow FFRCT Analysis values
>0.80 did not have any reported major adverse cardiovascular events compared to those with values
0.80 or below who experienced higher rates of major adverse cardiovascular events (p < 0.01)
despite overwhelmingly non-invasive patient management. Additionally, CCTA-based stenosis
severity was determined to be a poor predictor of Heartflow FFRCT Analysis values, demonstrating
that CCTA alone was not as effective for clinical decision-making. A review of outcomes at one year
showed that physician management decisions were safe and durable and that deferral of an invasive
procedure based on Heartflow FFRCT Analysis was safe and appropriate, as it was highly unlikely to
result in a later revascularization or adverse clinical event.
•PRECISE (2023): Our Company-sponsored PRECISE trial was a prospective randomized controlled
study conducted at 65 centers across the United States, Canada, the United Kingdom, and Europe
which compared decision-making and outcomes based on a CCTA + Heartflow FFRCT Analysis
pathway with the “usual care” pathway which involved alternative non-invasive or invasive testing
methods chosen by the clinician, such as exercise electrocardiogram, stress echocardiogram, stress
nuclear myocardial perfusion imaging (single-photon emission CT or positron emission tomography),
stress cardiovascular magnetic resonance imaging, or catheterization. The study included 2,103
participants without known CAD or prior testing and had a median follow up of 11.8 months. The
study found that, compared with the “usual care” pathways, CCTA + Heartflow FFRCT Analysis was
78% more likely to identify patients in need of revascularization (p < 0.001), and resulted in a 69%
reduction in diagnostic-only ICA. The net effect of this pathway was 2x the yield of ICA leading to a
revascularization procedure, from 30.5% of cases to 71.9% of cases. As a result, our internal analysis
based on the PRECISE data demonstrated a 20% increase in net revenue for the cardiac
catheterization lab, on average.
•PLATFORM (2015): Our Company-sponsored PLATFORM trial was a prospective controlled study of
sequential cohorts that enrolled 584 patients across 11 centers in the United Kingdom and Europe.
The study assessed the clinical and economic impacts of using a CCTA + Heartflow FFRCT Analysis
pathway to select patients with stable, new onset chest pain for ICA. The study compared outcomes
between cohorts with a “usual care” invasive pathway to a CCTA + Heartflow FFRCT Analysis
pathway. The study found that the CCTA + Heartflow FFRCT Analysis pathway reduced the rate of
unnecessary ICA by 83% from 73% to 12% (p < 0.0001) and showed a 23% reduction in costs at 90
days and a 32% reduction (p < 0.0001) in costs at one year based primarily on the avoidance of
unnecessary invasive procedures.
Our Heartflow Plaque Analysis
Our clinical portfolio includes 10 studies and over 25 peer-reviewed publications specific to Heartflow
Plaque Analysis. These studies and publications, which include large, multi-center, international trials,
document the performance, accuracy and clinical utility of Heartflow Plaque Analysis as well as its
positive impact on the physician’s ability to assess risk and manage outcomes. By providing more
accurate and detailed information on plaque types and volumes than can be achieved with traditional non-
invasive tests or risk measures, Heartflow Plaque Analysis supports more appropriate, precise medical
management. Key studies that support the clinical benefits of Heartflow Plaque Analysis include:
•REVEALPLAQUE (2024): Our Company-sponsored REVEALPLAQUE study demonstrated the
accuracy of Heartflow Plaque Analysis relative to IVUS, the accepted reference standard for coronary
plaque measurement and characterization. REVEALPLAQUE was a prospective, blinded, core-lab
adjudicated trial that enrolled 237 patients, with 432 lesions, in the United States and Japan and
compared coronary plaque quantification and characterization between Heartflow Plaque Analysis
and IVUS. The study showed that Heartflow’s Plaque Analysis results for total plaque volume,
calcified plaque, and non-calcified plaque were strongly correlated with IVUS measurements,
achieving 95% agreement with IVUS.
•DECODE (2024): Our Company-sponsored DECODE study evaluated the impact of the Heartflow
Plaque Analysis on clinical decision-making using data from 100 patients who underwent CCTA. For
each case, three cardiologists with expertise in reading CCTA and preventive therapies aligned on a
management plan based on patient demographics, clinical history, and the CCTA alone. The
cardiologists were then provided with Heartflow Plaque Analysis for the same patients and asked to
determine a management plan. The results showed that the use of Heartflow Plaque Analysis led to
changes in treatment plans for 66% of patients, including 63% of patients who had medical
management up-titrated. The likelihood of changing the management plan increased with higher CAC
scores and was more pronounced in patients with significant coronary stenosis; however, even 50%
of patients with a CAC score of 0 had a revised management plan with Heartflow Plaque Analysis.
•ADVANCEPLAQUE (2024): The ADVANCEPLAQUE study is a retrospective analysis of our
ADVANCE trial after 1-year follow up (see above for more information related to our Company-
sponsored ADVANCE trial). In a multi-variate analysis of the data, high total plaque volume as
identified by Heartflow Plaque Analysis was shown to be an independent predictor for the risk of
adverse clinical cardiac events. In addition, the risk of an adverse cardiac event was shown to be 2x
higher in patients where Heartflow Plaque Analysis showed a higher total plaque burden compared to
those with a lower plaque burden.
•EMERALD 2 (2024): The EMERALD 2 study, funded by the Company, enrolled 351 patients who
presented with acute coronary syndrome, including specifically-identified culprit plaque rupture, within
3 years following a CCTA across the United States, Canada, Denmark, Italy, Hungary, Belgium,
Australia, Japan and South Korea. The study sought to investigate the additive value of AI–enabled
quantitative coronary plaque analysis together with hemodynamic analysis as predictors of the
subsequent plaque rupture. The study showed that adding the CCTA-derived, AI-enabled measures
derived from FFRCT and Plaque Analyses predicted plaque rupture more accurately the reference
model of CCTA alone (p < 0.001).
•DECIDE: Based on the success of our DECODE study, which supported CMS coverage for Heartflow
Plaque Analysis, we initiated in March 2024 the DECIDE registry, a prospective real world analysis
measuring the impact of Heartflow Plaque Analysis on changes in treatment decisions compared to
CCTA alone or alternative non-invasive tests. In contrast with DECODE in which physicians
retrospectively identified revised patient management plans, physicians in our DECIDE registry will
use Heartflow Plaque Analysis information to implement real world patient management changes. The
study’s primary endpoint is change in medical management following Heartflow Plaque Analysis
compared to CCTA alone, and the secondary endpoint will examine changes in key outcomes
including death, heart attack, revascularization, cardiovascular medication changes and
cardiovascular hospitalizations at both 90-days and one-year follow-up. DECIDE was initiated in
March 2024 and we expect to enroll approximately 20,000 patients across over 30 sites in the United
States. As of March 31, 2025, we have enrolled over 10,000 patients. Our current findings from the
DECIDE registry show the Heartflow Plaque Analysis led to medical management change in over half
of patients beyond CCTA alone. We believe that the outcomes of the DECIDE registry will support
expanded commercial payor coverage and continued adoption of Heartflow Plaque Analysis.
Other Company sponsored or funded clinical studies
The table below summarizes the results of additional clinical studies of the Heartflow Platform that we
have sponsored or funded to date.
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| Journal of the American College of Cardiology | DISCOVER-FLOW study Authors: Bon-Kwon Koo, James K. Min, Bjarne L. Nørgaard, et al. Institution: Seoul National University Hospital N: 103 Description: Prospective, multicenter trial sponsored by the Company, aimed at evaluating the diagnostic performance of non-invasive fractional flow reserve derived from CCTA in assessing the functional significance of coronary artery disease. The study involved patients with suspected CAD who underwent CCTA and Heartflow FFRCT Analysis, with results compared to invasive FFR as the reference standard. Conclusions: The study concluded that Heartflow FFRCT Analysis demonstrated high diagnostic accuracy in identifying functionally significant coronary stenosis, with improved diagnostic discrimination (p < 0.001) compared to CCTA alone. These findings support the potential of Heartflow FFRCT Analysis as a reliable non-invasive method for assessing coronary artery disease, offering a promising alternative to invasive FFR for guiding clinical decision-making. |
| Journal of Cardiovascular Computed Tomography | SMART-CT 2.0 Authors: Michael F. Morris, Mahesh Chandrasekhar, Harish Gudi, et al. Institution: Banner University Medical Center, Phoenix N: 120 Description: The Company-sponsored SMART-CT 2.0 study (also referred to as the SMART-CT study) was designed to evaluate the effectiveness of an AI-informed coronary stenosis quantification tool, known as AI-CSQ, in assisting the interpretation of CCTA. This tool, aims to reduce the time required for CCTA interpretation, while maintaining or enhancing the accuracy and confidence of the readers. The study involved 120 CCTAs from patients at 2 sites with stable chest pain or symptoms of CAD. These were analyzed by six readers of varying experience levels, including cardiologists and radiologists, to determine the impact of AI-CSQ on interpretation time, diagnostic accuracy, and inter-reader variability. Conclusions: The study concluded that the use of AI-CSQ significantly decreased the overall time required for CCTA interpretation by 25.8%, regardless of the reader's experience level (p < 0.001). It also improved inter-reader agreement and boosted reader confidence in diagnosing coronary artery disease. These findings underscore the potential of advanced AI tools like AI-CSQ to enhance the efficiency and reliability of CCTA interpretation in clinical practice, addressing challenges such as time-consuming post-processing and variability in reader accuracy. |
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| | FORECAST Authors: Nick Curzen, Zoe Nicholas, Beth Stuart, et al. Institution: Multiple centers across the United Kingdom N: 1,400 Description: The FORECAST (Fractional Flow Reserve Derived from Computed Tomography Coronary Angiography in the Assessment and Management of Stable Chest Pain) study, funded by the Company, was a prospective, randomized controlled trial across 11 sites, designed to assess the clinical and economic impact of using CCTA combined with Heartflow FFRCT Analysis in the management of patients presenting with stable chest pain. The study compared this approach to standard care pathways that did not include Heartflow FFRCT Analysis, aiming to determine its effectiveness in reducing unnecessary invasive procedures and improving patient outcomes. Conclusions: The study concluded that the integration of CCTA with Heartflow FFRCT Analysis into the diagnostic pathway for stable chest pain resulted in a significant reduction in the need for ICA and unnecessary procedures, without an increase in adverse patient outcomes. It found that random assignment to the study arm using CCTA and our Heartflow FFRCT Analysis was associated with a 22% reduction in the need for ICA, a 52% reduction in the frequency of unnecessary ICA, 40% fewer layered non-invasive tests, and no increase in adverse patient outcomes or in costs (in the United Kingdom). |
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| Journal of the American Medical Association | DeFACTO study Authors: James K. Min, Jonathon Leipsic, Michael J. Pencina, et al. Institution: Multiple international centers (United States, Belgium, Canada, Latvia and South Korea) N: 252 Description: Multicenter diagnostic performance study, sponsored by the Company, involving 252 stable patients with suspected or known CAD from 17 centers in 5 countries who underwent CT, ICA, FFR, and Heartflow FFRCT Analysis between October 2010 and October 2011. Computed tomography, ICA, FFR, and Heartflow FFRCT Analysis were interpreted in blinded fashion by independent core laboratories. Accuracy of Heartflow FFRCT Analysis plus CT for diagnosis of ischemia was compared with an invasive FFR reference standard. Ischemia was defined by an FFR or Heartflow FFRCT Analysis of 0.80 or less, while anatomically obstructive CAD was defined by a stenosis of 50% or larger on CT and ICA. The primary study outcome assessed whether Heartflow FFRCT Analysis plus CT could improve the per- patient diagnostic accuracy such that the lower boundary of the 1-sided 95% confidence interval of this estimate exceeded 70%. Conclusions: The study did not meet its primary goal for per-patient diagnostic accuracy, as it resulted in diagnostic accuracy of 73%, with a lower bound of the 95% CI of 67%. However, the use of noninvasive Heartflow FFRCT Analysis combined with CT in stable patients with suspected or known CAD showed improved diagnostic accuracy and discrimination compared to CT alone for identifying hemodynamically significant CAD, using invasive FFR as the reference standard. This suggests that Heartflow FFRCT Analysis could enhance the noninvasive assessment of CAD by providing physiologic insights that CT alone cannot offer, potentially reducing unnecessary invasive procedures. Following the completion of the DeFACTO study, we substantially redesigned our technology, which improved product performance. The results of this improvement were validated in the NXT study, which resulted in a per vessel 86% accuracy and was the central evidence for the initial De Novo 510(k). |
Other clinical studies
The following summarizes the results of additional clinical studies that were not supported, sponsored, or
funded by the Company.
•SCOT-HEART (2015): SCOT-HEART was a foundational open-label, multi-center, parallel group
randomized controlled trial that compared the standard of care against the standard of care with
CCTA. The study registered 4,146 patients across 12 sites in Scotland. Enrollment was open to
patients aged 18–75 years who had been referred by a primary-care physician to a dedicated
cardiology chest pain clinic with suspected stable angina due to coronary heart disease. The study
highlighted the clinical superiority of CCTA over traditional stress-based NITs, finding a significant
41% reduction in the rate of death or non-fatal heart attacks after five years in patients who
underwent CCTA evaluations. The study also demonstrated that patients in the CCTA group had
higher rates of preventative therapies throughout follow-up: antiplatelet therapy use fell from 48%
(baseline) to 41% (at 1 year) in the standard of care group (p < 0.001), whereas it increased from
49% (baseline) to 52% (at 1 year) in those in the CCTA group (p = 0.017). Statin use increased in
both groups, from 43% to 50% (at 1 year) in the standard of care group and from 44% to 59% (at 1
year) in the CCTA group (p < 0.001 for both groups), but this was greater in those assigned to the
CCTA group (p < 0.001).
•FAME 1 (2009): The foundational FAME 1, a prospective randomized controlled trial, enrolled 1,005
patients with multi-vessel CAD across 20 sites in the United States and Europe. The study, along with
FAME 2, showed that deferring intervention is superior when blood flow, as measured by FFR, was
greater than 0.80 but that when FFR was below this same level, intervention was superior to optimal
medical therapy. In FAME 1, patients diagnosed with CAD by ICA and planned ICA had rates of major
adverse cardiovascular events that were lower with deferral of FFR negative lesions than with angio-
guided PCI of all lesions independent of FFR (18.3% vs. 13.2%) (p = 0.02). In addition, 78% of the
patients in the angiography group were free from angina at 1 year, as compared with 81% of patients
in the FFR group (p = 0.20).
•FAME 2 (2014): The foundational FAME 2, a prospective randomized controlled trial, enrolled 1,220
patients across 28 sites in Europe and North America. The enrolled patients were appropriate
candidates for PCI in stable condition who had angiographically assessed one-, two-, or three-vessel
CAD suitable for PCI. The study demonstrated that patients diagnosed with CAD by ICA and with
invasively-measured positive FFR had rates of major adverse cardiovascular events that were lower
with PCI and medical management than with medical management alone (8.1% vs. 19.5%) (p <
0.001). This reduction was driven by a lower rate of urgent revascularization in the PCI group (4.0%
vs. 16.3%) (p < 0.001), with no significant between-group differences in the rates of death and
myocardial infarction.
Sales and marketing
We believe the Heartflow Platform adds significant value across all the subspecialties that impact
cardiovascular care including referring cardiologists, imaging physicians, and interventionalists. We have
structured our sales force to efficiently call on these key physician stakeholders, with a primary focus on
the imaging physicians who are instrumental in new account adoption and the referring physicians who
are critical to driving volume growth at accounts in our installed base.
We market and sell our Heartflow Platform in United States through a direct sales organization. As of
March 31, 2025, our U.S. commercial team included 44 TSMs focused on opening new accounts, 55
TAMs who are focused on broadening referring physician awareness of the CCTA + Heartflow pathway
and driving increased volumes at accounts in our installed base, and our customer success organization
that supports seamless onboarding, implementation and ongoing utilization at our accounts. We support
our direct commercial efforts with a marketing team that generates demand for the CCTA + Heartflow
pathway and highlights clearly defined value propositions for the various stakeholders across our
customer base including cardiologists, radiologists and interventional cardiologists.
Our TSMs engage with physicians to communicate the value proposition of the Heartflow Platform,
leveraging our large base of clinical evidence to highlight its clinical and economic benefits as well as the
lack of any new capital equipment purchase to drive new account adoption. Our TSMs have substantial
experience selling into cardiology and radiology practices as well as engaging with broad stakeholders to
establish new diagnostic and therapeutic solutions, employing an enterprise sales strategy. Our TAMs
utilize our extensive clinical compendium to educate and train physicians on the benefits of our platform,
ultimately driving more referrals to our accounts. Our TAMs have strong backgrounds in establishing new,
disruptive therapies and growing a cardiology referral base.
Figure 13: Overview of Heartflow call points
Our software is simple, intuitive and does not require case coverage by our sales reps, which affords our
commercial organization a differentiated level of efficiency relative to most other medical device
technology companies. We intend to drive further adoption of our Heartflow Platform by leveraging our
existing and highly efficient cohort of TSMs and TAMs to continue opening new accounts and driving
volume growth. We expect to selectively add additional TSMs to grow our geographic presence where we
see areas of opportunity and modestly grow our team of TAMs to continue to drive awareness of the
benefits of our technology and broaden our referring physician population as our installed base grows.
We believe that all accounts with a CCTA program would benefit from adopting the Heartflow Platform.
We estimate that as of December 31, 2023, there were approximately 2,700 hospitals and outpatient
facilities in the United States that perform CCTA, and this target account base has grown at a 10% CAGR
from 2018 to 2023 as accounts increasingly recognize the benefits of a guideline directed CCTA program,
based on our analyses using Clarivate’s ProcedureFinder data repository.
We also have small, direct commercial teams in the United Kingdom and Japan. We may continue to
expand our commercial activities outside the United States in areas where we see potential opportunity
and supportive reimbursement dynamics.
Research and development
We have invested significantly in research and development efforts over more than a decade to establish
the first and most widely adopted AI-enabled non-invasive test for CAD that is authorized for marketing in
the United States. We have built sophisticated AI-based algorithms and established an intuitive, easy to
use web and mobile customer interface, developed secure data transfer software, a scalable cloud
database, and quality review software, all while facilitating operational scalability. Our highly skilled and
focused research and development (“R&D”) team has been pioneering AI-based coronary imaging for
over a decade and remains uniquely positioned to continuously advance our Heartflow Platform. Our R&D
team is comprised of PhD research scientists with expertise in AI-based algorithms and medical imaging,
alongside software engineers skilled in cloud architecture, AI algorithms, machine and deep learning and
3D visualization, as well as product managers and designers who ensure optimal customer experience
and design.
We are continuing to invest in research and development efforts with the goal of driving improvements to
the Heartflow Platform and expanding its applicability to additional disease states and patient populations.
Our near to medium term research and development priorities include: (i) continuing to train and improve
our AI algorithms to drive greater quality and efficiency and reduce manual involvement; (ii) enhancing
product features for both Heartflow FFRCT Analysis and Heartflow Plaque Analysis; (iii) developing
additional workflow enhancements for our customers; and (iv) expanding indications for our platform,
including asymptomatic risk prediction.
Reimbursement
The ability of our customers to obtain third-party payor coverage and payment for our Heartflow Platform
products for their patients is important to our business. Demand for our existing and new products is, and
will continue to be, affected by the extent to which government healthcare programs, such as Medicare
and Medicaid, and private health insurers, reimburse our customers for the use of our products with their
patients in the countries where we do business. We have successfully engaged with third-party payors in
major markets throughout the world to obtain coverage, coding, and payment rates for our products.
Nonetheless, not all third-party payors reimburse our customers for our products in all situations. Third-
party payor reimbursement for the Heartflow FFRCT Analysis is broad; however, Heartflow Plaque Analysis
is our second commercial product, and we continue to work to expand coverage and payment for its use.
Even if we develop or acquire a promising new product that has been cleared for commercial distribution
by the FDA, demand for the product may be limited unless our customers are reimbursed at favorable
rates by private health insurers and government healthcare programs.
Our Heartflow FFRCT Analysis is reimbursed under a Category I CPT code, 75580, effective as of January
1, 2024, and third-party payors have established coverage policies for Heartflow FFRCT Analysis that
apply to approximately 99% of covered lives in the United States. A new Category I CPT code was also
recently established to describe our Heartflow Plaque Analysis, which will take effect in January 2026.
Our Heartflow Plaque Analysis is generally covered by Medicare, with five of the seven MACs issuing final
LCDs that determined this analysis is medically necessary for certain Medicare patients in these MACs'
jurisdictions, and the remaining MACs providing coverage on a case-by-case basis. In July 2025, CMS
proposed to establish a national payment rate for the Category I CPT code that will describe our
Heartflow Plaque Analysis when performed in the physician office setting. If finalized in the final Physician
Fee Schedule rule expected to be published in the fourth quarter of 2025, a national Medicare payment
rate for our Heartflow Plaque Analysis will take effect on January 1, 2026.
In the United States, our customers purchase Heartflow FFRCT Analysis and Heartflow Plaque Analysis
reports generated by our products for their patients. These customers then submit a claim to the
applicable third-party payor for reimbursement. To the extent that coverage is denied on such claims, or
the reimbursement paid does not exceed the customer’s cost for our products, demand for our products
will be reduced or our charges for our products will have to be materially reduced. Internationally,
healthcare reimbursement systems vary significantly. In some countries, our customers, such as
hospitals, are constrained by fixed global budgets, regardless of the volume or nature of patient
treatment. Other countries require application for, and approval of, government or third-party payor
reimbursement. Without both favorable coverage determinations by, and the financial support of,
government and private third-party payors, the market for our products would be adversely affected. We
cannot be sure that third-party payors will maintain the current level of coverage and payment to our
customers for use of our existing products. Adverse coverage determinations, or reductions in the amount
of reimbursement, could harm our business by discouraging customers’ ordering of, and reducing the
prices they are willing to pay for, our products.
It is our intent to complete additional clinical studies and analyses, as needed, to obtain and continue to
expand coverage and payment at favorable rates for our products in countries or regions where it makes
economic sense to do so. Nonetheless, coverage and payment for our products can differ from payor to
payor. Furthermore, as a result of their influence over the healthcare system, third-party payors have
implemented, and are continuing to implement, cost-cutting measures such as seeking discounts, price
reductions or other incentives from medical products manufacturers, and imposing limitations on
coverage and payment for medical technologies and procedures. These trends could compel us to reduce
prices for our products and could cause a decrease in the size of the market or a potential increase in
competition that could negatively affect our business, financial condition and results of operations.
In addition to uncertainties surrounding insurance coverage policies, our Heartflow Platform, which
includes the separately billable services, Heartflow FFRCT Analysis and Heartflow Plaque Analysis, is
subject to periodic changes to reimbursement levels by government payors and private health insurers.
For example, CMS adopts changes to reimbursement policies during the annual Medicare rulemaking
process, which includes updates to Medicare payment levels to hospitals under the Medicare Hospital
Outpatient Prospective Payment System (“OPPS”), and updates to Medicare payment levels to physician
offices, independent diagnostic testing facilities, and freestanding imaging centers under the Medicare
Physician Fee Schedule (“MPFS”).
Updates to payments under OPPS, which are in the form of Ambulatory Payment Classifications (“APC”)
are made annually and primarily driven by the geometric mean cost (“GMC”) of the service, which is
calculated based on hospital cost reports submitted to CMS and hospital claims submitted during the prior
calendar year before the rule’s publication. If the reported GMCs for these services decline, whether due
to miscoding, erroneous claims denials, use of alternative revenue codes, underreporting costs by
hospitals, a reduction in the cost of the service, or a change in payment policy by CMS, CMS may assign
such service to a lower APC, resulting in a materially lower reimbursement rate for at least the next
calendar year. We may not become aware of our hospital customers reporting a lower GMC, or the
reason for any such reduction, early enough to prevent an impact to the GMC for the applicable period or
any potential payment classification change that CMS could make as a result of a decrease in the GMC.
Once hospitals submit their claims and CMS calculates the GMC for each procedure, our ability to
remedy any such issues may be limited by CMS rules and regulations.
Heartflow’s FFRCT and Heartflow Plaque Analysis are also subject to reimbursement changes under the
MPFS, which determines payment rates to physician offices, independent diagnostic testing facilities and
freestanding imaging centers. Like OPPS, CMS evaluates and updates payments rates on the MPFS on
an annual basis, and changes to the conversion factor, relative value units (“RVUs”), practice expense
allocations or procedure code valuations can affect the reimbursement available for Heartflow FFRCT
Analysis and Heartflow Plaque Analysis. For example, services that convert from Category III CPT codes
to Category I CPT code status are subject to review and re-survey by the American Medical Association
Relative Value Scale Update Committee, which may recommend an updated physician work value or
practice expense calculation in the form of updated RVUs. This initial review and any subsequent
resurvey can impact Medicare payment rates established in the annual MPFS. We believe the American
Medical Association may resurvey the CPT codes describing our Heartflow FFRCT Analysis as early as
2027 and our Heartflow Plaque Analysis as early as 2029. Additionally, the American Medical Association
and CMS continue to evolve the CPT coding structure and payment calculation for AI-enabled healthcare
services. Changes to existing codes or coding policies, or our ability to obtain new codes and establish
appropriate values, may impact future reimbursement for the Heartflow Platform.
In addition to risks associated with coding and government reimbursement, our Heartflow FFRCT Analysis
and Heartflow Plaque Analysis products face reimbursement uncertainty from commercial payors, such
as UnitedHealthcare, Aetna, Cigna, Anthem, and regional Blue Cross Blue Shield plans. Commercial
payors routinely reassess their medical policies, coverage criteria, and payment rates, and may choose to
deny coverage, impose restrictive utilization management protocols (such as prior authorization), or
reduce or bundle payment amounts based on internal cost-effectiveness assessments or evolving clinical
guidelines. Even if CMS maintains favorable Medicare reimbursement, commercial payors may
independently determine whether Heartflow FFRCT Analysis or Heartflow Plaque Analysis meets their
plans’ medical necessity standards, which can vary among commercial payors.
The overall escalating cost of medical products and services being paid for by the government and private
health insurance has led to, and may continue to lead to, increased pressures on the healthcare and
medical device industries to reduce the costs of products and services. Third-party payors are developing
increasingly sophisticated methods of controlling healthcare costs through prospective reimbursement
and capitation programs, group purchasing, redesign of benefits, and exploration of more cost-effective
methods of delivering healthcare. In the United States, some insured individuals enroll in managed care
programs, which monitor and often require pre-approval for the services that a member will receive. Some
managed care programs pay their providers on a per capita (patient) basis, which puts the providers at
financial risk for the services provided to their patients by paying these providers a predetermined
payment per member per month and, consequently, may limit the willingness of these providers to use
our products.
Competition
We consider our primary competition to be traditional non-invasive tests for CAD including primarily stress
tests such as SPECT, stress echocardiography and PET. The primary providers of imaging systems that
perform these tests include Siemens Healthineers AG, GE Healthcare, Koninklijke Philips N.V. and Canon
Medical Systems Corporation. These companies also manufacture CT scanners and therefore have a
vested interest in growing the CCTA market in addition to protecting their share of the non-invasive
market. These are large, multi-national, commercial organizations with significant resources and
distribution capabilities.
We also face competition from companies that have developed or are developing AI-based platforms that
leverage CCTA to diagnose CAD, including earlier-stage companies such as Cleerly, Inc., Elucid
Bioimaging Inc. and Keya Medical Technology Co., Ltd. We may also face competition from companies
developing AI-based platforms, even if they are not currently in the CAD market.
We believe the primary competitive factors in our market include: (i) the accuracy, reliability, and utility of
the test as demonstrated by the strength and quality of clinical data directly utilizing the test and
supporting it; (ii) speed and efficiency of achieving a definitive diagnosis at scale; (iii) per patient
economics including reimbursement rates and relative costs; (iv) availability and ease of use including
integration within hospital systems and clinical workflows as well as customer support; and (v) effective
marketing and physician education efforts as well as ability to impact physician mindshare and historical
practice patterns.
Intellectual property
Our success depends in part on our ability to obtain, maintain and defend our patent and other proprietary
rights for the Heartflow Platform, the validity and enforceability of our patents, our ability to operate
without infringing the valid and enforceable patents and proprietary rights of third parties and the
continued confidentiality of our know-how and trade secrets. We are actively involved in research and
development and therefore seek to protect the investments we have made into the development of the
Heartflow Platform and our proprietary technology by relying on a combination of patents, trademarks,
trade secrets, and licenses, as well as through internal compartmentalization processes, confidentiality
agreements and proprietary information agreements with suppliers, employees, consultants and others
who may have or gain access to our proprietary information. We seek patent protection in the United
States and key markets internationally for the Heartflow Platform, and any other inventions to which we
have rights, where available and appropriate. We also rely upon trademarks to build and maintain the
integrity and identity of our brand, and we seek to protect the confidentiality of trade secrets that may be
important to the development of our business, especially where we do not believe patent protection is
appropriate or obtainable. We license from third parties certain patent rights and proprietary know-how
that we believe to be useful to our business. We have non-exclusively licensed some patents in our
patent portfolio to a small number of licensees in a limited field of use that is outside of CCTA, and we
believe that those licensees' product offerings covered by our patent portfolio are complementary to our
product offerings.
Our patent portfolio, described more fully below, includes claims directed to the Heartflow Platform and its
delivery, as embodied in various systems, computer programs, computer implemented methods and
related methods of use. These claims are directed to various aspects of deriving anatomical and
physiological information from image data for the Heartflow Platform, aspects of the Heartflow Platform
user interface, machine learning methods for generation of the 3D models used for our FFRCT Analysis
and Plaque Analysis products, and methods of deriving blood flow, anatomy, plaque and organ tissue
information from the image data. A number of our issued patents also cover indications other than CAD,
such as peripheral artery disease, stroke, or aneurysms as well as technical applications related to image
data analysis and processing, and platform-related PHI and data transfer methodologies and a number of
issued patents cover alternative methods such as deriving FFRCT using purely machine learning methods
or from other imaging modalities.
As of December 31, 2024, our owned and licensed patent portfolio includes approximately five hundred
and eighty-six (586) issued patents and one hundred and three (103) pending patent applications globally,
of which nine (9) are allowed. In the U.S. this includes three hundred and nine (309) issued U.S. patents
and fifty-six (56) pending non-provisional U.S. patent applications (of which three (3) are allowed). In
foreign jurisdictions our owned and licensed patent portfolio includes two-hundred and eighty (280) issued
foreign patents and forty-seven (47) pending foreign patent applications (of which five (5) are allowed).
The two-hundred and eighty (280) issued foreign patents include one or more issued patents in Europe,
Japan, Korea, China, Australia, Canada, India, Hong Kong, and Israel. We also filed twenty-three foreign
utility models between 2011 and 2014, having ten-year terms, all of which have expired. The forty-seven
(47) pending foreign patent applications include one or more pending applications in jurisdictions such as
Europe, Canada, China, and Japan. We own all of our issued patents except for 7 issued U.S. patents
and 8 issued foreign patents, for which we have exclusive licenses. All of the issued U.S. patents in the
portfolio are utility patents. Assuming payment of all appropriate maintenance, renewal, annuity or other
governmental fees, as applicable, our owned and licensed issued U.S. patents expire between 2018 and
2041. If issued, our last to expire pending patent application (without accounting for potentially applicable
patent term adjustments or extensions) is expected to expire in 2045. One of our U.S. patents expired in
2018 and we do not expect any additional expirations in the near-term. The next expiration of a Heartflow-
licensed patent is expected to be in 2028. The next expiration of a Heartflow-owned patent is expected to
be in 2031.
Our patents and applications generally fall into three broad categories:
•applications and patents relating to our Heartflow FFRCT Analysis, including claims directed to
segmentation, determining blood flow characteristics using artificial intelligence and/or fluid dynamics,
and visualization generation;
•applications and patents relating to our Heartflow Plaque Analysis, including claims directed to plaque
and vessel visualization and characterization; and
•applications and patents relating to our Heartflow RoadMap Analysis, including claims directed to
image quality and annotation, segmentation, and vascular tree generation.
The term of individual patents depends upon the legal term of the patents in the countries in which they
are obtained. In most countries in which we file or intend to file, including the United States, the patent
term is 20 years from the earliest date of filing a non-provisional patent application. Additionally, a U.S.
provisional patent application expires twelve months from its filing date, and its subject matter can only be
claimed in an issued patent if, among other things, we timely file a non-provisional patent application
making a valid priority claim to that provisional patent application before it expires. In the United States, a
patent’s term may be lengthened by patent term adjustment, which compensates a patentee for
administrative delays by the USPTO in examining and granting a patent, or may be shortened if a patent
is terminally disclaimed over an earlier filed patent. The coverage sought in a patent application can be
denied or significantly reduced either before or after the patent is issued. We cannot be sure that patents
will be granted with respect to any current pending patent application or with respect to any patent
applications filed by us in the future, nor can we be certain that any current pending or published patent
application will be granted with the current claims or that any current or future patents will be
commercially useful in protecting the Heartflow Platform and our proprietary technology. In addition, any
patents that we may hold, whether owned or licensed, may be challenged, circumvented or invalidated by
third parties.
The success of our business strategy also depends in part on our continued ability to protect our brand.
We own registered trademarks for the Heartflow Platform. We also own and maintain registration for a
number of domain names. As of December 31, 2024, we have registered the trademarks “HEARTFLOW”
word mark and logo with the USPTO. Although we own registered trademarks and domain names in the
United States and certain other countries, and have filed trademark applications and secured domain
name registrations in the United States and in certain other countries, we do not have assurance that our
trademark portfolio will be adequate to secure or protect all necessary trademarks that we use.
The Heartflow Platform also implements software modules licensed to us by third-party authors under
“open source” licenses. The use of open source software may entail greater risks than the use of third-
party commercial software. Please see “Risk factors—Risks related to our intellectual property” for more
description of these risks. We have established a review process for screening requests from our
development organizations for the use of such software that is designed to help us mitigate risks related
to the quality of any open source software implemented in our technology platform. We also review any
open source software used to support our software development, but not directly incorporated into the
Heartflow Platform, as part of our general quality management processes. While these review processes
help us mitigate risks associated with the quality of the open source software incorporated into or used in
developing the Heartflow Platform, we cannot be sure that all open source software is submitted for
approval prior to use in connection with the Heartflow Platform.
We also rely on trade secrets, including know-how, unpatented technology and other proprietary
information, to strengthen our competitive position. We seek to protect trade secrets and confidential and
unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties
who have access to such knowledge, such as our employees, collaborators, manufacturers, consultants,
advisors and other third parties. We also seek to enter into confidentiality and invention or patent
assignment agreements with our employees and consultants that obligate them to maintain confidentiality
and assign their inventions to us. We also seek to preserve the integrity and confidentiality of our data
and trade secrets by maintaining the physical security of our premises and physical and electronic
security of our information technology systems.
Our ability to stop third parties from making, using, selling, offering to sell or importing the Heartflow
Platform depends on the extent to which we have rights under valid and enforceable patents, trade
secrets or other intellectual property and proprietary rights that cover these activities. We pursue
intellectual property protection to the extent we believe it would advance our business objectives.
Notwithstanding these efforts, there can be no assurance that we will adequately protect our intellectual
property or provide any competitive advantage. For more information regarding risks relating to
intellectual property, see “Risk factors—Risks related to our intellectual property.”
Government regulation
United States regulation of medical devices
Our products are medical devices subject to extensive and ongoing regulation by the FDA, CMS, the
Department of Health and Human Services Office of Inspector General (“OIG”) and regulatory bodies in
the United States and other countries. Regulations govern virtually every critical aspect of a medical
device company’s business operations, including research activities, product development and testing,
manufacturing and production, contracting, reimbursement, product messaging, medical communications,
sales, marketing and advertising. In the United States, the Federal Food, Drug and Cosmetic Act
(“FDCA”) and the implementing regulations of the FDA govern product design and development,
preclinical and clinical testing, premarket clearance or approval, product manufacturing, product labeling,
product storage, advertising and promotion, product sales and distribution, import, export and post market
clinical surveillance. Our business is subject to federal, state, local, and foreign regulations, such as ISO
13485:2016, ISO 14971:2019, FDA’s Quality System Regulation (“QSR”) contained in 21 CFR Part 820,
and the EU’s Medical Devices Directive 93/42/EEC and its replacement, Regulation (EU) 2017/745. The
Heartflow Platform consists of three main analyses; Heartflow FFRCT Analysis, Heartflow Roadmap
Analysis, and Heartflow Plaque Analysis. All three are authorized for clinical use in the United States,
Bahrain, Israel, Saudi Arabia, and the United Arab Emirates. Only the FFRCT Analyses is authorized for
clinical use in the European Economic Area, United Kingdom, Australia, Canada, and Japan.
FDA premarket clearance and approval requirements
Unless an exemption applies, each medical device commercially distributed in the United States requires
either FDA clearance of a 510(k) premarket notification, grant of a de novo classification request, or
approval of a premarket approval (“PMA”) application. Our Heartflow Platform is regulated in the United
States by the FDA as a Class II medical device. The FDA classifies medical devices into one of three
classes. Devices deemed to pose low to moderate risk are designated as either Class I or II. Class I
devices are subject to general controls such as establishment registration and device listing, labeling,
adherence to current good manufacturing practices outlined in the QSR, maintenance and investigation of
product complaint records, and adverse event reporting, but are usually exempt from premarket
notification requirements. Class II devices are subject to the same general controls and may be subject to
special controls such as performance standards, post-market surveillance, particularized labeling
requirements and/or clinical testing prior to clearance. Manufacturers of Class II devices, absent an
exemption, are required to submit to the FDA a premarket notification prior to commercial distribution.
Devices are designated as Class III, which requires approval of a PMA application, if they are deemed by
the FDA to pose the greatest risk. These high-risk devices include life sustaining or life supporting
devices, certain implantable devices, and other devices that are intended for a use that is of substantial
importance in preventing impairment of human health or that present a potential unreasonable risk of
illness or injury. The PMA approval process is more comprehensive than the 510(k) clearance process
and typically takes several years to complete.
510(k) clearance marketing pathway
A 510(k) notification requires the sponsor to demonstrate that a medical device is substantially equivalent
to another marketed device, termed a “predicate device,” that is legally marketed in the United States and
for which a PMA was not required. A device is substantially equivalent to a predicate device if it has the
same intended use and technological characteristics as the predicate, or has the same intended use but
different technological characteristics that do not raise new questions of safety and effectiveness, and
information submitted to the FDA demonstrates that the device is at least as safe and effective as the
predicate device.
If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market,
it will grant 510(k) clearance to commercially market the device. If there is no viable predicate device for a
new device because, for example, of a new intended use, the device is automatically designated as a
Class III device. Unless the De Novo pathway is available for the new device, the device sponsor must
fulfill more rigorous PMA requirements. The PMA process requires that the manufacturer demonstrate
that the device is safe and effective for its intended uses, which generally requires the submission of
extensive data, including results from pre-clinical studies and human clinical trials. A PMA must also
contain a full description of the device and its components, the methods, facilities, and controls used for
manufacturing, and proposed labeling. The PMA process is burdensome, and in practice, the FDA’s
review of a PMA application may take up to several years following initial submission.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or
effectiveness, or that would constitute a new or major change in its intended use, requires a new 510(k)
clearance, or depending on the modification, could require the filing of a de novo classification request or
a PMA application, which would require the submission to the FDA of clinical trial data, among other
information. We are required to determine, for each modification to our cleared products, whether to
submit a new 510(k) notification for the modification, based on the nature of the modification. If we
determine a new 510(k) submission is not required, the decision and justification are documented in a
“letter to file.” If the FDA disagrees with our determination, the FDA can require us to cease marketing or
recall the modified device until 510(k) clearance, grant of a de novo classification request or approval of a
PMA is obtained. We have made, and we plan to continue to make, minor product enhancements to our
cleared products that we believe do not require new 510(k) clearances and that we document in letters to
file. We also intend to make product enhancements from time to time that we expect may require new
510(k) clearances.
De novo classification process
A manufacturer can request a risk-based classification determination for a novel device in accordance
with the “de novo” process. Medical device types that the FDA has not previously classified as Class I, II,
or III are automatically classified into Class III regardless of the level of risk they pose. The Food and Drug
Administration Modernization Act of 1997 established a route to market for low-to-moderate risk medical
devices that are automatically placed into Class III due to the absence of a predicate device, called the
“Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure. This
procedure allows a manufacturer whose novel device is automatically classified into Class III to request
down-classification of its medical device into Class I or Class II on the basis that the device presents low
or moderate risk, rather than requiring the submission and approval of a PMA application. Pursuant to the
Food and Drug Administration Safety and Innovation Act (“FDASIA”), manufacturers may request de novo
classification directly without first submitting a 510(k) pre-market notification to the FDA and receiving a
not-substantially-equivalent determination. De novo classification requests, like PMA applications and
510(k) notifications, are subject to the payment of user fees.
Under the FDASIA, the FDA is required to reach a decision within 120 days following receipt of the de
novo request, although the process may take significantly longer. If the manufacturer seeks
reclassification into Class II, the manufacturer must include a draft proposal for special controls that are
necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. If the
FDA grants the de novo request, the device may be legally marketed in the United States. However, the
FDA may reject the request if the FDA identifies a legally marketed predicate device that would be
appropriate for a 510(k) notification, determines that the device is not low-to-moderate risk, or determines
that General Controls would be inadequate to control the risks and/or special controls cannot be
developed. After a device receives de novo classification, any modification that could significantly affect
its safety or efficacy, or that would constitute a major change or modification in its intended use, will
require a new 510(k) clearance or, depending on the modification, another de novo request or even PMA
approval.
We obtained initial marketing authorization for Heartflow FFRCT Analysis through the FDA’s “de novo”
classification process, supported by clinical data from our NXT clinical trial. Through this process, the FDA
agreed that special controls provide reasonable assurance of the safety and effectiveness of the
Heartflow FFRCT Analysis and therefore it can be classified as a Class II device. We received a de novo
authorization on November 26, 2014 for version 1.4 of the Heartflow FFRCT Analysis. We received the
510(k) clearance for version 2.x of the FFRCT product in January 2015, and 510(k) clearance for a
modification to the intended use language in August 2016. Additional clearances were received for a
strategic architecture scope change in December 2018, which is the device we refer to as Heartflow
Platform. The Heartflow Platform version 3.0 received FDA clearance in January 2021, and the newest
product generation, Heartflow Platform version 3.18, adding Roadmap and Plaque functions, received
FDA clearance in October 2022.
Medical device clinical trials
Clinical trials are sometimes required to support 510(k) or de novo submissions. All clinical investigations
of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s
investigational device exemption (“IDE”) regulations which govern investigational device labeling, prohibit
promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring
responsibilities of study sponsors and study investigators. If the device presents a “significant risk” to
human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application
to the FDA, which must become effective prior to commencing human clinical trials. If the device under
evaluation does not present a significant risk to human health, then the device sponsor is not required to
submit an IDE application to the FDA before initiating human clinical trials, but must still comply with
abbreviated IDE requirements when conducting such trials. A significant risk device is one that presents a
potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in
supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating
disease or otherwise preventing impairment of human health, or presents a potential for serious risk to a
patient in some other way. An IDE application must be supported by appropriate data, such as animal and
laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is
scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless
the FDA notifies the company that the investigation may not begin. If the FDA determines that there are
deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical
trial to proceed under a conditional approval.
Regardless of the degree of risk presented by the medical device, clinical studies must be approved by,
and conducted under the oversight of, an Institutional Review Board (“IRB”) for each clinical site. The IRB
is responsible for the initial and continuing review of the clinical study, and may pose additional
requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more
IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number
of patients, as approved by the FDA. If the device presents a non-significant risk to the patient, a sponsor
may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate
approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the
investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping
requirements. Acceptance of an IDE application for review does not guarantee that the FDA will allow the
IDE to become effective and, if it does become effective, the FDA may or may not determine that the data
derived from the trials support the safety and effectiveness of the device or warrant the continuation of
clinical trials.
During a study, the sponsor is required to comply with the applicable FDA requirements, including, for
example, trial monitoring, selecting clinical investigators and providing them with the investigational plan,
ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of
investigational devices or on making safety or effectiveness claims for them. The clinical investigators in
the clinical study are also subject to FDA’s regulations and must obtain patient informed consent,
rigorously follow the investigational plan and study protocol, control the disposition of the investigational
device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins,
we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, such as
strategic business decisions or a belief that the risks to study subjects may outweigh the anticipated
benefits.
Expedited development and review programs
Following passage of the 21st Century Cures Act, the FDA implemented the Breakthrough Devices
Program, which is a voluntary program offered to manufacturers of certain medical devices and device-
led combination products that may provide for more effective treatment or diagnosis of life-threatening or
irreversibly debilitating diseases or conditions. The goal of the program is to provide patients and
healthcare providers with more timely access to qualifying devices by expediting their development,
assessment and review, while preserving the statutory standards for PMA approval, 510(k) clearance and
de novo classification. The program is available for medical devices that meet certain eligibility criteria,
including that the device provides more effective treatment or diagnosis of a life-threatening or irreversibly
debilitating disease or condition, and that: (i) the device represents a breakthrough technology, (ii) no
approved or cleared alternatives exist, (iii) the device offers significant advantages over existing approved
or cleared alternatives, or (iv) the availability of the device is in the best interest of patients. Breakthrough
Device Designation provides certain benefits to device developers, including more interactive and timely
communications with FDA staff; use of post-market data collection, when scientifically appropriate, to
facilitate expedited and efficient development and review of the device; opportunities for more efficient
and flexible clinical study design; and prioritized review of premarket submissions. When reviewing
Breakthrough Device Designation requests, the FDA may require a combination of literature or
preliminary bench, animal or clinical data to demonstrate a reasonable likelihood of clinical and
technological success. Receiving a Breakthrough Device Designation from the FDA does not guarantee
that the FDA will grant marketing authorization for the device.
Post-market regulation
After a device is approved or cleared and placed in commercial distribution, numerous FDA regulatory
requirements apply. These include, but are not limited to, requirements to:
•register establishments and list devices with the FDA;
•maintain a quality system that is compliant with the QSR, which governs design, development, and
manufacture of devices;
•establish various specifications and controls for incoming components and finished devices;
•ensure that devices are designed to meet user needs;
•verify that finished devices are manufactured to the appropriate controls and that they meet
specifications;
•ensure that devices are assigned and labeled with a Unique Device Identifier (“UDI”) and that certain
UDI information is provided to FDA’s Global Unique Identification Database (“GUDID”);
•ensure that labeling and advertising and promotional activities are consistent with cleared/approved
uses, adequately substantiated, and truthful and not misleading;
•analyze quality data to identify and correct quality problems;
•submit notifications or applications for clearance or approval of product modifications that could
significantly affect safety or effectiveness or that would constitute a major change in intended use;
•review, evaluate and investigate complaints and report adverse events to the FDA when a device may
have caused or contributed to a death or serious injury or malfunctioned in a way that would be likely
to cause or contribute to a death or serious injury if the malfunction were to recur;
•report to FDA corrections and removals undertaken to reduce a risk to health posed by the device or
to remedy a violation of the FDCA that may present a risk to health. In addition, FDA may order a
mandatory recall if there is a reasonable probability that the device would cause serious adverse
health consequences or death;
•comply with any post-approval restrictions or conditions, including requirements to conduct post-
market surveillance studies to establish continued safety data; and
•conduct clinical studies in accordance with good clinical practices and applicable regulations,
including requirements for clinical trial registration and results reporting on ClinicalTrials.gov.
Manufacturing processes for medical devices are required to comply with the applicable portions of the
QSR, which cover the methods and the facilities and controls for the design, manufacture, testing,
production processes and controls, quality assurance, labeling, packaging, distribution, installation and
servicing of finished devices intended for human use. The QSR also requires, among other things,
maintenance of a device master file, device history file, device history record and complaint files. As a
manufacturer, we are subject to periodic scheduled or unscheduled inspections by the FDA. Failure to
maintain compliance with the QSR requirements could result in the shutdown of, or restrictions on,
manufacturing operations and the recall or seizure of marketed products. In February 2024, the FDA
issued the Quality Management System Regulation Final Rule (“QMSR”) to amend the QSR,
incorporating by reference the international standard for medical device quality management systems,
ISO 13485:2016. The rule becomes effective on February 2, 2026. Until then, manufacturers are required
to comply with the QSR.
The FDA polices these requirements by inspection, review of required reports or submissions, and market
surveillance, and the agency has broad enforcement powers to address any violations. The FDA may
conduct announced or unannounced facility inspections to determine compliance with the QSR and other
regulations, and these inspections may include our manufacturing facilities. Failure to comply with
applicable regulatory requirements can result in enforcement action by the FDA or other regulatory
authorities, which may result in sanctions and related consequences, including:
•untitled letters or warning letters or it has come to our attention letters;
•injunctions or consent decrees;
•fines or civil penalties;
•recall, detention, or seizure of our product;
•operating restrictions, partial suspension, or total shutdown of production;
•the FDA’s refusal of or delay in granting 510(k) clearance or premarket approval of new or modified
products;
•withdrawal of 510(k) clearances or PMA approvals;
•the FDA’s refusal to grant export certificates;
•criminal prosecution;
•unanticipated expenditures to address or defend such actions; and
•reputational harm resulting from such actions.
Other regulatory authorities overseeing the implementation and adherence of applicable state, federal
and analogous foreign regulatory authorities may also conduct unannounced inspections. Such
inspections may result in similar administrative, civil and criminal penalties. The discovery of previously
unknown problems with marketed medical devices, including unanticipated adverse events or adverse
events of increasing severity or frequency, whether resulting from the use of the device within the scope
of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the
device, including the removal of the product from the market or voluntary or mandatory device recalls.
International regulation — European Union, United Kingdom, Japan and Canada
In order to market and sell our product outside of the United States, we must comply with numerous and
varying regulatory requirements of other countries and jurisdictions regarding quality, safety, and efficacy
and governing, among other things, clinical trials, marketing authorization, commercial sales and
distribution of our product.
Although many of the regulatory issues we face in the United States are similar to the issues in other
geographies, the approval or certification process varies between countries and jurisdictions and can
involve additional testing and additional administrative review periods. The time required to obtain
approval or certification in other countries and jurisdictions might differ from and be longer than that
required to obtain clearance from the FDA. Regulatory approval or certification in one country or
jurisdiction does not ensure regulatory approval or certification in another, but a failure or delay in
obtaining regulatory approval or certification in one country or jurisdiction may negatively impact the
regulatory process in others.
European Union
The primary regulatory environment in Europe is that of the European Union, which includes most of the
major countries in Europe. The law regarding medical devices is harmonized in the European Union. Until
a few years ago, medical devices were governed by the Medical Devices Directive 93/42/EEC (“MDD”)
and the Active Implantable Medical Devices Directive 90/385/EEC (“AIMD”), implemented by the member
states of the European Union into their national law. However, on May 26, 2021,the Medical Devices
Regulation (EU) 2017/745 (“MDR”) entered into application, repealing and replacing the MDD and the
AIMD. As a Regulation, the MDR is directly applicable in all member states of the European Union and
does not require further implementation into national law. The MDR and its associated guidance
documents and harmonized standards govern, among other things, device design and development,
preclinical and clinical or performance testing, premarket conformity assessment, registration and listing,
manufacturing, labeling, storage, claims, sales and distribution, export and import and post-market
surveillance, vigilance, and market surveillance. The MDR is based on very similar general system as the
MDD, but adds obligations on manufacturers and distributors of medical devices.
Since May 26, 2021, medical devices placed on the European Union market must conform to the
requirements set out by the MDR. Medical devices must comply with the General Safety and
Performance Requirements (“GSPRs”) set out in Annex I of the MDR. Compliance with these
requirements is a prerequisite to be able to affix the CE mark to devices, without which they cannot be
marketed or sold in the European Union. To demonstrate compliance with the GSPRs provided in the
MDR and obtain the right to affix the CE mark, medical devices manufacturers must undergo a conformity
assessment procedure. The conformity assessment procedure varies depending on the class of the
product, but most cases involve an assessment by a Notified Body. Depending on the relevant conformity
assessment procedure, this assessment may consist of a review of the technical file submitted by the
manufacturer, an audit of the quality system of the manufacturer, and testing of the product of the
manufacturer. Even though a Notified Body is a private organization in one of the member states of the
European Union, all Notified Bodies in the European Union are designated and accredited by a national
government of the European Union based on stringent criteria. Only such accredited Notified Bodies may
give a CE Certificate of Conformity following successful completion of a conformity assessment procedure
conducted in relation to the medical device and its manufacturer and their conformity with the GSPRs.
The CE Certificate of Conformity confirms the conformity of the device to the GSPRs and allows the
applicant to affix the CE mark on the assessed medical device and to commercialize it in the European
Union after having prepared and signed a related European Union Declaration of Conformity.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the
GSPRs must be based, among other things, on the evaluation of clinical data supporting the safety and
performance of the products during normal conditions of use. Specifically, a manufacturer must
demonstrate that the device achieves its intended performance during normal conditions of use and that
the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed
against the benefits of its intended performance, and that any claims made about the performance and
safety of the device (e.g., product labeling and instructions for use) are supported by suitable evidence.
This assessment must be based on clinical data, which can be obtained from (i) clinical studies conducted
on the devices being assessed, (ii) scientific literature from similar devices whose equivalence with the
assessed device can be demonstrated or (iii) both clinical studies and scientific literature. The conduct of
clinical studies in the European Union is governed by detailed regulatory obligations. These may include
the requirement of prior authorization by the Competent Authorities of the country in which the study takes
place and the requirement to obtain a positive opinion from a competent Ethics Committee. This process
can be expensive and time-consuming. After a device is placed on the market in the European Union, it
remains subject to significant regulatory requirements.
The MDR also establishes transitional provisions, amended by Regulation (EU) 2023/607, permitting
certain devices that have been CE marked in accordance with the MDD or the AIMD to continue to be
placed on the European Union market under strict conditions and for a specific period of time depending
on the risk classification of the device and the date of issuance of any related CE Certificate of
Conformity. Accordingly, CE Certificates of Conformity issued by Notified Bodies in accordance with the
MDD or the AIMD from May 25, 2017, and which remained valid on May 26, 2021 and have not since
been withdrawn will, with certain exceptions, remain valid until December 31, 2027 for Class III and Class
IIb implantable medical devices and until December 31, 2028 for other Class IIb, Class IIa and Class I
devices with a measuring function or which are sterile. Class I medical devices, for which the conformity
assessment procedure in accordance with the MDD or the AIMD did not require the involvement of a
Notified Body but will require the involvement of a Notified Body in accordance with the MDR and for
which an European Union Declaration of Conformity was issued in accordance with the MDD or the AIMD
prior to May 26, 2021, can continue to be placed on the European Union market until December 31, 2028.
Manufacturers of medical devices may only benefit from the above extended transitional provisions
deadlines if the following conditions are fulfilled: (i) the devices continue to comply with the requirements
of the MDD or AIMD, as applicable, (ii) there are no significant changes in the design and intended
purpose, (iii) the devices do not present an unacceptable risk to the health or safety of patients, users or
other persons, or to other aspects of the protection of public health, (iv) the manufacturer implements a
quality management system by May 26, 2024 which complies with the requirements of the MDR, (v) by
May 26, 2024 an application is lodged with a Notified Body for conduct of the conformity assessment of
the devices covered by the CE Certificate of Conformity, or the devices intended to substitute for such
devices, in accordance with the MDR and a related written agreement is signed with the Notified Body by
September 26, 2024, and (vi) from May 26, 2021, compliance with the MDR relating to post-market
surveillance, market surveillance, vigilance, registration of economic operators and of devices is ensured
in place of the corresponding requirements in the MDD or AIMD.
In addition, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the
AIMD from May 25, 2017, which were valid on May 26, 2021 and have not been withdraw since but which
expired before March 20, 2023, will only continue to be valid in accordance with the extended transitional
deadlines above if either (i) the manufacturer signed a written agreement with a Notified Body for the
conformity assessment of the device covered by the expired CE Certificate of Conformity, or the device
intended to substitute that device, in accordance with the MDR before the date of expiry of the CE
Certificate of Conformity, or (ii) a competent authority of an European Union Member State has granted a
derogation from the application conformity assessment procedure in accordance with Article 59(1) or
Article 97(1) of the MDR.
On July 26, 2011, our Notified Body at the time, TUV Nord, issued a CE Certificate of Conformity for, and
thus allowed us to affix the CE mark, version 1.0 of the Heartflow Platform (July 26, 2011). The CE
Certificate of Conformity was subsequently reviewed for version 2.x of the Heartflow Platform and
confirmed in March of 2017. Our current version, version 3.x is also CE marked under the MDD
(November 20, 2019). We currently rely on the transitional provisions of the MDR to continue to place
version 3.x of the Heartflow Platform on the market in the European Union.
In addition, TUV Nord assessed the conformity of our quality management system (“QMS”) with the
industry standard, EN ISO 13485, and TUV Nord issued the certificate confirming that we meet all EN ISO
13485 requirements. Based on the EN ISO certificate, TUV Nord also issued a certificate under the
MDSAP (Medical Device Single Audit Program), stating that the requirements of EN ISO 13485:2016 for
quality management systems are met in Australia, Canada, USA and Japan.
In the second half of 2024, we changed Notified Bodies from TUV Nord to BSI by an agreement between
TUV Nord, BSI and us. BSI has taken over Notified Body responsibilities concerning all MDD/MDR
requirements. BSI has also taken over our QMS certifications. After this transfer, all certificates issued by
TUV Nord remain valid and in effect.
The advertising and promotion of medical devices in the European Union is subject to the national laws of
the individual European Union Member States that implemented the MDD, the AIMD and that apply the
MDR, Directive 2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/
EC on unfair commercial practices, as well as other national legislation of individual European Union
Member States governing the advertising and promotion of medical devices. European Union Member
States’ national legislation may also restrict or impose limitations on our ability to advertise our products
directly to the general public. In addition, voluntary European Union and national industry Codes of
Conduct provide guidelines on the advertising and promotion of our products to the general public and
may impose limitations on our promotional activities with healthcare professionals.
In addition, other countries, such as Switzerland, have voluntarily adopted laws and regulations relating to
medical devices that mirror those of the European Union. Medical devices certified by a Notified Body and
CE marked in the European Union may be placed on Swiss market.
United Kingdom
The United Kingdom left the European Union in January of 2020 and the transitional period ended on
December 31, 2020. In light of the fact that the CE Marking process is set out in European Union law,
which no longer applies in the United Kingdom, the United Kingdom has devised a new route to market
culminating in a UKCA Mark to replace the CE Mark. Northern Ireland will, however, continue to be
covered by the regulations governing CE Marks. The United Kingdom Medicines and Healthcare products
Regulatory Agency (“MHRA”) has established transitional provision to recognize the acceptance of certain
CE marked medical devices on the Great Britain market until June 30, 2030, at the latest, depending on
the type of device and its classification. Accordingly, medical devices which, for example, meet all
requirements of the European Union MDD and have a valid CE Certificate of Conformity and European
Union Declaration of conformity issued under the MDD prior to May 26, 2021, may be placed on the
market until the sooner of expiry of the CE Certificate of Conformity or June 30, 2028. Medical devices
which meet all requirements of the European Union MDR may be placed on the market until June 30,
2030. Manufacturers of medical devices located outside the United Kingdom, including manufacturers of
CE marked medical devices, need to appoint a United Kingdom Responsible Person before the devices
may be placed on the United Kingdom market. The United Kingdom government plans on introducing
new legislation governing medical devices which will be delivered though secondary legislation. The first
piece of legislation was laid in 2024 and updates post-market surveillance requirements. Additional
instruments will follow in 2025 and 2026 to introduce new pre-market requirements including international
reliance, and further enhancements to the regulations.
Japan
We applied for marketing authorization with the PMDA in Japan in February 2015, which was approved in
November 2016. As a result, we are able to commercially market the product in Japan. Our initial
SHONIN application is still current and includes a minor change notification.
Canada
Heartflow received our initial Canadian Medical Device License in August 2015. This remains current and
updated frequently with amendments for every minor software release. As well, Canada recognizes the
Heartflow Mobile application as a separate device identified within our Heartflow device family and
requires amendments for Mobile updates.
Other regulations — federal and state fraud and abuse, data privacy and security and
transparency laws
In addition to FDA restrictions on marketing and promotion of medical devices, there are numerous U.S.
federal and state laws, regulations, and guidance documents pertaining to healthcare compliance
protections against fraud and abuse, including anti-kickback laws, payment transparency laws, patient
inducement laws, and false claims laws, and, in some states, prohibitions against the corporate practice
of medicine and the unlicensed practice of medicine (collectively, fraud and abuse laws and regulations).
Our relationships with physicians, hospitals and other healthcare providers and referral sources for our
products are subject to scrutiny under these laws. Violations of these laws may be punishable by criminal
and civil sanctions, including, in some instances, imprisonment and exclusion from participation in federal
and state healthcare programs, including the Medicare, Medicaid and Veterans Administration health
programs. Because of the breadth and far-reaching nature of these laws, we may be required to alter or
discontinue one or more of our business practices to be in compliance with these laws.
These healthcare fraud and abuse laws and regulations are complex, and even minor departures from
what is expressly permitted under the laws and regulations can potentially give rise to claims that a
statute or regulation has been violated in a manner that could result in serious criminal or civil
consequences. Several of the more significant healthcare fraud and abuse laws and regulations that may
affect our business or ability to operate are summarized below.
The federal Anti-Kickback Statute is a criminal law that prohibits, among other things, knowingly and
willfully offering, paying, soliciting, or receiving any remuneration in cash or in-kind (including any
kickback or bribe, but also common forms of remuneration, such as service or consulting fees, service
fees, meals, travel expenses, discounts, or rebates), directly or indirectly, overtly or covertly, to induce or
in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order
of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal
healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value.
Although there are a number of statutory exceptions and regulatory safe harbors protecting some
common activities, the exceptions and safe harbors are drawn narrowly. Practices that involve
remuneration that may be alleged to be intended to induce prescribing, uses, purchases, or
recommendations of prescriptions, uses, or purchases of our products may be subject to scrutiny if they
do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular
applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under
the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case
basis based on a review of all relevant facts and circumstances. Several courts have interpreted the
statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is
to induce referrals of (or purchases, uses, or recommendations of prescriptions, uses, or purchases)
federal healthcare program covered business, the Anti-Kickback Statute has been implicated and
potentially violated.
Additionally, the Anti-Kickback Statute was amended by the ACA. Specifically, as noted above, under the
Anti-Kickback Statute, the government must prove that a defendant acted “knowingly” to prove a violation.
The ACA added a provision that clarifies that with respect to violations of the Anti-Kickback Statute, “a
person need not have actual knowledge” of the Statute or specific intent to commit a violation of the
Statute. This change effectively overturns case law interpretations that set a higher standard under which
prosecutors had to prove the specific intent to violate the law. In addition, the ACA codified case law that a
claim including items or services resulting from a violation of the federal Anti-Kickback Statute may
constitute a false or fraudulent claim for purpose of the federal civil False Claims Act.
The federal civil U.S. False Claims Act prohibits, among other things, any person or entity from knowingly
presenting, or causing to be presented, a false or fraudulent claim for payment or approval to the federal
government or knowingly making, using or causing to be made or used a false record or statement
material to a false or fraudulent claim to the federal government. A claim includes “any request or
demand” for money or property presented to the United States government. The civil False Claims Act
also applies to false submissions that cause the government to not receive a benefit to which it is entitled,
such as a discounted sales price for products covered by federal healthcare programs. Intent to deceive
is not required to establish liability under the civil False Claims Act. In addition, the civil False Claims Act
includes a whistleblower provision that allows private citizens to bring claims on behalf of the United
States government alleging violations of the law. Whistleblowers may be entitled to up to as much as
thirty percent (30%) of the government’s financial recovery resulting from such claims. This incentivizes
potential whistleblowers to file complaints in federal court, which complaints are relied upon heavily by the
government to investigate and prosecute allegations of violations of both the civil False Claims Act and
the Anti-Kickback Statute.
Many medical device, pharmaceutical, biotech and other healthcare companies have been investigated or
prosecuted under these healthcare fraud and abuse laws and regulations. Investigations, prosecutions
(and settlements) relate to a wide range of activities, including among other things, improper clinical
studies, provision of consulting fees to physicians for services that were not commercially reasonable,
providing free product to customers to induce them to do business with the manufacturer, providing high
value meals to customers to induce them to do business with the manufacturer, or providing non-
compliant discounts or rebates to customers, with the expectation that the customers would bill federal
programs for the product or the medical services that involve the product. Other companies have been
investigated or prosecuted for causing false claims to be submitted by, among other things, marketing of
products for unapproved, and thus noncovered, uses, or for promotion of uses inconsistent with approved
labeling (“off label” promotion).
The United States government may further prosecute conduct constituting a false claim under the criminal
False Claims Act. The criminal False Claims Act prohibits the making or presenting of a claim to the
government knowing such claim to be false, fictitious, or fraudulent and, unlike the civil False Claims Act,
requires proof of intent to submit a false claim.
In addition to the Anti-Kickback Statute and the civil and criminal False Claims Acts, the United States
federal government has the authority to seek civil monetary penalties, assessments and exclusions
against an individual or entity based on a wide variety of prohibited conduct. For example, the Civil
Monetary Penalties Law authorizes the imposition of substantial civil money penalties against an entity
that engages in activities including: (i) knowingly presenting or causing to be presented, a claim for
services not provided as claimed or which is otherwise false or fraudulent in any way; (ii) knowingly giving
or causing to be given false or misleading information reasonably expected to influence the decision to
discharge a patient; (iii) offering or giving remuneration to any beneficiary of a federal healthcare program
likely to influence the receipt of reimbursable items or services; (iv) arranging for reimbursable services
with an entity which is excluded from participation from a federal healthcare program; (v) knowingly or
willfully soliciting or receiving remuneration for a referral of a federal healthcare program beneficiary; or
(vi) using a payment intended for a federal healthcare program beneficiary for another use.
There are other federal anti-fraud laws, including the Health Information Portability and Accountability
Act’s fraud provisions, that prohibit, among other actions, knowingly and willfully executing, or attempting
to execute, a scheme to defraud any healthcare benefit program, including private payors, knowingly and
willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal
investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false, fictitious or fraudulent statement in connection with the
delivery of or payment for healthcare benefits, items or services.
Finally, many states and foreign countries have similar healthcare fraud and abuse statutes or regulations
that may be broader in scope and may apply regardless of payor, in addition to items and services
reimbursed under Medicaid and other state programs.
Violations any of these laws or any other governmental regulations that may apply to us may result in
significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment or
exclusion of devices from government-funded healthcare programs, such as Medicare and Medicaid or
comparable foreign programs.
Physician Payment Sunshine Act
Transparency laws regarding payments or other transfers of value provided to certain licensed healthcare
professionals and teaching hospitals may also impact our business practices. The federal Physician
Payment Sunshine Act requires most medical device manufacturers, including Heartflow, to track and
report annually to the Secretary of the United States Department of Health and Human Services (“HHS”)
financial arrangements, payments, and other transfers of value made by that entity to physicians (defined
to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare providers (such
as physician assistants and nurse practitioners) and teaching hospitals, as well as ownership and
investment interests held by such physicians and their immediate family members. The payment
information is made publicly available in a searchable format on the CMS Open Payments website.
Similar laws have been enacted or are under consideration in several states and foreign jurisdictions,
including states such as Massachusetts and Vermont, and countries like France, which has adopted the
Loi Bertrand, or French Sunshine Act, which became effective in 2013. We will need to dedicate
significant resources to establish and maintain systems and processes in order to comply with these
regulations. Failure to comply with these federal reporting requirements can result in significant civil
monetary penalties. In addition, information reported to HHS, since it is publicly reported, can potentially
be used by a whistleblower to bring claims under the civil False Claims Act alleging that certain payments
or transfers of value gave rise to kickbacks or false claims.
The Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from promising,
offering, paying, providing or authorizing the provision of money or anything else of value, directly or
indirectly, to any foreign official, political party candidate or certain other persons (including health care
professionals of state-funded hospitals) for the purpose of influencing any act or decision of the foreign
entity in order to assist the individual or business in obtaining, retaining or directing business. The FCPA
also obligates companies whose securities are listed in the United States to comply with accounting
provisions requiring them to maintain books and records that accurately and fairly reflect all transactions
of the corporation, including international subsidiaries, and to devise and maintain an adequate system of
internal accounting controls for domestic and international operations. Activities that violate the FCPA,
even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment,
disgorgement, oversight, and debarment from government contracts. In addition, several other domestic
and international anti-corruption or anti-bribery laws within and outside the United States apply to our
business.
Privacy, security and breach notification
Other federal and state laws and regulations restrict or otherwise impact our business practices. These
laws include, without limitation, data privacy, security and breach notification authorities.
HIPAA, as amended by HITECH, requires health plans, certain healthcare providers and healthcare
clearinghouses, referred to as “Covered Entities,” to protect the privacy and security of certain types of
health information, referred to as protected health information (“PHI”). HIPAA also imposes various
requirements on “Business Associates” — entities performing services for, or on behalf of, a Covered
Entity that has access to the Covered Entity’s PHI in connection with providing those services as well as
their covered subcontractors. Three key sets of federal regulations implementing HIPAA — the Privacy,
Security Breach Notification and Omnibus Rules (collectively, “HIPAA Rules”) set forth a number of
standards that Covered Entities and Business Associates must meet with respect to protecting the privacy
and security of PHI. HIPAA also regulates standardization of data content, codes and formats used in
healthcare transactions and standardization of identifiers for health plans and providers.
Our customers are Covered Entities under HIPAA, and, in some cases, Heartflow may be considered a
Business Associate to such Covered Entities when they pay Heartflow for certain services that involve the
sharing of PHI with Heartflow. When Heartflow bills payors directly for the services, Heartflow is acting as
a Covered Entity. Whether acting as a Business Associate, covered subcontractor, or a Covered Entity,
Heartflow has obligations to comply with HIPAA and the HIPAA Rules, and either contractual obligations
to its Covered Entity Customers or statutory and contractual obligations to ensure that any sub-Business
Associates comply. This requires risk assessments and a wide range of compliance policies, procedures
and practices to safeguard.
Penalties for violations of HIPAA regulations include civil and criminal penalties. Our failure to comply with
HIPAA could result in significant criminal and civil penalties and other damages which could adversely
affect our results of operations, financial position or cashflows. We have developed and implemented
processes designed to comply with HIPAA and are continuing to assess the need for additional
safeguards, policies, procedures, and programing and to develop them where necessary. The
requirements under HIPAA may change periodically and could have an effect on our business operations
if compliance becomes substantially more costly than under current requirements. Additionally, a breach
of unsecured PHI, such as by employee error or an attack by an outsider, could have an adverse effect on
our business in terms of potential penalties and corrective action required, in addition to reputational
damage.
In addition to HIPAA and other federal privacy regulations, there are a number of state laws governing
privacy, confidentiality and security of health information that apply to our business. Most states also have
authorities governing breach notification. New laws governing privacy, security, and breach notification
may be adopted in the future as well. We have undertaken measures to comply with health information
privacy requirements to which we know we are subject. However, we can provide no assurance that we
are or will always remain in compliance with diverse and changing privacy, security, and breach
notification requirements in all of the jurisdictions in which we do business. Failure to comply with privacy
security or breach notification requirements could result in civil or criminal penalties, which could have an
adverse effect on our business. Our failure to adequately protect personal or health related information
could have an adverse effect on our business. A wide variety of provincial, state, national and
international laws and regulations apply to the creation, collection, use, retention, protection, disclosure,
transfer, and other processing of personal information, including protected health information. These data
protection and privacy and security related laws and regulations are evolving and being tested in courts,
and may result in ever increasing regulatory and public scrutiny and escalating levels of enforcement and
sanctions. Our failure to comply with applicable laws and regulations, or to protect such data, could result
in enforcement action against us, including fines, imprisonment of company officials and public censure,
claims for damages by end customers and other affected individuals, damage to our reputation and loss
of goodwill (both in relation to existing end customers and potential end customers), any of which could
have an adverse effect on our operations, financial performance, and business. Evolving and changing
definitions of personal data and personal information, within the European Union, the United States and
elsewhere, especially relating to classification of IP addresses, machine identification, location data, and
other information, may limit or inhibit our ability to operate or expand our business. Even the perception of
privacy concerns, whether or not valid, may harm our reputation and inhibit adoption of our product by
current and future end customers.
Healthcare reform
Current and future U.S. legislative proposals to further reform healthcare or reduce healthcare costs may
result in low, or even no, reimbursement for our product, or for the procedures associated with the use of
our product, or limit coverage of our product. The cost containment measures that payors and providers
are instituting and the effect of any healthcare reform initiative implemented in the future could
significantly reduce our revenues from the sale of our product. Alternatively, the shift away from fee-for-
service agreements to capitated payment models supports the value of our product, as they are intended
to reduce longitudinal resource utilization, which can be cost saving for both payors and providers.
The ACA was enacted in March 2010. As a U.S.-based company with anticipated sales in the United
States, these healthcare reform laws will materially impact our business. Certain provisions of the ACA
are still set to become effective in future years and the administrative agencies responsible for issuing
regulations that implement some aspects of the laws have yet to do so.
There have been numerous legal challenges and Congressional actions and amendments to certain
aspects of the ACA. For example, on August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was
signed into law, which, among other things, extends enhanced subsidies for individuals purchasing health
insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut
hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary
maximum out-of-pocket cost and creating a new manufacturer discount program. Additionally, on July 4,
2025, the annual reconciliation bill, the “One Big Beautiful Bill Act,” or OBBBA, was signed into law which
is expected to reduce Medicaid spending and enrollment by implementing work requirements for some
beneficiaries, capping state-directed payments, reducing federal funding, and limiting provider taxes used
to fund the program. OBBBA also narrows access to ACA marketplace exchange enrollment and declines
to extend the ACA enhanced advanced premium tax credits, set to expire in 2025, which, among other
provisions in the law, are anticipated to reduce the number of Americans with health insurance. Further, it
is unclear whether there will be additional attempts to repeal the ACA outright or further pare back its
subsidies and enrollment periods.
The uncertain fate of the ACA notwithstanding, we expect that the ACA, as well as other healthcare
reform measures that may be adopted in the future, particularly in light of the recent changes in the White
House and Congress, may result in more rigorous coverage criteria and in additional downward pressure
on the price that we may receive for our products. Any reduction in payments from Medicare or other
government programs may result in a similar reduction in payments from private payors. The
implementation of cost containment measures or other healthcare reforms may prevent us from being
able to generate additional revenue or attain profitability.
Employees and human capital resources
As of March 31, 2025, we had 699 full-time employees globally. We believe the success of our business
will depend, in part, on our ability to attract and retain qualified personnel, in particular highly skilled
technology personnel. Our employees are not subject to a collective bargaining agreement, and we
believe that we have good relations with our employees.
Our human capital resources objectives include attracting and retaining top talent, investing in our talent
with leadership development and job-related technical training, and increasing diverse representation in
our employee base through inclusivity initiatives that build on our culture of inclusion and belonging. The
principal purposes of our equity incentive plans are to attract, retain and motivate employees, consultants
and directors through the granting of stock-based compensation awards and cash-based performance
bonus awards.
Facilities
Our corporate headquarters and research and development facilities are located in Mountain View,
California, where we lease approximately 61,500 square feet of office space under a lease agreement
that expires in August 2030. We also lease and occupy approximately 26,400 square feet in Austin, Texas
primarily for additional production personnel under a lease agreement that expires in December 2026. We
do not own any real property. We believe that these facilities are adequate for the foreseeable future.
Legal proceedings
We have become, and we may become in the future, involved in various legal proceedings arising from
the normal course of business activities. We are not presently a party to any litigation the outcome of
which, we believe, if determined adversely to us, would individually or taken together, materially and
adversely affect our business, financial condition, or results of operations. However, we may from time to
time be involved in various claims and legal proceedings of a nature we believe are normal and incidental
to a business such as ours. These matters may include employment, contract, intellectual property,
product liability and other general claims. Regardless of outcome, litigation can have an adverse impact
on us because of defense and settlement costs, diversion of management resources and other factors.
Corporate information
We were incorporated under the laws of the State of Delaware in 2007. On March 1, 2021, we completed
an internal reorganization in which a newly formed parent holding company was put in place. The
previous holders of our common stock and preferred securities became holders of common stock and
preferred securities of HeartFlow Holding, Inc. The equity incentive plan, outstanding equity awards,
outstanding warrants and certain other equity-related agreements of HeartFlow, Inc. were assumed by
HeartFlow Holding, Inc. Our operations and business activities remained at HeartFlow, Inc., and the
wholly-owned non-U.S. subsidiaries of HeartFlow, Inc. remained in place. On July 17, 2025, we
consolidated HeartFlow Holding, Inc. into HeartFlow, Inc. and the previous holders of HeartFlow Holding,
Inc. common stock and preferred securities became holders of our common stock and preferred
securities and the equity incentive plan, outstanding equity awards, outstanding warrants and certain
other equity-related agreements of HeartFlow Holding, Inc. were assumed by us. In connection with this
consolidation, we changed our name to Heartflow, Inc. Our principal executive offices are located at 331
E. Evelyn Avenue, Mountain View, California 94041, and our telephone number is (650) 241-1221. Our
corporate website address is www.heartflow.com. Information contained on, or accessible through, our
website shall not be deemed incorporated into and is not a part of this prospectus or the registration
statement of which it forms a part. We have included our website in this prospectus solely as an inactive
textual reference.
Management
The following table sets forth information regarding our executive officers and directors, including their
ages as of June 30, 2025:
| | | | |
| | | | |
Executive officers and employee director | | | | |
John C.M. Farquhar ............................................... | | | | President, Chief Executive Officer and Director |
Vikram Verghese .................................................... | | | | |
Campbell D.K. Rogers, M.D. ................................ | | | | |
| | | | |
William C. Weldon(3) ............................................... | | | | Director and Chair of the Board of Directors |
Timothy C. Barabe(1) .............................................. | | | | |
Julie A. Cullivan(1) ................................................... | | | | |
Nicholas Downing, M.D.(4) .................................... | | | | |
Jeffrey C. Lightcap(2)(3) ........................................... | | | | |
Wayne J. Riley, M.D.(1)(2) ....................................... | | | | |
Lonnie M. Smith(4) .................................................. | | | | |
Casey M. Tansey(2)(3) ............................................. | | | | |
Charles A. Taylor, Jr., Ph.D. .................................. | | | | |
| | | | |
(1)Member of our audit committee.
(2)Member of our compensation committee.
(3)Member of our nominating and corporate governance committee.
(4)Dr. Downing and Mr. Smith have each notified us that they will resign from our board of directors upon the commencement of trading of
our common stock on the Nasdaq Global Select Market.
Executive officers and employee director
John C.M. Farquhar has served as our Chief Executive Officer and as a member of our board of
directors since March 2022, and as our President since January 2022, and he served as our Chief
Operating Officer from July 2021 to March 2022. Prior to joining the Company, from March 2008 to July
2021, Mr. Farquhar held numerous positions of increasing responsibility across the cardiovascular and
diabetes portfolios of Medtronic plc (“Medtronic”), a global medical technology company, most recently
serving as a President and General Manager from June 2018 until July 2021. Prior to that, Mr. Farquhar
served as a Marketing Manager at General Mills, Inc., a multinational manufacturer and marketer of
branded consumer foods, from January 2004 until March 2008. He received a B.A. in Psychology and
History from Duke University and an M.B.A. from Northwestern University’s Kellogg School of
Management. We believe that Mr. Farquhar’s extensive experience in the medical sector qualifies Mr.
Farquhar to serve on our board of directors and his role as our Chief Executive Officer provides a vital link
between our board of directors and our management team.
Vikram Verghese has served as our Chief Financial Officer since June 2023. He joined the Company in
November 2021 as Senior Vice President of Upstream Marketing, Business Development, and Strategy.
Prior to that, Mr. Verghese held various positions at Medtronic from 2008 until July 2021 in various
leadership roles spanning global marketing, regulatory and clinical affairs and business development.
After completing his undergraduate degree in Electrical and Electronic Engineering in India, Mr. Verghese
received an M.S. in Biomedical Engineering from the University of Southern California and an M.B.A. from
University of Pennsylvania’s The Wharton School. He is also a CFA charter holder.
Campbell D.K. Rogers, M.D. has served as our Chief Medical Officer since March 2012. Prior to joining
the Company, Dr. Rogers was the Chief Scientific Officer and Global Head of Research and Development
at Cordis Corporation (“Cordis”), a medical device company that was formerly part of the Johnson &
Johnson family of companies, from July 2006 until February 2012, where he was responsible for leading
investments and research in cardiovascular devices. Prior to Cordis, Dr. Rogers was an Associate
Professor of Medicine at Harvard Medical School and the Harvard-M.I.T. Division of Health Sciences and
Technology from July 1994 until July 2006, and a director of the Cardiac Catheterization and Experimental
Cardiovascular Interventional Laboratories at Brigham and Women’s Hospital in Massachusetts from
October 2000 until June 2006, where he was responsible for clinical care, education and research. Dr.
Rogers served as a Principal Investigator for numerous interventional cardiology device, diagnostic, and
pharmacology trials, is the author of numerous publications in the area of coronary artery and other
cardiovascular diseases, and was the recipient of research grant awards from the National Institute of
Health and American Heart Association. Dr. Rogers previously served on the boards of directors of
Corindus Vascular Robotics, Inc. (formerly NYSE: CVRS) from 2016 until 2019, where he was a member
of the Audit Committee, and InspireMD, Inc. (Nasdaq: NSPR) from 2013 until 2022, where he was a
member of the Research and Development Committee. He received an A.B. in English from Harvard
College and an M.D. from Harvard Medical School.
Non-employee directors
William C. Weldon has served as Chair of our board of directors from June 2017 to May 2019 and since
2020, and also as a member of our board of directors since September 2014. Mr. Weldon is the former
Chairman of the board and Chief Executive Officer of Johnson & Johnson (NYSE: JNJ), a global
developer and manufacturer of healthcare products, having served in those positions from 2002 until his
retirement in 2012. Mr. Weldon previously served in a variety of senior executive positions during his 41-
year career with Johnson & Johnson until his appointment as Chairman of the board and Chief Executive
Officer. Mr. Weldon has served on the board of directors of Fairfax Financial Holdings Limited since April
2020. Mr. Weldon previously served as a director of CVS Health Corporation (NYSE: CVS) until his
retirement from that board in May 2023, Exxon Mobil Corporation (NYSE: XOM) until his retirement from
that board in May 2021, JPMorgan Chase & Co. (NYSE: JPM) until his retirement from that board in May
2019, and The Chubb Corporation until its acquisition by ACE Limited in January 2016. He is a member of
various not-for-profit organizations and is also a member of the Board of Trustees for Quinnipiac
University. Mr. Weldon received his B.A. in Biology from Quinnipiac University. We believe that Mr.
Weldon’s knowledge of the healthcare industry and his experience as chief executive officer and
chairman of the board at Johnson & Johnson and on the boards of other publicly traded companies,
which have exposed him to reporting and governance requirements, qualify him to serve on our board of
directors.
Timothy C. Barabe has served as a member of our board of directors since January 2022. Mr. Barabe
served as the Chief Financial Officer and Executive Vice President at Affymetrix Inc. (acquired by Thermo
Fisher Scientific, Inc.), a provider of life science productions and molecular diagnostic products, from
2010 until his retirement in June 2013. Prior to that, Mr. Barabe served as Senior Vice President and
Chief Financial Officer of Human Genome Sciences, Inc., a biopharmaceutical company, from July 2006
until March 2010. From 2004 until 2006, he served as Chief Financial Officer of Regent Medical Limited, a
U.K.-based, privately held surgical supply company, and with Novartis AG, a pharmaceutical company,
from 1982 until August 2004 in a succession of senior executive positions in finance and general
management, most recently as the Chief Financial Officer of Sandoz GmbH, the generic pharmaceutical
subsidiary of Novartis AG. Prior to that, Mr. Barabe served as the President of the Specialty Lens
Business Franchise and Group Vice President and Chief Financial Officer of CIBA Vision Corporation, a
contact lenses and lens care product manufacturer, until 2003. Mr. Barabe has served on the board of
directors of Cartesian Therapeutics, Inc. (Nasdaq: RNAC) since 2016 and previously served on the board
of directors of Veeva Systems Inc. (NYSE: VEEV) from September 2015 until June 2021, ArQule, Inc.,
from 2001 until January 2020, and Opexa Therapeutics, Inc. from 2014 until 2017. Mr. Barabe also
currently serves on the board of directors of Vigilant Biosciences, Inc., a private company. Mr. Barabe
received a B.B.A. in General Business, Finance from the University of Massachusetts at Amherst and an
M.B.A. from the University of Chicago. We believe that Mr. Barabe’s extensive finance experience, and
his service on the board of directors of several other publicly traded companies, qualifies Mr. Barabe to
serve on our board of directors.
Julie A. Cullivan has served as a member of our board of directors since November 2020. She has
served as a Special Advisor to Brighton Park Capital, L.P., an investment firm specializing in software,
information services and technology-enabled services, since June 2020, and previously served as the
Chief Technology and People Officer at Forescout Technologies Inc. (“Forescout”), a network security
software company, from June 2017 until January 2021. Prior to joining Forescout, Ms. Cullivan served as
the Executive Vice President, Business Operations and Chief Information Officer of FireEye, Inc., an
enterprise cybersecurity company, from January 2013 until May 2017, and as a Senior Vice President at
McAfee Corp., a global computer security software company, from April 2008 until October 2011. Earlier in
her career, Ms. Cullivan held executive roles at Autodesk, Inc., EMC Corporation, and Oracle Corporation.
Ms. Cullivan has served on the board of directors of Axon Enterprise, Inc. (Nasdaq: AXON) since 2017,
where she has been a member of the Audit Committee since July 2017, Chair of the Enterprise Risk
Committee since March 2022, and a member of the of the Nominating and Governance Committee since
July 2024. She has also served on the boards of directors of Cobalt Labs Inc. (dba Cobalt.io) since 2022,
where she is a member of the Compensation Committee, and OPSWAT Inc. since 2021. Ms. Cullivan
previously served on the boards of Astra Space Inc. (Nasdaq: ASTR), where she was a member of the
Audit Committee from February 2023 to July 2024, SADA, where she was a member of the
Compensation Committee from May 2021 to December 2024, and AaDya Security Inc. (dba Judy
Security) from March 2021 to August 2024. Ms. Cullivan received a B.S. in Finance from Santa Clara
University. We believe that Ms. Cullivan’s extensive experience in the technology sector, including her
past roles at leading technology, cybersecurity and digital infrastructure companies, qualifies Ms. Cullivan
to serve on our board of directors.
Nicholas Downing, M.D. has served as a member of our board of directors since March 2023. Since
2018, Dr. Downing has worked at Bain Capital, a private investment firm, currently serving as a Managing
Director on the Bain Capital Life Sciences team. Prior to joining Bain Capital, Dr. Downing was a Resident
Physician at the Brigham and Women’s Hospital in Boston from 2015 until 2018. Dr. Downing is the
author of over 40 peer-reviewed scientific articles. Prior to his medical career, Dr. Downing was a
Consultant at McKinsey and Company, a global management consulting firm, where he worked with
clients in the pharmaceutical, hospital and financial services industries. Dr. Downing has served as a
member of the board of directors and the Nominating and Corporate Governance Committee of
NewAmsterdam Pharma Company N.V. (Nasdaq: NAMS) since November 2022. Dr. Downing received
an A.B. in Chemistry from Harvard College and an M.D. from Yale University School of Medicine. We
believe that Dr. Downing’s extensive investment and financial experience, particularly in the medical
sector, as well as his medical background qualifies Dr. Downing to serve on our board of directors. Dr.
Downing has notified us that he will resign from our board of directors upon, and subject to, the
commencement of trading of our common stock on the Nasdaq Global Select Market. Dr. Downing’s
resignation is not due to any disagreement with us or any matters relating to our operations, policies or
practices.
Jeffrey C. Lightcap has served as a member of our board of directors since December 2011. Since
2007, Mr. Lightcap has served as a Senior Managing Director at HealthCor Partners Management, L.P.
(“HealthCor Partners”), a venture capital investment manager focused on late-stage venture and early
commercial stage healthcare companies. Since 2019, Mr. Lightcap also serves as a Senior Managing
Director at Healthcare Venture Partners, LLC, a venture capital investment manager focused on
investments in technology driven companies in the diagnostic, therapeutic and medtech sectors. From
1997 until 2006, Mr. Lightcap served as a Senior Managing Director at JLL Partners, a leading middle-
market private equity firm. Prior to JLL Partners, from 1993 until 1997, Mr. Lightcap served as a Managing
Director in the mergers and acquisitions group at Merrill Lynch & Co., Inc. (“Merrill Lynch”), a global
financial services company. Prior to joining Merrill Lynch, Mr. Lightcap was a Senior Vice President in the
mergers and acquisitions group at Kidder, Peabody & Co., an investment banking company, and briefly at
Salomon Brothers, a global financial institution. Mr. Lightcap currently serves on the board of directors of
Careview Communications, Inc. (OTC: CRVW), KellBenx, Inc. and Paige.AI, Inc. Mr. Lightcap also
previously served on the board of directors of a number of HealthCor Partners’ portfolio companies,
including Corindus Vascular Robotics Inc. (March 2008 to October 2019), Practice Partners in Healthcare,
LLC (September 2007 to April 2019), Paradigm Spine, LLC (April 2008 to March 2019) and RTI Surgical
Holdings, Inc. which became Surgalign Holdings, Inc. (March 2019 to September 2021). Mr. Lightcap
received a B.E. in Mechanical Engineering from the State University of New York at Stony Brook and an
M.B.A. from the University of Chicago. We believe that Mr. Lightcap’s extensive experience in the medical
sector, including his service on the boards of directors of multiple healthcare companies, qualifies Mr.
Lightcap to serve on our board of directors.
Wayne J. Riley, M.D. has served as a member of our board of directors since November 2021. Dr. Riley
has served as the President of the State University of New York Downstate Health Sciences University
since April 2017, where he is also a Tenured Professor of Internal Medicine and Health Policy and
Management. From 2013 until 2017, Dr. Riley was an Adjunct Professor of Healthcare Management at
Owen Graduate School of Management, Vanderbilt University and a Clinical Professor of Medicine at
Vanderbilt University School of Medicine. From 2007 until 2013, Dr. Riley served as President and Chief
Executive Officer of Meharry Medical College, and from 2003 until 2006, served as Vice President and
Vice Dean of Health Affairs and Governmental Relations at Baylor College of Medicine. Dr. Riley has
served on the board of directors of Compass Pathways, plc (Nasdaq: CMPS) since 2021 and HCA
Healthcare, Inc. (NYSE: HCA) since 2012, where he also serves as the chair of the patient safety and
quality committee and as a member of the audit and compliance committee and nominating and corporate
governance committee. Dr. Riley previously served as a director of Vertex Pharmaceuticals Inc. (Nasdaq:
VTRX) from 2010 until 2015, Pinnacle Financial Partners, Inc. from 2007 until 2013, and the Federal
Reserve Bank of Atlanta, Nashville Branch Bank Board from January 2013 to June 2013. He is President
Emeritus of the American College of Physicians and an elected member of the National Academy of
Medicine. Dr. Riley is also a commissioner of the Medicare Payment Advisory Commission, chair of the
Board of Trustees and of The New York Academy of Medicine since 2019. Dr. Riley received a B.A. in
Anthropology from Yale University, an M.P.H. in Health Systems Management from the Tulane University
School of Public Health and Topical Medicine, an M.D. from the Morehouse School of Medicine, and an
M.B.A. from Rice University’s Jesse H. Jones Graduate School of Business. We believe that Dr. Riley’s
experience as a practicing physician and his leadership, executive management and patient care skills at
other leading medical and educational institutions, as well as his prior public company board service,
qualify him to serve on our board of directors.
Lonnie M. Smith has served as a member of our board of directors since September 2011. From 1997
until April 2020, Mr. Smith was the President and Chief Executive Officer and then Chairman of Intuitive
Surgical, Inc., a developer and manufacturer of surgical robotic products designed to improve clinical
outcomes of patients. From 1978 until 1997, Mr. Smith was Senior Executive Vice President of
Hillenbrand Industries, a manufacturer and provider of products and services for the health care and
funeral services industries. During his tenure at Hillenbrand Industries, he was a member of the executive
committee, the office of the president and the board of directors. Mr. Smith has also held positions at The
Boston Consulting Group, a management consulting firm, and International Business Machines Corp, a
technology and consulting company. Mr. Smith served as chairman of the board of Tandem Diabetes
Care, Inc. (Nasdaq: TNDM), from 2013 until 2015. Mr. Smith received a B.S.E.E. from Utah State
University and an M.B.A. from Harvard Business School. We believe that Mr. Smith’s extensive medical,
management and directorship experience in the medical sector qualifies him to serve on our board of
directors. Mr. Smith has notified us that he will resign from our board of directors upon, and subject to, the
commencement of trading of our common stock on the Nasdaq Global Select Market. Mr. Smith’s
resignation is not due to any disagreement with us or any matters relating to our operations, policies or
practices.
Casey M. Tansey has served as a member of our board of directors since August 2010. Since 2005, he
has served as a General Partner of U.S. Venture Partners, a venture capital firm. From 2001 until 2004,
Mr. Tansey served as the Chief Executive Officer and President of Epicor Medical, a medical device
company. Prior to Epicor Medical, Mr. Tansey was Chief Executive Officer and President of Heartport,
Inc., a medical device company, which is now part of the Johnson & Johnson family of companies. Prior
to that, he was with the cardiovascular division at Baxter Edward, a medical technology company, for
nearly ten years, holding various sales and marketing positions. Mr. Tansey currently serves on the board
of directors and as a member of the organization and compensation committee of Inspire Medical
Systems, Inc. (NYSE: INSP) and previously served on the board of directors of Intersect ENT, Inc. from
2006 until 2017. He also serves on the board of directors for a number of U.S. Venture Partners’ portfolio
of private companies, including Cagent Vascular Inc., HighLife Medical Inc., Luminopia, Inc.,
MicroTransponder Inc., Neochord, Inc., Neuros Medical, Inc., ShiraTronics, Inc. and Shoulder
Innovations. Mr. Tansey received a B.S. and an M.B.A. from the Notre Dame De Namur University. We
believe that Mr. Tansey’s extensive experience as a venture capital investor and as a member of the
boards of directors of multiple companies in the medical sector qualify him to serve on our board of
directors.
Charles A. Taylor, Ph.D. is one of our founders, and has served as a member of our board of directors
since July 2007. He is currently the W.A. “Tex” Moncrief, Jr., Chair in Computational Medicine, and a
Professor in the Department of Internal Medicine and the Oden Institute for Computational Engineering
and Sciences at the University of Texas at Austin. Dr. Taylor served as the Chief Technology Officer from
April 2010 to February 2022 and then Chief Scientific Officer of the Company from February 2022 through
December 2023. Prior to joining the Company, Dr. Taylor was an Associate Professor in the Department
of Bioengineering and Surgery at Stanford University from July 1997 until August 2010, where he held
courtesy faculty appointments in the Departments of Mechanical Engineering and Radiology. He received
a B.S. in Mechanical Engineering, M.S. in Mechanical Engineering and M.S. in Mathematics from
Rensselaer Polytechnic Institute and a Ph.D. in Mechanical Engineering from Stanford University. Dr.
Taylor has published over 450 publications in scientific journals and conference papers related to
cardiovascular bioengineering and patient-specific modeling of blood flow in the cardiovascular system
and is also an inventor on more than 300 issued patents worldwide. In 2024, Dr. Taylor was inducted into
the U.S. National Academy of Engineering. We believe that Dr. Taylor’s extensive knowledge of the
Company as its founder, Chief Technology Officer and Chief Scientific Officer, experience as an inventor
and knowledge of our industry qualifies him to serve on our board of directors.
Family relationships
There are no family relationships among any of our executive officers or directors.
Board composition and election of directors
Our business and affairs are managed under the direction of our board of directors. Our board of directors
currently consists of ten members: Mr. Barabe, Ms. Cullivan, Dr. Downing, Mr. Farquhar, Mr. Lightcap, Dr.
Riley, Mr. Smith, Mr. Tansey, Dr. Taylor, and Mr. Weldon. Dr. Downing and Mr. Smith have each notified us
that they will resign from our board of directors upon the commencement of trading of our common stock
on the Nasdaq Global Select Market. Under our amended and restated voting agreement (“Voting
Agreement”), which would terminate at the completion of this offering, the stockholders who are party to
the Voting Agreement have agreed to vote their respective shares to elect: (i) one director designated by
BCLS Fund III Investments, LP, currently Nicholas Downing, (ii) two directors designated by the holders of
our Series A, Series B-1, Series B-2, Series C, Series D and Series E redeemable convertible preferred
stock, currently Casey M. Tansey and Jeffrey C. Lightcap, (iii) our Chief Executive Officer, John C.M.
Farquhar, (iv) one director designated by our founders, currently Charles A. Taylor, and (v) Timothy C.
Barabe, Julie A. Cullivan, Wayne J. Riley, Lonnie M. Smith and William C. Weldon, as directors
designated by the majority of the foregoing directors. In connection with this offering, the Voting
Agreement will terminate. As a result, following this offering there will be no contractual obligations
regarding the election of our directors.
After this offering, the authorized number of directors may be changed by resolution of our board of
directors, subject to the terms of our amended and restated certificate of incorporation that will become
effective upon the completion of this offering.
Director independence
We have applied to have our common stock listed on the Nasdaq Global Select Market and this offering is
contingent upon obtaining such approval. Under the listing rules of the Nasdaq Global Select
Market (“Listing Rules”), independent directors must comprise a majority of a listed company’s board of
directors within a specified period following completion of this offering. In addition, the Listing Rules
require that, subject to specified exceptions, each member of a listed company’s audit, compensation,
and nominating and corporate governance committees be independent. Under these rules, a director will
only qualify as an “independent director” if, in the opinion of the company’s board of directors, that person
does not have a relationship that would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. Under the Listing Rules, certain types of relationships generally
occurring within the last three years will automatically disqualify a director as independent, such as if the
director is one of our employees, is in receipt of direct compensation from us in excess of $120,000 in a
twelve-month period, or is engaged, directly or indirectly in certain business dealings with us in excess of
specified thresholds.
Our board of directors has determined that none of Mr. Barabe, Ms. Cullivan, Mr. Lightcap, Dr. Riley, Mr.
Tansey or Mr. Weldon has a relationship that would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director, and that each of such individuals are “independent directors”
in accordance with the Listing Rules. In making these determinations, our board of directors reviewed and
discussed information provided by the directors and us with regard to each director’s business and
personal activities and relationships as they may relate to us and our management. Mr. Farquhar is not
considered independent by virtue of his position as our Chief Executive Officer, and Dr. Taylor is not
considered independent by virtue of his former employment with us within the last three years.
Classified board of directors
In accordance with our amended and restated certificate of incorporation, which will be effective upon the
completion of this offering, our board of directors will be divided into three classes with staggered three-
year terms. At each annual general meeting of stockholders, the successors to directors whose terms
then expire will be elected to serve from the time of election and qualification until the third annual
meeting following election. Our directors will be divided among the three classes as follows:
•The Class I directors will be John C.M. Farquhar, Charles A. Taylor and Julie A. Cullivan, and their
terms will expire at the first annual meeting of stockholders following effectiveness of the amended
and restated certificate of incorporation;
•The Class II directors will be Jeffrey C. Lightcap, Casey M. Tansey and Timothy C. Barabe, and their
terms will expire at the second annual meeting of stockholders following effectiveness of the
amended and restated certificate of incorporation; and
•The Class III directors will be William C. Weldon and Wayne Riley, M.D., and their terms will expire at
the third annual meeting of stockholders following effectiveness of the amended and restated
certificate of incorporation.
The division of our board of directors into three classes with staggered three-year terms may delay or
prevent a change of our management or a change in control.
Leadership structure of the board
Our corporate governance guidelines to be in place upon the commencement of trading of our common
stock on the Nasdaq Global Select Market will provide our board of directors with flexibility to combine or
separate the positions of Chair of the board of directors and Chief Executive Officer and to implement a
lead independent director in accordance with its determination regarding which structure would be in the
best interests of our company.
Mr. Weldon currently serves as our Chair of the board of directors and Mr. Farquhar serves as our Chief
Executive Officer. Our board of directors has concluded that our current leadership structure is
appropriate at this time. However, our board of directors will continue to periodically review our leadership
structure and may make such changes in the future as it deems appropriate.
Board committees
Our board of directors has established an audit committee, a compensation committee, and a nominating
and corporate governance committee. Our board of directors may establish other committees to facilitate
the management of our business. The composition and functions of each committee are described below.
Members serve on these committees until their resignation or until otherwise determined by our board of
directors. Our board of directors has adopted a written charter for each committee that satisfies the
applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and Listing
Rules, which we will post on our website at www.heartflow.com upon the completion of this offering.
Audit committee
Our audit committee oversees our corporate accounting and financial reporting process and the quality
and integrity of our financial statements, the qualifications and performance of our independent registered
public accounting firm, our internal audit function and our risk management program. Among other
matters, the audit committee:
•oversees our independent registered public accounting firm, and has sole responsibility for the
appointment, compensation, retention and oversight of the work of our independent registered public
accounting firm;
•evaluates the independent registered public accounting firm’s qualifications, independence, and
performance;
•reviews and approves the scope of the annual audit and pre-approves all audit and non-audit fees
and services to be performed by our independent registered public accounting firm;
•reviews with management and our independent registered public accounting firm the results of the
annual audit and the review of our interim financial statements, and reviews our financial statements
and our management’s discussion and analysis of financial condition and results of operations to be
included in our annual and quarterly reports to be filed with the SEC;
•oversees our internal audit function;
•oversees our risk management program and reviews risks related to major financial risk exposures,
information security, regulatory compliance, and the steps our management has taken to monitor and
control these risks and exposures;
•establishes procedures for the receipt, retention, and treatment of any complaints received by us
regarding accounting, internal accounting controls, or auditing matters;
•reviews and approves all related person transactions; and
•reviews the audit committee charter and the audit committee’s performance on an annual basis.
Our audit committee consists of Timothy C. Barabe, Julie A. Cullivan and Wayne Riley, M.D. Our board of
directors has determined that all members are independent under the Listing Rules and Rule 10A-3(b)(1)
of the Exchange Act. The chair of our audit committee is Mr. Barabe. Our board of directors has
determined that Mr. Barabe is an “audit committee financial expert” as such term is currently defined in
Item 407(d)(5) of Regulation S-K. Our board of directors has also determined that each member of our
audit committee can read and understand fundamental financial statements as required by the Listing
Rules.
Compensation committee
Our compensation committee oversees our compensation policies, plans and benefit programs,
particularly as they apply to our executive officers. Among other matters, the compensation committee:
•reviews and approves corporate goals and objectives relevant to compensation of our Chief
Executive Officer, evaluates the performance of the Chief Executive Officer in light of those goals and
objectives and approves the compensation of Chief Executive Officer based on such evaluations;
•reviews and approves the compensation of our other executive officers;
•reviews and makes recommendations to our board of directors regarding non-employee director
compensation;
•reviews and approves or makes recommendations to our board of directors regarding the issuance of
stock options and other equity awards under our performance incentive plans;
•engages in risk assessments of our compensation programs; and
•reviews the compensation committee charter and the compensation committee’s performance on
annual basis.
Our compensation committee consists of Jeffrey C. Lightcap, Wayne Riley, M.D. and Casey M. Tansey.
Our board of directors has determined that all members are independent under the Listing Rules. The
chair of our compensation committee is Dr. Riley.
Nominating and corporate governance committee
Our nominating and corporate governance committee oversees the nomination process for our directors
and policies relating to our corporate governance. Among other matters, the nominating and corporate
governance committee:
•identifies individuals qualified to be members of our board of directors, including candidates
recommended by stockholders, consistent with criteria approved by our board of directors;
•evaluates and makes recommendations to our board of directors of candidates for membership on
our board of directors and on each of the board’s committees;
•develops and reviews the adequacy of our corporate governance guidelines and code of business
conduct and ethics and recommends and proposed changes to our board of directors;
•oversees the process of evaluating the performance of our board of directors;
•oversees management succession planning; and
•assists our board of directors on corporate governance matters and board of directors performance
matters, including recommendations regarding the size, structure and composition of our board of
directors and its committees.
Our nominating and corporate governance committee consists of Jeffrey C. Lightcap, Casey M. Tansey,
and William C. Weldon. Our board of directors has determined that all members are independent under
the Listing Rules. The chair of our nominating and corporate governance committee is Mr. Weldon.
Compensation committee interlocks and insider participation
None of the members of our compensation committee (Jeffrey C. Lightcap, Wayne Riley, M.D. and Casey
M. Tansey) is or has been during the past fiscal year one of our employees or has been at any time one of
our officers, and none of such individuals has any relationship requiring disclosure under SEC rules
applicable to related person transactions. None of our executive officers currently serves, or has served
during the last fiscal year, as a member of the board of directors or compensation committee (or other
board committee performing equivalent functions) of any entity that has one or more executive officers
serving as a member of our board of directors or on our compensation committee.
Code of business conduct and ethics
In connection with this offering, our board of directors has adopted a written code of business conduct
and ethics to be effective upon the commencement of trading of our common stock on the Nasdaq Global
Select Market, which applies to all of our directors, executive officers, and employees, including our
principal executive officer, principal financial officer, and principal accounting officer or controller, or
persons performing similar functions. The full text of our code of business conduct and ethics will be
posted on our website at www.heartflow.com upon the completion of this offering. The nominating and
corporate governance committee of our board of directors will be responsible for overseeing our code of
business conduct and ethics. We intend to disclose any future amendments to or waivers of our code of
business conduct and ethics applicable to our directors and officers, including our principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar
functions to the extent required by applicable rules of the SEC or the Nasdaq Global Select Market, on
our website at the address identified above.
Limitations on liability and indemnification matters
Our amended and restated certificate of incorporation, which will become effective upon the completion of
this offering, limit our directors’ and officers’ liability to us and our stockholders for monetary damages for
breach of fiduciary duty as a director or officer to the fullest extent permitted under the General
Corporation Law of the State of Delaware (the “DGCL”). Such provision will not eliminate or limit the
liability of:
•a director or officer for any breach of the director’s or officer’s duty of loyalty to the corporation or its
stockholders;
•a director or officer for any act or omission not in good faith or that involves intentional misconduct or
a knowing violation of law;
•a director for an unlawful payment of dividends or redemption of shares;
•a director or officer for any transaction from which the director or officer derived an improper personal
benefit; or
•an officer in any action by or in the right of the corporation.
These limitations of liability do not apply to liabilities arising under federal securities laws and do not affect
the availability of equitable remedies such as injunctive relief or rescission.
As permitted by the DGCL, our amended and restated certificate of incorporation will provide that we will,
in certain situations, indemnify our directors and officers and may indemnify other employees and other
agents, to the fullest extent permitted by law. Any indemnified person is also entitled, subject to certain
limitations, to payment of expenses (including attorneys’ fees) in advance of the final disposition of the
proceeding.
In addition, we have entered, and intend to continue to enter, into separate indemnification agreements
with our directors and officers. These indemnification agreements, among other things, require us to
indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines, and
settlement amounts incurred by a director or officer in any action or proceeding arising out of their
services as a director or officer, or any other company or enterprise to which the person provides services
at our request. We also maintain a directors’ and officers’ insurance policy pursuant to which our directors
and officers are insured against liability for actions taken in their capacities as directors and officers.
We believe that these provisions in our amended and restated certificate of incorporation and these
indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers, or control persons, we have been advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is therefore unenforceable.
Executive and director compensation
This section discusses the material components of the executive compensation program for our executive
officers who are named in the “Summary Compensation Table” below. In 2024, our “named executive
officers,” comprised of our principal executive officer and the two most highly compensated executive
officers (other than our principal executive officer) and their positions with the Company, were as follows:
•John C.M. Farquhar, President and Chief Executive Officer;
•Vikram Verghese, Chief Financial Officer; and
•Campbell D.K. Rogers, M.D., Chief Medical Officer.
As an “emerging growth company” as defined in the JOBS Act, we are not required to include a
Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure
requirements applicable to emerging growth companies.
2024 summary compensation table
The following table sets forth information concerning the compensation of our named executive officers
for the year ended December 31, 2024:
| | | | | | | | | | | | |
Name and principal position | | | | | | | | Non-equity incentive plan compensation ($)(3) | | All other compensation ($)(4) | | |
John C.M. Farquhar ................ | | | | | | | | | | | | |
President and Chief Executive Officer | | | | | | | | | | | | |
Vikram Verghese ..................... | | | | | | | | | | | | |
| | | | | | | | | | | | |
Campbell D.K. Rogers, M.D. . | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
(1)Amount represents a $57,500 bonus paid at the end of each quarter to Dr. Rogers during 2024.
(2)Amounts reflect the grant date fair value of stock options granted during 2024 computed in accordance with ASC Topic 718, rather than
the amounts paid to or realized by the named individual. See Note 14 of the consolidated financial statements elsewhere included in
this prospectus for a discussion of valuation assumptions made in determining the grant date fair value and compensation expense of
our stock options.
(3)Amounts represent annual bonuses earned by each named executive officer in 2024 which were paid by us after certification of
performance achievement in early 2025. See “2024 Bonuses” below.
(4)Amounts disclosed reflect Company contributions to our 401(k) plan.
Narrative to the summary compensation table
Each of our Named Executive Officers will participate in our senior leadership severance policy, as
described in “Senior leadership severance policy” below.
Elements of compensation
2024 salaries
In 2024, the named executive officers received an annual base salary to compensate them for services
rendered to the company. The base salary payable to each named executive officer is intended to provide
a fixed component of compensation reflecting the executive’s skill set, experience, role, and
responsibilities.
For fiscal year 2024, Mr. Farquhar’s annual base salary was $594,881 effective as of March 3, 2024 (and
it was $572,000 prior), Mr. Verghese’s base salary was $404,250 effective as of March 3, 2024 (and it
was $385,000 prior) and Dr. Rogers’s base salary was $535,600 effective as of February 7, 2021.
2024 bonuses
In 2024, Mr. Farquhar, Mr. Verghese and Dr. Rogers were eligible to earn annual cash bonuses targeted
at 100%, 50% and 50%, respectively, of their annual base salaries. Pursuant to our annual cash bonus
program, each named executive officer was eligible to earn his annual cash bonus based on the
attainment of pre-established annual company objectives. These pre-established objectives include
revenue, with a target of $120.1 million (weighted 40%), gross margin, with a target of 70.1% (weighted
20%), interactive product validation (weighted 20%), asymptomatic strategy (weighted 10%) and patient
care (weighted 10%). The actual achieved bonus amount was paid in 2025 based on achievement of
such objectives.
Equity compensation
Each of our named executive officers currently holds outstanding stock option awards granted pursuant to
the Company’s 2009 Equity Incentive Plan as described in more detail in the section titled “—Outstanding
equity awards at year end” below.
In connection with this offering, we intend to adopt the 2025 Plan (as defined below) in order to facilitate
the grant of cash and equity incentives to directors, employees (including our named executive officers)
and consultants of our company and certain of our subsidiaries (if any) and to enable us to obtain and
retain the services of these individuals, which is essential to our long-term success. We expect that the
2025 Plan will be effective upon the commencement of trading of the Company’s common stock on the
Nasdaq Global Select Market. For additional information about the 2025 Plan, please see the section
titled “—2025 performance incentive plan” below.
Other elements of compensation
Retirement plans
We maintain a 401(k) retirement savings plan for our employees, including our named executive officers,
who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the
401(k) plan on the same terms as other full-time employees. We anticipate that, following the completion
of this offering, our named executive officers will continue to participate in this 401(k) plan on the same
terms as other full-time employees.
Employee benefits and perquisites
All of our full-time employees, including our named executive officers, are eligible to participate in our
health and welfare plans, including:
•medical, dental, and vision benefits;
•medical and dependent care flexible spending accounts;
•short-term and long-term disability insurance; and
•life insurance.
We believe that the employee benefits described above are necessary and appropriate to provide a
competitive compensation package to our named executive officers.
No tax gross-ups
We do not make gross-up payments to cover our named executive officers’ personal income taxes that
may pertain to any of the compensation or perquisites paid or provided by the Company.
Outstanding equity awards at fiscal year-end
The following table summarizes the number of shares of common stock underlying outstanding equity
incentive plan awards for each named executive officer as of December 31, 2024:
| | | | | | | | | | | |
| | | | |
| | Number of securities underlying unexercised options - exercisable (#)(1) | | Number of securities underlying unexercised options - unexercisable (#)(2) | | Option exercise price ($) | | |
John C.M. Farquhar .................... | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Vikram Verghese ......................... | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Campbell D.K. Rogers, M.D. ..... | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
(1)Amounts disclosed in this column reflect the number of options granted to our named executive officers that were subject to time-based
vesting and have vested.
(2)Unless otherwise noted, the stock option vests and becomes exercisable as to 1/48th of the total number of shares underlying the stock
option monthly following the vesting commencement date, subject to the applicable named executive officer’s continued service through
the applicable vesting date.
(3)The stock option vests and becomes exercisable as to 1/4th of the total number of shares underlying the stock option on the first
anniversary of the vesting commencement date and 1/48th monthly thereafter, subject to the applicable named executive officer’s
continued service through the applicable vesting date.
(4)The stock option fully vests and becomes exercisable on the first anniversary of the vesting commencement date, subject to Dr. Rogers’
continued service through the applicable vesting date.
Senior leadership severance policy
In connection with the completion of this offering, we have adopted a senior leadership severance policy
(the “Severance Policy”) covering each of our named executive officers, which sets forth the benefits
payable to participants upon qualifying terminations of employment. Under the Severance Policy, upon a
termination without “cause” or a resignation for “good reason” (as such terms are defined in the
Severance Policy) (a “Qualifying Termination”), provided that the participant executes and does not
revoke a general release of claims in favor of the Company and adheres to any restrictive covenants with
the Company to which he or she is bound, the participant will be entitled to receive a certain number of
months of base salary continuation based on his or her position at the Company (twelve (12) months for
Mr. Farquhar, nine (9) months for other C-level participants, and six (6) months for senior vice president-
level participants) (the “Severance Period”), with payment commencing on or within ten (10) days
following the sixtieth (60th) day following the participant’s termination date. In addition, if the participant
elects continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the
Company will pay or reimburse the participant for his or her COBRA premiums during the Severance
Period.
Upon a Qualifying Termination occurring within three (3) months prior to or twelve (12) months following a
“change in control” (as such term is defined in the Severance Policy), provided the participant executes
and does not revoke a general release of claims in favor of the Company and adheres to any restrictive
covenants with the Company to which he or she is bound, the participant will be entitled to receive a
certain number of months of base salary continuation based on his or her position at the Company
(eighteen (18) months for Mr. Farquhar, twelve (12) months for other C-level participants, and nine (9)
months for senior vice president-level participants) (the “CIC Severance Period”) plus the participant’s
target bonus for the year of termination, with payment commencing on or within ten (10) days following
the sixtieth (60th) day following the participant’s termination date. In addition, all of the participant’s
outstanding equity awards, to the extent unvested, will become fully vested and exercisable as of the
participant’s termination date, and if the participant elects continuation coverage under COBRA, the
Company will pay or reimburse the participant for his or her COBRA premiums during the CIC Severance
Period.
The Severance Policy also contains a net-better Section 4999 cutback provision, which provides that, if
payments to a participant are subject to an excise tax under Section 4999 of the Code, then such
payments would be reduced by the amount needed to avoid triggering such tax, provided that such
reduction leaves the participant in a better after-tax position than if such payments had not been reduced
(taking into account the effect of the excise tax).
2024 non-employee director compensation table
We have paid certain of our non-employee directors, Mr. Weldon, Mr. Barabe, Mr. Riley, Mr. Smith, Mr.
Taylor and Ms. Cullivan, cash fees as set forth in the table below for their service on our board. We have
also reimbursed our directors for expenses associated with attending meetings of our board of directors
and committees of our board of directors.
Mr. Taylor, one of the Company’s founders, served as our Chief Technology Officer from April 2010 to
February 2022 and as our Chief Scientific Officer from February 2022 through December 2023. In
connection with his termination of employment, we entered into a separation agreement with Mr. Taylor
with an employment termination date of December 1, 2023, which provided for certain benefits in
consideration for his execution of a general release of claims and adherence to the protective covenants
set forth therein. Those benefits include (i) severance payments equal to $658,341.76, payable 50% on
the effective date of the agreement and 50% on June 1, 2024, (ii) payment of COBRA benefits for 12
months, (iii) if the Company paid bonuses with respect to the 2023 fiscal year, payment of Mr. Taylor’s
target bonus for such year, payable 50% in April 2024 and 50% in June 2024 and (iv) acceleration of 25%
of his then-unvested options.
In addition to his service on the board, since December 2023, Mr. Taylor has served as a consultant to us
and was paid cash fees of $3,178 in 2024 in consideration of his consulting services.
The following table sets forth information regarding the compensation of our non-employee directors for
the fiscal year ended December 31, 2024:
| | | | | | | | |
| | Fees earned or paid in cash ($) | | | | All other compensation ($) | | |
William C. Weldon ......................................... | | | | | | | | |
Timothy C. Barabe ........................................ | | | | | | | | |
Julie A. Cullivan ............................................. | | | | | | | | |
Nicholas Downing, M.D. ............................... | | | | | | | | |
Jeffrey C. Lightcap ........................................ | | | | | | | | |
Wayne J. Riley, M.D. ..................................... | | | | | | | | |
Lonnie M. Smith ............................................. | | | | | | | | |
Casey M. Tansey ........................................... | | | | | | | | |
Charles A. Taylor, Jr., Ph.D. ......................... | | | | | | | | |
| | | | | | | | |
(1)The aggregate number of stock option awards (whether exercisable or unexercisable) held as of December 31, 2024, by Mr. Weldon,
Mr. Barabe, Ms. Cullivan, Dr. Downing, Mr. Lightcap, Mr. Riley, Mr. Smith, Mr. Tansey and Mr. Taylor was 520,730, 100,730, 87,188, 0,
0, 185,000, 135,000, 0 and 460,301, respectively.
(2)This amount includes: (i) $329,171 in severance payments; (ii) $40,015 in COBRA payments; (iii) $198,718 as a target bonus for 2023;
and (iv) $3,178 in consulting fees.
In connection with the completion of this offering, we intend to approve and implement a compensation
program for our non-employee directors that consists of annual retainer fees and long-term equity
awards.
Director compensation policy
In connection with the completion of this offering, we have adopted a director compensation policy
covering our non-employee directors (the “Director Compensation Policy”), which sets out a
compensation program for our non-employee directors consisting of annual retainer fees and long-term
equity awards. The Director Compensation Policy will become effective upon the commencement of
trading of the Company’s common stock on the Nasdaq Global Select Market.
Under our Director Compensation Policy, each non-employee director is entitled to receive the following
cash compensation while serving on our Board:
| | |
| | |
Annual Cash Retainer ...................................................................................................................... | | |
Annual Chairperson Retainer .......................................................................................................... | | |
Annual Audit Committee Chairperson Retainer ........................................................................... | | |
Annual Compensation Committee Chairperson Retainer .......................................................... | | |
Annual Nominating and Corporate Governance Committee Chairperson Retainer .............. | | |
Annual Audit Committee Member Retainer .................................................................................. | | |
Annual Compensation Committee Member Retainer .................................................................. | | |
Annual Nominating and Corporate Governance Committee Member Retainer ...................... | | |
| | |
All annual retainers will be paid on a quarterly basis following the end of each calendar quarter in arrears,
and will be pro-rated if a non-employee director serves for only a portion of the calendar quarter.
In addition, under the Director Compensation Policy, non-employee directors are entitled to receive the
following equity-based compensation while serving on our Board:
•New directors: Each new non-employee director appointed or elected to our Board (or any non-
employee director serving on the Board prior to the offering who did not receive compensation for
such services prior to such date) is entitled to receive a new director equity award valued at $500,000
in the form of nonqualified stock options as of the director’s first date of service or the IPO, as the
case may be. Subject to the non-employee director’s continued service through the applicable vesting
date, 1/3 of the new director equity award will vest on the first anniversary of the grant date and the
remaining 2/3 of the new director equity award will vest in 24 substantially equal monthly installments
thereafter.
•Continuing directors: On the date of the offering and on the date of each annual meeting of the
Company’s stockholders thereafter, each continuing non-employee director is entitled to receive an
annual equity award valued at $250,000 in the form of nonqualified stock options. Subject to the non-
employee director’s continued service through the applicable vesting date, the annual equity award
will vest on the earlier of the first anniversary of the date of grant and the Company’s annual meeting
of stockholders in the year following the year in which the annual equity award was granted.
2025 performance incentive plan
In connection with the completion of this offering, we have adopted the Heartflow, Inc. 2025 Performance
Incentive Plan (the “2025 Plan”), which will become effective upon the commencement of trading of the
Company’s common stock on the Nasdaq Global Select Market. The principal terms of the 2025 Plan are
summarized below.
Purpose
The purpose of the 2025 Plan is to promote the success of the Company by providing an additional
means for us to attract, motivate, retain and reward selected employees and other eligible persons
through the grant of awards. Equity-based awards are also intended to further align the interests of award
recipients and our stockholders.
Administration
Our Board of Directors or one or more committees appointed by our Board of Directors will administer the
2025 Plan. Our Board of Directors has delegated general administrative authority for the 2025 Plan to the
Compensation Committee and has also formed an Equity Awards Committee that is authorized to grant
awards under the 2025 Plan to participants who are not executive officers of the Company. The Board of
Directors or a committee thereof (within its delegated authority) may delegate different levels of authority
to different committees or persons with administrative and grant authority under the 2025 Plan. (The
appropriate acting body, be it the Board of Directors or a committee or other person within its delegated
authority is referred to in this proposal as the “Administrator”).
The Administrator has broad authority under the 2025 Plan, including, without limitation, the authority:
•to select eligible participants and determine the type(s) of award(s) that they are to receive;
•to grant awards and determine the terms and conditions of awards, including the price (if any) to be
paid for the shares or the award and, in the case of share-based awards, the number of shares to be
offered or awarded;
•to determine any applicable vesting and exercise conditions for awards (including any applicable
performance and/or time-based vesting or exercisability conditions) and the extent to which such
conditions have been satisfied, or determine that no delayed vesting or exercise is required, to
determine the circumstances in which any performance-based goals (or the applicable measure of
performance) will be adjusted and the nature and impact of any such adjustment, to establish the
events (if any) on which exercisability or vesting may accelerate (including specified terminations of
employment or service or other circumstances), and to accelerate or extend the vesting or
exercisability or extend the term of any or all outstanding awards (subject in the case of options and
stock appreciation rights to the maximum term of the award);
•to cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or
terminate any or all outstanding awards, subject to any required consents;
•subject to the other provisions of the 2025 Plan, to make certain adjustments to an outstanding award
and to authorize the conversion, succession or substitution of an award;
•to determine the method of payment of any purchase price for an award or shares of the Company’s
common stock delivered under the 2025 Plan, as well as any tax-related items with respect to an
award, which may be in the form of cash, check, or electronic funds transfer, by the delivery of
already-owned shares of the Company’s common stock or by a reduction of the number of shares
deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and
third party payment or cashless exercise on such terms as the Administrator may authorize, or any
other form permitted by law;
•to modify the terms and conditions of any award, establish sub-plans and agreements and determine
different terms and conditions that the Administrator deems necessary or advisable to comply with
laws in the countries where the Company or one of its subsidiaries operates or where one or more
eligible participants reside or provide services;
•to approve the form of any award agreements used under the 2025 Plan; and
•to construe and interpret the 2025 Plan, make rules for the administration of the 2025 Plan, and make
all other determinations for the administration of the 2025 Plan.
Availability of repricing
The Administrator may (1) amend an outstanding stock option or stock appreciation right to reduce the
exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option
or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award, or
(3) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for
an option or stock appreciation right with an exercise or base price that is less than the exercise or base
price of the original award.
Eligibility
Persons eligible to receive awards under the 2025 Plan include officers or employees of the Company or
any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or
any of its subsidiaries.
Aggregate share limit
The maximum number of shares of the Company’s common stock that may be issued or transferred
pursuant to awards under the 2025 Plan equals the sum of the following (such total number of shares, the
“Share Limit”):
•an aggregate number of shares of the Company’s common stock equal to ten percent (10%) of the
total number of fully diluted shares of the Company’s common stock outstanding (including, without
limitation, any outstanding warrants) as of the date of commencement of trading of the shares of the
Company’s common stock on the Nasdaq Global Select Market (the “Initial Trading Date”), plus
•the number of shares available for additional award grant purposes under the 2009 Plan as of the
Initial Trading Date and determined immediately prior to the termination of the authority to grant new
awards under that plan as of the Initial Trading Date, plus
•the number of any shares subject to stock options granted under the 2009 Plan and outstanding as of
the Initial Trading Date which expire, or for any reason are cancelled or terminated, after the date of
the Initial Trading Date without being exercised (which, for purposes of clarity, will become available
for award grants under the 2025 Plan on a one-for-one basis).
In addition, the Share Limit will automatically increase, if on the last day of the Company’s fiscal year, the
Share Limit has not increased during such fiscal year pursuant to any Board-approved increase(s) by an
aggregate amount equal to or greater than five percent (5%) of the total number of fully diluted shares of
the Company’s common stock outstanding (including, without limitation, any outstanding warrants) on the
first day of such fiscal year (the “Minimum Annual Increase”), then in an amount equal to the difference
between the Minimum Annual Increase and the aggregate amount by which the Share Limit increased
pursuant to any Board-approved increase(s) during such fiscal year, effective as of the last day of such
fiscal year.
As noted above, no additional awards will be granted under the 2009 Plan if stockholders approve the
2025 Plan.
Additional share limits
The following other limits are also contained in the 2025 Plan. These limits are in addition to, and not in
lieu of, the Share Limit for the plan described above.
•The maximum number of shares that may be delivered pursuant to options qualified as incentive
stock options granted under the plan is 2,000,000 shares. (For clarity, any shares issued in respect of
incentive stock options granted under the plan will also count against the overall Share Limit above.)
•The maximum number of shares subject to awards that are granted under the 2025 Plan during any
one calendar year to any person who, on the grant date of the award, is a Non-Employee Director
shall not exceed the number of shares that produce a grant date fair value for the award that, when
combined with (i) the grant date fair value of any other awards granted under the 2025 Plan during
that same calendar year to that individual in his or her capacity as a Non-Employee Director and (ii)
the dollar amount of all other cash compensation payable by the Company to such Non-Employee
Director for his or her services in such capacity during that same calendar year (regardless of whether
deferred and excluding any interest or earnings on any portion of such amount that may be deferred),
is $750,000, provided that this limit is $1,000,000 as to any new Non-Employee Director for the
calendar year in which the non-employee director is first elected or appointed to the Board of
Directors. For purposes of this limit, the "grant date fair value" of an award means the value of the
award on the date of grant of the award determined using the equity award valuation principles
applied in the Company’s financial reporting. This limit does not apply to, and will be determined
without taking into account, any award granted to an individual who, on the grant date of the award, is
an officer or employee of the Company or one of its subsidiaries. This limit applies on an individual
basis and not on an aggregate basis to all Non-Employee Directors as a group.
Share-limit counting rules
The Share Limit of the 2025 Plan is subject to the following rules:
Shares that are subject to or underlie awards which expire or for any reason are cancelled or terminated,
are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2025 Plan will not be
counted against the Share Limit and will again be available for subsequent awards under the 2025 Plan.
Except as described below, to the extent that shares are delivered pursuant to the exercise of a stock
appreciation right granted under the 2025 Plan, the number of underlying shares which are actually
issued in payment of the award shall be counted against the Share Limit. (For purposes of clarity, if a
stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the
participant is 15,000 shares, 15,000 shares shall be charged against the Share Limit with respect to such
exercise.)
Shares that are exchanged by a participant or withheld by the Company to pay the exercise price of a
stock option or stock appreciation right granted under the 2025 Plan, as well as any shares exchanged or
withheld to satisfy the tax withholding obligations related to any stock option, stock appreciation right or
any other award will not be counted against the Share Limit and will again be available for subsequent
awards under the 2025 Plan. Shares that are exchanged by a participant or withheld by the Company as
full or partial payment in connection with any award granted under the 2025 Plan will not be counted
against the Share Limit and will again be available for subsequent awards under the 2025 Plan.
In addition, shares that are exchanged by a participant or withheld by the Company after the Initial
Trading Date as full or partial payment in connection with any award granted under the 2009 Plan, as well
as any shares exchanged by a participant or withheld by the Company after the Initial Trading Date to
satisfy the tax withholding obligations related to any award granted under the 2009 Plan, shall be
available for new awards under the 2025 Plan.
To the extent that an award is settled in cash or a form other than shares, the shares that would have
been delivered had there been no such cash or other settlement will not be counted against the Share
Limit and will again be available for subsequent awards under the 2025 Plan.
In the event that shares are delivered in respect of a dividend equivalent right, the actual number of
shares delivered with respect to the award shall be counted against the Share Limit. (For purposes of
clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Company pays a
dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares
shall be counted against the Share Limit.) Except as otherwise provided by the Administrator, shares
delivered in respect of dividend equivalent rights shall not count against any individual award limit under
the 2025 Plan other than the aggregate Share Limit.
In addition, the 2025 Plan generally provides that shares issued in connection with awards that are
granted by or become obligations of the Company through the assumption of awards (or in substitution for
awards) in connection with an acquisition of another company will not count against the shares available
for issuance under the 2025 Plan. The Company may not increase the applicable share limits of the 2025
Plan by repurchasing shares of common stock on the market (by using cash received through the
exercise of stock options or otherwise).
Types of awards
The 2025 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or
denominated in the Company’s common stock or units of the Company’s common stock, as well as cash
bonus awards. The 2025 Plan retains flexibility to offer competitive incentives and to tailor benefits to
specific needs and circumstances. Any award may be structured to be paid or settled in cash.
A stock option is the right to purchase shares of the Company’s common stock at a future date at a
specified price per share (the “exercise price”). The per share exercise price of an option generally may
not be less than the fair market value of a share of the Company’s common stock on the date of grant.
The maximum term of an option is ten years from the date of grant. An option may either be an incentive
stock option or a nonqualified stock option. Incentive stock options may only be granted to employees of
the Company or a subsidiary.
A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair
market value of share of the Company’s common stock on the date of exercise of the stock appreciation
right over the base price of the stock appreciation right. The base price will be established by the
Administrator at the time of grant of the stock appreciation right and generally may not be less than the
fair market value of a share of the Company’s common stock on the date of grant. Stock appreciation
rights may be granted in connection with other awards or independently. The maximum term of a stock
appreciation right is ten years from the date of grant.
The other types of awards that may be granted under the 2025 Plan include, without limitation, stock
bonuses, restricted stock, performance stock, restricted stock units, stock units or phantom stock (which
are contractual rights to receive shares of stock, or cash based on the fair market value of a share of
stock), dividend equivalents which represent the right to receive a payment based on the dividends paid
on a share of stock over a stated period of time, or similar rights to purchase or acquire shares, and cash
awards.
Any awards under the 2025 Plan (including awards of stock options and stock appreciation rights) may be
fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.
Dividend equivalents; deferrals
The Administrator may provide for the deferred payment of awards, and may determine the other terms
applicable to deferrals. The Administrator may provide that awards under the 2025 Plan (other than
options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on
the amount of dividends paid on outstanding shares of Common Stock, provided that any dividends and/
or dividend equivalents as to the portion of an award that is subject to unsatisfied vesting requirements
will be subject to termination and forfeiture to the same extent as the corresponding portion of the award
to which they relate in the event the applicable vesting requirements are not satisfied (or, in the case of a
restricted stock or similar award where the dividend must be paid as a matter of law, the dividend
payment will be subject to forfeiture or repayment, as the case may be, if the related vesting conditions
are not satisfied).
Assumption and termination of awards
If an event occurs in which the Company does not survive (or does not survive as a public company in
respect of its common stock), including, without limitation, a dissolution, merger, combination,
consolidation, conversion, exchange of securities, or other reorganization, or a sale of all or substantially
all of the business, stock or assets of the Company, awards then-outstanding under the 2025 Plan will not
automatically become fully vested pursuant to the provisions of the 2025 Plan so long as such awards are
assumed, substituted for or otherwise continued. However, if awards then-outstanding under the 2025
Plan are to be terminated in such circumstances (without being assumed or substituted for), such awards
would generally become fully vested (with any performance goals applicable to the award being deemed
met at the “target” performance level), subject to any exceptions that the Administrator may provide for in
an applicable award agreement. The Administrator also has the discretion to establish other change in
control provisions with respect to awards granted under the 2025 Plan. For example, the Administrator
could provide for the acceleration of vesting or payment of an award in connection with a corporate event
or in connection with a termination of the award holder’s employment.
Transfer restrictions
Subject to certain exceptions contained in Section 5.6 of the 2025 Plan, awards under the 2025 Plan
generally are not transferable by the recipient other than by will or the laws of descent and distribution
and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable
or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s
beneficiary or representative. The Administrator has discretion, however, to establish written conditions
and procedures for the transfer of awards to other persons or entities, provided that such transfers comply
with applicable federal and state securities laws and are not made for value (other than nominal
consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of
the voting securities are held by the award recipient or by the recipient’s family members).
Adjustments
As is customary in incentive plans of this nature, each share limit and the number and kind of shares
available under the 2025 Plan and any outstanding awards, as well as the exercise or purchase prices of
awards, and performance targets under certain types of performance-based awards, are subject to
adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits,
stock dividends, or other similar events that change the number or kind of shares outstanding, and
extraordinary dividends or distributions of property to the stockholders.
No limit on other authority
Except as expressly provided with respect to the termination of the authority to grant new awards under
the 2009 Plan if stockholders approve the 2025 Plan, the 2025 Plan does not limit the authority of the
Board of Directors or any committee to grant awards or authorize any other compensation, with or without
reference to the Company’s common stock, under any other plan or authority.
Termination of or changes to the 2025 plan
The Board of Directors may amend or terminate the 2025 Plan at any time and in any manner.
Stockholder approval for an amendment will be required only to the extent then required by applicable law
or deemed necessary or advisable by the Board of Directors. Unless terminated earlier by the Board of
Directors and subject to any extension that may be approved by stockholders, the authority to grant new
awards under the 2025 Plan will terminate at the close of business on the day before the tenth
anniversary of the effective date of the 2025 Plan. Outstanding awards, as well as the Administrator’s
authority with respect thereto, generally will continue following the expiration or termination of the plan.
Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing),
but the consent of the award holder is required if the amendment (or any plan amendment) materially and
adversely affects the holder.
Amended and restated 2009 equity incentive plan
The following summarizes the material terms of our Amended and Restated 2009 Equity Incentive Plan
(the “2009 Plan”), under which we have previously made periodic grants of equity and equity-based
awards to our named executive officers and other key employees. Upon the commencement of trading of
the Company’s common stock on the Nasdaq Global Select Market, the 2025 Plan will become effective
and no more grants may be made under the 2009 Plan.
The 2009 Plan was adopted by the board of directors of Heartflow, Inc. in 2009 and was amended and
restated effective March 1, 2021 in connection with a reorganization of Heartflow, Inc. in which the 2009
Plan and all outstanding award agreements thereunder were assigned to and assumed by HeartFlow
Holding, Inc. As of March 31, 2025, a total of 25,066,625 shares of common stock were then subject to
outstanding awards granted under the 2009 Plan, and an additional 561,738 shares of common stock
were then available for new award grants under the 2009 Plan. With respect to the stock options then-
outstanding on this date, the weighted-average exercise price of such options was $1.71 per share, and
the weighted-average remaining term of these options was 7.77 years.
Purpose
The purpose of the 2009 Plan is to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to employees, directors and consultants, and to
promote the success of our business.
Administration
The 2009 Plan is administered by our board of directors (the “Board”) or a committee thereof (the
“Administrator”). The Administrator has the discretion to (i) determine the fair market value of our common
stock, (ii) select the employees, directors and consultants to whom awards may be granted under the
2009 Plan, (iii) determine the number of shares of our common stock to be covered by each award
granted under the 2009 Plan, (iv) approve forms of award agreements for use under the 2009 Plan, (v)
determine the terms and conditions of any award granted under the 2009 Plan, (vi) institute and
determine the terms and conditions of an award exchange, (vii) construe and interpret the terms of the
2009 Plan and awards granted thereunder, (viii) prescribe, amend and rescind rules and regulations
relating to the 2009 Plan, (ix) modify or amend outstanding awards granted under the 2009 Plan, subject
to certain restrictions set forth in the 2009 Plan, (x) determine procedures for recipients to satisfy
withholding tax obligations, (xi) authorize any person to execute on our behalf any instrument required to
effect the grant of an award previously granted by the Administrator, (xii) allow a recipient to defer the
receipt of the payment of cash or the delivery of shares that otherwise would be due to such recipient
under an award, (xiii) establish additional rules to accommodate the rules or laws of applicable non-U.S.
jurisdictions and afford recipients who are foreign nationals or are employed outside the United States
favorable treatment under such rules or laws, and (xiv) make all other determinations deemed necessary
or advisable for administering the 2009 Plan. All decisions, or actions taken, by the plan administrator or
in connection with the administration of the 2009 Plan shall be final, conclusive and binding on all persons
having an interest in the 2009 Plan.
Eligibility
Our employees and consultants, employees and consultants of our parents or subsidiaries (if any), and
non-employee members of our Board are eligible to receive awards under the 2009 Plan, provided that
only employees may be granted awards intended as incentive stock options. As of December 31, 2024,
approximately 606 of our and our subsidiaries’ officers and employees (including all of our named
executive officers), and each of the nine non-employee members of our Board, were considered eligible
under the 2009 Plan. In addition, approximately 13 individual consultants and advisors engaged by us
and our subsidiaries were then considered eligible under the 2009 Plan.
Share reserve
As of March 31, 2025, a total of 30,787,082 shares of our common stock had been authorized for
issuance under the 2009 Plan, 25,066,625 shares were subject to stock options then-outstanding under
the 2009 Plan, no shares were subject to restricted stock and restricted stock unit awards then-
outstanding under the 2009 Plan, and 561,738 shares were available for issuance under the 2009 Plan.
Types of awards
The 2009 Plan authorizes the grant of stock options, stock appreciation rights, restricted stock and
restricted stock units. Awards granted under the 2009 Plan are generally not transferable by the recipient
other than by will or the laws of descent and distribution and are generally exercisable, during the
recipient’s lifetime, only by the recipient.
•Stock Options. A stock option is the right to purchase shares of our common stock at a future date at
a specified price per share (the “exercise price”). The per share exercise price of an option generally
may not be less than the fair market value of a share of our common stock on the date of grant. The
maximum term of an option is ten years from the date of grant. An option may either be an incentive
stock option or a non-qualified stock option. Incentive stock option benefits are taxed differently from
nonqualified stock options, are subject to more restrictive terms, and are limited in amount by the U.S.
Internal Revenue Code and the 2009 Plan. Incentive stock options may only be granted to our and
our subsidiaries’ employees.
•Stock Appreciation Rights. A stock appreciation right is the right to receive payment of an amount
equal to the excess of the fair market value of share of our common stock on the date of exercise of
the stock appreciation right over the base price of the stock appreciation right. The base price will be
established by the Administrator at the time of grant of the stock appreciation right and generally may
not be less than the fair market value of a share of our common stock on the date of grant. Stock
appreciation rights may be granted in connection with other awards or independently.
•Restricted Stock. A share of restricted stock is granted subject to vesting, transfer restrictions and
other restrictions as determined by the Administrator, or is a share issued pursuant to the early
exercise of a stock option. Recipients of restricted stock, unlike recipients of stock options and
restricted stock units, have voting rights and the right to receive dividends, if any, prior to the time
restrictions lapse with respect to such shares, however, extraordinary dividends will generally be
placed in escrow, and will not be released until restrictions are removed or expire.
•Restricted Stock Units. A restricted stock unit is a bookkeeping entry representing an amount equal to
the fair market value of a share that is granted subject to vesting, transfer restrictions and other
restrictions as determined by the Administrator. Unlike restricted stock, shares underlying restricted
stock units will not be issued until the restricted stock units have vested, and recipients of restricted
stock units generally have no voting or dividend rights prior such conditions being satisfied.
Adjustments
As is customary in incentive plans of this nature, the share limit, the number and kind of shares available
under the 2009 Plan, any outstanding awards as well as the exercise or purchase prices of awards, and
performance targets under certain types of performance-based awards, are subject to adjustment in the
event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or
other similar events that change the number or kind of shares outstanding, and extraordinary dividends or
distributions of property to the stockholders.
Assumption and termination of awards
If an event occurs that results in a change in control of us or in which we otherwise do not survive (or do
not survive as a public company in respect of our common stock), including, without limitation, a merger,
combination, consolidation, conversion, exchange of securities, or other reorganization, or a sale of all or
substantially all of our business, stock or assets, awards then-outstanding under the 2009 Plan will not
automatically become fully vested pursuant to the provisions of the 2009 Plan so long as such awards are
assumed or substituted. However, if awards then-outstanding under the 2009 Plan are to be terminated in
such circumstances (without being assumed or substituted), such awards would generally become fully
vested (with any performance goals applicable to the award being deemed met at the “target”
performance level and all other terms and conditions met), subject to any exceptions that the
Administrator may provide for in an applicable award agreement. The Administrator also has the
discretion to establish other change in control provisions with respect to awards granted under the 2009
Plan. If we are wound up pursuant to a dissolution or liquidation, awards then-outstanding under the 2009
Plan will terminate immediately prior to such event.
No limit on other authority
The 2009 Plan does not limit the authority of the Board or any committee thereof to grant awards or
authorize any other compensation, with or without reference to our common stock, under any other plan
or authority.
Termination of or changes to the 2009 plan
The Board may amend or terminate the 2009 Plan at any time and in any manner. Stockholder approval
for an amendment will be required only to the extent then required by applicable law or deemed
necessary or advisable by the Board. Unless terminated earlier by the Board, the authority to grant new
awards under the 2009 Plan will terminate on March 21, 2031. Outstanding awards, as well as the
Administrator’s authority with respect thereto, generally will continue following the expiration or
termination of the 2009 Plan. Generally speaking, outstanding awards may be amended by the
Administrator (except for a repricing), but the consent of the award holder is required if the amendment
(or any plan amendment) impair the rights of the holder.
2025 employee stock purchase plan
In connection with the completion of this offering, we have adopted the Heartflow, Inc. 2025 Employee
Stock Purchase Plan (the “ESPP”), which will become effective upon the commencement of trading of the
Company’s common stock on the Nasdaq Global Select Market. The principal terms of the ESPP are
summarized below.
Purpose
The purpose of the ESPP is to provide eligible employees with an opportunity to purchase shares of the
Company’s common stock at a favorable price and upon favorable terms in consideration of the
participating employees’ continued services. The ESPP is intended to provide an additional incentive to
participating eligible employees to remain in the Company’s employ and to advance the best interests of
the Company and those of the Company’s stockholders.
Operation of the ESPP
It is currently expected that the ESPP will operate in successive periods referred to as “Offering Periods.”
The ESPP administrator may change the duration of Offering Periods from time to time in advance of the
applicable Offering Period, provided that no Offering Period may be shorter than three months or longer
than 27 months. The ESPP administrator may also provide that an Offering Period will consist of multiple
“purchase periods,” with a purchase of shares under the ESPP to occur at the end of each such purchase
period. However, only one Offering Period may be in effect at any one time.
On the first day of each Offering Period (referred to as the “Grant Date”), each eligible employee who has
timely filed a valid election to participate in the ESPP for that Offering Period will be granted an option to
purchase shares of the Company’s common stock (each, a “Purchase Option”). A participant must
designate in the election the percentage of the participant’s compensation to be withheld from his or her
pay during that Offering Period for the purchase of stock under the ESPP. The participant’s contributions
under the ESPP will be credited to a bookkeeping account in his or her name. A participant generally may
elect to terminate, but may not otherwise increase or decrease, his or her contributions to the ESPP
during an Offering Period. Amounts contributed to the ESPP constitute general corporate assets of the
Company and may be used for any corporate purpose.
Each Purchase Option granted under the ESPP will automatically be exercised on the last day of the
Offering Period with respect to which it was granted, or the last day of each purchase period for an
Offering Period that consists of multiple purchase periods (each such date on which ESPP Purchase
Options are exercised is referred to as an “Purchase Date”). The number of shares acquired by a
participant upon exercise of his or her Purchase Option will be determined by dividing the participant’s
ESPP account balance as of the Purchase Date by the “Purchase Price” (as such term is defined in the
ESPP) for the applicable period. The determination of the Purchase Price for each Offering Period (or
each purchase period within an Offering Period) will be established by the ESPP administrator in advance
of the applicable period, except that in no event may the Purchase Price be lower than the lesser of (i)
85% of the fair market value of a share of the Company’s common stock on the applicable Grant Date, or
(ii) 85% of the fair market value of a share of the Company’s common stock on the applicable Purchase
Date. A participant’s ESPP account will be reduced upon exercise of his or her Purchase Option by the
amount used to pay the Purchase Price for the shares acquired by the participant. No interest will be paid
to any participant or credited to any account under the ESPP.
Eligibility
Only certain employees will be eligible to participate in the ESPP. To participate in an Offering Period, on
the Grant Date of that period an individual must:
•be employed by the Company or one of its subsidiaries that has been designated as a participating
subsidiary;
•be customarily employed for more than 20 hours per week; and
•be customarily employed for more than five months per calendar year.
Limits on authorized shares; limits on contributions
If stockholders approve the ESPP, the maximum number of shares of the Company’s common stock
initially available for delivery under the plan will be an aggregate number of shares equal to one and a half
percent (1.5%) of the total number of fully diluted shares of the Company’s common stock outstanding
(including, without limitation, any outstanding warrants) as of the date of commencement of trading of the
shares of the Company’s common stock on the Nasdaq Global Select Market. In addition, this share limit
will automatically increase on the first trading day in January of each of the calendar years during the term
of the ESPP, with the first such increase to occur in January 2026, by an amount equal to the lesser of (A)
one percent of the total number of shares of the Company’s common stock issued and outstanding on
December 31 of the immediately preceding calendar year or (B) such number of shares of the Company’s
common stock as may be established by the Board of Directors.
Participation in the ESPP is also subject to the following limits:
•A participant cannot contribute more than 15% of his or her compensation to the purchase of stock
under the ESPP in any one payroll period.
•A participant cannot purchase more than 50,000 shares of the Company’s common stock under the
ESPP in any one Offering Period (subject to adjustment by the ESPP administrator for any Offering
Period that is longer or shorter than six months).
•A participant cannot purchase more than $25,000 of stock (valued at the start of the applicable
Offering Period and without giving effect to any discount reflected in the purchase price for the stock)
under the ESPP in any one calendar year.
•A participant will not be granted a Purchase Option under the ESPP if it would cause the participant to
own stock and/or hold outstanding options to purchase stock representing 5% or more of the total
combined voting power or value of all classes of stock of the Company or one of its subsidiaries or to
the extent it would exceed certain other limits under the U.S. Internal Revenue Code (the “Code”).
We have the flexibility to change the 15%-contribution and the individual-share limit referred to above
from time to time without stockholder approval. However, we cannot increase the aggregate-share limit
under the ESPP, other than to reflect stock splits and similar adjustments as described below, without
stockholder approval. The $25,000 and the 5% ownership limitations referred to above are required under
the Code.
Antidilution adjustments
As is customary in stock incentive plans of this nature, the number and kind of shares available under the
ESPP, as well as ESPP purchase prices and share limits, are subject to adjustment in the case of certain
corporate events. These events include reorganizations, mergers, combinations, consolidations,
recapitalizations, reclassifications, stock splits, stock dividends, asset sales or other similar unusual or
extraordinary corporate events, or extraordinary dividends or distributions of property to our stockholders.
Termination of participation
A participant’s election to participate in the ESPP will generally continue in effect for all Offering Periods
until the participant files a new election that takes effect or the participant ceases to participate in the
ESPP. A participant’s participation in the ESPP generally will terminate if, prior to the applicable Purchase
Date, the participant ceases to be employed by the Company or one of its participating subsidiaries or the
participant is no longer scheduled to work more than 20 hours per week or five months per calendar year.
If a participant’s ESPP participation terminates during an Offering Period for any of the reasons discussed
in the preceding paragraph, the participant will no longer be permitted to make contributions to the ESPP
for that Offering Period and, subject to limited exceptions, the participant’s Purchase Option for that
Offering Period will automatically terminate and his or her ESPP account balance will be paid to him or
her in cash without interest. However, a participant’s termination from participation will not have any effect
upon his or her ability to participate in any succeeding Offering Period, provided that the applicable
eligibility and participation requirements are again then met.
Transfer restrictions
A participant’s rights with respect to Purchase Options or the purchase of shares under the ESPP, as well
as contributions credited to his or her ESPP account, may not be assigned, transferred, pledged or
otherwise disposed of in any way except by will or the laws of descent and distribution.
Administration
The ESPP is administered by the Board of Directors or by a committee appointed by the Board of
Directors. The Board of Directors has appointed the Compensation Committee of the Board of Directors
as the administrator of the ESPP. The administrator has full power and discretion to adopt, amend or
rescind any rules and regulations for carrying out the ESPP and to construe and interpret the ESPP.
Decisions of the ESPP administrator with respect to the ESPP are final and binding on all persons.
No limit on other plans
The ESPP does not limit the ability of the Board of Directors or any committee of the Board of Directors to
grant awards or authorize any other compensation, with or without reference to the Company’s common
stock, under any other plan or authority.
Amendments
The Board of Directors generally may amend or terminate the ESPP at any time and in any manner,
provided that the then-existing rights of participants are not materially and adversely affected thereby.
Stockholder approval for an amendment to the ESPP will only be required to the extent necessary to
meet the requirement of Section 423 of the Code or to the extent otherwise required by law or applicable
listing rules. The ESPP administrator also may, from time to time, without stockholder approval, designate
those subsidiaries of the Company whose employees may participate in the ESPP and make certain
other administrative changes as authorized by the plan.
Termination
No new Offering Periods will commence under the ESPP on or after the tenth anniversary of the effective
date of the ESPP, unless the Board of Directors terminates the ESPP earlier. The ESPP will also
terminate earlier if all of the shares authorized under the ESPP have been purchased. If an event occurs
in which the Company does not survive (or does not survive as a public company in respect of its
common stock), subject to any provision made by the Board of Directors for the assumption or
continuation of the Purchase Options then outstanding under the ESPP, the Offering Period then in
progress will be shortened and the outstanding Purchase Options will automatically be exercised on a
date established by the ESPP administrator that is not more than 10 days before the closing of the
transaction.
Certain relationships and related-party transactions
The following includes a summary of transactions since January 1, 2022 and any currently proposed
transactions to which we were or are expected to be a participant in which (i) the amount involved
exceeded or will exceed $120,000, and (ii) any of our directors, executive officers, or holders of more than
5% of our capital stock, or any affiliate or member of the immediate family of the foregoing persons, had
or will have a direct or indirect material interest, other than compensation and other arrangements that are
described under the section titled “Executive and director compensation.”
2025 convertible promissory notes financing
In January and March 2025, we entered into note purchase agreements with various investors, pursuant
to which we issued an aggregate of $98.3 million in principal amount of subordinated convertible
promissory notes (the “2025 Convertible Notes”) to investors, including related parties, with original
maturity dates of 48 months from the initial issuance of the notes. Pursuant to the January 2025 note
purchase agreement, (i) the first closing occurred on January 24, 2025, at which time we issued $44.6
million in principal amount of the 2025 Convertible Notes and (ii) the second closing occurred on January
31, 2025, at which time we issued $3.7 million in principal amount of the 2025 Convertible Notes.
Pursuant to the March 2025 note purchase agreement, the closing occurred on March 26, 2025, at which
time we issued $50.0 million in principal amount of the 2025 Convertible Notes. The aggregate principal
amount outstanding under the 2025 Convertible Notes will be automatically converted upon the
completion of this offering into shares of our common stock without interest.
The following related parties, or their respective affiliates, participated in the 2025 Convertible Notes
offering:
| | |
| | Aggregate purchase price ($) |
Hayfin HeartFlow UK Limited(2) ................................................................................................. | | |
BCLS Fund III Investments, LP(3) ............................................................................................. | | |
Capricorn Entities(4) ..................................................................................................................... | | |
Timothy C. Barabe(5) ................................................................................................................... | | |
Lonnie M. Smith(6) ....................................................................................................................... | | |
HCPCIV 1, LLC(7) ........................................................................................................................ | | |
U.S. Venture Partners Funds(8) ................................................................................................. | | |
Casey M. Tansey(9) ...................................................................................................................... | | |
Vikram Verghese(10) .................................................................................................................... | | |
| | |
(1)For additional information regarding these stockholders and their equity holdings, see the section titled “Principal stockholders.”
(2)Hayfin HeartFlow UK Limited and entities affiliated with Hayfin HeartFlow UK Limited own more than 5% of our outstanding capital.
Hayfin HeartFlow UK Limited is an entity affiliated with Hayfin Services, LLP, which is the administrative agent under our 2024 Credit
Agreement.
(3)BCLS Fund III Investments, LP owns more than 5% of our outstanding capital. Dr. Nicholas Downing, M.D. is a member of our board of
directors and is a managing director of Bain Capital Life Sciences.
(4)Consists of $1,929,687.95 in principal amount of the 2025 Convertible Notes purchased by Capricorn Healthcare Special Opportunities
II, L.P., $57,996.00 in principal amount of the 2025 Convertible Notes purchased by The Skoll Foundation, $52,169.37 in principal
amount of the 2025 Convertible Notes purchased by Capricorn Healthcare Special Opportunities II-A, L.P., and $38,663.43 in principal
amount of the 2025 Convertible Notes purchased by The Skoll Fund. Capricorn Entities own more than 5% of our outstanding capital.
(5)Mr. Timothy C. Barabe is a member of our board of directors.
(6)Mr. Lonnie M. Smith and entities affiliated with Mr. Smith own more than 5% of our outstanding capital. Mr. Smith is a member of our
board of directors.
(7)HCPCIV 1, LLC and entities affiliated with HCPCIV 1, LLC own more than 5% of our outstanding capital. Mr. Jeffrey C. Lightcap is a
member of our board of directors and is a controlling member of HCPCIV 1, LLC.
(8)Consists of $786,399.92 in principal amount of the 2025 Convertible Notes purchased by U.S. Venture Partners X, L.P. and $25,158.30
in principal amount of the 2025 Convertible Notes purchased by USVP X Affiliates, L.P. U.S. Venture Partners Funds own more than 5%
of our outstanding capital. Mr. Casey M. Tansey is a member of our board of directors and is a controlling member of U.S. Venture
Partners Funds.
(9)Mr. Casey M. Tansey is a member of our board of directors.
(10)Mr. Vikram Verghese is our Chief Financial Officer.
Amendment No. 1 to 2024 Credit Agreement and related matters
On January 24, 2025, in connection with the issuance of the 2025 Convertible Notes, we entered into
Amendment No. 1 to the 2024 Credit Agreement, pursuant to which our lender, Hayfin, converted $23.0
million of outstanding indebtedness under the 2024 Term Loan to 2025 Convertible Notes (the “2024 Term
Loan Conversion”) under the same terms as the other purchasers of the 2025 Convertible Notes, as
described above. As a result, Hayfin became a holder of 5% or more of our capital stock. For more
information about the 2024 Credit Agreement, as amended, see “Management’s discussion and analysis
of financial condition and results of operations—Liquidity and capital resources—Hayfin credit agreement”
and Note 8 to our consolidated financial statements included elsewhere in this prospectus.
In connection with the prior credit agreement with Hayfin that was refinanced by the 2024 Credit
Agreement, we issued warrants to purchase an aggregate of 541,389 shares of common stock to Hayfin.
As a result of the Series F redeemable convertible preferred stock financing referred to below, the
antidilution adjustments of these warrants resulted in the issuance to Hayfin in March 2023 of additional
warrants to purchase an aggregate of 4,269,801 shares of our common stock. The warrants have an
exercise price of $0.01 per share of common stock.
Series F and Series F-1 redeemable convertible preferred stock financing
In March 2023, we entered into a Series F and Series F-1 redeemable convertible preferred stock
purchase agreement with various investors, pursuant to which we issued an aggregate of 61,344,029
shares of Series F redeemable convertible preferred stock at a cash purchase price of $2.8505 per share
for gross proceeds of $174.9 million in multiple closings and 21,465,064 shares of Series F-1 redeemable
convertible preferred stock at a purchase price of $1.9098 per share for gross proceeds of $41.0 million
(the “Series F and Series F-1 redeemable convertible preferred stock financing”). The Series F-1
redeemable convertible preferred stock was issued upon conversion of the indebtedness under
outstanding subordinated convertible promissory notes issued by the Company from September 30, 2022
to December 16, 2022, in the aggregate principal amount of $40.0 million.
The table below sets forth the number of shares of our Series F and Series F-1 redeemable convertible
preferred stock purchased by our executive officers, directors, holders of more than 5% of our capital
stock at the time of the transaction, and their affiliated entities or immediate family members. Each share
of Series F and Series F-1 redeemable convertible preferred stock in the table below will convert into one
share of our common stock immediately prior to the completion of this offering.
| | | | | | |
| | Series F redeemable convertible preferred stock (#) | | Series F-1 redeemable convertible preferred stock (#) | | Aggregate purchase price ($)(2) |
BCLS Fund III Investments, LP(3) ....................................... | | | | | | |
The Lonnie and Cheryl Smith Family Trust(4) ................... | | | | | | |
Hayfin HeartFlow UK Limited(5) .......................................... | | | | | | |
HCPCIV 1, LLC(6) .................................................................. | | | | | | |
Wellington Entities(7) ............................................................. | | | | | | |
U.S. Venture Partners Funds(8) .......................................... | | | | | | |
Capricorn Entities(9) .............................................................. | | | | | | |
The Schiehallion Fund Limited(10) ...................................... | | | | | | |
William C. Weldon(11) ............................................................ | | | | | | |
| | | | | | |
(1)For additional information regarding these stockholders and their equity holdings, see the section titled “Principal stockholders.”
(2)The consideration for the Series F-1 redeemable convertible preferred stock was funded through the conversion of outstanding
subordinated convertible promissory notes.
(3)BCLS Fund III Investments, LP owns more than 5% of our outstanding capital. Dr. Nicholas Downing, M.D. is a member of our board of
directors and is a managing director of Bain Capital Life Sciences.
(4)Mr. Lonnie M. Smith and entities affiliated with Mr. Smith own more than 5% of our outstanding capital. Mr. Smith is a member of our
board of directors.
(5)Hayfin HeartFlow UK Limited and entities affiliated with Hayfin HeartFlow UK Limited own more than 5% of our outstanding capital.
Hayfin HeartFlow UK Limited is an entity affiliated with Hayfin Services, LLP, which is the administrative agent under our 2024 Credit
Agreement.
(6)HCPCIV 1, LLC and entities affiliated with HCPCIV 1, LLC own more than 5% of our outstanding capital. Mr. Jeffrey C. Lightcap is a
member of our board of directors and is a controlling member of HCPCIV 1, LLC.
(7)Consists of 3,176,720 shares of Series F redeemable convertible preferred stock held by Hadley Harbor Master Investors (Cayman) II
LP and 992,724 shares of Series F redeemable convertible preferred stock held by Texas Hidalgo CoInvestment Fund, L.P.
(8)Consists of 3,399,403 shares of Series F redeemable convertible preferred stock held by U.S. Venture Partners X, L.P. and 108,753
shares of Series F redeemable convertible preferred stock held by USVP X Affiliates, L.P. U.S. Venture Partners Funds own more than
5% of our outstanding capital.
(9)Consists of 1,402,222 shares of Series F redeemable convertible preferred stock held by Capricorn Healthcare Special Opportunities II,
L.P., 37,909 shares of Series F redeemable convertible preferred stock held by Capricorn Healthcare Special Opportunities II-A, L.P.,
12,729 shares of Series F redeemable convertible preferred stock held by Carthage, LP, 1,142,851 shares of Series F redeemable
convertible preferred stock held by Pacific Sequoia Holdings, LLC, 223,661 shares of Series F redeemable convertible preferred stock
held by The Skoll Foundation, and 194,532 shares of Series F redeemable convertible preferred stock held by The Skoll Fund.
Capricorn Entities own more than 5% of our outstanding capital.
(10)The Schiehallion Fund Limited and Baillie Gifford Funds affiliated with The Schiehallion Fund Limited own more than 5% of our
outstanding capital.
(11)Mr. William C. Weldon is a member of our board of directors.
2022 convertible promissory notes financing
In September 2022, we entered into a note purchase agreement with various investors, pursuant to which
we issued an aggregate of $40.0 million in principal amount of subordinated convertible promissory notes
(the “2022 Convertible Notes”) to investors with original maturity dates of 48 months from the dates of
issuance. The 2022 Convertible Notes automatically converted into shares of Series F-1 convertible
preferred stock on March 2, 2023. For more information, see the subsection titled “—Series F and Series
F-1 redeemable convertible preferred stock financing.”
The following related parties, or their respective affiliates, participated in the 2022 Convertible Notes
offering:
| | |
| | Aggregate purchase price ($) |
The Lonnie and Cheryl Smith Family Trust(2) ......................................................................... | | |
Hayfin HeartFlow UK Limited(3) ................................................................................................. | | |
HCPCIV 1, LLC(4) ........................................................................................................................ | | |
William C. Weldon(5) .................................................................................................................... | | |
| | |
(1)For additional information regarding these stockholders and their equity holdings, see the section titled “Principal stockholders.”
(2)Mr. Lonnie M. Smith and entities affiliated with Mr. Smith own more than 5% of our outstanding capital. Mr. Smith is a member of our
board of directors.
(3)Hayfin HeartFlow UK Limited and entities affiliated with Hayfin HeartFlow UK Limited own more than 5% of our outstanding capital.
Hayfin HeartFlow UK Limited is an entity affiliated with Hayfin Services, LLP, which is the administrative agent under our 2024 Credit
Agreement.
(4)HCPCIV 1, LLC and entities affiliated with HCPCIV 1, LLC own more than 5% of our outstanding capital. Mr. Jeffrey C. Lightcap is a
member of our board of directors and is a controlling member of HCPCIV 1, LLC.
(5)Mr. William C. Weldon is a member of our board of directors.
Investors’ rights agreement
We are party to an amended and restated investors’ rights agreement, as amended, dated March 2, 2023
(the “Investors’ Rights Agreement”), with the purchasers of our outstanding redeemable convertible
preferred stock, including the following directors, holders of more than 5% of our capital stock and entities
with which certain of our directors are affiliated: BCLS Fund III Investments, LP, Lonnie M. Smith, Hayfin
HeartFlow UK Limited (an entity affiliated with Hayfin Services, LLP, which is the administrative agent
under our 2024 Credit Agreement), HealthCor Partners Funds, Wellington Entities, U.S. Venture Partners
Funds, Capricorn Entities, Baillie Gifford Funds, William C. Weldon and Charles A. Taylor, Jr., Ph.D.
Following the completion of this offering, the holders of approximately million shares of our
common stock issuable upon the conversion of our outstanding redeemable convertible preferred stock
are entitled to rights with respect to the registration of their shares under the Securities Act. For a more
detailed description of these registration rights, see the section titled “Shares eligible for future sale—
Registration rights.”
Voting agreement
We are party to an amended and restated voting agreement, as amended, with certain holders of our
common stock and redeemable convertible preferred stock, including the following directors and
executive officers, holders of more than 5% of our capital stock, and entities with which certain of our
directors are affiliated: BCLS Fund III Investments, LP, Lonnie M. Smith, Hayfin HeartFlow UK Limited (an
entity affiliated with Hayfin Services, LLP, which is the administrative agent under our 2024 Credit
Agreement), HealthCor Partners Funds, Wellington Entities, U.S. Venture Partners Funds, Capricorn
Entities, Baillie Gifford Funds, William C. Weldon and Charles A. Taylor, Jr., Ph.D. Pursuant to the
amended and restated voting agreement, BCLS Fund III Investments, LP has the right to designate one
member to be elected to our board of directors, which designee is currently Nicholas Downing. Upon the
completion of this offering, the amended and restated voting agreement will terminate. Members
previously elected to our board of directors pursuant to this agreement will continue to serve as directors
until they resign, are removed or their successors are duly elected by holders of our common stock. The
composition of our board of directors after this offering is described in more detail in the section title
“Management—Board composition.”
Right of first refusal and co-sale agreement
We are party to an amended and restated right of first refusal and co-sale agreement with certain holders
of our common stock and redeemable convertible preferred stock, including the following directors,
holders of more than 5% of our capital stock, and entities with which certain of our directors are affiliated:
BCLS Fund III Investments, LP, Lonnie M. Smith, Hayfin HeartFlow UK Limited (an entity affiliated with
Hayfin Services, LLP, which is the administrative agent under our 2024 Credit Agreement), HealthCor
Partners Funds, Wellington Entities, U.S. Venture Partners Funds, Capricorn Entities, Baillie Gifford
Funds, William C. Weldon and Charles A. Taylor, Jr., Ph.D. This agreement provides for rights of first
refusal and co-sale relating to the shares of our common stock and convertible securities, other than
Series F and Series F-1 redeemable convertible preferred stock and the common stock issuable upon
conversion of such preferred stock, held by certain parties to the agreement. Upon the completion of this
offering, the amended and restated right of first refusal and co-sale agreement will terminate.
Management rights letters
In connection with the issuance of our Series F and Series F-1 convertible preferred stock, we entered
into management rights letters with certain purchasers of our redeemable convertible preferred stock,
including holders of more than 5% of our capital stock, Wellington Entities, U.S. Venture Partners X, L.P.
and Baillie Gifford Funds, pursuant to which such entities were granted certain management rights,
including the right to consult with and advise our management on significant business issues, review our
operating plans, examine our books and records and inspect our facilities. These management rights
letters and the rights granted to the parties thereto will terminate upon completion of this offering. Certain
of our obligations under the management rights letters will remain in effect after the completion of this
offering, including certain tax reporting and financial disclosures.
Letter agreement with Bain Capital Life Science
In connection with our Series F redeemable convertible preferred stock financing, we entered into a letter
agreement with BCLS Fund III Investments, LP (the “BCLS Letter Agreement”), which holds more than
5% of our outstanding capital stock. Pursuant to the BCLS Letter Agreement, BCLS Fund III Investments,
LP was granted the right to designate a board observer in a nonvoting capacity, which right will terminate
upon the completion of this offering. Certain of our obligations under the BCLS Letter Agreement will
remain in effect after the completion of this offering, including our obligation to obtain the consent of Bain
Capital prior to making certain public disclosures about Bain Capital or certain of its affiliates and certain
pro rata lock-up release rights of Bain Capital which provide that, in the event we or the managing
underwriter waive or terminate the lock-up restrictions contained in the Investors’ Rights Agreement or
certain lock-up agreements (including certain lock-up agreements for this offering), then such restrictions
applicable to Bain Capital under the Investors’ Rights Agreement or any lock-up agreement will be waived
or terminated, as applicable, to the same extent and with respect to the same percentage of securities.
Letter agreement with Capricorn Entities
In connection with our Series F redeemable convertible preferred stock financing, we entered into a letter
agreement with the Capricorn Entities (the “Capricorn Letter Agreement”), which collectively hold more
than 5% of our outstanding capital stock. Pursuant to the Capricorn Letter Agreement, the Capricorn
Entities were granted the right to designate a board observer in a nonvoting capacity. The Capricorn
Letter Agreement will terminate by its terms in connection with the completion of this offering and the
Capricorn Entities will not have any continuing rights following this offering.
2023 Taylor Trust repurchase
On March 29, 2023, we entered into a common stock repurchase agreement in connection with the
Series F and Series F-1 redeemable convertible preferred stock financing, pursuant to which we
repurchased 300,000 shares of common stock from the Taylor Family Revocable Trust, a family trust held
by Charles A. Taylor, Jr., Ph.D., one of our directors, at $2.8505 per share for an aggregate purchase
price of $855,150.00.
Other
Michael Smith, a relative of Mr. Lonnie M. Smith, one of our directors, has been one of our non-executive
employees since 2014. His overall cash compensation for each of 2022, 2023 and 2024 did not exceed
$300,000. He did not receive any equity compensation in 2024, and has received an aggregate of less
than 50,000 incentive stock options during his employment with us.
Executive officer and director compensation
Please see the section titled “Executive and director compensation” for information regarding the
compensation of our directors and executive officers and the new severance plan we intend to enter into
prior to this offering.
Indemnification agreements
We have entered into indemnification agreements with certain of our current directors and executive
officers and intend to enter into new indemnification agreements with each of our current directors and
executive officers before the completion of this offering. Our amended and restated certificate of
incorporation and our amended and restated bylaws will provide that we will indemnify our directors and
officers to the fullest extent permitted by applicable law. Further, we have purchased a policy of directors’
and officer’ liability insurance that insures our directors and officers against the cost of defense,
settlement or payment of a judgment under certain circumstances. See the section titled “Management—
Limitations on liability and indemnification matters.”
Policies and procedures for related-party transactions
Our board of directors has adopted a written related-party transaction policy, to be effective upon the
commencement of trading of our common stock on the Nasdaq Global Select Market, which sets forth the
policies and procedures for the review and approval or ratification of related-party transactions. This
policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K, any transaction,
arrangement, or relationship, or any series of similar transactions, arrangements, or relationships, in
which we were or are to be a participant, where the amount involved exceeds $120,000 and a related
person had or will have a direct or indirect material interest, including without limitation purchases of
goods or services by or from the related person or entities in which the related person has a material
interest, indebtedness, guarantees of indebtedness, and employment by us of a related person. In
reviewing and approving any such transactions, our audit committee is tasked to consider all relevant
facts and circumstances, including but not limited to whether the transaction is on terms comparable to
those that could be obtained in an arm’s length transaction with an unrelated third party and the extent of
the related person’s interest in the transaction. All of the transactions described in this section occurred
prior to the adoption of this policy.
Principal stockholders
The following table sets forth, as of June 30, 2025, information regarding beneficial ownership of our
capital stock by:
•each person, or group of affiliated persons, known by us to beneficially own more than 5% of our
common stock;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
The percentage ownership information under the column titled “Beneficial ownership prior to this offering”
is based on shares of our common stock outstanding as of June 30, 2025
including 149,581,073 shares of our common stock resulting from the Preferred Stock Conversion
and shares of our common stock resulting from the conversion of the 2025 Convertible Notes
(based on the assumed initial public offering price of $ per share, which is the midpoint of the price
range set forth on the cover page of this prospectus), in each case as if such conversion had occurred as
of June 30, 2025. The ownership information under the column titled “Beneficial ownership after this
offering” assumes the foregoing and the issuance of shares of common stock in this offering
and assumes no exercise of the underwriters’ option to purchase additional shares. In addition, the
following table does not reflect any shares of common stock that may be purchased in this offering.
We have determined beneficial ownership according to the rules and regulations of the SEC, which
generally means that a person has beneficial ownership of a security if they or it possesses sole or
shared voting or investment power of that security. In addition, shares of common stock issuable upon the
exercise of stock options or warrants that are currently exercisable or exercisable within 60 days of June
30, 2025 are included in the following table. These shares are deemed to be outstanding and beneficially
owned by the person holding those options or warrants for the purpose of computing the percentage
ownership of that person, but they are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. The information contained in the following table does not
necessarily indicate beneficial ownership for any other purpose. Unless otherwise indicated, the persons
or entities identified in this table have sole voting and investment power with respect to all shares shown
as beneficially owned by them, subject to applicable community property laws.
Unless otherwise noted below, the address for each beneficial owner listed in the table below is c/o
Heartflow, Inc., 331 E. Evelyn Avenue, Mountain View, California 94041.
| | | | | | | | |
| | Beneficial ownership prior to this offering | | Beneficial ownership after this offering |
| | Number of shares beneficially owned | | Percentage of beneficial ownership | | Number of shares beneficially owned | | Percentage of beneficial ownership |
5% and greater stockholders: | | | | | | | | |
BCLS Fund III Investments, LP(1) ................. | | | | | | | | |
HealthCor Partners Funds(2) .......................... | | | | | | | | |
Wellington Entities(3) ....................................... | | | | | | | | |
Capricorn Funds(4) ........................................... | | | | | | | | |
Entities affiliated with Hayfin Services, LLP (5) ........................................................................ | | | | | | | | |
Lonnie M. Smith(6) ........................................... | | | | | | | | |
U.S. Venture Partners Funds(7) ..................... | | | | | | | | |
Baillie Gifford Funds(8) .................................... | | | | | | | | |
Named executive officers and directors: | | | | | | | | |
John C.M. Farquhar(9) ..................................... | | | | | | | | |
Vikram Verghese(10) ........................................ | | | | | | | | |
Campbell D.K. Rogers, M.D.(11) ..................... | | | | | | | | |
William C. Weldon(12) ...................................... | | | | | | | | |
Timothy C. Barabe(13) ...................................... | | | | | | | | |
Julie A. Cullivan(14) ........................................... | | | | | | | | |
Nicholas Downing, M.D.(15) ............................ | | | | | | | | |
Jeffrey C. Lightcap(2) ....................................... | | | | | | | | |
Wayne Riley, M.D.(16) ...................................... | | | | | | | | |
Lonnie M. Smith(6) ........................................... | | | | | | | | |
Casey M. Tansey(17) ........................................ | | | | | | | | |
Charles A. Taylor, Jr., Ph.D.(18) ...................... | | | | | | | | |
All current directors and executive officers as a group (12 persons)(19) ............................ | | | | | | | | |
| | | | | | | | |
*Indicates beneficial ownership of less than 1% of the total outstanding common stock.
(1)Consists of (A) 35,081,564 shares of our common stock issuable upon conversion of our redeemable convertible preferred stock and
(B) shares of common stock issuable upon conversion of the 2025 Convertible Notes purchased by Bain Capital Life Sciences
Fund III, L.P. Bain Capital Life Sciences Investors, LLC ("BCLSI") is the manager of Bain Capital Life Sciences III General Partner, LLC,
which is the general partner of Bain Capital Life Sciences Fund III, L.P., which is the managing member of BCLS Fund III Investments
GP, LLC, which is the general partner of BCLS Fund III Investments, LP. As a result, BCLSI may be deemed to share voting and
dispositive power with respect to the securities held by BCLS Fund III Investments, LP. The principal address for BCLS Fund III
Investments, LP is 200 Clarendon Street, Boston, Massachusetts 02116.
(2)Consists of (A) shares of our common stock issuable upon conversion of our redeemable convertible preferred stock expected to be
held by the following entities, collectively referred to as “HealthCor Partners Funds”: (i) 13,196,866 shares of common stock issuable
upon conversion of our redeemable convertible preferred stock held by HCPCIV 1, LLC; (ii) 3,646,904 shares of common stock issuable
upon conversion of our redeemable convertible preferred stock held by HealthCor Partners Fund, L.P; and (iii) 2,432,579 shares of
common stock issuable upon conversion of our redeemable convertible preferred stock held by HealthCor Partners Fund II, L.P. and (B)
shares of common stock issuable upon conversion of the 2025 Convertible Notes purchased by HCPCIV 1, LLC. Mr. Lightcap, a
member of our board of directors, is a controlling member of each of the HealthCor Partners Funds. Mr. Lightcap disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest therein. The address for the HealthCor Partners Funds is 186
Seven Farms Drive, Suite F-371, Daniel Island, South Carolina 29492.
(3)Consists of (i) 9,894,486 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by
Hadley Harbor Master Investors (Cayman) II LP and (ii) 2,995,831 shares of our common stock issuable upon conversion of our
redeemable convertible preferred stock held by Texas Hidalgo Co-Investment Fund, L.P. (each a “Wellington Entity” and, collectively,
the “Wellington Entities”). Wellington Management Company LLP, a registered investment adviser under the Investment Advisers Act of
1940, as amended, is the investment adviser to each Wellington Entity, and Wellington Alternative Investments LLC is general partner
to each Wellington Entity. Wellington Management Investment, Inc. is the managing member of Wellington Alternative Investments LLC.
Wellington Management Company LLP is an indirect subsidiary of Wellington Management Group LLP. Wellington Management Group
LLP and Wellington Management Company LLP may be deemed beneficial owners with shared voting and investment power over the
shares held by each Wellington Entity. Additional information about Wellington Management Company LLP is available in its Form ADV
filed with the SEC. The address of all entities referenced in this footnote is 280 Congress Street, Boston, Massachusetts 02210.
(4)Consists of (A) shares of our common stock issuable upon conversion of our redeemable convertible preferred stock held by the
following entities, collectively referred to as the “Capricorn Funds”: (i) 2,503,775 shares of common stock issuable upon conversion of
our redeemable convertible preferred stock held by Capricorn Healthcare and Special Opportunities, LP; (ii) 3,090,809 shares of
common stock issuable upon conversion of our redeemable convertible preferred stock held by Capricorn Healthcare and Special
Opportunities II, LP; (iii) 83,560 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held
by Capricorn Healthcare and Special Opportunities II-A, LP; (iv) 208,016 shares of common stock issuable upon conversion of our
redeemable convertible preferred stock held by Capricorn S.A. SICAV — SIF — Global Non-Marketable Strategies Sub-Fund; (v)
92,057 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by Carthage, LP;
(vi) 121,594 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by CHSO CIG, LP;
(vii) 148,543 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by CHSO SFP, LP;
(viii) 222,116 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by CHSO TSF, LP;
(ix) 3,395,958 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by Pacific Sequoia
Holdings, LLC; (x) 632,386 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by
The Skoll Foundation; and (xi) 556,593 shares of common stock issuable upon conversion of our redeemable convertible preferred
stock held by The Skoll Fund and (B) (i) shares of common stock issuable upon conversion of the 2025 Convertible Notes
purchased by Capricorn Healthcare Special Opportunities II, L.P., (ii) shares of common stock issuable upon conversion of the
2025 Convertible Notes purchased by The Skoll Foundation, (iii) shares of common stock issuable upon conversion of the
2025 Convertible Notes purchased by Capricorn Healthcare Special Opportunities II-A, L.P., and (iv) shares of common stock
issuable upon conversion of the 2025 Convertible Notes purchased by The Skoll Fund.
CHSO Partners, LLC, is the general partner of Capricorn Healthcare and Special Opportunities, LP, CHSO CIG, LP, CHSO SFP, LP,
and CHSO TSF, LP. CHSO Partners, LLC has sole investment and voting authority over the shares held by these funds. Voting and
dispositive decisions on behalf of CHSO Partners LLC are made by the separate decisions of Barry Uphoff, the Principal Manager of
CHSO Partners LLC and a majority of the CIG Managers of CHSO Partners. Messrs. Eric Techel and Ion Yadigaroglu are the CIG
Managers of CHSO Partners LLC. Messrs. Uphoff, Techel and Yadigaroglu may be deemed to have shared voting and investment
control with respect to the shares held by the funds managed by CHSO Partners LLC.
CHSO Partners II, LLC, is the general partner of Capricorn Healthcare and Special Opportunities II, LP and Capricorn Healthcare &
Special Opportunities II-A, LP. CHSO Partners II, LLC has sole investment and voting authority over the shares held by these funds.
Voting and dispositive decisions on behalf of CHSO Partners II, LLC are made by the separate decisions of Barry Uphoff, the Principal
Manager of CHSO Partners II, LLC and one designated representative of Capricorn Investment Group, LLC. Mr. Uphoff and Capricorn
Investment Group may be deemed to have shared voting and investment control with respect to the shares held by the funds managed
by CHSO Partners II, LLC.
Capricorn Investment Group, LLC is the general partner of Carthage, LP and the investment manager of Pacific Sequoia Holdings, LLC,
The Skoll Foundation and The Skoll Fund.
The address for each of the Capricorn Funds is c/o Capricorn Investment Group LLC, 250 University Avenue, Palo Alto, California
94301. CHSO Partners, LLC and CHSO Partners II, LLC’s address is 2020 K Street NW, STE 720, Washington, DC 20006
(5)Consists of (A) (i) 6,197,531 shares of our common stock issuable upon conversion of our redeemable convertible preferred stock
expected to be held by Hayfin Heartflow UK Limited and (ii) 4,811,190 shares of our common stock subject to warrants exercisable by
Hayfin Tourmaline Luxco S.a.r.l. within 60 days of June 30, 2025 and (B) shares of common stock issuable upon conversion of
the 2025 Convertible Notes purchased by Hayfin HeartFlow UK Limited. The principal address for the Hayfin Services, LLP and its
affiliates is 65 Davies Street, London W1K5JL. Hayfin Services, LLP is the administrative agent under our 2024 Credit Agreement.
(6)Consists of (A) (i) 8,068,125 shares of our common stock issuable upon conversion of our redeemable convertible preferred stock
expected to be held by Lonnie M. Smith HeartFlow IV Grantor Retained Annuity Trust u/a June 24, 2023, (ii) 1,218,248 shares of our
common stock issuable upon conversion of our redeemable convertible preferred stock held by Lonnie M. Smith HeartFlow GRAT III,
(iii) 408,447 shares of our common stock issuable upon conversion of our redeemable convertible preferred stock held by McKram
Investment Capital II LLC, (iv) 100,000 shares of our common stock held directly by Mr. Smith and (v) 70,312 shares of our common
stock subject to options exercisable by Mr. Smith within 60 days of June 30, 2025 and (B) shares of common stock issuable
upon conversion of the 2025 Convertible Notes purchased by Lonnie M. Smith. Mr. Smith has voting and investment power over the
shares held by McKram Investment Capital II LLC. Mr. Smith has notified us that he will resign from our board of directors upon, and
subject to, the commencement of trading of our common stock on the Nasdaq Global Select Market.
(7)Consists of (A) shares of our common stock issuable upon conversion of our redeemable convertible preferred stock expected to be
held by the following entities, collectively referred to as the “U.S. Venture Partners Funds”: (i) 8,821,388 shares of common stock
issuable upon conversion of our redeemable convertible preferred stock held by U.S. Venture Partners X, L.P. and (ii) 282,212 shares of
common stock issuable upon conversion of our redeemable convertible preferred stock held by USVP X Affiliates, L.P. and (B) (i)
shares of common stock issuable upon conversion of the 2025 Convertible Notes purchased by U.S. Venture Partners X, L.P.
and (ii) shares of common stock issuable upon conversion of the 2025 Convertible Notes purchased by USVP X Affiliates, L.P.
Presidio Management Group X, L.L.C. (“PMG X”) is the general partner of the U.S. Venture Partners Funds. The managing members of
PMG X are Casey Tansey, a member of our Board of Directors, Irwin Federman, Steven M. Krausz, Rick Lewis and Jonathan D. Root,
all of whom may be deemed to share voting and investment power over these shares, but disclaim beneficial ownership except to the
extent of their pecuniary interests therein. The address for the U.S. Venture Partners Funds is 1460 El Camino Real, Suite 100, Menlo
Park, California 94025.
(8)Consists of shares of our common stock issuable upon conversion of our redeemable convertible preferred stock expected to be held
by the following entities, collectively referred to as “Baillie Gifford Funds”: (i) 435,065 shares of common stock issuable upon conversion
of our redeemable convertible preferred stock held by Host-Plus Pty Limited, (ii) 127,703 shares of common stock issuable upon
conversion of our redeemable convertible preferred stock held by Interventure Equity Investments Limited, (iii) an aggregate
of 4,206,595 shares of common stock issuable upon conversion of our redeemable convertible preferred stock held by Scottish
Mortgage Investment Trust plc, (iv) 227,050 shares of common stock issuable upon conversion of our redeemable convertible preferred
stock held by The Board of Trustees of the Saskatchewan Healthcare Employees' Pension Plan, (v) 3,292,033 shares of common stock
issuable upon conversion of our redeemable convertible preferred stock held by The Schiehallion Fund Limited, (vi) 249,612 shares of
common stock issuable upon conversion of our redeemable convertible preferred stock held by The States of Jersey Public Employees
Contributory Retirement Scheme, (vii) 194,236 shares of common stock issuable upon conversion of our redeemable convertible
preferred stock held by Vision Super Pty Ltd, and (viii) 45,229 shares of common stock issuable upon conversion of our redeemable
convertible preferred stock held by Warman Investments Pty Limited. Baillie Gifford Overseas Limited has been appointed to act for and
on behalf of, as direct investment manager, for each of Warman Investments Pty Limited, Host-Plus Pty Limited, Interventure Equity
Investments Limited, The Board of Trustees of the Saskatchewan Healthcare Employees' Pension Plan, Vision Super Pty Ltd and The
Schiehallion Fund Limited with full voting and investment power. Baillie Gifford & Co has been appointed to act for and on behalf of, as
direct investment manager, for each of Scottish Mortgage Investment Trust plc and The States of Jersey Public Employees Contributory
Retirement Scheme with full voting and investment power. The address for the Baillie Gifford Funds is Calton Square, 1 Greenside Row,
Edinburgh EH1 3AN, Scotland, United Kingdom.
(9)Consists of (i) 1,090,272 shares of our common stock and (ii) 3,085,561 shares of our common stock subject to options exercisable
within 60 days of June 30, 2025.
(10)Consists of (A) (i) 335,260 shares of our common stock and (ii) 238,262 shares of our common stock subject to options exercisable
within 60 days of June 30, 2025 and (B) shares of common stock issuable upon conversion of the 2025 Convertible Notes
purchased by Vikram Verghese.
(11)Consists of (i) 626,836 shares of our common stock subject to options exercisable within 60 days of June 30, 2025, and includes (ii)
349,026 shares of our common stock expected to be held by family trusts established by Dr. Rogers for the benefit of certain members
of his family and (iii) 75,957 shares of our common stock expected to be held by a trust beneficially owned by his wife. Dr. Rogers may
be deemed to beneficially own such shares.
(12)Consists of (i) 164,270 shares of our common stock, (ii) 398,016 shares of our common stock issuable upon conversion of our
redeemable convertible preferred stock and (iii) 287,291 shares of our common stock subject to options exercisable within 60 days
of June 30, 2025.
(13)Consists of (A) (i) 107,395 shares of our common stock and (ii) 7,708 shares of our common stock subject to options exercisable within
60 days of June 30, 2025 and (B) shares of common stock issuable upon conversion of the 2025 Convertible Notes purchased
by Timothy C. Barabe.
(14)Consists of (i) 129,687 shares of our common stock and (ii) 5,625 shares of our common stock subject to options exercisable within 60
days of June 30, 2025.
(15)Does not include shares of our common stock issuable upon conversion of our redeemable convertible preferred stock held by BCLS
Fund III Investments, LP or our 2025 Convertible Notes purchased by BCLS Fund III Investments, LP. Dr. Downing is a managing
director of Bain Capital Life Sciences. Dr. Downing, a current member of our board of directors, has notified us that he will resign from
our board of directors upon, and subject to, the commencement of trading of our common stock on the Nasdaq Global Select Market.
(16)Consists of 117,187 shares of our common stock subject to options exercisable within 60 days of June 30, 2025.
(17)Includes (A) the shares described in footnote 7 and (B) shares of common stock issuable upon conversion of the 2025
Convertible Notes purchased by Casey M. Tansey.
(18)Consists of (i) 400,000 shares of our common stock and (ii) 460,301 shares of our common stock subject to options exercisable within
60 days of June 30, 2025, and includes (iii) 2,265,280 shares expected to be held by various family trusts established by Dr. Taylor and
(iv) 117,220 shares expected to be held by various family members. Dr. Taylor may be deemed to beneficially own such
shares. 600,000 shares expected to be held by Dr. Taylor and his trust have been pledged to Section Capital Partners, LP.
(19)Includes the shares described in footnotes 1, 2, 6 and 9 through 18 above.
Description of capital stock
The following descriptions are summaries of our capital stock and the material terms of our amended and
restated certificate of incorporation, which will become effective upon the completion of this offering, and
our amended and restated bylaws, which will become effective upon the effectiveness of the amended
and restated certificate of incorporation. Because the following descriptions are only summaries, they do
not contain all of the information that may be important to you. Reference is made to the more detailed
provisions of, and the descriptions are qualified in their entirety by reference to, these documents, copies
of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part,
and applicable law.
General
Upon the completion of this offering and the filing of our amended and restated certificate of incorporation,
our authorized capital stock will consist of 300,000,000 shares of capital stock, par value $0.001 per
share, of which:
•250,000,000 shares are designated as common stock; and
•50,000,000 shares are designated as preferred stock.
As of March 31, 2025, there would have been shares of common stock outstanding, held of
record by stockholders, assuming the conversion of 122,231,454 of our outstanding redeemable
convertible preferred stock immediately prior to the completion of this offering and 2025 Convertible Notes
upon the completion of this offering into shares of common stock, based on the assumed initial
public offering price of $ per share, which is the midpoint of the price range set forth on the cover
page of this prospectus. On , 2025, we consummated a -for- reverse stock split of
our common stock.
Common stock
Voting rights
Holders of our common stock are entitled to one vote per share on all matters submitted to a vote of
stockholders.
Our amended and restated certificate of incorporation will not provide for cumulative voting for the
election of directors. Subject to the rights of the holders of one or more series of preferred stock, director
candidates standing for election will be elected by a plurality of the votes cast by our stockholders present
in person or represented by proxy at the meeting and entitled to vote thereon. Our amended and restated
certificate of incorporation will retain a classified board of directors, divided into three classes with
staggered three-year terms. Only one class of directors will be elected at each annual meeting of our
stockholders, with the other classes continuing for the remainder of their respective terms.
Dividend rights
Subject to preferences that may be applicable to any preferred stock, the holders of our common stock
will be entitled to receive ratably, on a per share basis, any dividends declared by our board of directors
out of assets legally available.
Liquidation rights
Subject to preferences that may be applicable to any preferred stock, in the event of any voluntary or
involuntary liquidation, dissolution or winding up, after payment or provision for payment of our debts and
other liabilities, the holders of shares of our common stock will be entitled to receive, ratably in proportion
to the number of shares held by the holder, all our remaining assets available for distribution to our
stockholders.
No preemptive or similar rights
The holders of our common stock will not be entitled to preemptive, subscription or conversion rights.
There will be no redemption or sinking fund provisions.
Preferred stock
Immediately prior to the completion of this offering, all outstanding shares of our redeemable convertible
preferred stock will be converted into shares of our common stock. Our amended and restated certificate
of incorporation will authorize 50,000,000 shares of preferred stock and will provide that preferred stock
may be issued from time to time in one or more series. Our board of directors will be authorized to fix the
voting rights, if any, designations, powers, preferences, the relative, participating, optional, special and
other rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each
series. These rights, powers and preferences could include dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms, and the number of shares
constituting, or the designation of, such series, any or all of which may be greater than the rights of
common stock. Our board of directors will be able to, without stockholder approval, issue shares of
preferred stock with voting and other rights that could adversely affect the voting power and other rights of
the holders of the common stock and could have anti-takeover effects. The ability of our board of directors
to issue shares of preferred stock without stockholder approval could have the effect of delaying,
deferring or preventing a change of control or the removal of existing management.
Stock options
As of March 31, 2025, we had outstanding 25,066,625 shares of our common stock issuable upon the
exercise of outstanding stock options, with a weighted-average exercise price of $1.71 per share,
and 15,554,075 shares were unvested, with a weighted average exercise price of $1.59 per share. For
additional information regarding the terms of our equity incentive plans, see the section titled “Executive
and director compensation—2025 Performance incentive plan” and “Executive and director compensation
—Amended and restated 2009 equity incentive plan.”
Warrants
As of March 31, 2025, we had outstanding warrants to purchase an aggregate of 4,811,190 shares of our
common stock, with an exercise price of $0.01 per share, issuable upon the exercise of such outstanding
warrants. The warrants will terminate on the ten-year anniversary of the issuance date, however, the
warrants will automatically net exercise immediately prior to termination if the fair market value of one
share of common stock exceeds the then current exercise price per share of common stock. In
connection with certain change of control transactions, which include SPAC combinations, mergers,
consolidations and the sale or lease of substantially all of the assets of the Company, the warrants will
also automatically net exercise if the fair market value of one share of common stock exceeds the then
current exercise price per share of common stock. The warrants do not automatically net exercise in
connection with an initial public offering.
Registration rights
Upon the completion of this offering and subject to the lock-up agreements entered into in connection with
this offering and federal securities laws, holders of shares of our common stock that will be issued upon
the conversion of our redeemable convertible preferred stock in connection with this offering and the
holder of shares of our common stock issuable or issued upon exercise of certain outstanding warrants to
purchase shares of our common stock will initially be entitled to certain registration rights under the
Securities Act. These securities are referred to as registrable securities. The holders of these registrable
securities possess registration rights pursuant to the terms of the Investors’ Rights Agreement and are
described in additional detail below. The registration of shares of our common stock pursuant to the
exercise of the registration rights described below would enable the holders to trade the registered shares
without restriction under the Securities Act when the applicable registration statement is declared
effective. We will pay the registration expenses, other than underwriting discounts, selling commissions,
stock transfer taxes, and fees and disbursements in excess of $100,000 to one counsel for the holders, of
the securities registered pursuant to the demand, Form S-3 and piggyback registrations described below.
Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified
conditions and limitations, to limit the number of securities the holders may include. The demand, Form
S-3 and piggyback registration rights described below will terminate upon the earliest to occur of (i) a
Liquidation Event (as defined in our amended and restated certificate of incorporation) where the
stockholders receive cash and/or publicly traded securities or the holders receive reasonably comparable
registration rights, (ii) with respect to each holder, such time after the completion of this offering after
which Rule 144 of the Securities Act (“Rule 144”) or another similar exemption under the Securities Act is
available for the sale of all of such holder’s shares without limitation, during a three-month period without
registration and such holder holds less than 1% of the outstanding capital stock of the company or (iii) the
date three years after the completion of this offering.
Demand registration rights
Upon the completion of this offering, holders of up to approximately million shares of our common
stock issued upon conversion of our redeemable convertible preferred stock and the holder of warrants to
purchase up to an aggregate of shares of our common stock will be entitled to certain demand
registration rights. Beginning six months after the effectiveness of the registration statement of which this
prospectus is a part, holders holding, collectively, at least a majority of the registrable securities held by
the holders of common stock issued upon conversion of our redeemable convertible preferred stock then
outstanding may, on not more than two occasions, request that we register at least 40% of the registrable
securities held by the holders of common stock issued upon conversion of our redeemable convertible
preferred stock then outstanding on a Form S-1 registration statement, subject to certain specified
exceptions. If we determine that it would be seriously detrimental to us and our stockholders to effect
such a demand registration, we have the right to defer such registration, not more than twice in any 12-
month period, for a period of up to 120 days. In addition, we will not be required to effect a demand
registration during the period beginning 60 days prior to our good faith estimate of the date of the filing of
and ending on a date 180 days following the effectiveness of a registration statement relating to a
registration initiated by us or if registration on Form S-3 is available.
Form S-3 registration rights
Upon the completion of this offering, holders of up to approximately million shares of our common
stock issued upon conversion of our redeemable convertible preferred stock and the holder of warrants to
purchase up to an aggregate of shares of our common stock will be entitled to certain Form S-3
registration rights. At any time when the company is qualified to file a Form S-3 registration statement,
holders holding, collectively, at least 30% of the registrable securities then outstanding may request that
we register registrable securities having an anticipated aggregate offering price of at least $10.0 million,
net of underwriting discounts and certain other expenses. These holders may make an unlimited number
of requests for registration on Form S-3; however, we will not be required to effect a registration on Form
S-3 if we have effected two such registrations pursuant to such requests within the 12-month period
preceding the date of the request. In addition, if we determine that it would be seriously detrimental to us
and our stockholders to effect such a registration, we have the right to defer such registration, not more
than twice in any 12-month period, for a period of up to 120 days. Lastly, we will not be required to effect a
registration on Form S-3 during the period beginning 30 days prior to our good faith estimate of the date
of the filing of and ending on a date 90 days following the effectiveness of a registration statement relating
to a registration initiated by us.
Piggyback registration rights
Pursuant to the Investors’ Rights Agreement, if we register any of our securities either for our own account
or for the account of other security holders, other than through this offering, holders of up to
approximately million shares of our common stock issued upon conversion of our redeemable
convertible preferred stock and the holder of warrants to purchase up to an aggregate of shares of
our common stock will be entitled to customary “piggyback” registration rights allowing them to include
their securities in such registration, subject to specified conditions, limitations and exceptions.
Anti-takeover effects of provisions of the proposed amended and restated
certificate of incorporation and bylaws and applicable law
Our amended and restated certificate of incorporation and bylaws will contain provisions that could have
the effect of delaying, deferring or discouraging another party from acquiring control of us. These
provisions and certain provisions of Delaware law, which are summarized below, could discourage
takeovers, coercive or otherwise, and as a consequence, they might also inhibit temporary fluctuations in
the market price of our common stock that often result from actual or rumored hostile takeover attempts.
These provisions are also designed, in part, to encourage persons seeking to acquire control of us to
negotiate first with our board of directors. It is also possible that these provisions might have the effect of
preventing changes in our management and could make it more difficult to accomplish transactions that
stockholders might otherwise deem to be in their best interests.
Classified board of directors
Our amended and restated certificate of incorporation will provide that our board of directors be classified
into three classes of directors, with each class serving a staggered three-year term. As a result, in most
circumstances, a person can gain control of our board of directors only by successfully engaging in a
proxy contest at two or more annual meetings of our stockholders.
Authorized but unissued shares
Our authorized but unissued common stock and preferred stock will be available for future issuances
without stockholder approval and could be utilized for a variety of corporate purposes, including future
offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could render more difficult or discourage
an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Written consent; special meeting of stockholders
Our amended and restated certificate of incorporation and bylaws will provide that stockholder action may
not be taken by written consent, which forces stockholder action to be taken at an annual or special
meeting of our stockholders.
Our amended and restated certificate of incorporation and bylaws will provide that, subject to the rights of
any holders of preferred stock, special meetings of our stockholders, for any purpose or purposes, may
be called only by (i) the chair of the board, (ii) the chief executive officer or (iii) the secretary at the
direction of our board of directors pursuant to a resolution adopted by a majority of our board of directors.
Advance notice requirements for stockholder proposals and director nominations
Our amended and restated bylaws will provide that stockholders seeking to bring business before the
annual meeting of our stockholders or to nominate candidates for election as directors at the annual
meeting of our stockholders or, in certain instances as provided in our bylaws, a special meeting of our
stockholders must provide timely notice of their intent in writing.
To give timely notice, the notice must be delivered to the secretary at our principal executive offices not
later than the close of business on the 90th day nor earlier than the 120th day prior to the first anniversary
of the preceding year’s annual meeting. However, if the date of the annual meeting is more than 30 days
before or more than 70 days after such anniversary date, the notice must be delivered not earlier than the
120th day prior to such annual meeting and not later than the close of business on the later of the 90th
day prior to such annual meeting or the tenth day following the day on which public announcement of the
date of the annual meeting is first made or sent by us.
Our amended and restated bylaws will also specify certain informational and other requirements as to the
form and content of the notice. These provisions, if not satisfied on a timely basis or at all, may preclude
our stockholders from bringing business or director nominations before the meeting of our stockholders.
Election and removal of directors
Our amended and restated certificate of incorporation and bylaws will contain provisions that establish
specific procedures for appointing and removing members of the board of directors.
Under the amended and restated certificate of incorporation, our directors may be removed from office,
but only for cause, which requires approval by the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all then-outstanding shares of capital stock entitled to vote generally in
the election of directors.
Vacancies and newly created directorships on our board of directors may be filled only by a majority vote
of the directors then in office, even if less than a quorum, or by a sole remaining director (and not by
stockholders). Any new director shall hold office for the remainder of the full term of the class of directors
to which the new directorship was added or in which the vacancy occurred and until his or her successor
has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement,
disqualification or removal. The treatment of vacancies has the effect of making it more difficult for
stockholders to change the composition of the board of directors.
No cumulative voting
The DGCL provides that stockholders are not entitled to cumulate votes in the election of directors unless
a corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of
incorporation will not authorize cumulative voting rights for our stockholders.
The absence of cumulative voting makes it more difficult for a minority stockholder to gain a seat on our
board of directors to influence a decision by our board of directors, including regarding any potential
merger, tender offer or other potential takeover transaction.
Amendments to our certificate of incorporation and bylaws
Our amended and restated certificate of incorporation and bylaws will provide that the affirmative vote of
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all then-outstanding
shares of capital stock entitled to vote generally in the election of directors is required to amend certain
provisions of our certificate of incorporation, including provisions relating to the size of the board, removal
of directors, special meetings, actions by written consent and cumulative voting. The affirmative vote of
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then
outstanding shares of capital stock entitled to vote generally in the election of directors will be required to
amend or repeal our bylaws, although our bylaws may be amended by a simple majority vote of our board
of directors.
Delaware anti-takeover statute
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general,
Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in
a business combination with an interested stockholder for a period of three years following the date the
person became an interested stockholder unless:
•prior to the date of the transaction, our board of directors approved either the business combination or
the transaction that resulted in the stockholder becoming an interested stockholder;
•upon completion of the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining the voting
stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (A)
shares owned by persons who are directors and also officers and (B) shares owned by employee
stock plans in which employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer; or
•at or subsequent to the date of the transaction, the business combination is approved by our board of
directors and authorized at an annual or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting
stock that is not owned by the interested stockholder.
Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in
a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder”
is a person who, together with affiliates and associates, owns or, within three years prior to the
determination of interested stockholder status, owned 15% or more of our outstanding voting stock. This
provision is expected to have an anti-takeover effect with respect to transactions our board of directors
does not approve in advance. Moreover, Section 203 may discourage attempts that might result in a
premium over the market price for the shares of our common stock held by stockholders.
Choice of forum
Our amended and restated certificate of incorporation will generally designate, unless we otherwise
consent in writing, the Court of Chancery (or, if such court does not have subject matter jurisdiction
thereof, the federal district court of the State of Delaware) as the sole and exclusive forum for (i) any
derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any current or former director, officer, employee or agent to us or our stockholders,
or any claim for aiding and abetting any such alleged breach, (iii) any action asserting a claim arising
pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or bylaws 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 of the law of the State of Delaware.
Our amended and restated certificate of incorporation will also provide that the federal district courts of
the United States will be the exclusive forum for the resolution of any complaint asserting a cause of
action arising under the Securities Act. Further, our amended and restated certificate of incorporation will
provide that the foregoing choice of forum provisions 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 courts of the United States
have exclusive jurisdiction.
Our amended and restated certificate of incorporation will also provide that any person or entity
purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have
notice of and consented to the foregoing provisions of the amended and restated certificate of
incorporation. Although our amended and restated certificate of incorporation will contain the choice of
forum provision described above, it is possible that a court could find that such a provision is inapplicable
for a particular claim or action or that such provision is unenforceable.
This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or any of our directors, officers, other employees or stockholders,
which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed
to have waived our compliance with federal securities laws and the rules and regulations thereunder.
Furthermore, 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 a court could find these
types of provisions to be inapplicable or unenforceable.
Limitations on liability and indemnification
For a discussion of liability and indemnification, see the section titled “Management—Limitations on
liability and indemnification matters.”
Transfer agent and registrar
The transfer agent and registrar for our common stock will be Fidelity Stock Transfer Solutions LLC. The
transfer agent’s address is 245 Summer Street, Boston, MA 02210.
Nasdaq listing
We have applied to list our common stock on the Nasdaq Global Select Market under the symbol “HTFL,”
and this offering is contingent upon obtaining such approval.
Shares eligible for future sale
Prior to this offering, there has been no public market for our common stock, and a liquid trading market
for our common stock may not develop or be sustained after this offering. Future sales of our common
stock, including shares issued upon the Preferred Stock Conversion, the Convertible Notes Conversion
and the exercise of outstanding options or warrants, in the public market after the completion of this
offering, or the perception that those sales may occur, could adversely affect the prevailing market price
for our common stock from time to time or impair our ability to raise equity capital in the future. Although
we have applied to have our common stock listed on the Nasdaq Global Select Market, we cannot assure
you that there will be an active public market for our common stock. As described below, only a limited
number of shares of our common stock will be available for sale in the public market for a period of
several months after the completion of this offering due to contractual and legal restrictions on resale
described below. Future sales of our common stock in the public market either before or after restrictions
lapse, or the perception that those sales may occur, could adversely affect the prevailing market price of
our common stock at such time and our ability to raise equity capital at a time and price we deem
appropriate.
Sale of restricted shares
Based on the number of shares of our common stock outstanding as of March 31, 2025, upon the
completion of this offering and assuming (i) the Preferred Stock Conversion, (ii) the Convertible Notes
Conversion, (iii) no exercise of the underwriters’ option to purchase additional shares of our common
stock and (iv) no exercise of outstanding options or warrants, we will have outstanding an aggregate
of shares of common stock.
Of these shares, all of the shares of common stock to be sold in this offering will be freely
tradable in the public market without restriction or further registration under the Securities Act, unless the
shares are held by any of our “affiliates” as such term is defined in Rule 144 or subject to lock-up
agreements. All remaining shares of common stock held by existing stockholders will be “restricted
securities,” as such term is defined in Rule 144. These restricted securities were issued and sold by us in
private transactions and are eligible for public sale only if registered under the Securities Act or if they
qualify for an exemption from registration under the Securities Act, including the exemptions provided by
Rule 144 or Rule 701 of the Securities Act (“Rule 701”), which rules are summarized below.
As a result of the lock-up agreements referred to below and the provisions of Rule 144 and Rule 701,
based on the number of shares of our common stock outstanding (calculated as of March 31, 2025 on the
basis of the assumptions described above and assuming no exercise of the underwriters’ option to
purchase additional shares, if any, and no exercise of outstanding options), the shares of our common
stock (excluding the shares sold in this offering) that will be available for sale in the public market are as
follows:
| | |
Approximate number of shares | | First date available for sale into public market |
| | 181 days after the date of this prospectus, upon expiration of the lock-up market stand-off agreements referred to below, subject in some cases to applicable volume, manner of sale and other limitations under Rule 144 and Rule 701. |
| | |
We may issue shares of common stock from time to time as consideration for future acquisitions,
investments, or other corporate purposes. In the event that any such acquisition, investment, or other
transaction is significant, the number of shares of common stock that we may issue may in turn be
significant. We may also grant registration rights covering those shares of common stock issued in
connection with any such acquisition and investment.
In addition, the shares of common stock reserved for future issuance under the 2025 Plan will become
eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules,
the lock-up agreements, a registration statement under the Securities Act, or an exemption from
registration, including Rule 144 and Rule 701.
Rule 144
Under Rule 144, as currently in effect, once we have been subject to the public company reporting
requirements of the Exchange Act for at least 90 days, and we are current in our Exchange Act reporting
at the time of sale, a person (or persons whose shares are required to be aggregated) who is not deemed
to have been one of our “affiliates” for purposes of Rule 144 at any time during the 90 days preceding a
sale and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six
months, including the holding period of any prior owner other than one of our “affiliates,” is entitled to sell
those shares in the public market (subject to the lock-up agreement referred to below, if applicable)
without complying with the manner of sale, volume limitations, or notice provisions of Rule 144, but
subject to compliance with the public information requirements of Rule 144. If such a person
has beneficially owned the shares proposed to be sold for at least one year, including the holding period
of any prior owner other than “affiliates,” then such person is entitled to sell such shares in the public
market without complying with any of the requirements of Rule 144 (subject to the lock-up agreement
referred to below, if applicable).
In general, under Rule 144, as currently in effect, once we have been subject to the public company
reporting requirements of the Exchange Act for at least 90 days, our “affiliates,” as defined in Rule 144,
who have beneficially owned the shares proposed to be sold for at least six months, are entitled to sell in
the public market, upon expiration of any applicable lock-up agreements and within any three-month
period, a number of those shares of our common stock that does not exceed the greater of:
•1% of the number of shares of common stock then outstanding, which will equal
approximately shares of common stock immediately upon the completion of this
offering (calculated as of March 31, 2025 on the basis of the assumptions described above and
assuming no exercise of the underwriters’ option to purchase additional shares and no exercise of
outstanding options or warrants subsequent to March 31, 2025); or
•the average weekly trading volume of our common stock on the Nasdaq Global Select Market during
the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
Such sales under Rule 144 by our “affiliates” or persons selling shares on behalf of our “affiliates” are also
subject to certain manner of sale provisions, notice requirements, and requirements related to the
availability of current public information about us. Notwithstanding the availability of Rule 144, the holders
of substantially all of our restricted securities have entered into lock-up agreements as referenced above,
and their restricted securities will become eligible for sale (subject to the above limitations under Rule
144) upon the expiration of the restrictions set forth in those agreements.
Rule 701
In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants, or
advisors who acquired common stock from us in connection with a written compensatory stock or option
plan or other written agreement in compliance with Rule 701 before the effective date of the registration
statement of which this prospectus is a part (to the extent such common stock is not subject to a lock-up
agreement) and who are not our “affiliates” as defined in Rule 144 during the immediately preceding 90
days, is entitled to rely on Rule 701 to resell such shares beginning 90 days after the date of this
prospectus in reliance on Rule 144, but without complying with the notice, manner of sale, public
information requirements, or volume limitation provisions of Rule 144. Persons who are our “affiliates”
may resell those shares beginning 90 days after the date of this prospectus without compliance with
minimum holding period requirements under Rule 144 (subject to the terms of the lock-up agreement
referred to below, if applicable).
Lock-up and market stand-off agreements
In connection with this offering, we, our directors, our executive officers, and the holders of substantially
all of our common stock, stock options, and other securities convertible into or exercisable or
exchangeable for our common stock, have agreed, that without the prior written consent of J.P. Morgan
Securities LLC, Morgan Stanley & Co. LLC and Piper Sandler & Co. on behalf of the underwriters, subject
to certain exceptions more fully described under the section titled “Underwriting”, we and they will not,
among other things, sell or otherwise transfer or dispose of any of our securities during the period from
the date of this prospectus continuing through the date 180 days after the date of this prospectus. See the
section titled “Underwriting” for additional information.
In addition to the restrictions contained in the lock-up agreements described above, we have entered into
agreements with certain securityholders, including the Investors’ Rights Agreement, our standard form of
option agreement and warrants that contain market stand-off provisions or incorporate market stand-off
provisions from our equity incentive plan imposing restrictions on the ability of such securityholders to
offer, sell, or transfer our equity securities for a period of 180 days following the date of this prospectus.
Following the lock-up periods set forth in the agreements described above, and assuming that J.P.
Morgan Securities LLC, Morgan Stanley & Co. LLC and Piper Sandler & Co. do not release any parties
from these agreements, all of the shares of our common stock that are restricted securities or are held by
our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance
with Rule 144 under the Securities Act.
Registration rights
Upon the completion of this offering, the holders of approximately shares of our common stock
will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to
the lock-up agreements described under “—Lock-up agreements” above. Registration of these shares
under the Securities Act would result in the shares becoming freely tradable without restriction under the
Securities Act, except for shares purchased by affiliates, immediately upon the effectiveness of the
relevant filed registration statement, subject to the terms of the lock-up agreements described above. Any
sales of securities by these stockholders could have a material adverse effect on the trading price of our
common stock.
Equity incentive plans
We intend to file with the SEC a registration statement on Form S-8 under the Securities Act to register
our shares issued or reserved for issuance under our equity incentive plans. Such registration statement
is expected to be filed and become effective as soon as practicable after the completion of this offering.
Accordingly, shares registered under such registration statement will be available for sale in the open
market following its effective date, subject to Rule 144 volume limitations, vesting restrictions, and the
lock-up agreements described above, if applicable.
Rule 10b5-1 trading plans
Following the completion of this offering, certain of our officers, directors, and significant stockholders may
adopt written plans, known as Rule 10b5-1 trading plans, in which they will contract with a broker to buy
or sell shares of our common stock on a periodic basis to diversify their assets and investments. Under
these Rule 10b5-1 trading plans, a broker may execute trades pursuant to parameters established by the
officer, director, or stockholder when entering into the plan, without further direction from such officer,
director, or stockholder. Such sales would not commence until the expiration of the applicable lock-up
agreements entered into by such officer, director, or stockholder in connection with this offering.
Material U.S. federal income tax consequences to non-U.S.
holders
The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S.
Holders (as defined below) of the purchase, ownership, and disposition of our common stock issued
pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The
effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local, or
non-U.S. tax laws are not discussed. This discussion is based on the U.S. Internal Revenue Code of
1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and
published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in
each case in effect as of the date hereof. These authorities may change or be subject to differing
interpretations. Any such change or differing interpretation may be applied retroactively in a manner that
could adversely affect a Non-U.S. Holder. We have not sought and will not seek any rulings from the IRS
regarding the matters discussed below. There can be no assurance the IRS or a court will not take a
contrary position to that discussed below regarding the tax consequences of the purchase, ownership,
and disposition of our common stock.
This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the
meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not
address all U.S. federal income tax consequences relevant to a Non-U.S. Holder’s particular
circumstances, including the impact of the Medicare contribution tax on net investment income and the
alternative minimum tax. In addition, it does not address consequences relevant to Non-U.S. Holders
subject to special rules, including, without limitation:
•U.S. expatriates and former citizens or long-term residents of the United States;
•persons holding our common stock as part of a hedge, straddle, or other risk reduction strategy or as
part of a conversion transaction or other integrated investment;
•banks, insurance companies, and other financial institutions;
•brokers, dealers, or traders in securities;
•“controlled foreign corporations,” “passive foreign investment companies,” and corporations that
accumulate earnings to avoid U.S. federal income tax;
•partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax
purposes (and investors therein);
•tax-exempt organizations or governmental organizations;
•persons deemed to sell our common stock under the constructive sale provisions of the Code;
•persons who hold or receive our common stock pursuant to the exercise of any employee stock
option or otherwise as compensation;
•tax-qualified retirement plans; and
•“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the
interests of which are held by qualified foreign pension funds.
If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax
treatment of a partner in the partnership will depend on the status of the partner, the activities of the
partnership, and certain determinations made at the partner level. Accordingly, partnerships holding our
common stock and the partners in such partnerships should consult their tax advisors regarding the U.S.
federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE.
INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION
OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS
ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF OUR
COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER
THE LAWS OF ANY STATE, LOCAL, OR NON-U.S. TAXING JURISDICTION OR UNDER ANY
APPLICABLE INCOME TAX TREATY.
Definition of a Non-U.S. Holder
For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is
neither a “U.S. person” nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S.
person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
•an individual who is a citizen or resident of the United States;
•a corporation created or organized under the laws of the United States, any state thereof or the
District of Columbia;
•an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
•a trust that (i) is subject to the primary supervision of a U.S. court and all substantial decisions of
which are subject to the control of one or more “United States persons” (within the meaning of Section
7701(a)(30) of the Code), or (ii) has a valid election in effect to be treated as a United States person
for U.S. federal income tax purposes.
Distributions
As described in the section titled “Dividend policy,” we do not anticipate paying any cash dividends in the
foreseeable future. However, if we do make distributions of cash or property on our common stock, such
distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our
current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital
and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but
not below zero. Any excess will be treated as capital gain and will be treated as described under the
subsection titled “—Sale or other taxable disposition” below.
Subject to the discussion below regarding effectively connected income, dividends paid to a Non-U.S.
Holder will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends
(or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a
valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the
lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that
qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an
appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding
their entitlement to benefits under any applicable tax treaties.
If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a
trade or business within the United States (and, if required by an applicable income tax treaty, the Non-
U.S. Holder maintains a permanent establishment in the United States to which such dividends are
attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above.
To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS
Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct
of a trade or business within the United States.
Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis
at the regular rates applicable to U.S. persons. A Non-U.S. Holder that is a corporation also may be
subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax
treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should
consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Sale or other taxable disposition
A Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or
other taxable disposition of our common stock unless:
•the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the
United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a
permanent establishment in the United States to which such gain is attributable);
•the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or
more during the taxable year of the disposition and certain other requirements are met; or
•our common stock constitutes a U.S. real property interest (“USRPI”) by reason of our status as a
U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes.
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net
income basis at the regular rates applicable to U.S. persons. A Non-U.S. Holder that is a corporation also
may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable
income tax treaty) on such effectively connected gain, as adjusted for certain items.
A Non-U.S. Holder described in the second bullet point above will be subject to U.S. federal income tax at
a rate of 30% (or such lower rate specified by an applicable income tax treaty) on gain realized upon the
sale or other taxable disposition of our common stock, which may be offset by certain U.S. source capital
losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United
States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to
such losses.
With respect to the third bullet point above, we believe we currently are not, and do not anticipate
becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on
the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests
and our other business assets, there can be no assurance we currently are not a USRPHC or will not
become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or
other taxable disposition of our common stock by a Non-U.S. Holder will not be subject to U.S. federal
income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on
an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or
less of our common stock throughout the shorter of the five-year period ending on the date of the sale or
other taxable disposition or the Non-U.S. Holder’s holding period.
Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide
for different rules.
Information reporting and backup withholding
Payments of dividends on our common stock will not be subject to backup withholding, provided the Non-
U.S. Holder certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E, or
W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with
the IRS in connection with any distributions on our common stock paid to the Non-U.S. Holder, regardless
of whether such distributions constitute dividends or whether any tax was actually withheld. In addition,
proceeds of the sale or other taxable disposition of our common stock within the United States or
conducted through certain U.S.-related brokers generally will not be subject to backup withholding or
information reporting if the applicable withholding agent receives the certification described above or the
Non-U.S. Holder otherwise establishes an exemption. Proceeds of a disposition of our common stock
conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated
relationships with the United States generally will not be subject to backup withholding or information
reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions
of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder
resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules
may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability,
provided the required information is timely furnished to the IRS.
Additional withholding tax on payments made to foreign accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly
referred to as the Foreign Account Tax Compliance Act (“FATCA”)) on certain types of payments made to
non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may
be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below) gross
proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or
a “non-financial foreign entity” (each as defined in the Code), unless (i) the foreign financial institution
undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity either certifies it
does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying
information regarding each substantial United States owner, or (iii) the foreign financial institution or non-
financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign
financial institution and is subject to the diligence and reporting requirements in (i) above, it must enter
into an agreement with the U.S. Department of the Treasury requiring, among other things, that it
undertake to identify accounts held by certain “specified United States persons” or “United States owned
foreign entities” (each as defined in the Code), annually report certain information about such accounts,
and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other
account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental
agreement with the United States governing FATCA may be subject to different rules.
Under applicable Treasury Regulations and administrative guidance, withholding under FATCA generally
applies to payments of dividends on our common stock. While withholding under FATCA would have
applied also to payments of gross proceeds from the sale or other disposition of our common stock
beginning on January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments
of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until
final Treasury Regulations are issued.
Prospective investors should consult their tax advisors regarding the potential application of withholding
under FATCA to their investment in our common stock.
Underwriting
We are offering the shares of common stock described in this prospectus through a number of
underwriters. J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Piper Sandler & Co. are acting
as joint book-running managers of the offering and as representatives of the underwriters. We have
entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the
underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally
agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth
on the cover page of this prospectus, the number of shares of common stock listed next to its name in the
following table:
| | |
| | |
J.P. Morgan Securities LLC .................................................................................................................. | | |
Morgan Stanley & Co. LLC ................................................................................................................... | | |
Piper Sandler & Co. ............................................................................................................................... | | |
Stifel, Nicolaus & Company, Incorporated ......................................................................................... | | |
Canaccord Genuity LLC ....................................................................................................................... | | |
Total .......................................................................................................................................................... | | |
| | |
The underwriters are committed to purchase all the shares of common stock offered by us if they
purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may also be increased or the offering may be
terminated.
The underwriters propose to offer the shares of common stock directly to the public at the initial public
offering price set forth on the cover page of this prospectus and to certain dealers at that price less a
concession not in excess of $ per share. After the initial offering of the shares to the public, if all of
the shares of common stock are not sold at the initial public offering price, the underwriters may change
the offering price and the other selling terms. Sales of any shares made outside of the United States may
be made by affiliates of the underwriters.
The underwriters have an option to buy up to additional shares of common stock from us to
cover sales of shares by the underwriters which exceed the number of shares specified in the table
above. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase
additional shares. If any shares are purchased with this option to purchase additional shares, the
underwriters will purchase shares in approximately the same proportion as shown in the table above. If
any additional shares of common stock are purchased, the underwriters will offer the additional shares on
the same terms as those on which the shares are being offered.
The underwriting fee is equal to the public offering price per share of common stock less the amount paid
by the underwriters to us per share of common stock. The underwriting fee is $ per share. The
following table shows the per share and total underwriting discounts and commissions to be paid to the
underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase
additional shares.
| | | | |
| | Without option to purchase additional shares exercise | | With full option to purchase additional shares exercise |
Per Share ................................................................................................................ | | | | |
Total .......................................................................................................................... | | | | |
| | | | |
We estimate that the total expenses of this offering, including registration, filing and listing fees, printing
fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will
be approximately $ . We have agreed to reimburse the underwriters for expenses relating to the
clearance of this offering with the Financial Industry Regulatory Authority, Inc. in an amount up to $ .
A prospectus in electronic format may be made available on the web sites maintained by one or more
underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to
allocate a number of shares to underwriters and selling group members for sale to their online brokerage
account holders. Internet distributions will be allocated by the representatives to underwriters and selling
group members that may make Internet distributions on the same basis as other allocations.
We have agreed that we will not, subject to certain exceptions, (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, hedge, lend, or otherwise transfer or dispose of, directly or indirectly, or submit to, or
file with, the SEC a registration statement under the Securities Act relating to, any shares of our common
stock or any securities convertible into or exercisable or exchangeable for any shares of our common
stock, or (ii) enter into any swap, hedging, or other agreement that transfers, in whole or in part, any of the
economic consequences of ownership of any shares of common stock or any such other securities, or
publicly disclose the intention to undertake any of the foregoing (regardless of whether any of these
transactions are to be settled by the delivery of shares of common stock or such other securities, in cash
or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC, Morgan
Stanley & Co. LLC and Piper Sandler & Co. for a period of 180 days after the date of this prospectus,
other than the shares of our common stock to be sold in this offering.
The restrictions on our actions, as described above, do not apply to certain transactions, including (i) the
issuance of shares of common stock or securities convertible into or exercisable for shares of our
common stock pursuant to the conversion or exchange of convertible or exchangeable securities or the
exercise of warrants or options (including net exercise) or the settlement of RSUs (including net
settlement), in each case outstanding on the date of the underwriting agreement and described in this
prospectus; (ii) grants of stock options, stock awards, restricted stock, RSUs, or other equity awards and
the issuance of shares of our common stock or securities convertible into or exercisable or exchangeable
for shares of our common stock (whether upon the exercise of stock options or otherwise) to our
employees, officers, directors, advisors, or consultants pursuant to the terms of an equity compensation
plan in effect as of the closing date of this offering and described in this prospectus, provided that such
recipients enter into a lock-up agreement with the underwriters; (iii) the issuance of up to 5% of the
outstanding shares of our common stock, or securities convertible into, exercisable for, or which are
otherwise exchangeable for, our common stock, immediately following the closing date of this offering, in
acquisitions or other similar strategic transactions, provided that such recipients enter into a lock-up
agreement with the underwriters; or (iv) the filing of any registration statement on Form S-8 relating to
securities granted or to be granted pursuant to any plan in effect on the date of the underwriting
agreement and described in this prospectus or any assumed benefit plan pursuant to an acquisition or
similar strategic transaction.
Our directors and executive officers, and holders of substantially all of our common stock, stock options,
and other securities convertible into or exercisable or exchangeable for our common stock (such persons,
the “lock-up parties”) have entered into lock-up agreements with the underwriters prior to the
commencement of this offering pursuant to which each lock-up party, with limited exceptions, for a period
of 180 days after the date of this prospectus (such period, the “restricted period”), may not and may not
cause any of their direct or indirect affiliates to, without the prior written consent of J.P. Morgan Securities
LLC, Morgan Stanley & Co. LLC and Piper Sandler & Co., (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock
or any securities convertible into or exercisable or exchangeable for our common stock (including without
limitation, our common stock or such other securities which may be deemed to be beneficially owned by
the lock-up party in accordance with the rules and regulations of the SEC and securities which may be
issued upon exercise of a stock option or warrant) (collectively with our common stock, the “lock-up
securities”), (ii) enter into any hedging, swap or other agreement or transaction that transfers, in whole or
in part, any of the economic consequences of ownership of the lock-up securities, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery of the lock-up securities, in cash
or otherwise, (iii) make any demand for or exercise any right with respect to the registration of any lock-up
securities, or (iv) publicly disclose the intention to do any of the foregoing.
Such persons or entities have further acknowledged that these undertakings preclude them from
engaging in any hedging or other transactions or arrangements (including, without limitation, any short
sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap
or any other derivative transaction or instrument, however described or defined) designed or intended, or
which could reasonably be expected to lead to or result in, a sale or disposition or transfer (whether by
the lock-up party or any other person) of any economic consequences of ownership, in whole or in part,
directly or indirectly, of any lock-up securities, whether any such transaction or arrangement (or
instrument provided for thereunder) would be settled by delivery of lock-up securities, in cash or
otherwise.
The restrictions described in the immediately preceding paragraph and contained in the lock-up
agreements between the underwriters and the lock-up parties do not apply, subject in certain cases to
various conditions, to certain transactions, including:
(a) transfers of lock-up securities: (i) as a bona fide gift or gifts or charitable contribution, or for bona fide
estate planning purposes, (ii) by will or intestacy or any other testamentary document, (iii) to any member
of the lock-up party’s immediate family or to any trust for the direct or indirect benefit of the lock-up party
or the immediate family of the lock-up party, or if the lock-up party is a trust, to a trustor, trustee or
beneficiary of the trust or to the estate of a trustor, trustee or beneficiary of such trust (for purposes of the
lock-up agreement, “immediate family” means any relationship by blood, current or former marriage,
domestic partnership or adoption, not more remote than first cousin), (iv) to a corporation, partnership,
limited liability company, investment fund or other entity (A) of which the lock-up party and/or the
immediate family of the lock-up party are the legal and beneficial owner of all of the outstanding equity
securities or similar interests, or (B) controlled by, or under common control with, the lock-up party or the
immediate family of the lock-up party, (v) to a nominee or custodian of a person or entity to whom a
disposition or transfer would be permissible under clauses (i) through (iv) above, (vi) in the case of a
corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation,
partnership, limited liability company, trust or other business entity that is an affiliate of the lock-up party,
or to any investment fund or other entity controlling, controlled by, managing or managed by or under
common control or common investment management with the lock-up party or its affiliates or (B) as part
of a disposition, transfer or distribution to limited partners, members or shareholders of the lock-up party;
(vii) by operation of law, such as pursuant to a qualified domestic order, divorce settlement, divorce
decree or separation agreement, (viii) to us upon death or disability of the lock-up party, or, if the lock-up
party is an employee of ours upon death, disability or termination of employment, in each case, of such
employee, (ix) as part of a sale or transfer of lock-up securities acquired (A) from the underwriters in this
offering or (B) in open market transactions after the completion of this offering, (x) to us in connection with
the vesting, settlement, or exercise of restricted stock units, options, warrants or other rights to purchase
shares of our common stock (including, in each case, by way of “net” or “cashless” exercise), including for
the payment of exercise price and tax and remittance payments due as a result of the vesting, settlement,
or exercise of such restricted stock units, options, warrants or rights, provided that any such shares of our
common stock received upon such exercise, vesting or settlement shall be subject to the terms of the
lock-up agreement, and provided further that any such restricted stock units, options, warrants or rights
are held by the lock-up party pursuant to an agreement or equity awards granted under a stock incentive
plan or other equity award plan, each such agreement or plan which is described herein, (xi) pursuant to a
bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the
Board of Directors and made to all holders of our capital stock involving a Change of Control (for
purposes hereof, “Change of Control” means the transfer (whether by tender offer, merger, consolidation
or other similar transaction), in one transaction or a series of related transactions, to a person or group of
affiliated persons, of shares of capital stock if, after such transfer, such person or group of affiliated
persons would hold more than 50% of our outstanding voting securities (or the surviving entity)); provided
that in the event that such tender offer, merger, consolidation or other similar transaction is not completed,
the lock-up party’s lock-up securities shall remain subject to the restrictions in the immediately preceding
paragraph, or (xii) in open market transactions by an employee of our company (who is not an officer or
director of our company) of up to 3.0 million shares of common stock (in the aggregate for all such
employees of our company and calculated on a pre-stock split basis); however, such open market
transactions under this clause (xii) shall only be permitted if the end of the restricted period falls during
our company's second insider trading policy's blackout period (the "Blackout Period") following the
completion of this offering, in which case such open market transactions will only be permitted starting on
the date that is 10 trading days prior to commencement of the second Blackout Period following the
completion of this offering and ending on the date of the start of such Blackout Period; provided that (X) in
the case of any transfer or distribution under (i), (ii), (iii), (iv), (v), (vi) and (vii) above, such transfer shall
not involve a disposition for value and each donee, distributee or transferee shall sign and deliver a lock-
up agreement, (Y) in the case of any transfer or distribution under (ii), (iii), (iv), (v), (vi), (ix) and (xii) above
no public disclosure or filing shall be made voluntarily during the restricted period, and (Z) in the case of
any transfer or distribution under (i), (vii), (viii) and (x) no public disclosure or filing shall be made
voluntarily during the restricted period, and to the extent a filing under 16(a) of the Exchange Act, or other
public filing, report or announcement reporting a reduction in beneficial ownership of shares of common
stock be legally required during the restricted period, such filing, report or announcement shall clearly
indicate the circumstances described in (i), (vii), (viii) or (x) above, including that the securities remain
subject to the terms of the lock-up agreement;
(b) exercise of the options, settlement of RSUs or other equity awards, or the exercise of warrants
granted pursuant to plans described in this prospectus, provided that any lock-up securities received upon
such exercise, vesting or settlement be subject to restrictions similar to those in the immediately
preceding paragraph;
(c) the conversion of outstanding preferred stock, warrants to acquire preferred stock, or convertible
securities into shares of our common stock or warrants to acquire shares of our common stock, provided
that any common stock or warrant received upon such conversion would be subject to restrictions similar
to those in the immediately preceding paragraph; and (d) the establishment by lock-up parties of trading
plans under Rule 10b5-1 under the Exchange Act, provided that (1) such plans do not provide for the
transfer of lock-up securities during the restricted period and (2) any required public announcement or
filing under the Exchange Act made by any person regarding the establishment of such plan during the
restricted period shall include a statement that the lock-up party is not permitted to transfer, sell or
otherwise dispose of lock-up securities under such plan during the restricted period in contravention of the
lock-up agreement and no public filing, report or announcement by any party shall be made voluntarily in
connection with such trading plan.
J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Piper Sandler & Co., in their sole discretion,
may release the securities subject to any of the lock-up agreements with the underwriters described
above, in whole or in part at any time.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the
Securities Act.
We have applied to have our common stock approved for listing on the Nasdaq Global Select Market
under the symbol “HTFL” and this offering is contingent upon obtaining approval of such listing.
In connection with this offering, the underwriters may engage in stabilizing transactions, which involves
making bids for, purchasing and selling shares of common stock in the open market for the purpose of
preventing or retarding a decline in the market price of the common stock while this offering is in
progress. These stabilizing transactions may include making short sales of common stock, which involves
the sale by the underwriters of a greater number of shares of common stock than they are required to
purchase in this offering, and purchasing shares of common stock on the open market to cover positions
created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not
greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked”
shorts, which are short positions in excess of that amount.
The underwriters may close out any covered short position either by exercising their option to purchase
additional shares, in whole or in part, or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other things, the price of shares available for
purchase in the open market compared to the price at which the underwriters may purchase shares
through the option to purchase additional shares. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of the common stock in
the open market that could adversely affect investors who purchase in this offering. To the extent that the
underwriters create a naked short position, they will purchase shares in the open market to cover the
position.
The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also
engage in other activities that stabilize, maintain or otherwise affect the price of the common stock,
including the imposition of penalty bids. This means that if the representatives of the underwriters
purchase common stock in the open market in stabilizing transactions or to cover short sales, the
representatives can require the underwriters that sold those shares as part of this offering to repay the
underwriting discount received by them.
These activities may have the effect of raising or maintaining the market price of the common stock or
preventing or retarding a decline in the market price of the common stock, and, as a result, the price of
the common stock may be higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time. The underwriters may
carry out these transactions on the Nasdaq Global Select Market, in the over-the-counter market or
otherwise.
Prior to this offering, there has been no public market for our common stock. The initial public offering
price will be determined by negotiations between us and the representatives of the underwriters. In
determining the initial public offering price, we and the representatives of the underwriters expect to
consider a number of factors including:
•the information set forth in this prospectus and otherwise available to the representatives;
•our prospects and the history and prospects for the industry in which we compete;
•an assessment of our management;
•our prospects for future earnings;
•the general condition of the securities markets at the time of this offering;
•the recent market prices of, and demand for, publicly traded common stock of generally comparable
companies; and
•other factors deemed relevant by the underwriters and us.
Neither we nor the underwriters can assure investors that an active trading market will develop for shares
of our common stock, or that the shares will trade in the public market at or above the initial public offering
price.
Other relationships
Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may
provide from time to time in the future certain commercial banking, financial advisory, investment banking
and other services for us and such affiliates in the ordinary course of their business, for which they have
received and may continue to receive customary fees and commissions. In addition, from time to time,
certain of the underwriters and their affiliates may effect transactions for their own account or the account
of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or
equity securities or loans, and may do so in the future.
Selling restrictions
Other than in the United States, no action has been taken by us or the underwriters that would permit a
public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose
is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor
may this prospectus or any other offering material or advertisements in connection with the offer and sale
of any such securities be distributed or published in any jurisdiction, except under circumstances that will
result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose
possession this prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the offering and the distribution of this prospectus. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any
jurisdiction in which such an offer or a solicitation is unlawful.
Notice to prospective investors in the European Economic Area
In relation to each Member State of the European Economic Area (each a “Relevant State”), no shares
have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the
publication of a prospectus in relation to the shares which has been approved by the competent authority
in that Relevant State or, where appropriate, approved in another Relevant State and notified to the
competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that
offers of shares may be made to the public in that Relevant State at any time under the following
exemptions under the Prospectus Regulation:
(i)to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus
Regulation;
(ii)to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of
the Prospectus Regulation), subject to obtaining the prior consent of the underwriters; or
(iii)in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant
to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the
Prospectus Regulation. and each person who initially acquires any shares or to whom any offer is made
will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and
to us that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation. In the
case of any shares being offered to a financial intermediary as that term is used in the Prospectus
Regulation, each such financial intermediary will be deemed to have represented, acknowledged and
agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on
behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances
which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant
State to qualified investors as so defined or in circumstances in which the prior consent of the
underwriters have been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to shares in any
Relevant State means the communication in any form and by any means of sufficient information on the
terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or
subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
Notice to prospective investors in the United Kingdom
No shares have been offered or will be offered pursuant to the offering to the public in the United Kingdom
prior to the publication of a prospectus in relation to the shares which (i) has been approved by the
Financial Conduct Authority or (ii) is to be treated as if it had been approved by the Financial Conduct
Authority in accordance with the transitional provisions in Article 74 (transitional provisions) of the
Prospectus Amendment etc (EU Exit) Regulations 2019/1234, except that the shares may be offered to
the public in the United Kingdom at any time:
(i)to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus
Regulation;
(ii)to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of
the UK Prospectus Regulation), subject to obtaining the prior consent of underwriters for any such
offer; or
(iii)in any other circumstances falling within Section 86 of the FSMA,
provided that no such offer of the shares shall require the Issuer or any Manager to publish a prospectus
pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK
Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in
relation to the shares in the United Kingdom means the communication in any form and by any means of
sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to
decide to purchase or subscribe for any shares and the expression “UK Prospectus Regulation” means
Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018.
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and
any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in
the Prospectus Regulation) (i) who have professional experience in matters relating to investments falling
within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as
amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may
otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as “relevant persons”) or otherwise in circumstances which have not resulted
and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the
Financial Services and Markets Act 2000.
Any person in the United Kingdom that is not a relevant person should not act or rely on the information
included in this document or use it as basis for taking any action. In the United Kingdom, any investment
or investment activity that this document relates to may be made or taken exclusively by relevant persons.
Notice to prospective investors in Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are
accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection
73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares
must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus
requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies
for rescission or damages if this prospectus (including any amendment thereto) contains a
misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser
within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The
purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s
province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the
underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding
underwriter conflicts of interest in connection with this offering.
Notice to prospective investors in Switzerland
This prospectus does not constitute an offer to the public or a solicitation to purchase or invest in any
shares. No shares have been offered or will be offered to the public in Switzerland, except that offers of
shares may be made to the public in Switzerland at any time under the following exemptions under the
Swiss Financial Services Act (“FinSA”):
(i)to any person which is a professional client as defined under the FinSA;
(ii)to fewer than 500 persons (other than professional clients as defined under the FinSA), subject to
obtaining the prior consent of the representatives of the underwriters for any such offer; or
(iii)in any other circumstances falling within Article 36 FinSA in connection with Article 44 of the Swiss
Financial Services Ordinance,
provided that no such offer of shares shall require the Company or any investment bank to publish a
prospectus pursuant to Article 35 FinSA.
The shares have not been and will not be listed or admitted to trading on a trading venue in Switzerland.
Neither this document nor any other offering or marketing material relating to the shares constitutes a
prospectus as such term is understood pursuant to the FinSA and neither this document nor any other
offering or marketing material relating to the shares may be publicly distributed or otherwise made publicly
available in Switzerland.
Notice to prospective investors in the Dubai International Financial Centre
This document relates to an Exempt Offer in accordance with the Markets Law, DIFC Law No. 1 of 2012,
as amended. This document is intended for distribution only to persons of a type specified in the Markets
Law, DIFC Law No. 1 of 2012, as amended. It must not be delivered to, or relied on by, any other person.
The Dubai Financial Services Authority (DFSA) has no responsibility for reviewing or verifying any
documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement
nor taken steps to verify the information set forth herein and has no responsibility for this document. The
securities to which this document relates may be illiquid and/or subject to restrictions on their resale.
Prospective purchasers of the securities offered should conduct their own due diligence on the securities.
If you do not understand the contents of this document you should consult an authorized financial advisor.
In relation to its use in the DIFC, this document is strictly private and confidential and is being distributed
to a limited number of investors and must not be provided to any person other than the original recipient,
and may not be reproduced or used for any other purpose. The interests in the securities may not be
offered or sold directly or indirectly to the public in the DIFC.
Notice to prospective investors in the United Arab Emirates
The shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United
Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws
of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering
and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United
Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer.
This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the
Securities and Commodities Authority, Financial Services Regulatory Authority (FSRA) or the Dubai
Financial Services Authority (DFSA).
Notice to prospective investors in Australia
This prospectus:
•does not constitute a disclosure document or a prospectus under Chapter 6D.2 of the Corporations
Act 2001 (Cth) (the “Corporations Act”);
•has not been, and will not be, lodged with the Australian Securities and Investments Commission
(“ASIC”), as a disclosure document for the purposes of the Corporations Act and does not purport to
include the information required of a disclosure document for the purposes of the Corporations Act;
and
•may only be provided in Australia to select investors who are able to demonstrate that they fall within
one or more of the categories of investors, available under section 708 of the Corporations Act
(“Exempt Investors”).
The shares may not be directly or indirectly offered for subscription or purchased or sold, and no
invitations to subscribe for or buy the shares may be issued, and no draft or definitive offering
memorandum, advertisement or other offering material relating to any shares may be distributed in
Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act
or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an
application for the shares, you represent and warrant to us that you are an Exempt Investor.
As any offer of shares of our common stock under this prospectus will be made without disclosure in
Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia
within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under
Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the shares of
our common stock you undertake to us that you will not, for a period of 12 months from the date of issue
of the shares, offer, transfer, assign or otherwise alienate those shares of our common stock to investors
in Australia except in circumstances where disclosure to investors is not required under Chapter 6D.2 of
the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.
Notice to prospective investors in Japan
The shares have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial
Instruments and Exchange Act. Accordingly, none of the shares nor any interest therein may be offered or
sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used
herein means any person resident in Japan, including any corporation or other entity organized under the
laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of
a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise
in compliance with, the Financial Instruments and Exchange Act and any other applicable laws,
regulations and ministerial guidelines of Japan in effect at the relevant time.
Notice to prospective investors in Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any
document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance
(Cap. 571 of the Laws of Hong Kong) (the “SFO”) of Hong Kong and any rules made thereunder; or (b) in
other circumstances which do not result in the document being a “prospectus” as defined in the
Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong) (the “CO”) or
which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or
document relating to the shares has been or may be issued or has been or may be in the possession of
any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the
contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do
so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to
be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the
SFO and any rules made thereunder.
Notice to prospective investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, no shares have been or will be offered or sold and no shares have been or will be made the
subject of an invitation for subscription or purchase, and no prospectus or any other document or material
in connection with the offer or sale, or invitation for subscription or purchase, of the shares, has been or
will be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to
an institutional investor (as defined in Section 4A of the Securities and Futures Act 2001 of Singapore, as
modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant
person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person
pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of
the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable
provision of the SFA.
Singapore SFA Product Classification — In connection with Section 309B of the SFA and the CMP
Regulations 2018, unless otherwise specified before an offer of shares of our common stock, we have
determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the
shares of common stock are ‘‘prescribed capital markets products’’ (as defined in the CMP Regulations
2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of
Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Notice to prospective investors in Bermuda
Shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment
Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-
Bermudian persons (including companies) may not carry on or engage in any trade or business in
Bermuda unless such persons are permitted to do so under applicable Bermuda legislation.
Notice to prospective investors in Saudi Arabia
This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are
permitted under the Rules on the Offer of Securities and Continuing Obligations Regulations as issued by
the board of the Saudi Arabian Capital Market Authority (“CMA”) pursuant to resolution number
3-123-2017 dated 27 December 2017, as amended (the “CMA Regulations”). The CMA does not make
any representation as to the accuracy or completeness of this document and expressly disclaims any
liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document.
Prospective purchasers of the securities offered hereby should conduct their own due diligence on the
accuracy of the information relating to the securities. If you do not understand the contents of this
document, you should consult an authorised financial adviser.
Notice to prospective investors in the British Virgin Islands
The shares are not being, and may not be offered to the public or to any person in the British Virgin
Islands for purchase or subscription by or on behalf of us. The shares may be offered to companies
incorporated under the BVI Business Companies Act, 2004 (British Virgin Islands), “BVI Companies”), but
only where the offer will be made to, and received by, the relevant BVI Company entirely outside of the
British Virgin Islands.
Notice to prospective investors in China
This prospectus will not be circulated or distributed in the PRC and the shares will not be offered or sold,
and will not be offered or sold to any person for re-offering or resale directly or indirectly to any residents
of the PRC (for such purposes, not including the Hong Kong and Macau Special Administrative Regions
or Taiwan), except pursuant to any applicable laws and regulations of the PRC. Neither this prospectus
nor any advertisement or other offering material may be distributed or published in the PRC, except under
circumstances that will result in compliance with applicable laws and regulations.
Notice to prospective investors in Korea
The shares have not been and will not be registered under the Financial Investments Services and
Capital Markets Act of Korea and the decrees and regulations thereunder (the “FSCMA”), and the shares
have been and will be offered in Korea as a private placement under the FSCMA. None of the shares
may be offered, sold or delivered directly or indirectly, or offered or sold to any person for re-offering or
resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws
and regulations of Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and
the decrees and regulations thereunder (the “FETL”). Furthermore, the purchaser of the shares shall
comply with all applicable regulatory requirements (including but not limited to requirements under the
FETL) in connection with the purchase of the shares. By the purchase of the shares, the relevant holder
thereof will be deemed to represent and warrant that if it is in Korea or is a resident of Korea, it purchased
the shares pursuant to the applicable laws and regulations of Korea.
Notice to prospective investors in Malaysia
No prospectus or other offering material or document in connection with the offer and sale of the shares
has been or will be registered with the Securities Commission of Malaysia (“Commission”) for the
Commission’s approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this
prospectus and any other document or material in connection with the offer or sale, or invitation for
subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be
offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or
indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a
holder of a Capital Markets Services Licence; (iii) a person who acquires the shares, as principal, if the
offer is on terms that the shares may only be acquired at a consideration of not less than RM250,000 (or
its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets
or total net joint assets with his or her spouse exceeds RM3 million (or its equivalent in foreign
currencies), excluding the value of the primary residence of the individual; (v) an individual who has a
gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the
preceding twelve months; (vi) an individual who, jointly with his or her spouse, has a gross annual income
of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding twelve months; (vii) a
corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based
on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its
equivalent in foreign currencies); (ix) a bank licensee or insurance licensee as defined in the Labuan
Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in
the Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by
the Commission; provided that, in the each of the preceding categories (i) to (xi), the distribution of the
shares is made by a holder of a Capital Markets Services License who carries on the business of dealing
in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus
does not constitute and may not be used for the purpose of public offering or an issue, offer for
subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of
a prospectus with the Commission under the Capital Markets and Services Act 2007.
Notice to prospective investors in Taiwan
The shares have not been and will not be registered with the Financial Supervisory Commission of
Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within
Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the
Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial
Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorised to offer, sell, give
advice regarding or otherwise intermediate the offering and sale of the shares in Taiwan.
Notice to prospective investors in South Africa
Due to restrictions under the securities laws of South Africa, no “offer to the public” (as such term is
defined in the South African Companies Act, No. 71 of 2008 (as amended or re-enacted) (the “South
African Companies Act”) is being made in connection with the issue of the shares in South Africa.
Accordingly, this document does not, nor is it intended to, constitute a “registered prospectus” (as that
term is defined in the South African Companies Act) prepared and registered under the South African
Companies Act and has not been approved by, and/or filed with, the South African Companies and
Intellectual Property Commission or any other regulatory authority in South Africa. The shares are not
offered, and the offer shall not be transferred, sold, renounced or delivered, in South Africa or to a person
with an address in South Africa, unless one or other of the following exemptions stipulated in section 96
(1) applies:
| |
| the offer, transfer, sale, renunciation or delivery is to: |
| |
| (i) persons whose ordinary business, or part of whose ordinary business, is to deal in securities, as principal or agent; |
| |
| (ii) the South African Public Investment Corporation; |
| |
| (iii) persons or entities regulated by the Reserve Bank of South Africa; |
| |
| (iv) authorised financial service providers under South African law; |
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| (v) financial institutions recognised as such under South African law; |
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| (vi) a wholly-owned subsidiary of any person or entity contemplated in (c), (d) or (e), acting as agent in the capacity of an authorised portfolio manager for a pension fund, or as manager for a collective investment scheme (in each case duly registered as such under South African law); or |
| |
| (vii) any combination of the person in (i) to (vi); or |
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| the total contemplated acquisition cost of the securities, for any single addressee acting as principal is equal to or greater than ZAR1,000,000 or such higher amount as may be promulgated by notice in the Government Gazette of South Africa pursuant to section 96(2)(a) of the South African Companies Act. |
Information made available in this prospectus should not be considered as “advice” as defined in the
South African Financial Advisory and Intermediary Services Act, 2002.
Notice to prospective investors in Israel
This prospectus does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the
Israeli Securities Law, and has not been filed with or approved by the Israel Securities Authority. In Israel,
this prospectus is being distributed only to, and is directed only at, and any offer of the shares is directed
only at, (i) a limited number of persons in accordance with the Israeli Securities Law and (ii) investors
listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint
investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment
advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with
equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may
be amended from time to time), or, collectively referred to as qualified investors (in each case, purchasing
for their own account or, where permitted under the Addendum, for the accounts of their clients who are
investors listed in the Addendum). Qualified investors are required to submit written confirmation that they
fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
Legal matters
The validity of the issuance of our common stock offered in this prospectus will be passed upon for us by
O’Melveny & Myers LLP. King & Spalding LLP is acting as regulatory counsel to us in connection with this
offering and will pass upon certain legal matters. Certain legal matters in connection with this offering will
be passed upon for the underwriters by Cooley LLP, San Francisco, California.
Experts
The financial statements as of December 31, 2024 and 2023 and for the years then ended included in this
Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an
independent registered public accounting firm, given on the authority of said firm as experts in auditing
and accounting.
Where you can find additional information
We have filed with the SEC a registration statement on Form S-1, including exhibits and schedules, under
the Securities Act, with respect to the shares of common stock being offered by this prospectus. This
prospectus, which constitutes part of the registration statement, does not contain all of the information in
the registration statement and its exhibits. For further information with respect to us and the common
stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements
contained in this prospectus as to the contents of any contract or any other document referred to are
summary in nature and not necessarily complete, and in each instance, we refer you to the copy of the
contract or other document filed as an exhibit to the registration statement. Each of these statements is
qualified in all respects by reference to the full text of such contract or other document.
You may read our SEC filings, including this registration statement, over the Internet at the SEC’s website
at www.sec.gov. Upon the completion of this offering, we will be subject to the information reporting
requirements of the Exchange Act, and we will file reports, proxy statements, and other information with
the SEC. These reports, proxy statements, and other information will be available for review at the SEC’s
website referred to above. We also maintain a website at www.heartflow.com, at which, following the
completion of this offering, you may access these materials free of charge as soon as reasonably
practicable after they are electronically filed with, or furnished to, the SEC. Information contained on or
accessible through our website is not a part of this prospectus or the registration statement of which it
forms a part, and the inclusion of our website address in this prospectus is an inactive textual reference
only. You should not consider the contents of our website in making an investment decision with respect
to our common stock.
HeartFlow Holding, Inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2023 and 2024, and
Three Months Ended March 31, 2024 and 2025 (unaudited)
| |
| |
| |
| |
Consolidated Balance Sheets ............................................................................................................... | |
| |
Deficit ......................................................................................................................................................... | |
| |
| |
| |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Heartflow, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of HeartFlow Holding, Inc. and its
subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated
statements of operations and comprehensive loss, of redeemable convertible preferred stock and
stockholders’ deficit and of cash flows for the years then ended, including the related notes (collectively
referred to as the "consolidated financial statements"). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December
31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s consolidated financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 26, 2025
We have served as the Company’s auditor since 2009, which includes periods before the Company
became subject to SEC reporting requirements.
HeartFlow Holding, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
| | | | | |
| | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Cash and cash equivalents ............................................................................ | | | | | |
Accounts receivable, net of allowance for credit losses of $1,058, $814 and $742 at December 31, 2023 and 2024, and March 31, 2025 (unaudited), respectively ................................................................................ | | | | | |
Restricted cash, current .................................................................................. | | | | | |
Prepaid expenses and other current assets ................................................ | | | | | |
Total current assets ................................................................................... | | | | | |
Property and equipment, net ................................................................................ | | | | | |
Operating lease right-of-use assets .................................................................... | | | | | |
Restricted cash, non-current ................................................................................ | | | | | |
Other non-current assets ...................................................................................... | | | | | |
Total assets ................................................................................................. | | | | | |
| | | | | |
Liabilities, redeemable convertible preferred stock and stockholders' deficit | | | | | |
| | | | | |
Accounts payable ............................................................................................ | | | | | |
Accrued expenses and other current liabilities ........................................... | | | | | |
Operating lease liabilities, current ................................................................. | | | | | |
Total current liabilities ................................................................................ | | | | | |
Convertible notes ................................................................................................... | | | | | |
Term loan ................................................................................................................ | | | | | |
Common stock warrant liability ............................................................................ | | | | | |
Derivative liability ................................................................................................... | | | | | |
Operating lease liabilities, non-current .............................................................. | | | | | |
Other non-current liabilities .................................................................................. | | | | | |
Total liabilities ............................................................................................. | | | | | |
Commitments and contingencies (Note 7) | | | | | |
Redeemable convertible preferred stock issuable in series, $0.001 par value; 122,231,454 shares authorized, issued and outstanding as of December 31, 2023 and 2024, and March 31, 2025 (unaudited); aggregate liquidation value of $951,917 as of December 31, 2023 and 2024, and March 31, 2025 (unaudited) .............................................................. | | | | | |
| | | | | |
Common stock, $0.001 par value; 210,000,000, 210,300,000 and 210,300,000 shares authorized as of December 31, 2023 and 2024, and March 31, 2025 (unaudited), respectively; 14,427,925, 17,877,051 and 18,259,138 shares issued and outstanding as of December 31, 2023 and 2024, and March 31, 2025 (unaudited), respectively ....................................... | | | | | |
Additional paid-in capital ....................................................................................... | | | | | |
Accumulated other comprehensive loss ............................................................ | | | | | |
Accumulated deficit ............................................................................................... | | | | | |
Total stockholders’ deficit .......................................................................... | | | | | |
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit ................................................................................... | | | | | |
| | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
HeartFlow Holding, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | |
Revenue ..................................................................... | | | | | | | |
Cost of revenue ......................................................... | | | | | | | |
Gross profit ................................................................. | | | | | | | |
| | | | | | | |
Research and development .................................... | | | | | | | |
Selling, general and administrative ........................ | | | | | | | |
Total operating expenses ......................................... | | | | | | | |
Loss from operations ................................................ | | | | | | | |
Interest income .......................................................... | | | | | | | |
Interest expense ........................................................ | | | | | | | |
Change in fair value of convertible note ................ | | | | | | | |
Change in fair value of common stock warrant liability ......................................................................... | | | | | | | |
Change in fair value of derivative liability .............. | | | | | | | |
Other income (expense), net ................................... | | | | | | | |
Loss before provision for income taxes ................. | | | | | | | |
(Provision for) benefit from income taxes ............. | | | | | | | |
Net loss ....................................................................... | | | | | | | |
Cumulative dividends on Series C redeemable convertible preferred stock ...................................... | | | | | | | |
Deemed dividend upon down round of redeemable convertible preferred stock ................ | | | | | | | |
Net loss attributable to common stockholders ..... | | | | | | | |
Comprehensive loss: ................................................ | | | | | | | |
Net loss ....................................................................... | | | | | | | |
Other comprehensive loss: ...................................... | | | | | | | |
Foreign currency translation gain (loss) ................ | | | | | | | |
Total comprehensive loss ........................................ | | | | | | | |
| | | | | | | |
Net loss per share attributable to common stockholders, basic and diluted ............................... | | | | | | | |
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted ............................... | | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
HeartFlow Holding, Inc.
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit
(in thousands, except share and per share amounts)
| | | | | | | | | | | | | | | | |
| Redeemable Convertible Preferred Stock | | | | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | | | Total Stockholders’ Deficit |
| | | | | | | | | | | | |
Balance at January 1, 2023 ........................ | | | | | | | | | | | | | | | | |
Issuance of common stock upon exercise of stock options .......................... | | | | | | | | | | | | | | | | |
Issuance of Series F redeemable convertible preferred stock at $2.8505 per share, net of issuance costs of $5,904 ......................................................... | | | | | | | | | | | | | | | | |
Issuance of Series F-1 redeemable convertible preferred stock at $1.9098 per share upon conversion of convertible notes and accrued interest .. | | | | | | | | | | | | | | | | |
Deemed dividend upon down round of redeemable convertible preferred stock | | | | | | | | | | | | | | | | |
Repurchase of common stock ................. | | | | | | | | | | | | | | | | |
Stock-based compensation expense ..... | | | | | | | | | | | | | | | | |
Foreign currency translation loss ............ | | | | | | | | | | | | | | | | |
Net loss ....................................................... | | | | | | | | | | | | | | | | |
Balance at December 31, 2023 ................. | | | | | | | | | | | | | | | | |
Issuance of common stock upon exercise of stock options .......................... | | | | | | | | | | | | | | | | |
Stock-based compensation expense ..... | | | | | | | | | | | | | | | | |
Foreign currency translation loss ............ | | | | | | | | | | | | | | | | |
Net loss ....................................................... | | | | | | | | | | | | | | | | |
Balance at December 31, 2024 ................. | | | | | | | | | | | | | | | | |
Issuance of common stock upon exercise of stock options (unaudited) ..... | | | | | | | | | | | | | | | | |
Stock-based compensation expense (unaudited) ................................................. | | | | | | | | | | | | | | | | |
Foreign currency translation loss (unaudited) ................................................. | | | | | | | | | | | | | | | | |
Net loss (unaudited) .................................. | | | | | | | | | | | | | | | | |
Balance at March 31, 2025 (unaudited) .. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Redeemable Convertible Preferred Stock | | | | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | | | Total Stockholders’ Deficit |
| | | | | | | | | | | | |
Balance at December 31, 2023 ................. | | | | | | | | | | | | | | | | |
Issuance of common stock upon exercise of stock options (unaudited) ..... | | | | | | | | | | | | | | | | |
Stock-based compensation expense (unaudited) ................................................. | | | | | | | | | | | | | | | | |
Foreign currency translation gain (unaudited) ................................................. | | | | | | | | | | | | | | | | |
Net loss (unaudited) .................................. | | | | | | | | | | | | | | | | |
Balance at March 31, 2024 (unaudited) .. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
HeartFlow Holding, Inc.
Consolidated Statements of Cash Flows
(in thousands)
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | |
Cash flows from operating activities: | | | | | | | |
Net loss .............................................................................................................................................................................. | | | | | | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | |
Depreciation and amortization ................................................................................................................................. | | | | | | | |
Stock-based compensation expense ..................................................................................................................... | | | | | | | |
Amortization of debt discount and debt issuance costs ...................................................................................... | | | | | | | |
Amortization of right-of-use asset ........................................................................................................................... | | | | | | | |
Change in fair value of convertible note ................................................................................................................ | | | | | | | |
Change in fair value of common stock warrant liability ....................................................................................... | | | | | | | |
Change in fair value of derivative liability .............................................................................................................. | | | | | | | |
Paid-in-kind interest .................................................................................................................................................. | | | | | | | |
Non-cash interest charges ....................................................................................................................................... | | | | | | | |
Change in allowance for credit losses ................................................................................................................... | | | | | | | |
Changes in assets and liabilities: ............................................................................................................................ | | | | | | | |
Accounts receivable, net ................................................................................................................................... | | | | | | | |
Prepaid expenses and other current assets ................................................................................................... | | | | | | | |
Other non-current assets ................................................................................................................................... | | | | | | | |
Accounts payable ............................................................................................................................................... | | | | | | | |
Accrued expenses and other current liabilities .............................................................................................. | | | | | | | |
Operating lease liabilities .................................................................................................................................. | | | | | | | |
Other non-current liabilities ............................................................................................................................... | | | | | | | |
Net cash used in operating activities ........................................................................................................ | | | | | | | |
Cash flows from investing activities | | | | | | | |
Purchase of property and equipment ..................................................................................................................... | | | | | | | |
Net cash used in investing activities ........................................................................................................ | | | | | | | |
Cash flows from financing activities | | | | | | | |
Proceeds from issuance of Series F redeemable convertible preferred shares, net of issuance costs ...... | | | | | | | |
Proceeds from convertible notes offering, net of issuance costs ...................................................................... | | | | | | | |
Proceeds from exercise of stock options ............................................................................................................... | | | | | | | |
Payments of exit, prepayment penalty and lender fees ...................................................................................... | | | | | | | |
Payments of deferred offering costs ....................................................................................................................... | | | | | | | |
Repurchase of common stock ................................................................................................................................. | | | | | | | |
Net cash provided by financing activities ................................................................................................ | | | | | | | |
Effect of foreign exchange rates .................................................................................................................................... | | | | | | | |
Net increase (decrease) in cash, cash equivalents and restricted cash .......................................................... | | | | | | | |
Balance, beginning of period ................................................................................................................................... | | | | | | | |
Balance, end of period .............................................................................................................................................. | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | |
Cash paid (refunded) for taxes ................................................................................................................................ | | | | | | | |
Cash paid for interest ................................................................................................................................................ | | | | | | | |
Supplemental disclosure of non-cash investing and financing activities: | | | | | | | |
Purchases of property and equipment included in accounts payable ............................................................... | | | | | | | |
Derecognition of derivative liability in connection with debt refinancing ........................................................... | | | | | | | |
Right-of-use asset obtained in exchange for lease obligation ........................................................................... | | | | | | | |
Conversion of term loan principal to convertible notes ....................................................................................... | | | | | | | |
Issuance of convertible notes to certain employees in lieu of cash compensation ........................................ | | | | | | | |
Reclassification of term loan debt discount to convertible notes debt discount .............................................. | | | | | | | |
Unpaid deferred offering costs included in accounts payable and accrued expenses and other current liabilities ....................................................................................................................................................................... | | | | | | | |
Unpaid convertible notes issuance costs included in accounts payable and accrued expenses and other current liabilities ............................................................................................................................................... | | | | | | | |
Reduction in right-of-use asset and lease obligation due to amendment in lease terms .............................. | | | | | | | |
Deemed dividend upon down round of redeemable convertible preferred stock ............................................ | | | | | | | |
Conversion of convertible note into Series F-1 redeemable convertible preferred stock .............................. | | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
1. Business Overview
Description of Business
HeartFlow Holding, Inc. (the “Company”) was incorporated in the state of Delaware in July 2007 as
Cardiovascular Simulation, Inc. and changed its name to HeartFlow, Inc. in May 2009. On March 1, 2021,
the Company completed an internal reorganization in which a newly formed parent holding company,
HeartFlow Holding, Inc., was established.
The Company is a commercial-stage medical technology company that has pioneered the use of software
and AI to deliver a non-invasive solution for diagnosing and managing coronary artery disease (“CAD”).
The Company’s novel HeartFlow Platform uses AI and advanced computational fluid dynamics to create a
personalized 3D model of a patient’s heart based off a single coronary computed tomography
angiography (“CCTA”). This results in actionable data on blood flow, stenosis, plaque volume and plaque
composition. The Company’s HeartFlow FFRCT Analysis and Plaque Analysis software assists physicians
in diagnosing, managing and delivering precision care to patients with CAD. The Company was awarded
Conformité Européene Mark (“CE Mark”) for its HeartFlow FFRCT Analysis in July 2011. The Company
received clearance from the U.S. Food and Drug Administration (“FDA”) in November 2014 for its
HeartFlow FFRCT Analysis and in October 2022 for its Plaque Analysis.
The Company’s United States (“U.S.”) headquarters is located in Mountain View, California, and the
Company also has offices in Santa Rosa, California, Austin, Texas, and Tokyo, Japan.
The Company had the following wholly-owned subsidiaries as of March 31, 2025:
| | |
| | |
HeartFlow, Inc. ............................................................... | | |
HeartFlow Japan G.K. .................................................. | | |
HeartFlow U.K. Ltd ........................................................ | | |
HeartFlow Technology U.K. Limited ........................... | | |
| | |
Effective July 2024, HeartFlow International Sarl, a wholly-owned subsidiary in Switzerland, was
dissolved.
Liquidity
The Company has incurred operating losses and negative cash flows from operations since its inception
and has an accumulated deficit of $874.5 million, $971.0 million and $1.0 billion as of December 31, 2023
and 2024 and March 31, 2025 (unaudited), respectively. The Company expects to incur losses for the
foreseeable future. Historically, the Company’s activities have been financed through sales of shares of
redeemable convertible preferred stock, common stock and convertible promissory notes, borrowings
under term loans and revenue received from customers.
As of December 31, 2024 and March 31, 2025 (unaudited), the Company had $51.4 million and $109.8
million in cash and cash equivalents, respectively.
Based on the Company’s current operating plan as of June __, 2025, the date these interim financial
statements (unaudited) were available to be issued, the Company believes that the expected cash
generated from revenue transactions with customers and its existing cash and cash equivalents will be
sufficient to fund the Company’s planned operating expenses and capital expenditure requirements for at
least the next 12 months from the date these interim consolidated financial statements (unaudited) were
available to be issued.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
However, the Company may experience lower than expected cash generated from operating activities or
greater than expected capital expenditures, cost of revenue, or operating expenses, and may need to
raise additional capital to fund operations, further research and development activities, or acquire, invest
in, or license other businesses, assets, or technologies. The Company’s future capital needs will depend
upon many factors, including the market acceptance of the Company’s products, the cost and pace of
developing new products, and the costs of supporting sales growth.
Should the Company obtain additional equity or debt financing to satisfy its liquidity needs, the issuance
of additional debt or equity securities could be dilutive to existing stockholders. Furthermore, any new
securities could have rights that are senior to existing stockholders and could contain covenants that
would restrict operations. There can be no assurance that the Company will generate sufficient future
cash flows from operations or that financing will be available on terms commercially acceptable to the
Company or at all. If the Company is unable to obtain future funding, the Company would curtail
expenses by reducing some of its research and development programs and commercialization efforts in
order to maintain liquidity, if necessary.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company as well as its
wholly owned subsidiaries and have been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”). All significant intercompany balances and
transactions have been eliminated in consolidation.
Reclassification of Prior Period Presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation. A
reclassification was made to the Consolidated Statements of Cash Flows for the year ended December
31, 2023 to identify non-cash interest charges of $865,000. This change in classification does not affect
previously reported cash flows from operating activities in the Consolidated Statements of Cash Flows
and had no effect on the reported results of operations.
Unaudited Interim Financial Information
The accompanying consolidated balance sheet as of March 31, 2025, the consolidated statements of
operations and comprehensive loss and cash flows for the three months ended March 31, 2024 and
2025, and the consolidated statements of redeemable convertible preferred stock and stockholders’ deficit
as of March 31, 2024 and 2025, are unaudited. The financial data and other information disclosed in
these notes to the consolidated financial statements related to March 31, 2025, and the three months
ended March 31, 2024 and 2025, are also unaudited. The unaudited interim consolidated financial
statements have been prepared on the same basis as the annual consolidated financial statements and,
in the opinion of management, reflect all adjustments, which include only normal recurring adjustments,
necessary to a fair statement of the Company’s financial position as of March 31, 2025, and the results of
its operations and cash flows for the three months ended March 31, 2024 and 2025. These interim
financial results are not necessarily indicative of results expected for the full fiscal year or for any
subsequent interim period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management used significant judgement when making estimates in the
determination of the fair value of its common stock and stock options, deferred income tax valuation
allowance, capitalized internal-use software, depreciation of property and equipment, allowance for credit
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
losses, revenue recognition, valuation of operating lease right-of-use (“ROU”) assets and operating lease
liabilities, and the fair value of convertible debt, warrants to purchase common stock and embedded
derivatives. Management evaluates its estimates and assumptions on an ongoing basis using historical
experience and other factors and adjusts those estimates and assumptions as facts and circumstances
dictate. Actual results could materially differ from those estimates.
Segment Information
The Company operates and manages its business as one reportable and operating segment, which is the
business of non-invasive coronary artery disease detection solutions. The Company’s Chief Executive
Officer, who is the Chief Operating Decision Maker (“CODM”), reviews financial information, including
revenue and net loss, presented on a consolidated basis for purposes of making operating decisions,
allocating resources and evaluating financial performance.
The Company's measure of segment profit or loss is consolidated net loss, which is used by the CODM to
measure actual results versus expectations, set performance metrics, and develop the annual budget to
achieve the Company’s long-term objectives. Significant segment expenses within consolidated net loss
includes cost of revenue, research and development, and selling, general and administrative expenses,
which are each separately presented on the Company’s consolidated statements of operations and
comprehensive loss. Other expense items that are presented on the consolidated statements of
operations include interest income, interest expense, changes in fair value of warrant liability, other
income, net, and provision for income taxes.
The following table is representative of the significant expense categories regularly provided to the CODM
when managing the Company’s single reporting segment and includes a reconciliation to the consolidated
net loss shown in the consolidated statements of operations and comprehensive loss for the years ended
December 31, 2023 and 2024 and for the three months ended March 31, 2024 and 2025 (unaudited) (in
thousands):
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | |
Revenue ............................................................. | | | | | | | |
| | | | | | | |
Cost of revenue ............................................ | | | | | | | |
Research and development expenses: .... | | | | | | | |
Research and development .................. | | | | | | | |
Regulatory and clinical ........................... | | | | | | | |
Selling, general and administrative expenses: ...................................................... | | | | | | | |
Sales ......................................................... | | | | | | | |
Marketing ................................................. | | | | | | | |
General and administrative ................... | | | | | | | |
Loss from operations ....................................... | | | | | | | |
Other income (expense), net(2) .................. | | | | | | | |
(Provision for) benefit from income taxes | | | | | | | |
Segment net loss .............................................. | | | | | | | |
| | | | | | | |
(1)The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
(2)Other income (expense), net represents the consolidated amounts for interest income, interest expense, change in fair value of
convertible note, change in fair value of common stock warrant liability, change in fair value of derivative liability and other income
(expense), net as shown on the consolidated statements of operations and comprehensive loss.
The Company derives revenue and has long-lived assets primarily in the United States of America.
Revenue by geography is further described in Note 3.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments that are readily convertible to known amounts of
cash and purchased with an original maturity of three months or less to be cash equivalents. Cash
equivalents consist primarily of amounts invested in money market accounts.
The following table provides a reconciliation of cash, cash equivalents and restricted cash within the
consolidated balance sheets to the total shown in the consolidated statements of cash flows (in
thousands):
| | | | | |
| | | |
| | | | | |
| | | | | |
Cash and cash equivalents ........................................................ | | | | | |
Restricted cash ............................................................................ | | | | | |
Total cash, cash equivalents and restricted cash ................... | | | | | |
| | | | | |
As of December 31, 2023 and 2024 and March 31, 2025 (unaudited), restricted cash represents deposits
held as security in connection with the Company’s facility lease agreements.
Fair Value of Financial Instruments
The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value
is an exit price, representing the amount that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in
pricing an asset or a liability.
The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest
priority to valuations based upon unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs
that are significant to the valuation (Level 3 measurements). The accounting guidance establishes three
levels of the fair value hierarchy as follows:
Level 1 - Observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities;
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to
the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety requires management to make judgments and
considers factors specific to the asset or liability.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2023 and 2024 and March 31, 2025 (unaudited), the carrying amounts of the
Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and
accrued liabilities approximate fair value due to their relatively short maturities and market interest rates, if
applicable. Management believes that the Company’s Term Loan and 2025 Convertible Notes bear
interest at the prevailing market rates for instruments with similar characteristics; accordingly, the carrying
value of these instruments approximate its fair value. Fair value accounting is applied to the 2022
Convertible Notes, common stock warrant liability and derivative liability. No convertible notes or
derivative liability were outstanding as of December 31, 2024.
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash
equivalents, restricted cash and accounts receivable. The Company maintains bank deposits in federally
insured financial institutions and these deposits may at times exceed federally insured limits. To date, the
Company has not experienced any losses on its cash deposits. The Company currently has full control of
its cash and cash equivalents balance.
On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial
Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as
receiver. On March 13, 2023, the FDIC announced that it had transferred all insured and uninsured
deposits and substantially all assets of SVB to a newly created, full-service FDIC-operated “bridge bank”
called Silicon Valley Bridge Bank, N.A. (“SVBB”), where depositors would have full access to their money
immediately. On March 27, 2023, First Citizens BancShares, Inc. (“First Citizens Bank”) acquired SVBB
from the FDIC and operated SVBB as Silicon Valley Bank, a division of First Citizens Bank. The Company
successfully transferred all funds to another financial institution and did not incur any losses on its
deposits as a result of SVB’s closure.
No single customer represented more than 10% of the Company’s revenue during the years ended
December 31, 2023 and 2024 or for the three months ended March 31, 2024 and 2025 (unaudited).
No single customer represented more than 10% of the Company’s accounts receivable as of
December 31, 2023 and 2024 and March 31, 2025 (unaudited).
Accounts Receivable
The Company performs ongoing credit evaluations of its customers’ financial conditions and generally
extends credit to customers without requiring collateral. Accounts receivable are recorded at the amounts
billed less estimated allowances for credit losses for any potential uncollectible amounts. The Company
continually monitors customer payments and maintains an allowance for estimated losses resulting from a
customer’s inability to make required payments. The Company considers factors such as historical
experience, credit quality, age of the accounts receivable balances, geographic related risks and
economic conditions that may affect a customer’s ability to pay. Accounts receivable are written-off and
charged against an allowance for credit losses when the Company has exhausted collection efforts
without success.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation or amortization. Depreciation
and amortization is computed using the straight-line method over the estimated useful lives of assets,
which generally ranges from two to five years. Leasehold improvements are amortized over the lesser of
their useful life or the remaining life of the lease. Upon sale or retirement of assets, the cost and related
accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected
in results from operations in the period realized. Maintenance and repairs are expensed as incurred.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
Impairment of Long-Lived Assets
The Company reviews its long-lived assets, including property and equipment, for impairment at least
annually and whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible
impairment, the Company uses an estimate of the related undiscounted future cash flows over the
remaining useful life of the long-lived assets in measuring whether they are recoverable. If the carrying
value of the asset exceeds the estimated undiscounted future cash flows, a loss is recorded as the
excess of the asset’s carrying value over its fair value. No assets were determined to be impaired during
the years ended December 31, 2023 and 2024 or for the three months ended March 31, 2024 and 2025
(unaudited).
Deferred Offering Costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly associated
with in-process equity financings as deferred offering costs until such financings are consummated. After
consummation of the equity financing, these costs are recorded as a reduction of the proceeds from the
offering, either as a reduction of the carrying value of preferred stock or in stockholders’ deficit as a
reduction of additional paid-in capital generated as a result of the offering. Should the in-process equity
financing be abandoned, the deferred offering costs would be expensed immediately as a charge to
operating expenses in the consolidated statements of operations and comprehensive loss. No deferred
offering costs were capitalized as of December 31, 2023. As of December 31, 2024 and March 31, 2025
(unaudited), deferred offering costs of $413,000 and $3.3 million, respectively, were capitalized within
other non-current assets in the consolidated balance sheets.
Internal-Use Software
The Company capitalizes certain costs related to internal-use software during the application
development stage. Costs related to planning and post implementation activities are expensed as
incurred. Capitalized internal-use software is amortized on a straight-line basis over the estimated useful
life, which is generally two years, after the product is deployed and ready for use. The Company
evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events
or changes in circumstances occur that could impact the recoverability of these assets. Capitalized
internal-use software costs are classified as a component of property and equipment, net.
Leases
At the inception of a contractual arrangement, the Company determines whether the contract contains a
lease by assessing whether there is an identified asset and whether the contract conveys the right to
control the use of the identified asset in exchange for consideration over a period of time.
An ROU asset and corresponding lease liability are recorded on the consolidated balance sheets based
on the present value of lease payments over the lease term. An ROU asset represents the right to control
the use of an identified asset over the lease term and a lease liability represents the obligation to make
lease payments arising from the lease. Leases with an initial term of 12 months or less are not recorded
in the consolidated balance sheets. The Company uses its incremental borrowing rate to determine the
present value of lease payments, as the discount rate implicit in the lease is not readily available. The
lease terms used to calculate the ROU asset and related lease liabilities include options to extend or
terminate the lease when it is reasonably certain that the Company will exercise that option. The
Company elected to account for contracts that contain lease and non-lease components as a single lease
component. For the years ended December 31, 2023 and 2024 and the three months ended March 31,
2025 (unaudited), the Company’s only leases were for its facilities, which are classified as operating
leases with lease expense recognized on a straight-line basis over the lease term. Variable lease costs,
which primarily consist of common area maintenance, taxes, and utility charges are expensed as
incurred. The Company does not have any finance leases.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
Term Loan
The Term Loan is accounted for at amortized cost. Original debt issuance costs are deferred and
presented as a reduction to the carrying value of the Term Loan. Debt discount and debt issuance costs
are amortized using the effective interest method and recorded in interest expense within the
consolidated statements of operations and comprehensive loss. Refer to Note 8 for additional information.
2022 Convertible Notes
The Company issued convertible notes from September 2022 to December 2022 (the “2022 Convertible
Notes”) to certain investors (the “2022 Convertible Note Investors”), which were all converted to Series
F-1 redeemable convertible preferred stock in March 2023. Refer to Notes 9 and 10 for additional
information. The 2022 Convertible Notes contained embedded features that provided the 2022
Convertible Note Investors with multiple settlement alternatives. Rather than accounting for the
embedded features that qualified as derivatives separately, the Company elected to account for the 2022
Convertible Notes at fair value each reporting period. Debt issuance costs were expensed as incurred.
Until their conversion in March 2023, the Company recognized the changes in fair value (including
interest) as change in fair value of convertible note within the consolidated statements of operations and
comprehensive loss.
2025 Convertible Notes (unaudited)
The Company issued convertible notes in January 2025 and March 2025 (the “2025 Convertible Notes”)
to various investors and certain employees (the “Requisite Holders”), which are accounted for at
amortized cost. Debt issuance costs are deferred and presented as a reduction to the carrying value of
the 2025 Convertible Notes. The Company determined that certain features of the 2025 Convertible
Notes contain embedded derivatives that provide the Requisite Holders with multiple settlement
alternatives and the embedded features that qualified as derivatives were accounted for separately. Debt
discount and debt issuance costs are amortized using the effective interest method and recorded to
interest expense within the consolidated statements of operations and comprehensive loss. The
Company recognized the changes in fair value of the derivative liability as change in fair value of
derivative liability within the consolidated statements of operations and comprehensive loss. Refer to Note
9 and Note 13 for additional information.
Common Stock Warrants
The Company’s warrants to purchase common stock that were issued in connection with the Term Loan
do not meet the equity indexation criteria and are classified as a liability. The warrants are recorded at fair
value upon issuance and are subject to remeasurement to fair value at each balance sheet date, with any
changes in fair value recognized as change in fair value of common stock warrant within the consolidated
statements of operations and comprehensive loss. Refer to Note 12 for additional information.
Embedded Derivatives
Prior to its refinancing in June 2024, the Term Loan contained certain prepayment features, default put
option and default interest adjustment features that were determined to be embedded derivatives
requiring bifurcation and separate accounting as a single compound derivative, as discussed in Note 13.
The impact of bifurcation of the embedded derivative on the date of issuance was reflected as a debt
discount. The fair value of the derivative liability related to the Company’s Term Loan, as discussed in
Note 8, was estimated using a scenario-based analysis comparing the probability-weighted present value
of the Term Loan payoff at maturity with and without the bifurcated features. This method isolates the
value of the embedded derivative by measuring the difference in the host contract’s value with and
without the isolated features. The resulting cash flows are discounted at the Company’s borrowing rate,
as adjusted for fluctuations in the market interest rate from the inception of the Company’s comparative
borrowings to the reporting date, to measure the fair value of the embedded derivative. Until its
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
derecognition in June 2024, the derivative liability was remeasured to fair value at each reporting period
and the related change was reflected as change in fair value of derivative liability on the consolidated
statements of operations and comprehensive loss.
The 2025 Convertible Notes contain certain settlement features and default put options that were
determined to be embedded derivatives requiring bifurcation and separate accounting as a single
compound derivative, as discussed in Note 13. The impact of bifurcation of the embedded derivatives on
the date of issuance during the three months ended March 31, 2025 (unaudited) was reflected as a debt
discount. The fair value of the derivative liability related to the Company’s 2025 Convertible Notes, as
discussed in Note 9, were estimated using a scenario-based analysis comparing the probability-weighted
present value of the 2025 Convertible Notes with and without the bifurcated features. This method
isolates the value of the embedded derivatives by measuring the difference in the host contract’s value
with and without the isolated features. To measure the fair value of the embedded derivatives, the
resulting cash flows were discounted using appropriate discount rates that reflect the overall implied risk
of the instruments based on their purchase prices and adjusted for fluctuations in the market and
Company interest rates when necessary. The derivative liability was remeasured to fair value at March 31,
2025 (unaudited) and the related change was reflected as change in fair value of derivative liability on the
consolidated statements of operations and comprehensive loss for the three months ended March 31,
2025 (unaudited).
Redeemable Convertible Preferred Stock
The Company records redeemable convertible preferred stock at fair value on the dates of issuance, net
of issuance costs. The redeemable convertible preferred stock is recorded outside of stockholders’ deficit
because the preferred shares are contingently redeemable upon the occurrence of an event that is
outside of the Company’s control. The Company has elected not to adjust the carrying values of the
redeemable convertible preferred stock to the liquidation preferences of such shares because it is
uncertain whether or when an event would occur that would obligate the Company to pay the liquidation
preferences to holders of shares of redeemable convertible preferred stock. Subsequent adjustments to
the carrying values to the liquidation preferences will be made only when it becomes probable that such
liquidation event will occur. The redemption value of each series of redeemable convertible preferred
stock is equal to their respective original issue price plus accrued but unpaid dividends on Series C
redeemable convertible preferred shares and all declared but unpaid dividends (if any) for other series of
redeemable convertible preferred shares. In connection with the Series F redeemable convertible
preferred stock financing, the cumulative dividends payable to holders of Series C redeemable convertible
preferred stock upon a liquidation event were capped from $6.66 to $8.25 per share depending on the
time of issuance, with an aggregate total of $88.5 million as of December 31, 2023 and 2024 and March
31, 2025 (unaudited). Refer to Note 10 for additional information.
Revenue Recognition
The Company sells its HeartFlow Platform to medical providers in the United States and in select
international markets. The Company determines revenue recognition through the following steps:
•Identification of the contract, or contracts, with a customer;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, the Company satisfies a performance obligation.
The Company identified a single performance obligation, which is comprised of a highly interdependent
bundle of goods or services that are not distinct on their own but are as a group and consists of providing
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
implementation services and the requested analysis, including an image file and related licenses and
support. Revenue recognition commences only after completion of installation, implementation and
training for new customer accounts. The Company’s service consists of providing a visualization of the
patient’s coronary arteries and enables physicians to create more effective treatment plans. This service
is normally billable upon delivery of the analysis to the physician. Payment terms are generally net 30
days.
Substantially all of the Company’s revenue is from usage-driven fees and generated on a “pay-per-click”
basis each time a physician orders the Company’s HeartFlow FFRCT Analysis and Plaque Analysis. The
Company also derives revenue from subscription fees from customers accessing the Company’s hosted
software service during the subscription period. During the years ended December 31, 2023 and 2024
and three months ended March 31, 2024 and 2025 (unaudited), 98.1%, 98.8%, 97.6% and 98.9% of
revenue was from usage-driven fees, respectively, and the remainder was from subscription fees.
Revenue is recognized when control of these services is transferred to the customer, at an amount that
reflects the consideration the Company expects to be entitled to receive in exchange for those services.
The Company recognizes usage-driven fee revenue upon delivery of the requested analysis to the
physician, which is when control of these services is transferred to the customer. The Company
recognizes revenue on a straight-line basis over the contract term for subscriptions where the customer
pays a fixed amount upfront for unlimited analyses. Contracts with customers typically include a fixed
amount of consideration and are generally cancellable with 30 days’ written notice.
The transaction price consists of fixed consideration and variable consideration related to utilization and
volume rebates for reimbursement claims from government and commercial payers which are known and
determinable based on the number of analyses delivered within each quarterly period. The transaction
price (inclusive of both fixed consideration and variable consideration that is not constrained) is
recognized as revenue when control transfers. The Company uses a portfolio approach to estimate
variable consideration using the expected value method.
Unbilled Receivables
Unbilled receivables generally represent revenue in which the Company has satisfied its performance
obligation prior to invoicing. The Company records unbilled receivables within accounts receivable, net on
the consolidated balance sheets, based on the Company’s unconditional right to payment at the end of
the applicable period.
Contract Costs
Costs associated with product revenue include a flat rate commission per analysis and new customer site
commissions as well as implementation and onboarding costs. The Company capitalizes new customer
site commissions and certain implementation and onboarding costs that are considered to be incremental
to the acquisition of new customer contracts. Capitalized implementation and onboarding costs are
amortized over an estimated period of benefit of two years and capitalized new site commission costs are
amortized over an estimated period of benefit of three years. The estimated period of benefit is
determined by evaluating average customer life, the nature of the related benefit, and the specific facts
and circumstances of its arrangements. The Company evaluates these assumptions at least annually and
periodically reviews whether events or changes in circumstances have occurred that could impact the
period of benefit.
The Company expenses flat rate commissions when incurred as commensurate with its usage-driven fee
revenue recognition and amortizes capitalized new customer site commissions to selling, general and
administrative expense in the consolidated statements of operations and comprehensive loss. During the
year ended December 31, 2023, new site commission costs were not capitalized as the amount was not
material. The Company amortizes capitalized implementation and onboarding costs to cost of revenue in
the consolidated statements of operations and comprehensive loss. Short-term capitalized contract costs
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
are included in prepaid expenses and other current assets and the long-term portion is included in other
non-current assets in the consolidated balance sheets.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to
performance obligations that are unsatisfied, or partially unsatisfied. It includes contract liabilities and
amounts that will be invoiced and recognized as revenue in future periods and does not include contracts
where the customer is not committed. The customer is not considered committed when they are able to
terminate for convenience without payment of a substantive penalty under the contract. Additionally, as a
practical expedient, the Company has not disclosed the value of unsatisfied performance obligations for
contracts with an original expected length of one year or less.
Contract Liabilities
The Company records contract liabilities when billings or payments are received in advance of revenue
recognition from subscription services. The contract liabilities balance is reduced as the revenue
recognition criteria are met, generally within 12 months. Once services are available to customers, the
Company records amounts due in accounts receivable, net and contract liabilities within accrued
expenses and other current liabilities on the consolidated balance sheets. To the extent the Company bills
customers in advance of the billing period commencement date, the accounts receivable and
corresponding contract liabilities amount are netted to zero on the consolidated balance sheets, unless
such amounts have been paid as of the balance sheet date.
Cost of Revenue
Cost of revenue includes, but is not limited to, personnel and related expenses, stock-based
compensation costs, third-party hosting fees, amortization of capitalized internal-use software,
amortization of contract fulfillment costs as well as royalties associated with technology licenses used in
connection with the delivery of the Company’s HeartFlow Platform and allocated overhead, including rent,
equipment, depreciation, technology services and utilities, related to the Company’s production team. The
role of the production team is to support the Company’s patient case volume revenue by performing
defined quality-related activities on CCTA scans submitted by its customers for analysis. The production
team also supports activities in the Company’s clinical trials and research and development, which are
allocated as research and development expense.
Research and Development
Costs related to research, design, development, clinical studies, regulatory activities, and medical affairs
are charged to research and development and are expensed as incurred. These costs include, but are not
limited to, personnel and related expenses, clinical trials, stock-based compensation costs, third-party
consulting costs, the portion of the costs incurred by the production team to support clinical trials and
research and development efforts, and allocated overhead, including rent, equipment, depreciation and
utilities.
Clinical Trials
The Company accrues and expenses costs for its clinical trial activities performed by third parties,
including clinical research organizations and other service providers, based upon estimates of the work
completed over the life of the individual study in accordance with associated agreements. The Company
determines these estimates through discussion with internal personnel and outside service providers as
to progress or stage of completion of trials or services pursuant to contracts with clinical research
organizations and other service providers and the agreed-upon fee to be paid for such services.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs includes design and production
costs, including website development, testimonial videos, written media campaigns and other items.
Advertising costs of $778,000, $1,538,000, $327,000 and $384,000 was expensed during the years
ended December 31, 2023 and 2024, and three months ended March 31, 2024 and 2025 (unaudited),
respectively.
Stock-Based Compensation
The Company accounts for share-based payments at fair value. The grant date fair value of options
granted is measured using the Black-Scholes option pricing model. Option awards vest based on the
satisfaction of a service requirement and stock-based compensation expense is recorded on a straight-
line basis over the applicable service period, which is generally four years. For performance-based stock
options, the Company will assess the probability of performance conditions being achieved in each
reporting period. The amount of stock-based compensation expense recognized in any one period related
to performance-based stock options can vary based on the achievement or anticipated achievement of
the performance conditions. Forfeitures are recognized in the period in which the forfeiture occurs.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method,
deferred tax assets and liabilities are determined based on the temporary differences between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. As a result of the history of net operating losses, the
Company has provided for a full valuation allowance against the deferred tax assets for assets that are
not more-likely-than-not to be realized.
The Company applies a comprehensive model for the recognition, measurement, presentation and
disclosure in the consolidated financial statements of any uncertain tax positions that have been taken or
expected to be taken on a tax return using a two-step approach. The first step is to evaluate the tax
position taken or expected to be taken in a tax return by determining if the weight of available evidence
indicates that it is more likely than not that the tax position will be sustained upon examination by the
relevant taxing authorities, based on the technical merits of the position. For tax positions that are more
likely than not to be sustained upon audit, the second step is to measure the tax benefit in the financial
statements as the largest benefit that has a greater than 50% likelihood of being sustained upon
settlement. Significant judgment is required to evaluate uncertain tax positions. Changes in facts and
circumstances could have a material impact on the Company’s effective tax rate and results of operations.
The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a
component of provision for income taxes in the consolidated statements of operations and comprehensive
loss.
Comprehensive Loss
Comprehensive loss is comprised of net loss and foreign currency translation gains and losses.
Foreign Currency
The functional currency of the Company’s foreign subsidiaries is the local currency except for HeartFlow
International Sarl, which was the U.S. Dollar. For all non-functional currency balances, the
remeasurement of such balances to the functional currency results in either a foreign exchange
transaction gain or loss, which is recorded within other income, net within the consolidated statements of
operations and comprehensive loss. The Company recognized foreign exchange transaction losses of
$172,000, $269,000, $137,000 and $357,000 during the years ended December 31, 2023 and 2024, and
three months ended March 31, 2024 and 2025 (unaudited), respectively. During the years ended
December 31, 2023 and 2024, and three months ended March 31, 2024 and 2025 (unaudited), the
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
Company recognized $504,000, $271,000, $(1,000) and $236,000 of foreign currency translation (gain)
loss, respectively, in the statements of comprehensive loss related to foreign subsidiaries which have
local functional currencies.
Net Loss Per Share Attributable to Common Stockholders
Basic net loss per common share is calculated by dividing the net loss attributable to common
stockholders by the weighted-average number of shares of common stock outstanding during the period,
without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing
the net loss attributable to common stockholders by the weighted-average number of shares of common
stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per
share calculation, the redeemable convertible preferred stock, common stock warrants and stock options
are considered to be potentially dilutive securities.
Basic and diluted net loss attributable to common stockholders per share is presented in conformity with
the two-class method required for participating securities as the redeemable convertible preferred stock
and common stock subject to repurchase are considered participating securities. The Company’s
participating securities do not have a contractual obligation to share in the Company’s losses. As such,
the net loss is attributed entirely to common stockholders. Diluted net loss per share is the same as basic
net loss per share because the effects of potentially dilutive items were anti-dilutive given the Company’s
net loss position during the years ended December 31, 2023 and 2024 and three months ended March
31, 2024 and 2025 (unaudited).
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards
Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified
effective date. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our
Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to
complying with new or revised accounting standards, which means that when a standard is issued or
revised and it has different application dates for public and nonpublic companies, the Company will adopt
the new or revised standard at the time nonpublic companies adopt the new or revised standard and will
do so until such time that the Company either i) irrevocably elects to “opt out” of such extended transition
period or ii) no longer qualifies as an emerging growth company. The Company may choose to early
adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic
companies.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued Account Standards Update (“ASU”) 2020-06, Debt-Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own
Equity. The amendment simplifies the accounting for certain financial instruments with characteristics of
liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The new
standard requires entities to provide expanded disclosures about the terms and features of convertible
instruments, how the instruments have been reported in the entity’s financial statements, and information
about events, conditions, and circumstances that can affect how to assess the amount or timing of an
entity’s future cash flows related to those instruments. On January 1, 2024, the Company adopted ASU
2020-06, which had an immaterial impact on its financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures. The amendment expands segment disclosures by requiring disclosure
of significant segment expenses that are regularly provided to the chief operating decision maker
(“CODM”), the amount and description of other segment items, permits companies to disclose more than
one measure of segment profit or loss, and requires all annual segment disclosures to be included in the
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
interim periods. The amendments do not change how an entity identifies its operating segments,
aggregates those operating segments, or applies quantitative thresholds to determine its reportable
segments. During the year ended December 31, 2024, the Company adopted ASU 2023-07, which had a
disclosure only impact on its financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income
Tax Disclosures, which requires enhanced income tax disclosures, including specific categories and
disaggregation of information in the effective tax rate reconciliation, disaggregated information related to
income taxes paid, income or loss from continuing operations before income tax expense or benefit, and
income tax expense or benefit from continuing operations. This guidance is effective for annual periods
beginning after December 15, 2024. The adoption of ASU 2023-09 is expected to have a disclosure only
impact on the Company’s financial statements for the year ended December 31, 2025.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive
Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement
Expenses, which requires more detailed disclosures about specified categories of expenses (including
employee compensation, depreciation, and amortization) included in certain expense captions presented
on the face of the income statement. This ASU is effective for fiscal years beginning after December 15,
2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption
permitted. The amendments may be applied either (i) prospectively to financial statements issued for
reporting periods after the effective date of this ASU or (ii) retrospectively to all prior periods presented in
the financial statements. The Company is currently evaluating the impact of this pronouncement on the
disclosures in its consolidated financial statements.
3. Revenue and Contract Balances
Disaggregation of Revenue
The following table summarizes total revenue from customers by geographic region (in thousands):
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | |
United States ............................................................... | | | | | | | |
United Kingdom ........................................................... | | | | | | | |
Japan............................................................................. | | | | | | | |
Rest of Europe ............................................................. | | | | | | | |
Total revenue ............................................................... | | | | | | | |
| | | | | | | |
Revenues by geography are determined based on the region of the Company's contracting entity, which
may be different than the region of the customer.
Contract Balances
Unbilled receivables included within accounts receivable on the consolidated balance sheets as of
December 31, 2023 and 2024 and March 31, 2025 (unaudited) was $342,000, $574,000 and $861,000,
respectively.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
The following table provides the breakdown of capitalized contract costs on the consolidated balance
sheets (in thousands):
| | | | | |
| | | Three Months Ended March 31, |
| | | | | |
| | | | | |
Balance at beginning of period .................................................. | | | | | |
Contract costs capitalized .......................................................... | | | | | |
Contract costs amortized ............................................................ | | | | | |
Balance at end of period ............................................................. | | | | | |
| | | | | |
The following table provides the breakdown of contract liabilities included within accrued expenses and
other current liabilities on the consolidated balance sheets (in thousands):
| | | | | |
| | | Three Months Ended March 31, |
| | | | | |
| | | | | |
Balance at beginning of period .................................................. | | | | | |
Contract liabilities added ............................................................ | | | | | |
Contract liabilities recognized as revenue ............................... | | | | | |
Balance at end of period ............................................................. | | | | | |
| | | | | |
4. Fair Value Measurement
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a
recurring basis by level within the fair value hierarchy (in thousands):
| | | | | | | |
| |
| | | | | | | |
| | | | | | | |
Money market funds included in cash and cash equivalents ............................................... | | | | | | | |
Total .................................................................... | | | | | | | |
| | | | | | | |
Common stock warrant liability ...................... | | | | | | | |
Derivative liability .............................................. | | | | | | | |
Total .................................................................... | | | | | | | |
| | | | | | | |
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
| | | | | | | |
| |
| | | | | | | |
| | | | | | | |
Money market funds included in cash and cash equivalents ............................................... | | | | | | | |
Total .................................................................... | | | | | | | |
| | | | | | | |
Common stock warrant liability ...................... | | | | | | | |
Total .................................................................... | | | | | | | |
| | | | | | | |
| | | | | | | |
| March 31, 2025 (unaudited) |
| | | | | | | |
| | | | | | | |
Money market funds included in cash and cash equivalents ............................................... | | | | | | | |
Total .................................................................... | | | | | | | |
| | | | | | | |
Common stock warrant liability ...................... | | | | | | | |
Derivative liability .............................................. | | | | | | | |
Total .................................................................... | | | | | | | |
| | | | | | | |
The following tables present a reconciliation of the Company’s financial liabilities measured at fair value
as of December 31, 2023 and 2024 and March 31, 2025 (unaudited) using significant unobservable inputs
(Level 3), and the change in fair value (in thousands):
| |
| |
Fair value as of January 1, 2023 ..................................................................................................... | |
Change in fair value ........................................................................................................................... | |
Derecognition of convertible notes upon conversion into redeemable convertible preferred stock ..................................................................................................................................................... | |
Fair value as of December 31, 2023 ............................................................................................... | |
| |
The 2022 Convertible Notes, which are not regularly traded, are classified as Level 3, since their values
cannot be determined by using readily observable inputs or measures, such as market prices (see Note
9). The fair value of the 2022 Convertible Notes was estimated as the sum of its components (conversion
features and the debt component) as of the issuance dates and as of the subsequent balance sheet
dates. To value each of the conversion features, a “with and without” methodology was employed. The
debt component was valued using a discounted cash flow method that measured the net present value of
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
the principal and interest payments to be received by the holders of the 2022 Convertible Notes
(excluding the conversion features) through the estimated maturity date.
| |
| Common Stock Warrant Liability |
Fair value as of January 1, 2023 ..................................................................................................... | |
Change in fair value ........................................................................................................................... | |
Fair value as of December 31, 2023 ............................................................................................... | |
Change in fair value ........................................................................................................................... | |
Fair value as of December 31, 2024 ............................................................................................... | |
Change in fair value (unaudited) ...................................................................................................... | |
Fair value as of March 31, 2025 (unaudited) ................................................................................. | |
| |
In determining the fair value of the common stock warrant liability, the Company used the Black-Scholes
option pricing model to estimate the fair value using unobservable inputs including the expected term,
expected volatility, risk-free interest rate and dividend yield (see Note 12).
| |
| Term Loan Derivative Liability |
Fair value as of January 1, 2023 ..................................................................................................... | |
Change in fair value ........................................................................................................................... | |
Fair value as of December 31, 2023 ............................................................................................... | |
Change in fair value ........................................................................................................................... | |
Derecognition in connection with debt refinancing ....................................................................... | |
Fair value as of December 31, 2024 ............................................................................................... | |
| |
In determining the fair value of the term loan derivative liability, a two-step valuation approach was
employed, which included a probability-weighted scenario valuation method, the Black-Scholes-Merton
method, and the option pricing method, using unobservable inputs (see Note 13), which are classified as
Level 3 within the fair value hierarchy, and then comparing the instrument’s value with and without the
derivative features to estimate their combined fair value. The debt instrument is carried at amortized cost,
which approximates its fair value.
| |
| 2025 Convertible Notes Derivative Liability (unaudited) |
Fair value as of January 1, 2025 .................................................................................... | |
Recognition in connection with convertible notes offering (unaudited) .................... | |
Change in fair value (unaudited) ..................................................................................... | |
Fair value as of March 31, 2025 (unaudited) ................................................................ | |
| |
In determining the fair value of the convertible notes derivative liability, a two-step valuation approach was
employed, which included a probability-weighted scenario valuation method, the Monte Carlo Simulation
method, and the option pricing method, using unobservable inputs (see Note 13), which are classified as
Level 3 within the fair value hierarchy, and then comparing the instrument’s value with and without the
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
derivative features to estimate their combined fair value. The debt instrument is carried at amortized cost,
which approximates its fair value.
5. Balance Sheet Components
Allowance for Credit Losses
The following table presents a reconciliation of the allowance for credit losses (in thousands):
| | | | | |
| | | Three Months Ended March 31, |
| | | | | |
| | | | | |
Balance at beginning of period .................................. | | | | | |
Additions ....................................................................... | | | | | |
Write-offs ....................................................................... | | | | | |
Balance at end of period ............................................ | | | | | |
| | | | | |
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets are comprised of the following (in thousands):
| | | | | |
| | | |
| | | | | |
| | | | | |
Prepaid expenses ........................................................................ | | | | | |
Contract costs, current ................................................................ | | | | | |
Other .............................................................................................. | | | | | |
Total prepaid expenses and other current assets ................. | | | | | |
| | | | | |
Property and equipment, net
Property and equipment consisted of the following (in thousands):
| | | | | |
| | | |
| | | | | |
| | | | | |
Property and equipment at cost: | | | | | |
Computer equipment and software ........................................... | | | | | |
Furniture, fixtures and equipment ............................................. | | | | | |
Capitalized internal-use software .............................................. | | | | | |
Leasehold improvements ........................................................... | | | | | |
Construction in progress ............................................................. | | | | | |
Total property and equipment .............................................. | | | | | |
Less: Accumulated depreciation and amortization ................. | | | | | |
Property and equipment, net .................................................... | | | | | |
| | | | | |
The Company capitalized certain internal-use software costs totaling $4.6 million, $4.1 million, $796,000
and $936,000, including stock-based compensation of $408,000, $393,000, $77,000 and $6,000 related
to internal-use software development efforts, during the years ended December 31, 2023 and 2024, and
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
three months ended March 31, 2024 and 2025 (unaudited), respectively. Amortization of capitalized
internal-use software totaled $3.2 million, $3.7 million, $733,000 and $1.0 million for the years ended
December 31, 2023 and 2024, and three months ended March 31, 2024 and 2025 (unaudited),
respectively.
Depreciation and amortization expense related to property and equipment, excluding capitalized internal-
use software, was $1.5 million, $1.7 million, $471,000 and $370,000 for the years ended December 31,
2023 and 2024, and three months ended March 31, 2024 and 2025 (unaudited), respectively.
Other Non-Current Assets
Other non-current assets are comprised of the following (in thousands):
| | | | | |
| | | |
| | | | | |
| | | | | |
Contract costs, net ....................................................................... | | | | | |
Deferred offering costs ................................................................ | | | | | |
Other .............................................................................................. | | | | | |
Total other non-current assets .................................................. | | | | | |
| | | | | |
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following (in thousands):
| | | | | |
| | | |
| | | | | |
| | | | | |
Accrued payroll and related expenses ..................................... | | | | | |
Customer contract and rebate liabilities ................................... | | | | | |
Accrued royalty ............................................................................ | | | | | |
Accrued professional fees .......................................................... | | | | | |
Accrued clinical trial expenses .................................................. | | | | | |
Other .............................................................................................. | | | | | |
Total accrued expenses and other current liabilities ............. | | | | | |
| | | | | |
6. Leases
The Company leases office space in Mountain View, California, Santa Rosa, California, Austin, Texas,
and Tokyo, Japan.
Mountain View, California
In August 2021, the Company entered into a facility lease agreement with MV Campus Owner, LLC. (the
“Landlord”), for approximately 61,000 rentable square feet in Mountain View, California through August
2030. The Company received a tenant improvement allowance of $1.8 million, in which the remaining
unused amount of $1.4 million was credited against rent expense during the year ended December 31,
2023. In connection with the lease, the Company established a standby letter of credit for the benefit of
the landlord in the amount of $4.3 million in August 2021, which is classified as non-current restricted
cash on the consolidated balance sheets as of December 31, 2023 and 2024 and March 31, 2025
(unaudited).
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
Santa Rosa, California
In October 2024, the Company entered into an agreement to sublease approximately 4,000 rentable
square feet of office space in Santa Rosa, California for 29 months commencing on November 1, 2024. In
connection with this sublease, the Company paid a security deposit of $8,000 and recorded an ROU
asset and lease liability of $169,000.
Austin, Texas
In January 2023, the Company amended its facility lease agreement in Austin, Texas, which provides for
approximately 26,000 square feet of space, to extend the lease term which expired in November 2023
with a five-year renewal option to December 2025 with no renewal option. In connection with the lease
amendment, the Company recorded a reduction of $1.8 million in ROU asset and lease liability from the
remeasurement that previously included the renewal option during the year ended December 31, 2023. In
March 2025, the Company amended the lease for its Austin, Texas facility to extend the lease term an
additional 12 months through December 2026 and recorded an ROU asset and lease liability of $561,000
in connection with the lease extension. A security deposit of $150,000 was recorded as non-current
restricted cash as of December 31, 2023 and March 31, 2025 (unaudited) and as current restricted cash
as of December 31, 2024, on the consolidated balance sheets related to this lease.
Tokyo, Japan
The Company has one non-cancellable operating lease for its facility in Tokyo, Japan which was set to
expire in November 2024. In April 2024, the Company entered into an agreement to extend the lease for
an additional three years through November 2027. In connection with the new lease agreement, the
Company recorded an ROU asset and lease liability of $420,000.
Operating lease cost consisted of the following (in thousands):
| | | | | | | |
| | | |
| | | | | | | |
| | | | | |
Operating lease cost ......................................... | | | | | | | |
Variable lease cost ............................................ | | | | | | | |
Total lease cost .................................................. | | | | | | | |
| | | | | | | |
Cash paid for amounts included in the measurement of operating lease liabilities during the years ended
December 31, 2023 and 2024, and the three months ended March 31, 2024 and 2025 (unaudited) was
$4.1 million, $5.2 million, $1.3 million and $1.4 million, respectively.
The following table summarizes the maturities of the aggregate lease payments under the Company’s
operating lease liabilities as of December 31, 2024 and March 31, 2025 (unaudited) (in thousands):
| | | |
| | | |
| | | |
| | | |
2025 .......................................................................................................................... | | | |
2026 .......................................................................................................................... | | | |
2027 .......................................................................................................................... | | | |
2028 .......................................................................................................................... | | | |
2029 .......................................................................................................................... | | | |
Thereafter ................................................................................................................ | | | |
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
| | | |
Total minimum lease payments ............................................................................ | | | |
Less: Amount of lease payments representing interest .............................. | | | |
Present value of future minimum lease payments ............................................ | | | |
Less: current portion ......................................................................................... | | | |
Operating lease liabilities, net of current portion ............................................... | | | |
| | | |
The following table summarizes additional information related to the Company’s operating leases (in
thousands, except weighted-average data):
| | | | | |
| | | |
| | | | | |
| | | | | |
Right-of-use assets ..................................................................... | | | | | |
Weighted-average remaining lease term (years) ................... | | | | | |
Weighted-average discount rate ............................................... | | | | | |
| | | | | |
7. Commitments and Contingencies
Royalty Commitments
The Company has entered into various exclusive technology licensing agreements and other software
licensing agreements. The terms of the agreements require the Company to make annual royalty
payments in fixed amounts as well as certain milestone and revenue-based payments. The revenue-
based royalty percentage is in the low single digits, subject to reductions and offsets in certain
circumstances with a minimum royalty commitment of $50,000 annually. Future minimum royalty
commitments due under the terms of these exclusive agreements as of December 31, 2024 and March
31, 2025 (unaudited) are as follows (in thousands):
| | | |
| | | |
| | | |
Minimum Royalty Commitments: | | | |
2025 .......................................................................................................................... | | | |
2026 .......................................................................................................................... | | | |
2027 .......................................................................................................................... | | | |
2028 .......................................................................................................................... | | | |
2029 .......................................................................................................................... | | | |
Thereafter ................................................................................................................. | | | |
Total minimum royalty commitments .................................................................... | | | |
| | | |
The Company incurred royalty expense of $2.1 million, $1.5 million, $336,000 and $414,000 for the years
ended December 31, 2023 and 2024, and three months ended March 31, 2024 and 2025 (unaudited),
respectively.
Purchase Commitments
Open purchase commitments consist of agreements to purchase of goods and services entered into in
the ordinary course of business. These amounts were not recorded as liabilities on the consolidated
balance sheets as of December 31, 2024 as the Company had not yet received the related goods or
services. As of December 31, 2024 and March 31, 2025 (unaudited), the Company had estimated open
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
purchase commitments for goods and services of $5.2 million and $4.3 million over the next four and
three years, respectively.
Contingencies
The Company is not involved in any pending legal proceedings that it believes could have a material
adverse effect on its financial condition, results of operations or cash flows. The Company may pursue or
be subject to litigation and other legal actions from time to time arising in the ordinary course of business,
including intellectual property, products liability, breach of contract, commercial, employment, and other
similar claims which could have an adverse impact on its reputation, business and financial condition and
divert the attention of its management from the operation of its business. The Company accrues a liability
for such matters when it is probable that future expenditures will be made, and such expenditures can be
reasonably estimated. There were no contingent liabilities requiring accrual or disclosures as of
December 31, 2023 and 2024 and March 31, 2025 (unaudited).
Indemnifications
The Company provides general indemnifications to management and the members of the Company’s
board of directors (the “Board of Directors”) when they act, in good faith, in the best interest of the
Company. The Company is unable to develop an estimate of the maximum potential amount of future
payments that could potentially result from any hypothetical future claim, but expects the risk of having to
make any payments under these general business indemnifications to be remote. The Company also
maintains insurance coverage that would generally enable the Company to recover a portion of any future
amounts paid.
8. Term Loan
Initial Term Loan
On January 19, 2021, the Company entered into a Credit Agreement with Hayfin Services, LLP (“Hayfin”)
for total borrowings of up to $70.0 million (the “Initial Term Loan”). The Company received net cash
proceeds of $68.1 million, after deducting $1.3 million of lender fees as a discount to the debt, and
$629,000 of debt issuance costs. The Company also issued a warrant to the lender to purchase a total of
315,810 shares of its common stock. The fair value of the warrant was $4.3 million as of the issuance
date, which was accounted for as a debt discount. Refer to Note 12 for additional information.
New Money Term Loan
On March 17, 2022, the Company entered into Amendment No. 1 to the Credit Agreement with Hayfin for
an additional $50.0 million term loan (the “New Money Term Loan”), collectively with the Initial Term Loan,
(the “Term Loan”). Additionally, certain terms of the Initial Term Loan were amended. The Company
received net cash proceeds of $49.2 million, after deducting $820,000 of lender fees as a discount to the
debt. The Company also issued an additional warrant to the lender to purchase a total of 225,579 shares
of common stock. The fair value of the warrant was $3.5 million as of the issuance date, which was
accounted for as a debt discount. Refer to Note 12 for additional information.
Other Amendments
The Company entered into Amendments No. 2 and No. 3 to the Credit Agreement in September 2022 and
December 2022, respectively, which enabled the Company to issue Subordinated Convertible Promissory
Notes and to increase the aggregate principal of the Subordinated Convertible Promissory Notes that can
be issued to $42.0 million (see Note 9).
In the first quarter of 2023, the Company entered into three amendments to the Credit Agreement with
Hayfin. In March 2023, the Company entered into Amendment No. 4 and Waiver to Credit Agreement with
Hayfin to temporarily waive various covenant requirements that had not been met through the waiver date
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
and to enable the Company to amend certain terms of the Credit Agreement. Under Amendment No. 4, as
part of the Series F redeemable convertible preferred stock financing closing (see Note 10), the Company
issued to Hayfin 4,269,801 warrants for shares of common stock for no consideration and committed to
sell 2,689,375 and 3,508,156 shares of Series F-1 and Series F redeemable convertible preferred stock,
respectively. These shares were issued to Hayfin Heartflow UK Limited upon Convertible Note conversion
and upon the initial closing of Series F redeemable convertible preferred stock with the same terms as all
other investors. In March 2023, the Company entered into Amendment No. 5 to the Credit Agreement with
Hayfin, which required the Company’s securities at JPMorgan Chase Bank to become a “Controlled
Account”, as defined by the Credit Agreement. Also in March 2023, the Company entered into
Amendment No. 6 to the Credit Agreement with Hayfin, which permitted the reacquisition of 300,000
shares of common stock from an employee/founder of the Company. In connection with these
amendments, the Company paid $94,000 in lender fees, which were recorded as a debt discount.
Amendments No. 4 through No. 6 were accounted for as debt modifications for accounting purposes.
2024 Credit Agreement
On June 14, 2024, the Company entered into a Credit Agreement and Guaranty (the “2024 Credit
Agreement”) with Hayfin for a $138.1 million term loan (the “2024 Term Loan”) to refinance its outstanding
loan obligations under the 2021 Credit Agreement, as amended (the “2021 Credit Agreement”). In
addition, in connection with the 2024 Term Loan, the Company entered into several other adjoining
agreements with Hayfin. The 2024 Term Loan extended the maturity date from January 19, 2026 to
June 14, 2028. The 2024 Credit Agreement was accounted for as a debt modification for accounting
purposes.
On January 24, 2025, in connection with the issuance of the 2025 Convertible Notes, the Company
entered into Amendment No.1 to the 2024 Credit Agreement, in which Hayfin converted $23.0 million of
principal under the 2024 Term Loan to 2025 Convertible Notes under the same terms as the other
purchasers of the 2025 Convertible Notes. The principal balance outstanding under the 2024 Term Loan,
as amended, is $115.1 million as of March 31, 2025 (unaudited). The amendment was accounted for as a
debt modification for accounting purposes.
Prepayment Terms and Other Fees
Any prepayment or repayment of the principal balance are subject to an exit fee. The Company is
accreting the exit fee over the loan term using the effective interest method. Under the 2024 Term Loan,
the Company has the option to prepay the 2024 Term Loan subject to a prepayment fee of 1.5% for
prepayments after the second anniversary but on or prior to the third anniversary of the 2024 Term Loan
and a prepayment fee of 3% for prepayments thereafter. The Company must repay the loan in full
immediately upon the occurrence of a change in control. In addition, immediately upon the consummation
of an IPO or SPAC, as defined in the terms of the 2024 Credit Agreement, the Company shall repay the
2024 Term Loan in an amount equal to the lesser of (i) the net cash proceeds of such IPO or SPAC in
excess of $150.0 million and (ii) $35.0 million. In connection with Amendment No.1 to the 2024 Term Loan
in January 2025, the amount immediately payable upon the consummation of an IPO or SPAC, as defined
in the terms of the 2024 Credit Agreement, was amended where repayment of the 2024 Term Loan will be
at an amount equal to the lesser of (i) the net cash proceeds of such IPO or SPAC in excess of $150.0
million and (ii) $50.0 million (or $55.0 million if the underwriters exercise any portion of their option to
purchase additional shares).
On June 14, 2024, concurrently with entering the 2024 Credit Agreement, the Company signed a fee
letter agreement with Hayfin under which the Company agreed to pay $9.2 million in fees to Hayfin, which
consists of a 3% exit fee and 3% early prepayment fee due under the 2021 Credit Agreement in the
amount of $8.3 million payable in sixteen equal quarterly installments of approximately $518,000 through
March 31, 2028, agent fees of $150,000, due in annual installments of $30,000 through March 31, 2028
and an upfront fee of $721,000. The Company paid the $721,000 upfront fee and $30,000 agent fee upon
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
the closing of the 2024 Term Loan. The exit fee and early prepayment fee must be repaid in full
immediately upon the occurrence of a financing event, including, but not limited to, any IPO, SPAC, or
issuance of convertible notes or equity. The exit fee and early prepayment fee remaining under the
original terms of the 2024 Term Loan, which were immediately due and payable upon issuance of the
2025 Convertible Notes was amended in January 2025 to be immediately due and payable upon the next
occurrence of a financing event as described above.
Interest
The Initial Term Loan had an interest rate equal to the sum of the applicable margin of 6.0% plus the
higher of SOFR and 1.0%, and the New Money Term Loan had an interest rate equal to the sum of the
applicable margin of 15.25% plus the higher of the adjusted term for such interest period and 1.0%.
Interest payments are due quarterly. The Company may elect to pay the quarterly interest in-kind (“PIK”)
through the last interest period ending before the second anniversary of the original Credit Agreement.
However, if the Company elects to pay interest in-kind after the first anniversary, the applicable margin
increases by 1.0%.
With respect to the New Money Term Loan, the Company may elect to pay PIK Interest, provided that, (i)
prior to December 31, 2023, a minimum of 3% per annum shall be payable in cash and (ii) on or after
December 31, 2023, a minimum of 6% per annum shall be payable in cash. During the year ended
December 31, 2023, $144,000 of interest was paid-in-kind and was added to the outstanding principal
balance of the Term Loan.
The 2024 Term Loan bears interest at a floating per annum rate in an amount equal to the sum of (i) 7.0%
(or 6.0% if the alternative base rate (“ABR”) is in effect) plus (ii) the greater of (x) the forward-looking term
rate based on SOFR for a respective tenor (or the alternative base rate, if applicable), and (y) 2.0%. The
ABR equals to the sum of (i) 6.0% plus (ii) the greater of (1) the Wall Street Journal Prime Rate, plus
0.5%, (2) the Federal Reserve Bank of New York rate plus 0.5% or (3) CBA Term SOFR for one month
tenor plus 1.0%. The Company has the option to pay interest in-kind at the rate equal to the cash interest
rate plus 1.0%.
Debt Issuance Costs and Debt Discount
Debt issuance costs include third-party costs incurred in connection with the original Credit Agreement.
Debt discount includes fees paid to the lender, warrants issued to the lender and the embedded derivative
liability as described below.
Prior to the refinancing of the 2021 Credit Agreement with the 2024 Term Loan (the “2024 Term Loan
Refinancing”), certain prepayment features of the Term Loan, default put option and default interest
adjustment features were determined to be embedded derivatives requiring bifurcation and separate
accounting for at fair value as a single compound derivative. The fair value of the derivative liability was
$2.1 million, as of the issuance date in January 2021, and is remeasured to fair value at each reporting
period. In connection with the 2024 Term Loan Refinancing, the associated current fair value of the
derivative liability of $1.1 million was remeasured at the date of refinancing and was derecognized and
recorded as a debt discount to the 2024 Term Loan. Refer to Note 13 for additional information.
In connection with the conversion of $23.0 million of principal under the 2024 Term Loan to 2025
Convertible Notes under Amendment No.1 to the 2024 Credit Agreement in January 2025, $239,000 of
pro-rata debt discount under the 2024 Term Loan was reclassified as a debt discount under the 2025
Convertible Notes.
The debt issuance costs and debt discount are classified as an offset to the Term Loan on the
consolidated balance sheets, and is accreted over the loan term using the effective interest method.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2023, the effective interest rate of the Initial Term Loan and the New Money Term
Loan was 16.1% and 26.8%, respectively. As of December 31, 2024 and March 31, 2025 (unaudited), the
effective interest rate of the 2024 Term Loan was 16.0% and 15.2%, respectively.
Collateral and Covenants
The 2024 Term Loan is collateralized by substantially all of the Company’s assets. The 2024 Credit
Agreement contains certain customary representations and warranties, covenants, events of default,
termination provisions and affirmative and negative covenants, including, among others, covenants that
limit or restrict the Company’s (and its subsidiaries) ability to incur additional indebtedness, grant liens,
merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, make
investments, dispose of assets and enter into certain transactions with affiliates, in each case subject to
certain exceptions. Events of default include, among others, non-payment of principal, interest or fees,
violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events,
material judgments, cross-defaults to material contracts and events constituting a change of control. Upon
the occurrence of an event of default, the interest rate applicable to the 2024 Term Loan shall increase by
3.0% per annum and the outstanding principal balance, along with any accrued interest, shall become
immediately due and payable. The Company is subject to financial covenants which requires the
Company to maintain a $25.0 million minimum liquidity balance in cash and cash equivalents at all times
and minimum net sales for twelve consecutive month periods ending on the last day of a fiscal quarter,
which is not tested as long as the Company maintains minimum liquidity of at least $60.0 million and there
has been no decline in net sales for two-consecutive fiscal quarters at the end of such fiscal quarter. The
minimum twelve months trailing net sales covenant increases each quarter and is $70.0 million for the
quarter ended March 31, 2024 up to a minimum net sales amount of $110.0 million for the quarter ended
June 30, 2025 and each quarter thereafter. In connection with Amendment No.1 to the 2024 Term Loan in
January 2025, the minimum liquidity cash balance covenant under the 2024 Term Loan was reduced to
$15.0 million from the previous $25.0 million. Other non-financial covenants are outlined in the 2024
Credit Agreement.
As of December 31, 2024 and March 31, 2025 (unaudited), the Company was in compliance with the
2024 Term Loan covenants.
Debt Components
The components of the Term Loan are as follows (in thousands):
| | | | | |
| | | |
| | | | | |
| | | | | |
Principal value of Term Loan ...................................................... | | | | | |
PIK interest added to principal ................................................... | | | | | |
Accreted exit fee .......................................................................... | | | | | |
Debt discount ............................................................................... | | | | | |
Debt issuance costs .................................................................... | | | | | |
Total Term Loan .......................................................................... | | | | | |
| | | | | |
The 2024 Term Loan was classified as long-term on the consolidated balance sheets as of December 31,
2023 and 2024 and March 31, 2025 (unaudited). As of December 31, 2023, the estimated fair value of
the Term Loan was $132.4 million. As of December 31, 2024 and March 31, 2025 (unaudited), the
Company believes the fair value of the 2024 Term Loan approximates its carrying value due to the
relatively close proximity of the 2024 Term Loan Refinancing and amendment to the balance sheet date.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
9. Convertible Notes
2022 Convertible Notes
During the period from September 2022 through December 2022, the Company issued convertible
promissory notes to the 2022 Convertible Note Investors, with an aggregate principal amount of $40.0
million. The 2022 Convertible Notes bore interest at a rate of 8% per annum, compounded monthly. The
aggregate principal amount and interest accrued on the 2022 Convertible Notes was due September 30,
2026, and could not be prepaid by the Company without the consent of a majority of the 2022 Convertible
Note Investors.
The principal and accrued interest on the 2022 Convertible Notes was subject to automatic conversion
upon a Qualified Financing (defined as a transaction or series of transactions in which the Company sells
shares of its capital stock for cash proceeds of at least $100 million, including the 2022 Convertible
Notes) at a conversion price equal to 67% of the price per share paid by the investors purchasing such
capital stock in such Qualified Financing. Upon a Non-Qualified Financing, whereby the cash proceeds
are less than $100 million, upon the written consent of a majority of the 2022 Convertible Note Investors,
the 2022 Convertible Notes shall convert on the same terms as a Qualified Financing.
The 2022 Convertible Notes were also subject to repayment upon a Change of Control. A Change of
Control is defined as a sale of all or substantially all of the Company’s assets, a merger or business
combination with a change in more than 50% of the voting interest, or after a person or group, directly or
indirectly, owns more than 35% of the capital stock of the Company after the Company becomes publicly
traded.
In March 2023, the Company completed a Qualified Financing and all of the 2022 Convertible Notes,
including principal and interest, were converted into 21,465,064 shares of Series F-1 redeemable
convertible preferred stock and the Company derecognized the 2022 Convertible Notes from its
consolidated balance sheets. The Company remeasured the fair value of the 2022 Convertible Notes
immediately before the conversion and recognized a loss of $5.1 million from the change in fair value
within the consolidated statements of operations and comprehensive loss for the year ended
December 31, 2023.
2025 Convertible Notes (unaudited)
In January and March 2025, the Company issued convertible promissory notes to Requisite Holders in
the aggregate amount of $98.3 million, which was comprised of $74.0 million in aggregate principal
amount of notes issued for cash consideration, $1.3 million in aggregate principal amount of notes issued
in lieu of cash compensation to certain employees and $23.0 million in aggregate principal amount of
notes issued from the conversion of principal under the 2024 Term Loan. Net cash proceeds was $72.7
million after deducting $1.2 million of debt issuance costs, of which $1.1 million was unpaid as of March
31, 2025 (unaudited).
The 2025 Convertible Notes are due and payable in full 48 months from the issue date. Upon completion
of an IPO transaction, the 2025 Convertible Notes shall automatically convert into shares of the
Company’s common stock at the IPO price per share at the lower of a 20% discount and a valuation cap
of $2.0 billion on a pre-money basis. In the event the Company completes a sale of shares of preferred
stock, the Requisite Holders may elect to convert the outstanding 2025 Convertible Notes into shares of
such series of preferred stock at the same terms. Further, upon a change of control transaction, the
Requisite Holders may elect to convert the outstanding 2025 Convertible Notes into shares of the
Company’s common stock at the lower of a 20% discount to the implied price per share of common stock
in the change of control transaction and a valuation cap of $2.0 billion on a pre-money basis, or receive
payment of all principal and any accrued but unpaid PIK interest.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
The 2025 Convertible Notes do not accrue interest for one year following the date of issuance. Following
the one-year anniversary of the issue date and for the remainder of the term, the 2025 Convertible Notes
interest will accrue on an annual basis at the rate of 7.0% per annum (PIK Interest). All PIK Interest
accrued and payable will be paid by capitalizing such interest on an annual basis and adding it to the
outstanding principal amount of the 2025 Convertible Notes.
The 2025 Convertible Notes contain embedded derivative features, including conversion upon a change
in control and automatic conversion upon completion of a qualified IPO, that were required to be
bifurcated and accounted for separately as a single derivative instrument. The issuance date estimated
fair values of the derivative liability was $11.1 million and $20.8 million in January and March 2025
(unaudited), respectively, which was accounted for as a debt discount. See Note 13 for additional
information. The debt issuance costs and debt discount are classified as an offset to the 2025 Convertible
Notes on the consolidated balance sheets, and are accreted over the loan term using the effective
interest method.
As of March 31, 2025 (unaudited), the aggregate principal balance due under the 2025 Convertible Notes
was $98.3 million and was classified as long-term on the consolidated balance sheets.
The components of the 2025 Convertible Notes are as follows (in thousands):
| |
| |
| |
| |
Principal value of Convertible Notes ............................................................................................ | |
Debt discount .................................................................................................................................. | |
Debt issuance costs ....................................................................................................................... | |
Total Convertible Notes .................................................................................................................. | |
| |
10. Redeemable Convertible Preferred Stock
In March 2023, the Company issued 61,344,029 shares of Series F redeemable convertible preferred
stock to existing and new investors at a price per share of $2.8505 for an aggregate cash consideration of
$174.9 million, net of $5.9 million issuance costs. Contemporaneously with the issuance of the Series F
redeemable convertible preferred stock, the Company converted all of the outstanding Convertible Notes
issued by the Company from September 30, 2022 to December 16, 2022, in the aggregate principal
amount of $40.0 million plus accrued, unpaid interest of $994,000 into 21,465,064 shares of Series F-1
redeemable convertible preferred stock at a price per share of $1.9098, which represents a discount of
33% from the cash purchase price per share. Additionally, in connection with the Series F redeemable
convertible preferred stock financing, the cumulative dividends payable to holders of Series C redeemable
convertible preferred stock upon a liquidation event were capped from $6.66 to $8.25 per share
depending on the time of issuance, with an aggregate total of $88.5 million.
The issuance of the Series F redeemable convertible preferred stock triggered the anti-dilution protection
provision for Series B-1, Series B-2, Series C, Series D and Series E stockholders. As a result, the
Company recorded a $26.8 million deemed dividend in the amount equal to the change in fair value of the
abovementioned series of convertible preferred stock before and after the anti-dilution adjustment. The
fair value of the Series B-1, Series B-2, Series C, Series D and Series E redeemable convertible preferred
stock was determined using a “with-and-without” model under which the equity value of the Company was
allocated using a hybrid method, whereby the enterprise value in the IPO scenario is allocated to each
class of shares using the fully-diluted shares outstanding and whereby the enterprise value in the non-
IPO scenario is allocated using an option-pricing model to reflect the full distribution of possible non-IPO
outcomes, both before and after the anti-dilution adjustment. The following table summarizes information
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
about the significant Level 3 unobservable inputs used to estimate the fair value of the Company’s
preferred stock at the modification date:
| |
| |
Risk-free interest rate ........................................................................................................................ | |
Expected volatility ............................................................................................................................... | |
Expected term (in years) ................................................................................................................... | |
Expected dividend yield .................................................................................................................... | |
| |
Redeemable convertible preferred stock consists of the following as of December 31, 2023 and 2024 and
March 31, 2025 (unaudited) (in thousands, except share amounts):
| | | | | | | |
| December 31, 2023 and 2024 and March 31, 2025 (unaudited) |
| Number of Shares Authorized | | Number of Shares Issued and Outstanding | | | | |
Series A .................................................... | | | | | | | |
Series B-1 ................................................ | | | | | | | |
Series B-2 ................................................ | | | | | | | |
Series C ................................................... | | | | | | | |
Series D ................................................... | | | | | | | |
Series E ................................................... | | | | | | | |
Series F .................................................... | | | | | | | |
Series F-1 ................................................ | | | | | | | |
Total ......................................................... | | | | | | | |
| | | | | | | |
The significant rights and obligations of the Company’s redeemable convertible preferred stock are as
follows:
Dividends
The holders of Series A, Series B-1, Series B-2, Series C, Series D, Series E, Series F and Series F-1
redeemable convertible preferred stock are entitled, on a pro rata, pari passu basis, when and if declared
by the Board of Directors, to non-cumulative dividends out of the Company's assets legally available
therefore at the rate of $0.030, $0.284, $0.284, $0.7384, $1.24, $2.0265, $0.2281 and $0.1528 per share
per annum, respectively. No distributions will be made with respect to the common stock until all declared
but unpaid dividends on redeemable convertible preferred stock have been paid or set aside for payment
to the convertible preferred stockholders. Except with respect to the rights of the holders of Series C
redeemable convertible preferred stock upon a liquidation event, the right to receive dividends on shares
of redeemable convertible preferred stock are non-cumulative, and no right to such dividends accrues to
holders of redeemable convertible preferred stock by reason of the fact that dividends on such shares are
not declared or paid in any years. At December 31, 2023 and 2024 and March 31, 2025 (unaudited), no
dividends had been declared or paid.
Dividends are payable to preferred stockholders in the order of: first, the Series F and Series F-1
redeemable convertible preferred stock, then the Series E redeemable convertible preferred stock, then
the Series D redeemable convertible preferred stock, then the Series C redeemable convertible preferred
stock, then the Series B-1 and B-2 redeemable convertible preferred stock, and then finally, the Series A
redeemable convertible preferred stock. After payment of the full amount of any dividends described
above, any additional dividends shall be distributed among all holders of common stock and all holders of
redeemable convertible preferred stock on an as-converted basis.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
The holders of Series C redeemable convertible preferred stock are the only preferred stockholders
entitled to cumulative dividends upon a liquidation event. In connection with the Series F redeemable
convertible preferred stock financing, the cumulative dividends payable to holders of Series C redeemable
convertible preferred stock upon a liquidation event were capped from $6.66 to $8.25 per share
depending on the time of issuance, with an aggregate total of $88.5 million, provided, however, that the
Company shall be under no obligation to pay such Series C preferred accruing dividends until a
liquidation event; provided further, that a holder of shares of Series C redeemable convertible preferred
stock shall automatically forfeit any then accrued but unpaid Series C redeemable convertible preferred
accruing dividends with respect to such shares upon conversion of such shares into shares of common
stock. As of December 31, 2023 and 2024 and March 31, 2025 (unaudited), the total accumulated, but not
yet declared or paid, dividends of $88.5 million related to the Series C redeemable convertible preferred
stock was not recorded in the consolidated financial statements as an accrued dividend as such an event
was not considered probable to occur.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary,
the holders of Series F, Series F-1, Series E, Series D, Series C, Series B-1, Series B-2 and Series A
redeemable convertible preferred stock are entitled to liquidation preferences in the amount of $4.2758,
$2.8647, $25.3317, $15.50, $9.23, $3.55, $3.55, and $0.50 per share, respectively, for each outstanding
share plus all declared but unpaid dividends, if the shares are not converted to common stock.
Payment of liquidation rights to preferred stockholders are in the order of: first, the Series F and Series
F-1 redeemable convertible preferred stock, then the Series E redeemable convertible preferred stock,
then the Series D redeemable convertible preferred stock, then the Series C redeemable convertible
preferred stock, then the Series B-1 and B-2 redeemable convertible preferred stock, and then finally, the
Series A redeemable convertible preferred stock. The remaining assets, if any, shall be distributed to the
holders of common stock.
If upon the liquidation, dissolution or winding up of the Company, the assets of the Company legally
available for distribution to the holders of the Series F, Series F-1, Series E, Series D, Series C, Series
B-1, Series B-2 and Series A redeemable convertible preferred stock are insufficient to permit the
payment to such holders of the full liquidation preferences to which they are entitled, then the holders of
the Company’s common stock will receive nothing in respect of their equity holdings in the Company.
Upon such an event, the assets of the Company legally available for distribution shall satisfy the
respective liquidation preferences of the preferred stockholders with equal pro rata priority in the same
preferential order as described above.
Conversion Rights
Each share of Series A, Series B-1, Series B-2, Series C, Series D, Series E, Series F and Series F-1
redeemable convertible preferred stock shall automatically be converted into fully-paid, nonassessable
shares of common stock at the then effective conversion rate per share (currently $0.50, $3.0161,
$3.0161, $5.4841, $8.2085, $12.4806, $2.8505 and $1.9098, respectively) for such share prior to the
closing of a firm commitment underwritten IPO pursuant to an effective registration statement filed under
the Securities Act of 1933, as amended, or SPAC transaction covering the offer and sale of the
Company’s common stock, provided that (i) the aggregate gross proceeds to the Company are not less
than $100,000,000 and (ii) the per share price of the shares sold in the public offering shall be no less
than $4.9884 per share or $5.7010 per share (subject to adjustment from time to time for
Recapitalizations and as otherwise set forth elsewhere herein) so long as a certain investor holds at least
11,693,855 shares of Series F redeemable convertible preferred stock (a ‘‘Qualified Public Offering’’) shall
automatically be converted into fully-paid, nonassessable shares of common stock at the then effective
conversion rate for such share upon the written consent of the holders of a majority of the Series F and
F-1 redeemable convertible preferred stock (voting as a single class and on an as-converted basis). The
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
conversion rates per share for previously issued preferred stock were amended as a result of the Series F
redeemable convertible preferred stock financing from the original conversion rates per share for Series
B-1, Series B-2, Series C, Series D and Series E redeemable convertible preferred stock ($3.55, $3.55,
$9.23, $15.50 and 25.3317, respectively). Upon a Qualified Public Offering, shares of each series of the
outstanding redeemable convertible preferred stock are convertible into the number of shares of common
stock determined by dividing the original issue price for the relevant series of redeemable convertible
preferred stock by the conversion price for such series. As of December 31, 2023 and 2024 and March
31, 2025 (unaudited), shares of Series A, Series B-1, Series B-2, Series C, Series D, Series E, Series F
and Series F-1 outstanding redeemable convertible preferred stock are convertible into shares of
common stock on a 1:1, 1.177017:1, 1.177017:1, 1.683047:1, 1.888287:1, 2.029686:1, 1:1, and 1:1
basis, respectively.
Voting Rights
The holder of each share of Series A, Series B-1, Series B-2, Series C, Series D, Series E, Series F and
Series F-1 redeemable convertible preferred stock is entitled to one vote for each share of common stock
into which it could be converted.
11. Common Stock
Under the Company’s Amended and Restated Certificate of Incorporation, the Company is authorized to
issue 210,300,000 shares of $0.001 par value common stock.
Common stock reserved for issuance, on an as-converted basis, consisted of the following:
| | | | | | | |
| | | |
| | | | | | | |
| | | | | | | |
| | | | | |
Redeemable convertible preferred stock ...... | | | | | | | |
Options to purchase common stock .............. | | | | | | | |
Common stock warrants ................................. | | | | | | | |
Total ................................................................... | | | | | | | |
| | | | | | | |
12. Common Stock Warrant Liability
On January 19, 2021, in connection with entering into the Credit Agreement, the Company issued Hayfin
a warrant to purchase 315,810 shares of common stock at an exercise price of $0.01 per share. On
March 17, 2022, upon amendment to the Credit Agreement, the Company issued Hayfin a warrant to
purchase 225,579 shares of common stock at an exercise price of $0.01 per share. On March 3, 2023,
upon Amendment No. 4 to the Credit Agreement and as a result of antidilution adjustment provisions in
connection with the Series F redeemable convertible preferred stock financing, the Company issued
Hayfin a warrant to purchase 4,269,801 shares of common stock at an exercise price of $0.01 per share
(collectively, the “Warrants”). As of December 31, 2023 and 2024 and March 31, 2025 (unaudited), all
warrants remained outstanding.
The Warrants have a net exercise provision under which their holders may, in lieu of payment of the
exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market
value of the Company’s stock at the time of exercise of the Warrants after deduction of the aggregate
exercise price. The Warrants contain provisions for adjustment of the exercise price and number of
shares issuable upon the exercise of the Warrants, if upon the issuance of next round securities, the
Warrants are then currently exercisable and the next round price is less than $25.3317 per share (as
adjusted for any stock splits, recapitalizations, and the like). In such case, the number of exercise shares
shall be increased to equal the quotient obtained by dividing (a) $8.0 million by (b) the next round price.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
The Warrants also have customary antidilution protection provisions. The Warrants will terminate on the
ten-year anniversary of the issuance date, however, the Warrants will automatically net exercise
immediately prior to termination if the fair market value of one share of common stock exceeds the then
current exercise price per share of common stock. In connection with certain change of control
transactions, which include SPAC combinations, mergers, consolidations and the sale or lease of
substantially all of the assets of the Company, the Warrants will also automatically net exercise if the fair
market value of one share of common stock exceeds the then current exercise price per share of
common stock. The Warrants do not automatically net exercise in connection with an initial public offering.
The aggregate fair value of the Warrants issued in connection with the initial Credit Agreement and the
amended Credit Agreement was $4.3 million and $3.5 million, respectively, at issuance and was
recognized as a debt discount and recorded as a warrant liability.
The warrant liabilities were remeasured to fair value as of December 31, 2023 and 2024 and March 31,
2024 and 2025 (unaudited), resulting in a (gain) loss of $2.3 million, $16.4 million, $(1,000) and $1.6
million, respectively, within the consolidated statements of operations and comprehensive loss.
The fair value of the common stock warrant liability was determined using the Black-Scholes option
pricing model based on the following weighted average assumptions:
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | | | |
| | | | | |
Stock price ......................................................... | | | | | | | |
Exercise price ................................................... | | | | | | | |
Contractual term (in years) ............................. | | | | | | | |
Expected volatility ............................................. | | | | | | | |
Weighted-average risk-free interest rate ...... | | | | | | | |
Dividend yield .................................................... | | | | | | | |
| | | | | | | |
13. Derivative Liability
Term Loan
Prior to the 2024 Term Loan Refinancing in June 2024, the Term Loan contained certain prepayment
features, default put option and default interest adjustment features that were determined to be
embedded derivatives requiring bifurcation and separate accounting as a single compound derivative, as
discussed in Note 8. The fair value of the derivative liability was recorded at the issuance date as debt
discounts and reductions to the carrying value of long-term debt on the consolidated balance sheets. The
derivative liability is remeasured to fair value at each reporting period and the related changes in fair
value are recorded on the consolidated statements of operations and comprehensive loss. Through the
time of the 2024 Term Loan Refinancing in June 2024, the Company continued to adjust the derivative
liability for changes in fair value of the Term Loan.
Estimating fair values of the derivative liability requires the development of significant and subjective
estimates that may, and are likely to, change over the duration of the instrument with related changes in
internal and external market factors. Since the derivative financial instrument is initially and subsequently
carried at fair value, the Company’s income will reflect the volatility in these estimate and assumption
changes.
The derivative liability was remeasured to fair value as of December 31, 2023 and June 14, 2024,
resulting in a gain of $4.2 million and a loss of $222,000, respectively, within the consolidated statements
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
of operations and comprehensive loss. In connection with the 2024 Term Loan Refinancing on June 14,
2024, the associated current fair value of the derivative liability of $1.1 million as remeasured at the date
of refinancing was derecognized and recorded as a debt discount to the 2024 Term Loan.
The fair value of the derivative liability was estimated using a scenario-based analysis comparing the
probability-weighted present value of the Term Loan payoff at maturity with and without the bifurcated
features. The Company used both the Black-Scholes-Merton and option pricing method to estimate the
fair value of the derivative liability because it believes these techniques are reflective of all significant
assumption types and ranges of assumption inputs that market participants would likely consider in
transactions involving compound embedded derivatives. The option pricing method was employed as part
of a back-solve analysis to the Company’s Series F Preferred round of financing. The Company’s
assumptions used in determining the fair value of the derivative liability is as follows:
| | | |
| | | |
| | | |
Debt yield ................................................................................................................. | | | |
Probability of business combination or IPO (with feature) ............................... | | | |
Event date of business combination or IPO (with feature) ............................... | | | |
Probability of Default .............................................................................................. | | | |
Event date of Default .............................................................................................. | | | |
Probability to incur new debt ................................................................................. | | | |
Event date to incur new debt ................................................................................. | | | |
Probability of change of control ............................................................................ | | | |
Event date of change of control ............................................................................ | | | |
Event date (without feature) .................................................................................. | | | |
| | | |
Debt yield — Discount rate that reconciles the total fair value of the Warrants and 2021 Credit Agreement
with the transaction value. Debt yield reflects a change in the credit benchmark for a “CCC” rated
obligation.
2025 Convertible Notes (unaudited)
The 2025 Convertible Notes were determined to contain certain settlement features and conversion put
options which require bifurcation and separate accounting as a single compound embedded derivative, as
discussed in Note 9. The fair value of the derivative liability was recorded at the issuance dates as a debt
discount and reduction to the carrying value of the 2025 Convertible Notes on the consolidated balance
sheets. The derivative liability is remeasured to fair value at each reporting period and the related
changes in fair value are recorded on the consolidated statements of operations and comprehensive loss.
The fair value of the derivative liability was estimated using a scenario-based analysis comparing the
probability-weighted present value of the 2025 Convertible Notes with and without the bifurcated features.
The Company used the Monte Carlo Simulation method to estimate the fair value of the derivative liability
because it believes this technique is reflective of all significant assumption types and ranges of
assumption inputs that market participants would likely consider in transactions involving compound
embedded derivatives. The option pricing method was employed as part of a back-solve analysis for
scenarios in which the Company was expected to raise another financing round. The Company also
employed a waterfall analysis that allocated certain exit proceeds to its outstanding share classes for
scenarios in which the Company was assumed to exit via change of control or initial public offering. The
Company’s assumptions used in determining the issuance date fair value of the derivative liability is as
follows:
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
| | | |
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| | | |
| |
Debt yield ................................................................................................................. | | | |
Probability of IPO .................................................................................................... | | | |
Event date of IPO .................................................................................................... | | | |
Probability of change of control ............................................................................ | | | |
Event date of change of control ............................................................................ | | | |
Discount rate ............................................................................................................ | | | |
| | | |
The issuance date estimated fair values of the derivative liability was $11.1 million (unaudited) and $20.8
million (unaudited) in January and March 2025, respectively, which were recorded as debt discounts. The
January 2025 derivative liability was remeasured to fair value as of March 31, 2025 (unaudited) using the
March 26, 2025 assumptions, resulting in a loss of $9.0 million within the consolidated statements of
operations and comprehensive loss. The aggregate fair value of the derivative liability as of March 31,
2025 (unaudited) was $40.9 million.
14. Equity Incentive Plan
In 2009, the Company adopted its 2009 Equity Incentive Plan (the “Plan”) which provides for the grant of
stock options to the Company’s employees, members of the Board of Directors and consultants. Options
granted under the Plan may be either incentive stock options (“ISOs”) or nonqualified stock options
(“NSOs”). ISOs may be granted only to employees. NSOs, Stock Appreciation Rights, Restricted Stock,
and Restricted Stock Units may be granted to employees, members of the Board of Directors and
consultants. As of December 31, 2024 and March 31, 2025 (unaudited), the Company reserved
30,787,082 shares for issuance under the Plan.
Options under the Plan have a term of ten years from the grant date. The option exercise price will be
determined by the Board of Directors, but will be no less than 100% of the fair market value per share on
the date of grant. In addition, in the case of an ISO granted to an employee who owns stock representing
more than 10% of the voting power of all classes of stock of the Company, the per share exercise price
will be no less than 110% of the fair market value per share on the date of grant. Through December 31,
2024 and March 31, 2025 (unaudited), options granted generally vest over (i) four years with 25% vesting
on the first anniversary of the issuance date and 1/48th per month thereafter or (ii) vesting monthly in
equal installments over four years.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
Stock option activity under the Company’s 2009 Equity Incentive Plan is set forth below (in thousands,
except share and per share amounts):
| | | | | | | | | |
| Shares Available for Grant | | | | Awards Weighted- Average Exercise Price | | Weighted- Average Remaining Contractual Life (Years) | | |
Balance at December 31, 2022 ..... | | | | | | | | | |
Authorized ......................................... | | | | | | | | | |
Options granted ............................... | | | | | | | | | |
Options exercised ............................ | | | | | | | | | |
Options canceled ............................. | | | | | | | | | |
Balance at December 31, 2023 .... | | | | | | | | | |
Authorized ......................................... | | | | | | | | | |
Options granted ............................... | | | | | | | | | |
Options exercised ............................ | | | | | | | | | |
Options canceled ............................. | | | | | | | | | |
Balance at December 31, 2024 ..... | | | | | | | | | |
Vested and exercisable, December 31, 2024 ..................... | | | | | | | | | |
Vested and expected to vest, December 31, 2024 ..................... | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Shares Available for Grant | | | | Awards Weighted- Average Exercise Price | | Weighted- Average Remaining Contractual Life (Years) | | |
Balance at December 31, 2024 ..... | | | | | | | | | |
Authorized (unaudited) ................... | | | | | | | | | |
Options granted (unaudited) .......... | | | | | | | | | |
Options exercised (unaudited) ...... | | | | | | | | | |
Options canceled (unaudited) ........ | | | | | | | | | |
Balance at March 31, 2025 (unaudited) .................................... | | | | | | | | | |
Vested and exercisable, March 31, 2025 (unaudited) ................... | | | | | | | | | |
Vested and expected to vest, March 31, 2025 (unaudited) ....... | | | | | | | | | |
| | | | | | | | | |
The weighted-average grant date fair value of options granted during the years ended December 31,
2023 and 2024 and three months ended March 31, 2025 (unaudited) was $0.43, $1.23 and $2.43 per
share, respectively. There were no options granted during the three months ended March 31, 2024
(unaudited). The total grant date fair value of options vested was $3.2 million, $2.0 million, $477,000 and
$811,000 during the years ended December 31, 2023 and 2024 and three months ended March 31, 2024
and 2025 (unaudited), respectively.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
The following table summarizes information about stock options outstanding as of December 31, 2024:
| | | | | | | | | | |
| | | | Weighted- Average Remaining Contractual Life (Years) | | Weighted- Average Exercise Price | | | | Weighted- Average Exercise Price |
$0.76 - $0.76 ......................... | | | | | | | | | | |
$0.93 - $0.93 ......................... | | | | | | | | | | |
$1.74 - $1.74 ......................... | | | | | | | | | | |
$2.85 - $2.85 ......................... | | | | | | | | | | |
$3.28 - $3.28 ......................... | | | | | | | | | | |
$4.20 - $4.20 ......................... | | | | | | | | | | |
$4.24 - $4.24 ......................... | | | | | | | | | | |
$9.58 - $9.58 ......................... | | | | | | | | | | |
$0.76 - $9.58 ......................... | | | | | | | | | | |
| | | | | | | | | | |
The following table summarizes information about stock options outstanding as of March 31, 2025
(unaudited):
| | | | | | | | | | |
| | | | Weighted- Average Remaining Contractual Life (Years) | | Weighted- Average Exercise Price | | | | Weighted- Average Exercise Price |
$0.76 - $0.76 ......................... | | | | | | | | | | |
$0.93 - $0.93 ......................... | | | | | | | | | | |
$1.74 - $1.74 ......................... | | | | | | | | | | |
$2.85 - $2.85 ......................... | | | | | | | | | | |
$3.28 - $3.28 ......................... | | | | | | | | | | |
$4.20 - $4.20 ......................... | | | | | | | | | | |
$4.24 - $4.24 ......................... | | | | | | | | | | |
$4.34 - $4.34 ......................... | | | | | | | | | | |
$9.58 - $9.58 ......................... | | | | | | | | | | |
$0.76 - $9.58 ......................... | | | | | | | | | | |
| | | | | | | | | | |
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying
stock options and the fair value of the Company’s common stock for stock options that were in-the-money
at each reporting period. The aggregate intrinsic value of stock options exercised for the years ended
December 31, 2023 and 2024 and three months ended March 31, 2024 and 2025 (unaudited) was
$4,000, $1.7 million, $1,000 and $1.1 million, respectively.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
Stock-Based Compensation
The Company estimated the fair value of stock options using the Black-Scholes option-pricing model
based on the following assumptions:
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | | | |
| | | | | |
Expected life (in years) ......................... | | | | | | | |
Expected volatility .................................. | | | | | | | |
Risk-free interest rate ............................ | | | | | | | |
Dividend yield ......................................... | | | | | | | |
| | | | | | | |
The significant assumptions used in these calculations are summarized as follows:
Fair value of common stock. Because there has been no public market for the Company’s common stock,
the fair value of common stock shares underlying stock options has historically been determined by the
Board of Directors at the time of option grant by considering independent valuation performed by third-
party valuation firm as well as a number of objective and subjective factors, including valuation of
comparable companies, sales of convertible preferred stock to unrelated third parties, operating and
financial performance, the lack of liquidity of capital stock and general and industry specific economic
outlook, among other factors. The fair value of common stock was determined in accordance with
applicable elements of the American Institute of Certified Public Accountants Practice Aid, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation. In 2023, the Company considered
the stay private scenario and IPO exit scenario. In the stay private scenario, three market methodologies
were employed including (i) a market indexing valuation analysis based on the Series F Preferred
financing round, (ii) a guideline public company analysis based on the Company’s historical and forecast
operating metrics, and (iii) a guideline transaction analysis based on the Company’s historical and
forecast operating metrics. In the IPO exit scenario, the total equity value was estimated based on the
expected timing, offering size and pre-money valuation. A hybrid method was used to allocate equity
value to common stock under the stay private and IPO scenarios.
Expected term. The expected term of stock options represents the weighted-average period the stock
options are expected to remain outstanding. The Company does not have sufficient historical exercise
and post-vesting termination activity to provide accurate data for estimating the expected term of options
and has opted to use the “simplified method,” whereby the expected term equals the arithmetic average
of the vesting term and the original contractual term of the option.
Expected volatility. As the Company is not publicly traded, the expected volatility for the Company’s stock
options was determined by using an average of historical volatilities of selected industry peers deemed to
be comparable to the Company’s business corresponding to the expected term of the awards.
Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the
time of grant for zero-coupon U.S. Treasury notes with maturities corresponding to the expected term of
the awards.
Expected dividend yield. The expected dividend rate is zero as the Company currently has no history or
expectation of declaring dividends on its common stock.
The Company also issues stock options with vesting based upon completion of performance goals. The
fair value for these performance-based awards is recognized over the period during which the goals are
to be achieved. Stock-based compensation expense recognized at fair value includes the impact of
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
estimated probability that the goals would be achieved, which is assessed prior to the requisite service
period for the specific goals.
Total stock-based compensation expense is as follows (in thousands):
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | | | |
| | | | | |
Cost of revenue ................................................ | | | | | | | |
Research and development(1) ......................... | | | | | | | |
Selling, general and administrative ............... | | | | | | | |
Total stock-based compensation expense .. | | | | | | | |
| | | | | | | |
(1)Includes stock-based compensation expense of $627,000 during the year ended December 31, 2023 related to a repurchase of
common shares from one employee, as described below.
As of December 31, 2023 and 2024 and March 31, 2025 (unaudited), total unrecognized stock-based
compensation costs related to unvested stock options was $20.7 million, $16.5 million and $15.7 million,
respectively, which is expected to be recognized over a remaining weighted-average period of 3.22 years,
2.79 years and 2.65 years, respectively.
In January 2023, the fair value of the Company’s common stock declined from $14.27 to $0.76 per share,
prompting the Company to reduce the exercise price of certain stock options to $0.76, effective July 10,
2023. No other changes to the stock options’ terms were made. The Company calculated the incremental
fair value by calculating the fair value of the award immediately before and immediately after the
modification. The fair value of the award immediately before the repricing is based on assumptions
(including volatility, expected term and risk free interest rate) that reflect the facts and circumstances on
the modification date and therefore, differ from the fair value calculated on the grant date. The average
additional compensation per award from the modification was $0.09 and the aggregate incremental
expense was $649,000, of which $340,000 was immediately recognized on the modification date and the
remaining amount is recognized over the options’ remaining requisite service period.
In March 2023, the Board of Directors approved a repurchase of 300,000 common shares from an
employee of the Company at a purchase price of $2.8505 per share for total consideration of $855,000.
The fair value of the repurchased common shares was $228,000, and the difference between the
repurchase price and fair value of the common shares of $627,000 was recorded as stock-based
compensation expense within research and development expense in the consolidated statements of
operations and comprehensive loss during the year ended December 31, 2023.
15. Employee Retirement Plan
The Company has a qualified retirement plan under section 401(k) of the Internal Revenue Code (“IRC”)
under which participants may contribute up to 100% of their eligible compensation, subject to maximum
deferral limits specified by the IRC. The Company may make matching contributions of up to 4.0% of an
employee’s eligible compensation, subject to conditions specified by the IRC. During the years ended
December 31, 2023 and 2024, and three months ended March 31, 2024 and 2025, the Company’s
matching contributions totaled $1.4 million, $1.5 million, $356,000 and $688,000, respectively.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
16. Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the computation of basic and diluted net loss per share attributable to
common stockholders (in thousands, except share and per share amounts):
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | |
| | | | | | | |
| | | | | |
| | | | | | | |
Net loss .............................................................. | | | | | | | |
Cumulative dividends on Series C redeemable convertible preferred stock ....... | | | | | | | |
Deemed dividend upon down round of redeemable convertible preferred stock ....... | | | | | | | |
Net loss attributable to common stockholders ..................................................... | | | | | | | |
| | | | | | | |
Weighted-average shares used to compute net loss per share, basic and diluted ............. | | | | | | | |
Net loss per share attributable to common stockholders, basic and diluted ...................... | | | | | | | |
| | | | | | | |
The following outstanding shares of potentially dilutive securities were excluded from the computation of
diluted net loss per share attributable to common stockholders for the period presented because including
them would have been antidilutive:
| | | | | | | |
| | | |
| | | | | | | |
| | | | | | | |
| | | | | |
Redeemable convertible preferred stock ...... | | | | | | | |
Outstanding options to purchase common stock ................................................................... | | | | | | | |
Common stock warrants ................................. | | | | | | | |
Total .................................................................... | | | | | | | |
| | | | | | | |
17. Income Taxes
The components of net loss before income taxes are as follows (in thousands):
| | | |
| |
| | | |
United States ........................................................................................................... | | | |
International ............................................................................................................. | | | |
Net loss before income taxes ................................................................................ | | | |
| | | |
For the years ended December 31, 2023 and 2024, the Company did not record any federal or state
provision for income tax expense. For the years ended December 31, 2023 and 2024, the Company
recorded an income tax provision of $547,000 and $53,000, respectively, from international jurisdictions.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
The following table presents a reconciliation of the statutory federal rate and the Company’s effective tax
rate (in thousands):
| | | |
| |
| | | |
Tax at federal statutory rate ................................................................................... | | | |
State taxes, net of federal benefit ......................................................................... | | | |
Change in valuation allowance ............................................................................. | | | |
Stock-based compensation ................................................................................... | | | |
Fair value remeasurement ..................................................................................... | | | |
R&D credits .............................................................................................................. | | | |
Foreign rate differential .......................................................................................... | | | |
Other ......................................................................................................................... | | | |
Provision for income taxes .................................................................................... | | | |
| | | |
Significant components of the net deferred tax assets for federal and state income taxes are as follows (in
thousands):
| | | |
| |
| | | |
| | | |
Net operating loss carryforwards ..................................................................... | | | |
Research and development credits ................................................................. | | | |
Stock-based compensation .............................................................................. | | | |
Interest limitation ................................................................................................ | | | |
Accruals and reserves ....................................................................................... | | | |
Fixed asset and intangible asset basis ........................................................... | | | |
Operating lease liabilities .................................................................................. | | | |
Section 174 research and development capitalization ................................. | | | |
Total deferred tax assets ........................................................................................ | | | |
| | | |
Deferred tax liabilities: | | | |
Capitalized implementation costs .................................................................... | | | |
Operating lease right-of-use assets ................................................................ | | | |
Other .................................................................................................................... | | | |
Total deferred tax liabilities .................................................................................... | | | |
Deferred tax assets, net ......................................................................................... | | | |
Valuation allowance ................................................................................................ | | | |
| | | |
As the Company has incurred annual net operating losses since inception, a full valuation allowance is
provided against U.S. net deferred tax assets due to uncertainties regarding the Company’s ability to
realize these assets. The valuation allowance increased by $20.4 million and $16.8 million for the years
ended December 31, 2023 and 2024, respectively.
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2024, the Company had net operating loss carryforwards of approximately $542.9
million and $435.5 million available to reduce future taxable income, if any, for federal and state income
tax purposes, respectively. Of these amounts, $355.9 million of federal net operating losses are carried
forward indefinitely, and $187.0 million are limited to 80% of future taxable income. The remaining federal
net operating losses will expire starting in 2030. Utilization of net operating loss carryforwards may be
subject to an annual limitation in certain situations where changes occur in the stock ownership of a
company. In the event the Company has undergone or undergoes a change in ownership, utilization of
the carryforwards could be limited.
The Company also had federal and California research and development credit carryforwards of
approximately $9.4 million and $7.0 million, respectively, as of December 31, 2024. The federal credits
will expire starting in 2030, if not utilized. The California credits have no expiration date.
Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated
foreign subsidiaries because of the Company’s intent to reinvest such earnings indefinitely in active
foreign operations. The Company believes that future domestic cash generation will be sufficient to meet
future domestic cash needs. The Company has not recorded a deferred tax liability on the undistributed
earnings of non-U.S. subsidiaries. The foreign withholding taxes would not have a material impact on the
Company’s financial position and results of operation. As of December 31, 2023 and 2024, the Company
had $0.6 million and $1.1 million, respectively, in unremitted earnings that were indefinitely reinvested
related to its consolidated foreign subsidiaries.
The Company’s gross unrecognized tax benefits as of December 31, 2023 and 2024 was $8.2 million and
$8.6 million, respectively, all of which would affect the Company’s income tax expense if recognized
before consideration of the Company’s valuation allowance. The Company does not expect its
unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes
interest and penalties accrued on any unrecognized tax benefits as a component of provision for income
taxes.
The following table summarizes the activity related to unrecognized tax benefits as follows (in thousands):
| | | |
| |
| | | |
Balance at beginning of period ............................................................................. | | | |
Increase related to current year tax positions .................................................... | | | |
Changes related to prior year tax positions ........................................................ | | | |
Balance at end of period ........................................................................................ | | | |
| | | |
The Company files income tax returns in the U.S. federal jurisdiction, various state and certain foreign
jurisdictions. In the normal course of business, the Company is subject to examination by their respective
taxing authorities. The Company has been selected for audit by the Internal Revenue Service for its 2022
tax year. The examination is at its early stages. However, no tax adjustments are anticipated. The statute
of limitations remains effectively open for the U.S. federal and state tax jurisdictions for all tax years from
2010 through 2024. Tax years outside the normal statute of limitations remain open to examination by tax
authorities due to tax attributes generated in earlier years which have been carried forward and may be
examined and adjusted in subsequent years when utilized.
Three Months Ended March 31, 2024 and 2025 (unaudited)
The Company had an effective tax rate of 0% for both the three months ended March 31, 2024 and 2025
(unaudited). The Company continues to incur operating losses.
During the three months ended March 31, 2024 and 2025 (unaudited), the Company has evaluated all
available evidence, both positive and negative, including historical levels of income, expectations and
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
risks associated with estimates of future taxable income and has determined that it is more likely than not
that its net deferred tax assets will not be realized. Due to uncertainties surrounding the realization of the
deferred tax assets, the Company continues to maintain a full valuation allowance against its net deferred
tax assets.
18. Subsequent Events
The Company has reviewed and evaluated subsequent events as of December 31, 2023 through March
26, 2025, the date that the consolidated financial statements were available to be issued.
2025 Convertible Notes
In January and March 2025, the Company issued convertible promissory notes to various investors and
certain employees (the “Requisite Holders”) in the aggregate amount of $98.3 million, which was
comprised of $75.3 million in aggregate principal amount of notes issued for cash consideration, $1.3
million in aggregate principal amount of notes issued in lieu of cash compensation to certain employees,
and $23.0 million in aggregate principal amount of notes issued in the 2024 Term Loan Conversion
(collectively, the “2025 Convertible Notes”). The 2025 Convertible Notes are due and payable in full 48
months from the issue date. Upon completion of an IPO transaction, the 2025 Convertible Notes shall
automatically convert into shares of the Company’s common stock at the IPO price per share at the lower
of a 20% discount and a valuation cap of $2.0 billion on a pre-money basis. In the event the Company
completes a sale of shares of preferred stock, the Requisite Holders may elect to convert the outstanding
2025 Convertible Notes into shares of such series of preferred stock at the same terms. Further, upon a
change of control transaction, the Requisite Holders may elect to convert the outstanding 2025
Convertible Notes into shares of the Company’s common stock at the lower of a 20% discount to the
implied price per share of common stock in the change of control transaction and a valuation cap of $2.0
billion on a pre-money basis, or receive payment of all principal and any accrued but unpaid PIK interest.
The 2025 Convertible Notes do not accrue interest for one year following the date of issuance. Following
the one-year anniversary of the issue date and for the remainder of the term, the 2025 Convertible Notes
interest will accrue on an annual basis at the rate of 7.0% per annum (PIK Interest). All PIK Interest
accrued and payable will be paid by capitalizing such interest on an annual basis and adding it to the
outstanding principal amount of the 2025 Convertible Notes. The Company is currently analyzing the
appropriate accounting treatment and financial statement impact related to the 2025 Convertible Notes on
its consolidated financial statements.
2025 Amendment to 2024 Credit Agreement
On January 24, 2025, in connection with the issuance of the 2025 Convertible Notes, the Company
entered into Amendment No.1 to the 2024 Credit Agreement, in which its lender, Hayfin, converted $23.0
million of principal under the 2024 Term Loan to 2025 Convertible Notes under the same terms as the
other purchasers of the 2025 Convertible Notes. The principal balance outstanding under the 2024 Term
Loan, as amended, is $115.1 million. The minimum liquidity cash balance covenant under the 2024 Term
Loan was reduced to $15.0 million from the previous $25.0 million. In addition, the amount immediately
payable upon the consummation of an IPO or SPAC, as defined in the terms of the 2024 Credit
Agreement, was amended where repayment of the 2024 Term Loan will be at an amount equal to the
lesser of (i) the net cash proceeds of such IPO or SPAC in excess of $150.0 million and (ii) $50.0 million
(or $55.0 million if the underwriters exercise any portion of their option to purchase additional shares).
The exit fee and prepayment fee remaining under the original terms of the 2024 Term Loan, which were
immediately due and payable upon issuance of the 2025 Convertible Notes was also amended to be
immediately due and payable upon the next occurrence of a financing event as described in Note 8.
2025 Facility Lease Amendment
HeartFlow Holding, Inc.
Notes to Consolidated Financial Statements
On March 12, 2025, the Company amended the lease for its Austin, Texas facility to extend the lease term
an additional 12 months through December 31, 2026. The monthly lease payments are approximately
$57,000 per month during the one-year extension period.
Grant of Option Awards
Subsequent to December 31, 2024, the Company granted options for 796,801 shares of common stock,
subject to service-based vesting conditions, with an exercise price of $4.34 per share to employees.
19. Subsequent Events (unaudited)
For the interim consolidated financial statements as of March 31, 2025, and for the three months then
ended, the Company has evaluated events through June 20, 2025, which is the date the unaudited
interim consolidated financial statements were available to be issued and through July 17, 2025, which is
the date the consolidated financial statements were available to be reissued.
Authorized Shares Increase
In May 2025, the Company’s stockholders and Board of Directors approved an additional 1,000,000
shares of common stock to be authorized for issuance under the 2009 Equity Incentive Plan.
Grant of Option Awards
Subsequent to March 31, 2025, the Company granted options for 621,827 shares of common stock,
subject to service-based vesting conditions, with an exercise price of $4.67 per share to employees.
2025 Facility Lease
On July 2, 2025, the Company entered into a facility lease agreement for approximately 8,100 rentable
square feet of office space in San Francisco, California for 39 months through November 30, 2028, with
the option to extend for one additional three-year period. In connection with the lease, the Company paid
a security deposit of $90,000. The average monthly lease payments are approximately $40,000 per
month during the lease term.
Consolidation of HeartFlow Holding, Inc. With and Into HeartFlow, Inc.
On July 17, 2025, the Company’s stockholders and Board of Directors approved the consolidation of
HeartFlow Holding, Inc. with and into HeartFlow, Inc., with HeartFlow, Inc. continuing as the surviving
company. The previous holders of HeartFlow Holding, Inc.’s common stock and preferred securities
became holders of HeartFlow, Inc.’s common stock and preferred securities, and the equity incentive
plan, outstanding equity awards, outstanding warrants and certain other equity-related agreements of
HeartFlow Holding, Inc. were assumed by HeartFlow, Inc. In connection with this consolidation, the
Company changed its name to Heartflow, Inc.
shares
Common stock
Preliminary prospectus
, 2025
Part II
Information not required in prospectus
Item 13. Other expenses of issuance and distribution.
The following table sets forth the costs and expenses, other than the underwriting discounts and
commissions, payable by Heartflow, Inc. (the “Registrant”) in connection with the sale of the Registrant’s
common stock, par value $0.001 per share (the “Common Stock”), being registered. All amounts are
estimates except for the Securities and Exchange Commission (the “SEC”) registration fee, the Financial
Industry Regulatory Authority (“FINRA”) filing fee, and the Nasdaq Global Select Market listing fee.
| |
| |
SEC registration fee ........................................................................................................................... | |
FINRA filing fee ................................................................................................................................... | |
Nasdaq listing fee ............................................................................................................................... | |
Transfer agent’s fees and expenses ............................................................................................... | |
Printing and engraving expenses .................................................................................................... | |
Legal fees and expenses .................................................................................................................. | |
Accounting fees and expenses ........................................................................................................ | |
Miscellaneous expenses ................................................................................................................... | |
Total ...................................................................................................................................................... | |
| |
*To be filed by amendment.
Item 14. Indemnification of directors and officers.
Section 145 of the General Corporation Law of the State of Delaware (the “Delaware General Corporation
Law”) provides that a corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by such person in connection with any threatened, pending, or
completed actions, suits, or proceedings in which such person is made a party by reason of such person
being or having been a director, officer, employee, or agent to the Registrant. The Delaware General
Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. Article X of the Registrant’s current amended and restated certificate of
incorporation and VIII of the Registrant’s amended and restated certificate of incorporation to be effective
upon completion of the sale of the Registrant’s common stock being registered each provide for
indemnification by the Registrant of its directors and officers to the fullest extent permitted by the
Delaware General Corporation Law. The Registrant has entered into indemnification agreements with
each of its current directors, executive officers, and certain other officers to provide these directors and
officers additional contractual assurances regarding the scope of the indemnification set forth in the
Registrant’s amended and restated certificate of incorporation and to provide additional procedural
protections. There is no pending litigation or proceeding involving a director or executive officer of the
Registrant for which indemnification is sought.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its
certificate of incorporation that a director or an officer of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or an
officer, except for liability (i) for any breach of the director’s or officer’s duty of loyalty to the corporation or
its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) in the case of directors, for unlawful payments of dividends or unlawful stock
repurchases, redemptions, or other distributions, or (iv) for any transaction from which the director or
officer derived an improper personal benefit; provided that officers may not be indemnified for actions by
or in the right of the corporation. The Registrant’s amended and restated certificate of incorporation to be
effective upon completion of the sale of the Registrant’s common stock being registered provides for such
limitation of liability.
The Registrant maintains standard policies of insurance under which coverage is provided (a) to its
directors and officers against loss rising from claims made by reason of breach of duty or other wrongful
act and (b) to the Registrant with respect to payments that may be made by the Registrant to such
officers and directors pursuant to the above indemnification provision or otherwise as a matter of law.
The proposed form of underwriting agreement to be filed as Exhibit 1.1. to this registration statement
provides for indemnification of officers and directors of the Registrant by the underwriters against certain
liabilities.
Item 15. Recent sales of unregistered securities.
Since January 1, 2022, to the date of this registration statement, the Registrant made sales of the
following unregistered securities:
(a) Equity plan-related issuances
1.Since January 1, 2022, the Registrant granted to its directors, employees, consultants, and other
service providers options to purchase an aggregate of shares of its Common Stock under
its HeartFlow Holding, Inc. Amended and Restated 2009 Equity Incentive Plan (“2009 Equity Incentive
Plan”), with a weighted-average exercise price of $ per share.
2.Since January 1, 2022, the Registrant issued and sold to its directors, employees, consultants, and
other service providers an aggregate of shares of its Common Stock upon the exercise of
stock options under its 2009 Equity Incentive Plan, with a weighted-average exercise price of
$ per share.
(b) Sales of preferred stock
3.In March 2023, the Registrant sold an aggregate of (i) 61,344,029 shares of its Series F redeemable
convertible preferred stock to 29 accredited investors at a purchase price of $2.8505 per share and
(ii) 21,465,064 shares of its Series F-1 redeemable convertible preferred stock to 19 accredited
investors at a purchase price of $1.9098 per share, for an aggregate purchase price of $215.9 million.
The Series F-1 redeemable convertible preferred stock were issued upon conversion of the
indebtedness under outstanding subordinated convertible promissory notes.
(c) Warrants
4.On March 17, 2022, the Registrant issued a warrant to Hayfin Tourmaline Luxco S.a.r.l. to purchase
an aggregate of 225,579 shares of its Common Stock at a purchase price of $0.01 per share (the
“2022 Hayfin Warrant”).
5.On March 2, 2023, the warrant issued to Hayfin Tourmaline Luxco S.a.r.l. on January 19, 2021 (the
“2021 Hayfin Warrant”) was adjusted in connection with the Series F and Series F-1 Convertible
Preferred Stock Financing, allowing Hayfin Tourmaline Luxco S.a.r.l. to purchase an aggregate of
2,806,525 shares of its Common Stock at a purchase price of $0.01 per share pursuant to the 2021
Hayfin Warrant.
6.On March 2, 2023, the 2022 Hayfin Warrant was adjusted in connection with the Series F and
Series F-1 Convertible Preferred Stock Financing, allowing Hayfin Tourmaline Luxco S.a.r.l. to
purchase an aggregate of 2,004,665 shares of its Common Stock at a purchase price of $0.01 per
share pursuant to the 2022 Hayfin Warrant.
(d) Convertible notes
7.From September 30, 2022 to December 16, 2022, the Registrant issued $40.0 million principal
amount of the 2022 Convertible Promissory Notes to investors, including related parties, with original
maturity dates of 48 months from the dates of issuance. The 2022 Convertible Notes automatically
converted into shares of Series F-1 convertible preferred stock on March 2, 2023.
8.In January and March 2025, the Registrant issued an aggregate of $98.3 million principal amount of
the 2025 Convertible Promissory Notes to investors, including related parties, with original maturity
dates of 48 months from the dates of issuance. The 2025 Convertible Promissory Notes will be
automatically converted upon the completion of this offering into shares of Common Stock without
interest.
No underwriters were involved in these transactions. The offers, sales, and issuances of the securities
described in paragraphs (1) through (2) were deemed to be exempt from registration under Rule 701
promulgated under the Securities Act of 1933, as amended (the “Securities Act”) as transactions under
compensatory benefit plans and contracts relating to compensation, or under Section 4(a)(2) of the
Securities Act as a transaction by an issuer not involving a public offering. The recipients of such
securities were our directors, employees, or bona fide consultants and received the securities under the
Registrant’s equity incentive plans. Appropriate legends were affixed to the securities issued in these
transactions. Each of the recipients of securities in these transactions had adequate access, through
employment, business or other relationships, to information about the Registrant.
The offers, sales, and issuances of the securities described in paragraphs (3) through (8) were deemed to
be exempt under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D under the Securities
Act as a transaction by an issuer not involving a public offering. The recipients of securities in each of
these transactions acquired the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to the securities issued in
these transactions. Each of the recipients of securities in these transactions was an accredited investor
within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access to
information about the Registrant.
Item 16. Exhibits and financial statement schedules.
(a)Exhibits. See the Exhibit Index attached to this registration statement, which Exhibit Index is
incorporated herein by reference.
(b)Consolidated financial statement schedules. Schedules not listed above have been omitted
because the information required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the SEC such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
1.For purposes of determining any liability under the Securities Act, the information omitted from the
form of prospectus filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration statement as of the time it was
declared effective.
2.For the purpose of determining any liability under the Securities Act, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Exhibit index
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| | Form of Underwriting Agreement. |
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| | Form of Common Stock Certificate. |
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| | Opinion of O’Melveny & Myers LLP. |
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| | Form of Indemnification Agreement for Directors and Officers. |
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| | Consent of O’Melveny & Myers LLP (included in Exhibit 5.1). |
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*To be filed by amendment.
#Indicates management contract or compensatory plan.
+Filed herewith.
†Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish
supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.
Signatures
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of
Mountain View, State of California on July 17, 2025.
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| | | President and Chief Executive Officer |
Signatures and power of attorney
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Vikram Verghese, Angela Ahmad and Mhairi L. Jones, and each of them, as their true and lawful
attorneys-in-fact and agents, each with the full power of substitution, for them and in their name, place, or
stead, in any and all capacities, to sign any and all amendments to this registration statement (including
post-effective amendments), and to sign any registration statement for the same offering covered by this
registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully to all intents
and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
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| | President, Chief Executive Officer and Director (Principal Executive Officer) | | |
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| | Chief Financial Officer (Principal Financial Officer) | | |
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| | Chief Accounting Officer (Principal Accounting Officer) | | |
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| | Chair of the Board of Directors | | |
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/s/ Nicholas Downing, M.D. | | | | |
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/s/ Charles A. Taylor, Jr., Ph.D. | | | | |
Charles A. Taylor, Jr., Ph.D. | | |
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HEARTFLOW, INC.
ARTICLE I
The name of the corporation is Heartflow, Inc. (the “Company”).
ARTICLE II
The purpose of the Company is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
ARTICLE III
The address of the Company’s registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, 19801. The name of the registered agent at such address is The Corporation Trust Company.
ARTICLE IV
The total number of shares of stock that the Company shall have authority to issue is 332,531,454, consisting of 210,300,000 shares of Common Stock, $0.001 par value per share (“Common Stock”), and 122,231,454 shares of Preferred Stock, $0.001 par value per share. The first Series of Preferred Stock shall be designated “Series A Preferred Stock” and shall consist of 4,082,965 shares. The second series of Preferred Stock shall be designated “Series B-1 Preferred Stock” and shall consist of 1,954,846 shares. The third series of Preferred Stock shall be designated “Series B-2 Preferred Stock” and shall consist of 2,848,263 shares. The fourth series of Preferred Stock shall be designated “Series C Preferred Stock” and shall consist of 11,343,434 shares. The fifth series of Preferred Stock shall be designated “Series D Preferred Stock” and shall consist of 7,151,873 shares. The sixth series of Preferred Stock shall be designated “Series E Preferred Stock” and shall consist of 12,040,980 shares. The seventh series of Preferred Stock shall be designated “Series F Preferred Stock” and shall consist of 61,344,029 shares. The eighth series of Preferred Stock shall be designated “Series F-1 Preferred Stock” and shall consist of 21,465,064 shares.
ARTICLE V
The terms and provisions of the Common Stock and Preferred Stock are as follows:
1. Definitions. For purposes of this ARTICLE V, the following definitions shall apply:
(a) “Conversion Price” shall mean $0.50 per share for the Series A Preferred Stock, $3.0161 per share for the Series B-1 Preferred Stock, $3.0161 per share for the Series B-2 Preferred Stock, $5.4841 per share for the Series C Preferred Stock, $8.2085 per share for the Series D Preferred Stock, $12.4806 per share for the Series E Preferred Stock, $2.8505 per share for the Series F Preferred Stock, and $1.9098 per share for the Series F-1 Preferred Stock (each subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein).
(b) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.
(c) “Company” shall mean Heartflow, Inc.
(d) “Dividend Rate” shall mean an annual rate of $0.03 per share for the Series A Preferred Stock, $0.284 per share for the Series B-1 Preferred Stock, $0.284 per share for the Series B-2 Preferred Stock, $0.7384 per share for the Series C Preferred Stock, $1.24 per share for the Series D Preferred Stock, $2.0265 per share for the Series E Preferred Stock, $0.2281 per share for the Series F Preferred Stock, and $0.1528 per share for the Series F-1 Preferred Stock (each subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein).
(e) “Liquidation Preference” shall mean $0.50 per share for the Series A Preferred Stock, $3.55 per share for the Series B-1 Preferred Stock, $3.55 per share for the Series B-2 Preferred Stock, $9.23 per share for the Series C Preferred Stock, $15.50 per share for the Series D Preferred Stock, $25.3317 per share for the Series E Preferred Stock, $4.2758 per share for the Series F Preferred Stock, and $2.8647 per share for the Series F-1 Preferred Stock (each subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein).
(f) “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(g) “Original Issue Price” shall mean $0.50 per share for the Series A Preferred Stock, $3.55 per share for the Series B-1 Preferred Stock, $3.55 per share for the Series B-2 Preferred Stock, $9.23 per share for the Series C Preferred Stock, $15.50 per share for the Series D Preferred Stock, and $25.3317 per share for the Series E Preferred Stock, $2.8505 per share for the Series F Preferred Stock, and $1.9098 per share for the Series F-1 Preferred Stock (each subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein).
(h) “Preferred Stock” shall mean the Series A Preferred Stock, the Series B-1 Preferred Stock, the Series B-2 Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock, and the Series F-1 Preferred Stock.
(i) “Recapitalization” shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event after the date hereof.
(j) “Series B Preferred Stock” shall mean the Series B-1 Preferred Stock and the Series B-2 Preferred Stock.
(k) “Series C Preferred Accrued Dividend” shall mean: (i) with respect to the shares of Series C Preferred Stock issued on December 21, 2011, a dividend in the amount of $8.2579 per share (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein); (ii) with respect to the shares of Series C Preferred Stock issued on January 12, 2012, a dividend in the amount of $8.2134 per share (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein); (iii) with respect to the shares of Series C Preferred Stock issued on January 20, 2012, a dividend in the amount of $8.1973 per share (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein); and (iv) with respect to the shares of Series C Preferred Stock issued on February 19, 2014, a dividend in the amount of $6.6577 per share (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere
herein), in each case of items (i) through (iv) of the foregoing, payable to the holders of outstanding shares of Series C Preferred Stock as of immediately prior to the closing of a Liquidation Event, subject to and in accordance with the conditions set forth in Section 2(d) and Section 3(a)(iv).
2. Dividends.
(a) Series F Preferred Stock and Series F-1 Preferred Stock. From and after the date of the issuance of any shares of Series F Preferred Stock and Series F-1 Preferred Stock, the holders of outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock shall be entitled to receive, only when, as and if declared by the Company’s Board of Directors (the “Board of Directors”), out of any funds and assets at the time legally available therefor, dividends at the Dividend Rate specified for the Series F Preferred Stock and Series F-1 Preferred Stock, respectively, payable in preference and priority to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Common Stock of the Company. The right to receive dividends on shares of Series F Preferred Stock and Series F-1 Preferred Stock shall not be cumulative, and no right to dividends shall accrue to holders of Series F Preferred Stock or Series F-1 Preferred Stock by reason of the fact that dividends on said shares are not declared or paid. Payment of any dividends to the holders of Series F Preferred Stock and Series F-1 Preferred Stock shall be on a pro rata, pari passu basis.
(b) Series E Preferred Stock. After all dividends on the Series F Preferred Stock and the Series F-1 Preferred Stock have been paid or set aside for payment to the holders of Series F Preferred Stock and Series F-1 Preferred Stock, the holders of outstanding shares of Series E Preferred Stock shall be entitled to receive, only when, as and if declared by the Board of Directors, out of any funds and assets at the time legally available therefor, dividends at the Dividend Rate specified for the Series E Preferred Stock payable in preference and priority to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Common Stock of the Company. The right to receive dividends on shares of Series E Preferred Stock shall not be cumulative, and no right to dividends shall accrue to holders of Series E Preferred Stock by reason of the fact that dividends on said shares are not declared or paid. Payment of any dividends to the holders of Series E Preferred Stock shall be on a pro rata, pari passu basis.
(c) Series D Preferred Stock. After all dividends on the Series F Preferred Stock, the Series F-1 Preferred Stock and the Series E Preferred Stock have been paid or set aside for payment to the holders of Series F Preferred Stock, Series F-1 Preferred Stock, and Series E Preferred Stock, the holders of outstanding shares of Series D Preferred Stock shall be entitled to receive, only when, as and if declared by the Board of Directors, out of any funds and assets at the time legally available therefor, dividends at the Dividend Rate specified for the Series D Preferred Stock payable in preference and priority to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Common Stock of the Company. The right to receive dividends on shares of Series D Preferred Stock shall not be cumulative, and no right to dividends shall accrue to holders of Series D Preferred Stock by reason of the fact that dividends on said shares are not declared or paid. Payment of any dividends to the holders of Series D Preferred Stock shall be on a pro rata, pari passu basis.
(d) Series C Preferred Stock. After all dividends on the Series F Preferred Stock, the Series F-1 Preferred Stock, the Series E Preferred Stock and the Series D Preferred Stock have been paid or set aside for payment to the holders of Series F Preferred Stock, Series F-1 Preferred Stock, Series E Preferred Stock and Series D Preferred Stock, the holders of outstanding shares of Series C Preferred Stock shall be entitled to receive only when, as and if declared by the Board of Directors, out of any funds and assets at the time legally available therefor, dividends at the Dividend Rate specified for the Series C Preferred Stock payable in preference and priority to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on shares of Series A Preferred Stock, Series B Preferred Stock, or Common Stock of the Company in any calendar year. The right to receive dividends on shares of Series C Preferred Stock pursuant to the prior sentence shall not be cumulative, and no right to dividends shall accrue to holders of Series C Preferred Stock by reason of the fact that dividends on said shares are not declared or paid. Payment of any dividends to the holders of Series C Preferred Stock shall be on a pro rata, pari passu basis. Notwithstanding the foregoing, in the event of a Liquidation Event, and subject to the conditions set forth in Section 3(a)(iv), each holder of outstanding shares of Series C Preferred Stock as of immediately prior to the closing of such Liquidation Event shall be entitled to receive the Series C Preferred Accrued Dividend. For the avoidance of doubt, a holder of shares of Series C Preferred Stock shall automatically forfeit the right to receive any Series C Preferred Accrued Dividend with respect to such shares of Series C Preferred Stock upon conversion of such shares of Series C Preferred Stock into shares of Common Stock.
(e) Series B Preferred Stock. After all dividends on the Series F Preferred Stock, the Series F-1 Preferred Stock, the Series E Preferred Stock, the Series D Preferred Stock and the Series C Preferred Stock have been paid or set aside for payment to the holders of Series F Preferred Stock, Series F-1 Preferred Stock, Series E Preferred Stock, Series D Preferred Stock and Series C Preferred Stock, the holders of outstanding shares of Series B Preferred Stock shall be entitled to receive, only when, as and if declared by the Board of Directors, out of any funds and assets at the time legally available therefor, dividends at the Dividend Rate specified for the Series B Preferred Stock payable in preference and priority to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on the Common Stock and Series A Preferred Stock of the Company. The right to receive dividends on shares of Series B Preferred Stock shall not be cumulative, and no right to dividends shall accrue to holders of Series B Preferred Stock by reason of the fact that dividends on said shares are not declared or paid. Payment of any dividends to the holders of Series B Preferred Stock shall be on a pro rata, pari passu basis.
(f) Series A Preferred Stock. After dividends on the Series F Preferred Stock, the Series F-1 Preferred Stock, the Series E Preferred Stock, the Series D Preferred Stock, the Series C Preferred Stock and the Series B Preferred Stock have been paid or set aside for payment to the holders of Series F Preferred Stock, Series F-1 Preferred Stock, Series E Preferred Stock, Series D Preferred Stock, Series C Preferred Stock and Series B Preferred Stock, the holders of outstanding shares of Series A Preferred Stock shall be entitled to receive, only when, as and if declared by the Board of Directors, out of any funds and assets at the time legally available therefor, dividends at the Dividend Rate specified for the Series A Preferred Stock payable in preference and priority to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on the Common Stock of the Company. The right to receive dividends on shares of Series A Preferred Stock shall not be cumulative, and no right to dividends shall accrue to holders of Series A Preferred Stock by reason of the fact that dividends on said shares are not declared or paid. Payment of any dividends to the holders of Series A Preferred Stock shall be on a pro rata, pari passu basis.
(g) Dividend Participation. Except as otherwise expressly contemplated by this Section 2, the Company shall not declare, pay or set aside any dividends on shares of Common Stock or any other class or series of capital stock of the Company (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Amended and Restated Certificate of Incorporation) the holders of the shares of Preferred Stock then outstanding shall first receive, or simultaneously receive, in addition to the other dividends payable on the shares of Preferred Stock pursuant to this Section 2, on a pro rata, pari passu basis, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of such series of Preferred Stock as would equal the product of (x) the dividend payable on each share of such series of Preferred Stock determined as if all shares of such series had been converted into Common Stock, and (y) the number of shares of Common Stock issuable upon conversion of a share of such series of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend, or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of such series of Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Original Issue Price for such series of Preferred Stock; provided that, if the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one (1) class or series of capital stock of the Company, the dividend payable to the holders of Preferred Stock pursuant to this Section 2(g) shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest dividend to the holders of such series of Preferred Stock.
(h) Waiver of Dividends. Any dividend payable on any series of Preferred Stock may be waived, in whole or in part, by the consent or vote of the holders of a majority of the outstanding shares of such series; provided, however, that any dividend payable on the Series F Preferred Stock and Series F-1 Preferred Stock shall not be waived, in whole or in part, without the consent or vote of the holders of at least 60% of the outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock (collectively, the “Series F Requisite Holders”).
3. Liquidation Rights.
(a) Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary:
(i) Series F Preference. The holders of Series F Preferred Stock and Series F-1 Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Liquidation Event (as defined below), out of the consideration payable to stockholders in such Liquidation Event or out of the Available Proceeds (as defined below), as applicable, prior and in preference to any payment or distribution to the holders of Series E Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series F Preferred Stock and Series F-1 Preferred Stock held by them equal to the sum of (i) the applicable Liquidation Preference specified for such share of Series F Preferred Stock and Series F-1 Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Series F Preferred Stock and Series F-1 Preferred Stock ((i) and (ii) together, the “Series F Preference”). If upon the liquidation, dissolution or winding up of the Company or any Liquidation Event, the assets of the
Company legally available for distribution to the holders of the Series F Preferred Stock and Series F-1 Preferred Stock are insufficient to permit the payment to such holders of the full Series F Preference, then the entire assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series F Preferred Stock and Series F-1 Preferred Stock in proportion to the number of shares of Series F Preferred Stock and Series F-1 Preferred Stock held by them.
(ii) Series E Preference. After payment has been made or set aside of the full Series F Preference, the holders of Series E Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Liquidation Event, out of the consideration payable to stockholders in such Liquidation Event or out of the Available Proceeds, as applicable, prior and in preference to any payment or distribution the holders of Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series E Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Series E Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Series E Preferred Stock ((i) and (ii) together, the “Series E Preference”). If upon the liquidation, dissolution or winding up of the Company or any Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series E Preferred Stock following the payment of the Series F Preference are insufficient to permit the payment to such holders of the full Series E Preference, then the entire assets of the Company legally available for distribution following the payment of the Series F Preference shall be distributed with equal priority and pro rata among the holders of the Series E Preferred Stock in proportion to the number of shares of Series E Preferred Stock held by them.
(iii) Series D Preference. After payment has been made or set aside of the full Series F Preference and the full Series E Preference, the holders of Series D Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Liquidation Event, out of the consideration payable to stockholders in such Liquidation Event or out of the Available Proceeds, as applicable, prior and in preference to any payment or distribution the holders of Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series D Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Series D Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Series D Preferred Stock ((i) and (ii) together, the “Series D Preference”). If upon the liquidation, dissolution or winding up of the Company or any Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series D Preferred Stock following the payment of the Series F Preference and Series E Preference are insufficient to permit the payment to such holders of the full Series D Preference, then the entire assets of the Company legally available for distribution following the payment of the Series F Preference and Series E Preference shall be distributed with equal priority and pro rata among the holders of the Series D Preferred Stock in proportion to the number of shares of Series D Preferred Stock held by them.
(iv) Series C Preference. After payment has been made or set aside of the full Series F Preference, the full Series E Preference and the full Series D Preference, the holders of Series C Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Liquidation Event, out of the consideration payable to stockholders in such Liquidation Event or out of the Available Proceeds, as applicable, prior and in preference to any payment or distribution to the holders of Series B Preferred Stock, Series A Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series C
Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Series C Preferred Stock, (ii) in the case of a Liquidation Event, the applicable Series C Preferred Accrued Dividend for such share and (iii) all declared but unpaid dividends (if any) on such share of Series C Preferred Stock that do not constitute the Series C Preferred Accrued Dividend ((i)-(iii) collectively, the “Series C Preference”). If upon the liquidation, dissolution or winding up of the Company or a Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series C Preferred Stock following the payment of the Series F Preference, Series E Preference and Series D Preference are insufficient to permit the payment to such holders of the full Series C Preference, then the entire assets of the Company legally available for distribution following the payment of the Series F Preference, Series E Preference and Series D Preference shall be distributed with equal priority and pro rata among the holders of the Series C Preferred Stock in proportion to the number of shares of Series C Preferred Stock held by them.
(v) Series B Preference. After payment has been made or set aside of the full Series F Preference, the full Series E Preference, the full Series D Preference and the full Series C Preference, the holders of Series B Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Liquidation Event, out of the consideration payable to stockholders in such Liquidation Event or out of the Available Proceeds, as applicable, prior and in preference to any payment or distribution the holders of Series A Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series B Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Series B Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Series B Preferred Stock ((i) and (ii) together, the “Series B Preference”). If upon the liquidation, dissolution or winding up of the Company or any Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series B Preferred Stock following the payment of the Series F Preference, Series E Preference, Series D Preference and Series C Preference are insufficient to permit the payment to such holders of the full Series B Preference, then the entire assets of the Company legally available for distribution following the payment of the Series F Preference, Series E Preference, Series D Preference and Series C Preference shall be distributed with equal priority and pro rata among the holders of the Series B Preferred Stock in proportion to the number of shares of Series B Preferred Stock held by them.
(vi) Series A Preference. After payment has been made or set aside of the full Series F Preference, the full Series E Preference, the full Series D Preference, the full Series C Preference and the full Series B Preference, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Liquidation Event, out of the consideration payable to stockholders in such Liquidation Event or out of the Available Proceeds, as applicable, prior and in preference to any payment or distribution to the holders of the Common Stock by reason of their ownership of such stock, an amount per share for each share of Series A Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Series A Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Series A Preferred Stock, or such lesser amount as may be approved by the holders of the majority of the outstanding shares of Series A Preferred Stock ((i) and (ii) together, the “Series A Preference” and, collectively with the Series F Preference, the Series E Preference, Series D Preference, Series C Preference, and the Series B Preference, the “Liquidation Preferences”). If upon the liquidation, dissolution or winding up of the Company or any Liquidation Event, the assets of the Company legally available for distribution to the holders of Series A Preferred Stock following the payment of the Series F Preference, Series E Preference, Series D Preference, Series C Preference and Series B Preference are insufficient to permit the payment to such holders of the full Series A Preference,
then the entire assets of the Company legally available for distribution Stock following the payment of the Series F Preference, Series E Preference, Series D Preference, Series C Preference and Series B Preference shall be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock in proportion to the number of shares of Series A Preferred Stock held by them.
(b) Remaining Assets. After the payment or setting aside for payment to the holders of Preferred Stock of the full Liquidation Preferences specified in Section 3(a), the entire remaining assets of the Company legally available for distribution shall be distributed pro rata to the holders of the Common Stock of the Company in proportion to the number of shares of Common Stock held by them.
(c) Shares not Treated as Both Preferred Stock and Common Stock in any Distribution. Shares of Preferred Stock shall not be entitled to be converted into shares of Common Stock in order to participate in any distribution, or series of distributions, as shares of Common Stock, without first foregoing participation in the distribution, or series of distributions, as shares of Preferred Stock.
(d) Reorganization. For purposes of this Section 3, a liquidation, dissolution or winding up of the Company shall be deemed to be occasioned by, or to include: (i) (x) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company or any of its stockholders is party (including, without limitation, any acquisition of securities of the Company representing 50% or more of the outstanding voting rights of all security holders of the Company in a single transaction or a series of related transactions (including by share issuance or share sale, but excluding any sale of stock for capital raising purposes)), or (y) any reorganization, merger or consolidation in which the Company is a constituent party or in which a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, other than, in the cause of clauses (x) and (y), a transaction or series of related transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, as a result of shares in the Company held by such holders prior to such transaction or series of related transactions, at least a majority of the total voting power, whether held directly or indirectly, represented by the outstanding voting securities of the Company or such other surviving or resulting entity; (ii) a sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries taken as a whole, except where such sale, lease, exclusive license or other disposition is to a wholly-owned subsidiary of the Company; or (iii) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. The treatment of any transaction or series of related transactions as a liquidation, dissolution or winding up pursuant to clause (i) or (ii) above (either, a “Liquidation Event”), may be waived only by the consent or vote of the holders of each of (i) a majority of the outstanding Preferred Stock (voting as a single class and on an as-converted basis), (ii) at least 60% of the outstanding Series C Preferred Stock with respect to the Series C Preferred Stock (voting as a separate series), (iii) at least 60% of the outstanding Series D Preferred Stock with respect to the Series D Preferred Stock (voting as a separate series), (iv) at least 60% of the outstanding Series E Preferred Stock with respect to the Series E Preferred Stock (voting as a separate series), and (v) the Series F Requisite Holders with respect to the Series F Preferred and Series F-1 Preferred Stock.
(e) Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Company upon any Liquidation Event shall be the cash or the value of the property, rights or securities to be paid or distributed to such holders pursuant to such Liquidation
Event. The value of such property, rights or securities shall be determined in good faith by the Board of Directors, including the Series F Director (as defined in Section 5(d) below).
(f) Effecting a Liquidation Event. The Company shall not have the power to effect a Liquidation Event referred to in Section 3(d)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Company in such Liquidation Event shall be allocated to the holders of capital stock of the Company in accordance with Section 3(a) and Section 3(b).
In the event of a Liquidation Event referred to in Section 3(d)(ii) or 3(d)(iii), if the Company does not effect a dissolution of the Company under the Delaware General Corporation Law within ninety (90) days after such Liquidation Event, then (i) the Company shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90th) day after the Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (ii) to require the redemption of such shares of Preferred Stock, and (ii) if the Series F Requisite Holders so request in a written instrument delivered to the Company not later than one hundred twenty (120) days after such Liquidation Event, the Company shall use the consideration received by the Company for such Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors, including the Series F Director), together with any other assets of the Company available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Liquidation Event, to redeem all outstanding shares of Preferred Stock, subject to and in accordance with the Liquidation Preferences set forth in Section 3(a), at a price per share equal to the applicable Liquidation Preference pursuant to Section 3(a). Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of a series of Preferred Stock, the Company shall redeem a pro rata portion of each holder’s shares of such series of Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. Prior to the distribution or redemption provided for in this Section 3(f), the Company shall not expend or dissipate the consideration received for such Liquidation Event, except to discharge expenses incurred in connection with such Liquidation Event.
(g) Allocation of Escrow and Contingent Consideration. In the event of a Liquidation Event pursuant to this Section 3, if any portion of the consideration payable to the stockholders of the Company is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Company in accordance with Sections 3(a) and 3(b) as if the Initial Consideration were the only consideration payable in connection with such Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Company upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Company in accordance with Sections 3(a) and 3(b) after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Section 3(g), consideration placed into escrow or retained as a holdback to be available for satisfaction of indemnification or similar obligations or otherwise subject to contingencies in connection with such Liquidation Event shall be deemed to be Additional Consideration.
4. Conversion. The holders of the Preferred Stock shall have conversion rights as follows:
(a) Right to Convert. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, after the date of issuance of such share at the office of the Company or any transfer agent for the Preferred Stock, into that number of fully-paid, nonassessable shares of Common Stock determined by dividing the Original Issue Price for the relevant series by the Conversion Price for such series in effect at the time of the conversion. The number of shares of Common Stock into which each share of Preferred Stock of a series may be converted is hereinafter referred to as the “Conversion Rate” for each such series. Upon any decrease or increase in the Conversion Price for any series of Preferred Stock, as described in this Section 4, the Conversion Rate for such series shall be appropriately adjusted.
(b) Termination of Conversion Rights. In the event of a liquidation, dissolution or winding up of the Company or a Liquidation Event, the conversion rights detailed in this Section 4 shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock; provided, that the foregoing termination of the conversion rights shall not affect the amount(s) otherwise paid or payable in accordance with Section 3(a) to the holders of Preferred Stock pursuant to such liquidation, dissolution or winding up of the Company or a Liquidation Event.
(c) Automatic Conversion.
(i) Each share of Preferred Stock shall automatically be converted into fully-paid, non-assessable shares of Common Stock at the then effective Conversion Rate for such share immediately prior to the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), covering the offer and sale of the Company’s Common Stock, provided that (A) (i) the net offering proceeds to the Company are not less than $100,000,000, and (ii) the per share price of the shares sold in the public offering shall be no less than $4.9884 per share net of underwriter commissions and expenses (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein); or (B) (i) so long as BCLS (as defined in the Purchase Agreement (as defined below)) holds at least 11,693,855 shares of Series F Preferred Stock, the affirmative consent of BCLS, (ii) the net offering proceeds to the Company are not less than $100,000,000 and (iii) the per share price of the shares sold in the public offering shall be no less than $5.7010 per share net of underwriter commissions and expenses (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein) (in each case of (A) or (B), a “Qualified Public Offering”). For purposes of this Amended and Restated Certificate of Incorporation, “Purchase Agreement” shall mean that certain Series F and F-1 Preferred Stock Purchase Agreement, dated on or about the Series F Original Issue Date, by and among the Company and the purchasers of Series F Preferred Stock and Series F-1 Preferred Stock party thereto.
(ii) Each share of Preferred Stock shall automatically be converted into fully-paid, non-assessable shares of Common Stock at the then effective Conversion Rate for such share immediately prior to the closing of a SPAC Transaction, provided that: (A) (i) such SPAC Transaction will result in cash on the balance sheet of the successor company of the SPAC Transaction of not less than $100,000,000 and (ii) the per share price assigned to each share of Common Stock in such SPAC Transaction is not less than $4.9884 per share (subject to adjustment from time to time for Recapitalization and as otherwise set forth elsewhere herein); or (B) (i) so long as BCLS holds at least 11,693,855 shares of Series F Preferred Stock, the affirmative consent of BCLS, (ii) the addition of cash
to the balance sheet of the successor company of the SPAC Transaction of not less than $100,000,000, and (iii) the per share price assigned to each share of Common Stock in such SPAC Transaction is not less than $5.7010 per share (subject to adjustment from time to time for Recapitalization and as otherwise set forth elsewhere herein) (in each case of (A) or (B), a “Qualified SPAC Transaction”). A “SPAC Transaction” shall mean a transaction or series of transactions (whether by merger, consolidation, or transfer or issuance of equity interests or otherwise) whereby a special purpose acquisition company acquires all of the equity interests of the Company (or any surviving or resulting company).
(iii) All shares of each series of Preferred Stock then outstanding shall automatically be converted into fully paid, non-assessable shares of Common Stock at the then effective Conversion Rate applicable to each such series upon the written request of the holders of a majority of the then outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock (voting as a single series and on an as-converted basis).
Each of the events referred to in this Section 4(c) are referred to herein as an “Automatic Conversion Event” and the time of such Automatic Conversion Event or the date and time specified or the time of the Automatic Conversion Event is referred to herein as the “Mandatory Conversion Time.”
(d) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the number of shares of Common Stock to be issued upon conversion of the Preferred Stock shall be rounded down to the nearest whole share. For such purpose, all shares of Preferred Stock held by each holder of Preferred Stock shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash, provided that the Company shall not be obligated to pay cash to a holder of any fractional share if the total amount payable to such holder in respect of such fractional share pursuant to the foregoing would be less than $100.
(e) Mechanics of Conversion. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 4. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of Preferred Stock shall be entitled to convert the same into full shares of Common Stock, and to receive certificates therefor, and shall either (A) surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or of any transfer agent for the Preferred Stock or (B) notify the Company or its transfer agent that such certificates have been lost, stolen or destroyed and execute an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates, and shall give written notice to the Company at such office that he elects to convert the same; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares of Preferred Stock are delivered to the Company or its transfer agent as provided above, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates. On the date of the occurrence of an Automatic Conversion Event, each holder of record of shares of Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, notwithstanding that the certificates representing such shares of Preferred Stock shall not have been surrendered at the office of the Company, that notice from the Company shall not have been received by any holder of record of shares of Preferred
Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder.
(f) Stock Certificates. The Company shall, as soon as practicable after such delivery, or after such agreement and indemnification, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock, plus any declared and unpaid dividends on the converted Preferred Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date; provided, however, that if the conversion is in connection with an underwritten offer of securities registered pursuant to the Securities Act or a merger, sale, financing, or liquidation of the Company or other event, the conversion may, at the option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing of such transaction or upon the occurrence of such event, in which case the person(s) entitled to receive the Common Stock issuable upon such conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such transaction or the occurrence of such event. The outstanding shares of Preferred Stock shall be converted automatically without any further action by the holders of such shares and all rights with respect to the Preferred Stock converted pursuant to this Section 4, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time).
(g) Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Mandatory Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Company may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.
(h) Taxes. The Company shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.
(i) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definition. For purposes of this paragraph 4(i), “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to paragraph
4(i)(iii), deemed to be issued) by the Company after the filing of this Amended and Restated Certificate of Incorporation (the “Original Issue Date”), other than issuances or deemed issuances of:
(1) shares of Common Stock issued upon the conversion of the Preferred Stock;
(2) shares of Common Stock and options, warrants or other rights to purchase Common Stock issued or issuable to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary pursuant to stock grants, restricted stock purchase agreements, option plans, purchase plans, incentive programs or similar arrangements approved by the Board of Directors, including the Series F Director;
(3) shares of Common Stock issued or issuable upon the exercise or conversion of Options or Convertible Securities;
(4) shares of Common Stock issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment is made pursuant to paragraph 4(i)(vi), 4(j) or 4(k) hereof;
(5) shares of Common Stock issued or issuable in a registered public offering under the Securities Act pursuant to which all outstanding shares of Preferred Stock are automatically converted into Common Stock pursuant to a Qualified Public Offering;
(6) shares of Common Stock issued or issuable pursuant to an automatic conversion of all outstanding shares of Preferred Stock into Common Stock pursuant to a Qualified SPAC Transaction;
(7) shares of Common Stock issued or issuable pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board of Directors, including the Series F Director;
(8) shares of Common Stock issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing or commercial leasing transaction approved by the Board of Directors, including the Series F Director;
(9) shares of Common Stock issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by the Board of Directors, including the Series F Director;
(10) shares of Common Stock issued or issuable in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors, including the Series F Director; and
(11) shares of Common Stock issued or issuable to suppliers or third-party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors, including the Series F Director.
The Shares of Common Stock set forth in Section 4(i)(i)(1)-(11) are the “Excluded Shares.”
(ii) No Adjustment of Conversion Price. No adjustment in the applicable Conversion Price of any series of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Company receives written notice from the holders of a majority of the outstanding shares of such series of Preferred Stock; provided, however that a waiver of any adjustment to the Conversion Price of the Series F Preferred Stock or Series F-1 Preferred Stock pursuant to this Section 4 shall require the affirmative written consent or vote of the Series F Requisite Holders.
(iii) Deemed Issue of Additional Shares of Common Stock. In the event the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities), or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities, the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options and the conversion or exchange of the underlying securities, shall be deemed to have been issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which shares are deemed to be issued:
(1) no further adjustment in the Conversion Price of any series of Preferred Stock shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock in connection with the exercise of such Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Company or in the number of shares of Common Stock issuable upon the exercise, conversion or exchange thereof (other than a change pursuant to the anti-dilution provisions of such Options or Convertible Securities such as this Section 4(i) or pursuant to Recapitalization provisions of such Options or Convertible Securities such as Sections 4(i)(vi), 4(j) and 4(k) hereof), the Conversion Price of each series of Preferred Stock and any subsequent adjustments based thereon shall be recomputed to reflect such change as if such change had been in effect as of the original issue thereof (or upon the occurrence of the record date with respect thereto);
(3) no readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount above the Conversion Price that would have resulted from any other issuances of Additional Shares of Common Stock and any other adjustments provided for herein between the original adjustment date and such readjustment date;
(4) if the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price pursuant to the terms of Section 4(i)(iv), are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion
and/or exchange of any such Option or Convertible Security, or (2) any increase or decrease in the consideration payable to the Company upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (4) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date;
(5) if the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of Section 4(i)(iv) (either because the consideration per share (determined pursuant to Section 4(i)(v)) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Original Issue Date), are revised after the Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security, or (ii) any decrease in the consideration payable to the Company upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto shall be deemed to have been issued effective upon such increase or decrease becoming effective;
(6) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price of each Series of Preferred Stock computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if:
(a) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue of such exercised Options plus the consideration actually received by the Company upon such exercise or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and
(b) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Company for the issue of such exercised Options, plus the consideration deemed to have been received by the
Company (determined pursuant to Section 4(i)(v)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised; and
(7) if such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this paragraph 4(i)(iii) as of the actual date of their issuance.
(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event this Company shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to paragraph 4(i)(iii)) without consideration or for a consideration per share less than the applicable Conversion Price of a series of Preferred Stock in effect on the date of and immediately prior to such issue, then, the Conversion Price of the affected series of Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such Conversion Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the number of such Additional Shares of Common Stock so issued. Notwithstanding the foregoing, the Conversion Price shall not be reduced at such time if the amount of such reduction would be less than $0.01, but any such amount shall be carried forward, and a reduction will be made with respect to such amount at the time of, and together with, any subsequent reduction which, together with such amount and any other amounts so carried forward, equal $0.01 or more in the aggregate. For the purposes of this Section 4(i)(iv), all shares of Common Stock issuable upon conversion of all outstanding shares of Preferred Stock and the exercise and/or conversion of any other outstanding Convertible Securities and all outstanding Options shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this Section 4(i), the consideration received by the Company for the issue (or deemed issue) of any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
(a) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company, excluding amounts paid or payable for accrued interest;
(b) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors, including the Series F Director; and
(c) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as determined in good faith by the Board of Directors, including the Series F Director.
(2) Options and Convertible Securities. The consideration per share received by the Company for Additional Shares of Common Stock deemed to have been issued pursuant to paragraph 4(i)(iii) shall be determined by dividing
(x) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities.
(vi) Adjustments for Subdivisions or Combinations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock after the Original Issue Date, the Conversion Price of each series of Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined (by Recapitalization or otherwise) into a lesser number of shares of Common Stock, the Conversion Prices in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.
(j) Adjustments for Subdivisions or Combinations of Preferred Stock. In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Preferred Stock after the Original Issue Date, the Dividend Rate, Original Issue Price, Conversion Price and Liquidation Preference of the affected series of Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be combined (by Recapitalization or otherwise) into a lesser number of shares of Preferred Stock, the Dividend Rate, Original Issue Price, Conversion Price and Liquidation Preference of the affected series of Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.
(k) Adjustments for Reclassification, Exchange and Substitution. Subject to Section 3 (“Liquidation Rights”), if after the Original Issue Date the Common Stock issuable upon conversion of the Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, Recapitalization, consolidation, merger or otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive each holder of such Preferred Stock shall have the right thereafter to convert such shares of Preferred Stock into a number of shares of such other class or classes of stock which a holder of the number of shares of Common Stock deliverable upon conversion of such series of Preferred Stock immediately before that change would have been entitled to receive in such reorganization,
Recapitalization, consolidation or merger, all subject to further adjustment as provided herein with respect to such other shares.
(l) Adjustment for Certain Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the applicable Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the applicable Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and
(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing, (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the applicable Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the applicable Conversion Price shall be adjusted pursuant to this Section as of the time of actual payment of such dividends or distributions; and (ii) that no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.
(m) Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 2 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.
(n) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Company at its expense shall, as promptly as reasonably practicable, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Preferred Stock.
(o) Waiver of Adjustment of Conversion Price. Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of any series of Preferred Stock may be waived by the consent or vote of the holders of a majority of the outstanding shares of such series either before or after the issuance causing the adjustment, provided that any downward adjustment of the Conversion Price of the Series F Preferred Stock or Series F-1 Preferred Stock may be waived only with the consent or vote of the Series F Requisite Holders. Any such waiver shall bind all future holders of shares of such series of Preferred Stock.
(p) Notices of Record Date. In the event that this Company shall propose at any time:
(i) to declare any distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to effect any Recapitalization of its Common Stock outstanding involving a change in the Common Stock; or
(iii) to voluntarily liquidate or dissolve the Company, wind up the Company’s affairs, or to enter into any Liquidation Event;
then, in connection with each such event, this Company shall send to the holders of the Preferred Stock prior written notice of the record date on which a record shall be taken for such distribution (and specifying the date on which the holders of Common Stock shall be entitled thereto and, if applicable, the amount and character of such distribution) or for determining rights to vote in respect of the matters referred to in (ii) and (iii) above, as well as the effective date on which such event detailed in (ii) and (iii) above is proposed to take place.
Such written notice shall be sent at least five (5) days prior to the record date or effective date for the event specified in such notice and shall be given by first class mail (or express courier), postage prepaid, addressed to the holders of Preferred Stock at the address for each such holder as shown on the books of the Company and shall be deemed given on the date such notice is mailed.
The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the consent or vote of the Series F Requisite Holders.
(q) Multiple Closing Dates. In the event the Company shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the applicable Conversion Price pursuant to the terms of Section 4(i)(iv) then, upon the final such issuance, the applicable Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period)
(r) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price.
5. Voting.
(a) Restricted Class Voting. Except as otherwise expressly provided herein or as required by law, the holders of Preferred Stock and the holders of Common Stock shall vote together and not as separate classes.
(b) No Series Voting. Other than as provided herein or required by law, there shall be no series voting.
(c) Preferred Stock. Each holder of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Preferred Stock held by such holder could be converted as of the record date. The holders of shares of the Preferred Stock shall be entitled to vote on all matters on which the Common Stock shall be entitled to vote. Holders of Preferred Stock shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Company. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted), shall be disregarded.
(d) Election of Directors. The holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, voting together as a single series, shall be entitled to elect two members of the Company’s Board of Directors (the “General Preferred Directors”) at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors. The holders of Series F Preferred Stock and Series F-1 Preferred Stock, voting together as a single series, shall be entitled to elect one member of the Company’s Board of Directors (the “Series F Director”, and together with the General Preferred Directors, the “Preferred Directors”) at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; provided that, for administrative convenience, the initial Series F Director may also be appointed by the Board of Directors in connection with the approval of the initial issuance of Series F Preferred Stock and Series F-1 Preferred Stock without a separate action by the holders of the Series F Preferred Stock or Series F-1 Preferred Stock. The holders of Common Stock, voting as a separate class, shall be entitled to elect two members of the Company’s Board of Directors (the “Common Director(s)”) at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; provided, however, that at such time as no Founder (as defined in that certain Amended and Restated Voting Agreement, dated on or about the date of this Restated Certificate, by and among the Company and the other parties thereto
(the “Voting Agreement”)) is then providing services to the Company or any of its subsidiaries as an employee, following the resignation or removal of the Founder Director (as defined in the Voting Agreement), the number of Common Directors that the holders of Common Stock, voting as a separate class, shall be entitled to elect shall be reduced to one. Any additional members of the Company’s Board of Directors shall be elected by the holders of Common Stock and Preferred Stock, voting together as a single class and on an as-converted basis. Any director elected as provided in this Section 5(d) may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of shares of Common Stock or a series of Preferred Stock or, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to this Section 5(d), then any directorship not so filled shall remain vacant until such time as the holders of the Common Stock or such series of Preferred Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Company other than by the stockholders of the Company that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Section 5(d), a vacancy in any directorship filled by the holders of any class or classes or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or classes or series or by any remaining director or directors elected by the holders of such class or classes or series pursuant to this Section 5(d).
(e) Adjustment in Authorized Common Stock. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Amended and Restated Certificate of Incorporation) an affirmative vote of the holders of a majority of the stock of the Company (on an as converted basis), irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware.
(f) Common Stock. Each holder of shares of Common Stock shall be entitled to one vote for each share thereof held.
6. Amendments and Changes.
(a) As long as at least 1,000,000 shares of Preferred Stock shall be issued and outstanding (as adjusted for Recapitalizations), the Company shall not (whether by merger, recapitalization, consolidation or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the holders of a majority of the outstanding shares of Preferred Stock, voting together as a single class and on an as-converted basis:
(i) amend, alter or repeal any provision of the Certificate of Incorporation of the Company or Bylaws of the Company in a manner that adversely affects the powers, preferences or rights of the Preferred Stock;
(ii) increase or decrease (other than for decreases resulting from conversion of the Preferred Stock) the authorized number of shares of Preferred Stock or any additional class or series of capital stock of the Company
unless the same ranks junior to the Preferred Stock with respect to its rights, powers, preferences, and privileges;
(iii) create, or authorize the creation of, or issue or obligate itself to issue shares of, or reclassify (by Recapitalization or otherwise), any capital stock unless the same ranks junior to the Preferred Stock with respect to its rights, preferences and privileges;
(iv) purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Company other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at no greater than the original purchase price thereof, or (iv) as approved by the Board of Directors, including the approval of the Series F Director;
(v) increase the authorized number of shares available for issuance under the Company’s Amended and Restated 2009 Stock Equity Incentive Plan;
(vi) liquidate, dissolve or wind-up the business and affairs of the Company, or effect any merger or consolidation or any other Liquidation Event or consent thereto;
(vii) create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Company, or permit any subsidiary to create, or authorize the creation of, or issue or obligate itself to issue, any shares of any class or series of capital stock, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Company, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary, unless, in each case, such action is approved by the Board of Directors, including the approval of the Series F Director;
(viii) change the number of votes entitled to be cast by any director or directors on any matter, or adopt any amendment to Article VIII or any provision materially inconsistent with Article VIII; or
(ix) amend this Section 6(a).
(b) As long as at least 1,000,000 shares of Series F Preferred Stock or Series F-1 Preferred Stock shall be issued and outstanding (as adjusted for Recapitalizations), the Company shall not (whether by merger, recapitalization, consolidation or otherwise):
(i) without first obtaining the approval (by vote or written consent as provided by law) of the holders of a majority of the aggregate outstanding shares of the Series F Preferred Stock and Series F-1 Preferred Stock (voting together as a single series), (A) amend, alter or repeal any provision of the Certificate of Incorporation of the Company if such action would alter or change the powers, preferences, or special rights of the Series F Preferred Stock or Series F-1 Preferred Stock so as to affect them adversely, but shall not so affect the entire class of Preferred Stock, or (B) amend this Section 6(b)(i); or
(ii) without first obtaining the approval of the Series F Requisite Holders, (A) authorize a Liquidation Event pursuant to which the holders of Series F Preferred Stock receive at the closing of such Liquidation Event aggregate gross proceeds of less than $8.5515 per share (subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein), (B) increase or decrease the authorized number of shares of Series F Preferred Stock or Series F-1 Preferred Stock, or (C) amend this Section 6(b)(ii).
(c) As long as at least 1,000,000 shares of Series E Preferred Stock shall be issued and outstanding (as adjusted for Recapitalizations), the Company shall not (whether by merger, recapitalization, consolidation or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the holders of more than 60% of the outstanding shares of Series E Preferred Stock:
(i) amend, alter or repeal any provision of the Certificate of Incorporation of the Company if such action would alter or change the powers, preferences, or special rights of the Series E Preferred Stock so as to affect them adversely, but shall not so affect the entire class of Preferred Stock; or
(ii) amend this Section 6(c).
(d) As long as at least 1,000,000 shares of Series D Preferred Stock shall be issued and outstanding (as adjusted for Recapitalizations), the Company shall not (whether by merger, recapitalization, consolidation or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the holders of more than 60% of the outstanding shares of Series D Preferred Stock:
(i) amend, alter or repeal any provision of the Certificate of Incorporation of the Company if such action would alter or change the powers, preferences, or special rights of the Series D Preferred Stock so as to affect them adversely, but shall not so affect the entire class of Preferred Stock;
(ii) amend this Section 6(d).
(e) As long as at least 1,000,000 shares of Series C Preferred Stock shall be issued and outstanding (as adjusted for Recapitalizations), the Company shall not (whether by merger, recapitalization, consolidation or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the holders of more than 60% of the outstanding shares of Series C Preferred Stock:
(i) amend, alter or repeal any provision of the Certificate of Incorporation of the Company if such action would alter or change the powers, preferences, or special rights of the Series C Preferred Stock so as to affect them adversely, but shall not so affect the entire class of Preferred Stock; or
(ii) amend this Section 6(e).
(f) As long as at least 1,000,000 shares of Series B Preferred Stock shall be issued and outstanding (as adjusted for Recapitalizations), the Company shall not (whether by merger, recapitalization, consolidation or otherwise), without first obtaining the approval (by vote or written consent as provided by law) of the holders of more than 55% of the outstanding shares of Series B Preferred Stock:
(i) amend, alter or repeal any provision of the Certificate of Incorporation of the Company if such action would alter or change the powers, preferences, or special rights of the Series B Preferred Stock so as to affect them adversely, but shall not so affect the entire class of Preferred Stock;
(ii) increase the number of authorized shares of Series B Preferred Stock; or
(iii) amend this Section 6(f).
7. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed, converted or otherwise acquired by the Company or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Company nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption, conversion or acquisition.
8. Waiver. Except as otherwise set forth herein, any of the rights, powers, preferences and other terms of any series of Preferred Stock set forth herein may be waived on behalf of all holders of such series of Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of such series of Preferred Stock then outstanding, provided that, except as otherwise set forth in this Amended and Restated Certificate of Incorporation, any of the rights, powers, preferences and other terms of the Series F Preferred Stock and Series F-1 Preferred Stock set forth herein may only be waived on behalf of all holders of the Series F Preferred Stock and Series F-1 Preferred Stock by the affirmative written consent or vote of the Series F Requisite Holders.
9. Notices. Any notice required by the provisions of this ARTICLE V to be given to the holders of Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder’s address appearing on the books of the Company.
ARTICLE VI
The Company is to have perpetual existence.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of the Company shall so provide.
ARTICLE VIII
Unless otherwise set forth herein, the number of directors that constitute the Board of Directors of the Company shall be fixed by, or in the manner provided in, the Bylaws of the Company. Each director shall be entitled to one (1) vote on each matter presented to the Board of Directors; provided, however, that, so long as the holders of Series F Preferred Stock and Series F-1 Preferred Stock are entitled to elect the Series F Director, the affirmative vote of the Series F Director shall be required for the authorization by the Board of Directors of any of the matters set forth in Section 5.1 of the Amended and Restated Investors’ Rights Agreement, dated on or about the date of this Amended and Restated Certificate of Incorporation, by and among the Company and the other parties thereto, as such agreement may be amended from time to time.
ARTICLE IX
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Company is expressly authorized to adopt, amend or repeal the Bylaws of the Company.
ARTICLE X
1. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for a breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
2. The Company shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “Indemnified Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Company or, while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in ARTICLE X the Company shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.
3. The Company shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this ARTICLE X or otherwise.
4. If a claim for indemnification or advancement of expenses under this ARTICLE X is not paid in full within thirty (30) days after a written claim therefor by the Indemnified Person has been received by the Company, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Company shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.
5. The rights conferred on any person by this ARTICLE X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of this Amended and Restated Certificate of Incorporation, the Bylaws of the Company, or any agreement, or pursuant to any vote of stockholders or disinterested directors or otherwise. The Company’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise.
6. Neither any amendment nor repeal of this ARTICLE X, nor the adoption of any provision of this Company’s Certificate of Incorporation inconsistent with this ARTICLE X, shall eliminate or reduce the effect of this ARTICLE X, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this ARTICLE X, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE XI
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Company may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Company.
ARTICLE XII
The Company renounces, to the fullest extent permitted by law, any interest or expectancy of the Company in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Company who is not an employee of the Company or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Company or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Company. Any repeal or modification of this ARTICLE XII will only be prospective and will not affect the rights under this
ARTICLE XII in effect at the time of the occurrence of any actions or omissions to act giving rise to liability. Notwithstanding anything to the contrary contained elsewhere in this Amended and Restated Certificate of Incorporation, the affirmative vote of the Series F Requisite Holders, shall be required to amend or repeal, or to adopt any provisions inconsistent with this ARTICLE XII.
ARTICLE XIII
For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Amended and Restated Certificate of Incorporation from employees, officers, directors or consultants of the Company in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under this Amended and Restated Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).
[Signature Page Follows]
IN WITNESS WHEREOF, Heartflow, Inc. has caused this Certificate of Incorporation to be duly executed and acknowledged in its name and on its behalf by an authorized officer as of the 17th day of July, 2025.
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| HEARTFLOW, INC. |
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| By: | /s/ John C.M. Farquhar |
| Name: John C.M. Farquhar |
| Title: Chief Executive Officer |
[Signature Page to Certificate of Incorporation]
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HEARTFLOW, INC.
Heartflow, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the Corporation is “Heartflow, Inc.” The original certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on February 19, 2021 under the name HeartFlow Holding, Inc., and a Certificate of Ownership and Merger of the Corporation was filed on July 17, 2025, which changed the name of the Corporation to Heartflow, Inc. (together, the “Original Certificate”).
2. This amended and restated certificate of incorporation (this “Certificate of Incorporation”), which restates, integrates and amends the provisions of the Original Certificate, was duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware, as amended from time to time (the “DGCL”).
3. The text of the Original Certificate is hereby restated, integrated and amended in its entirety to read as follows:
ARTICLE I.
NAME
The name of the corporation is Heartflow, Inc. (the “Corporation”).
ARTICLE II.
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE III.
REGISTERED AGENT
The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801, and the name of the Corporation’s registered agent at such address is The Corporation Trust Company.
ARTICLE IV.
CAPITALIZATION
Section 4.1Authorized Capital Stock. The total number of shares of all classes of capital stock which the Corporation is authorized to issue is 300,000,000 shares, consisting of (a)
250,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), and (b) 50,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).
Section 4.2Preferred Stock. The board of directors of the Corporation (the “Board”) is hereby expressly authorized to provide out of the unissued shares of the Preferred Stock for one or more series of Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designation (a “Preferred Stock Designation”) filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by law, now or hereafter, to adopt any such resolution or resolutions.
Section 4.3Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) without a separate class vote of the holders of Common Stock or Preferred Stock irrespective of the provisions of Section 242(b)(2) of the DGCL. Except as otherwise required by law or this Certificate of Incorporation (including any Preferred Stock Designation), holders of shares of any series of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Preferred Stock Designation) or the DGCL. No stockholder shall, by reason of the holding of shares of any class or series of capital stock of the Corporation, have any preemptive or preferential right to acquire or subscribe for any shares or securities of any class or series, whether now or hereafter authorized, which may at any time be issued, sold or offered for sale by the Corporation, unless specifically provided for in this Certificate of Incorporation or a Preferred Stock Designation.
Section 4.4Dividends. Subject to applicable law and the rights of the holders of any series of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive such dividends (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in such dividends.
Section 4.5Liquidation, Dissolution or Winding Up of the Corporation. Subject to applicable law and the rights of the holders of any series of Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Common Stock held by them.
ARTICLE V.
BOARD OF DIRECTORS
Section 5.1.Board Powers. The business and affairs of the Corporation shall be managed by, or under the direction of, the Board.
Section 5.2.Number, Election and Term.
(a)The number of directors of the Corporation, other than those who may be elected by the holders of one or more series of the Preferred Stock voting separately by class or series, shall be fixed from time to time exclusively by the Board pursuant to a resolution adopted by a majority of the Board.
(b)Subject to Section 5.5, the Board shall be divided into three classes designated Class I, Class II and Class III. The term of the initial Class I Directors shall expire at the first annual meeting of the stockholders of the Corporation following the time at which the initial classification of the Board becomes effective; the term of the initial Class II Directors shall expire at the second annual meeting of the stockholders of the Corporation following the time at which the initial classification of the Board becomes effective; and the term of the initial Class III Directors shall expire at the third annual meeting of the stockholders of the Corporation following the time at which the initial classification of the Board becomes effective. At each succeeding annual meeting of the stockholders of the Corporation, beginning with the first annual meeting of the stockholders of the Corporation following such initial classification, each of the successors elected to replace the class of directors whose term expires at that annual meeting shall be elected for a three-year term and until the election and qualification of their respective successors in office, subject to their earlier death, resignation, retirement or removal. The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III, with such assignment becoming effective as of the initial effectiveness of this Section 5.2.
(c)Subject to Section 5.5, a director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.
(d)Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot. There is no cumulative voting with respect to the election of directors.
Section 5.3.Newly Created Directorships and Vacancies. Subject to Section 5.5, newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely and exclusively by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full term of the class of directors to
which the new directorship was added or in which the vacancy occurred and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, or removal.
Section 5.4.Removal. Subject to Section 5.5, directors of the Corporation may be removed only for cause and by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
Section 5.5.Preferred Stock Directors. Notwithstanding any other provision of this Article V, and except as otherwise required by law, whenever the holders of one or more series of Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of Preferred Stock as set forth in this Certificate of Incorporation (including any Preferred Stock Designation) and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly provided by such terms. Except as otherwise provided for or fixed pursuant to the provisions of Article IV hereof (including any Preferred Stock Designation), whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to said provisions, the terms of office of all directors elected by the holders of such Preferred Stock, or elected to fill any vacancies resulting from the death, resignation, or removal of such additional directors, shall forthwith terminate (in which case such director shall cease to be qualified as a director and shall cease to be a director) and the total authorized number of directors of the Corporation shall be automatically reduced accordingly.
ARTICLE VI.
BYLAWS
In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power and is expressly authorized to adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended, altered or repealed by the stockholders of the Corporation; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Certificate of Incorporation (including any Preferred Stock Designation), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders of the Corporation to adopt, amend, alter or repeal the Bylaws; provided, further, however, that no Bylaws hereafter adopted by the stockholders of the Corporation shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.
ARTICLE VII.
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT
Section 7.1.Special Meetings. Subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the Corporation, for any purpose or purposes, may be called only by the (i) Chair of the Board, (ii) Chief Executive Officer or (iii) Secretary of the Corporation at the direction of the Board pursuant to a resolution adopted by a majority of the Board, and the ability of the stockholders of the Corporation to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings of stockholders of the Corporation may not be called by another person or persons.
Section 7.2.Advance Notice. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws.
Section 7.3.Action by Consent. Except as may be otherwise provided for or fixed pursuant to this Certificate of Incorporation (including any Preferred Stock Designation) relating to the rights of the holders of any outstanding series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected by a duly called annual or special meeting of such stockholders and may not be effected by consent of the stockholders of the Corporation.
ARTICLE VIII.
LIMITED LIABILITY; INDEMNIFICATION
Section 8.1Limitation of Director Liability. A director or officer of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any amendment, modification or repeal of the second preceding sentence shall not adversely affect any right or protection of a director or officer of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
Section 8.2Indemnification and Advancement of Expenses.
(a)To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer
of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending against any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section 8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a), except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.
(b)If a claim for indemnification under this Section 8.2 (following the final disposition of such proceeding) is not paid in full within sixty days after the Corporation has received a claim therefor by the indemnitee, or if a claim for any advancement of expenses under this Section 8.2 is not paid in full within thirty days after the Corporation has received a statement or statements requesting such amounts to be advanced, the indemnitee shall thereupon (but not before) be entitled to file suit to recover the unpaid amount of such claim. If successful in whole or in part, the indemnitee shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action, the Corporation shall have the burden of proving that the indemnitee is not entitled to the requested indemnification or advancement of expenses under applicable law.
(c)The rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Certificate of Incorporation, the Bylaws, an agreement, vote of stockholders or disinterested directors or otherwise.
(d)Any repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate of Incorporation inconsistent with this Section 8.2, shall, unless otherwise
required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
(e)This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.
ARTICLE IX.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation (including any Preferred Stock Designation), and other provisions authorized by the laws of the State of Delaware at the time in force that may be added or inserted, in the manner now or hereafter prescribed by this Certificate of Incorporation and the DGCL; and, except as set forth in Article VIII, all rights, preferences and privileges of whatever nature herein conferred upon stockholders, directors or any other persons by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article IX. Notwithstanding any other provision of this Certificate of Incorporation or any other provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Certificate of Incorporation (including any Preferred Stock Designation), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders of the Corporation to amend, alter or repeal, or adopt any provision inconsistent with, any of Article V, Article VI, Article VII, Article VIII, Article X and this sentence of this Certificate of Incorporation, or in each case, the definition of any capitalized terms used therein or any successor provision (including, without limitation, any such article or section as renumbered as a result of any amendment, alteration, repeal or adoption of any other provision of this Certificate of Incorporation).
ARTICLE X.
EXCLUSIVE FORUM FOR CERTAIN LAWSUITS
Section 10.1Forum. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the
Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, or any claim for aiding and abetting any such alleged breach, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or this Certificate of Incorporation or the Bylaws 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 of the law of the State of Delaware.
Section 10.2Federal Forum. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.
Section 10.3Any person or entity purchasing or otherwise acquiring or holding any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article X. Notwithstanding the foregoing, the provisions of this Article X shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.
ARTICLE XI.
SEVERABILITY
If any provision or provisions (or any part thereof) of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby, and (ii) the provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Corporation to the fullest extent permitted by law.
AMENDED AND RESTATED
BYLAWS
OF
HEARTFLOW, INC.
Adopted July 17, 2025
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| | | Page |
| | | |
| Article I — MEETINGS OF STOCKHOLDERS | 1 |
| | | |
| 1.1 | Place of Meetings | 1 |
| 1.2 | Annual Meeting | 1 |
| 1.3 | Special Meeting | 1 |
| 1.4 | Notice of Stockholders’ Meetings | 1 |
| 1.5 | Quorum | 2 |
| 1.6 | Adjourned Meeting; Notice | 2 |
| 1.7 | Conduct of Business | 2 |
| 1.8 | Voting | 2 |
| 1.9 | Stockholder Action by Written Consent Without a Meeting | 3 |
| 1.10 | Record Date for Stockholder Notice; Voting; Giving Consents | 4 |
| 1.11 | Proxies | 4 |
| 1.12 | List of Stockholders Entitled to Vote | 5 |
| | | |
| Article II — DIRECTORS | 5 |
| | | |
| 2.1 | Powers | 5 |
| 2.2 | Number of Directors | 5 |
| 2.3 | Election, Qualification and Term of Office of Directors | 5 |
| 2.4 | Resignation and Vacancies | 5 |
| 2.5 | Place of Meetings; Meetings by Telephone | 6 |
| 2.6 | Conduct of Business | 6 |
| 2.7 | Regular Meetings | 6 |
| 2.8 | Special Meetings; Notice | 7 |
| 2.9 | Quorum; Voting | 7 |
| 2.10 | Board Action by Written Consent Without a Meeting | 7 |
| 2.11 | Fees and Compensation of Directors | 7 |
| 2.12 | Removal of Directors | 8 |
| | | |
| Article III — COMMITTEES | 8 |
| | | |
| 3.1 | Committees of Directors | 8 |
| 3.2 | Committee Minutes | 8 |
| 3.3 | Meetings and Actions of Committees | 8 |
| 3.4 | Subcommittees | 9 |
| | | |
| Article IV — OFFICERS | 9 |
| | | |
| 4.1 | Officers | 9 |
| 4.2 | Appointment of Officers | 9 |
| 4.3 | Subordinate Officers | 9 |
| 4.4 | Removal and Resignation of Officers | 9 |
| 4.5 | Vacancies in Offices | 9 |
| 4.6 | Representation of Shares of Other Corporations | 9 |
| 4.7 | Authority and Duties of Officers | 10 |
| | | |
| Article V — INDEMNIFICATION | 10 |
| | | |
| 5.1 | Indemnification of Directors and Officers in Third Party Proceedings | 10 |
| 5.2 | Indemnification of Directors and Officers in Actions by or in the Right of the Company | 10 |
| 5.3 | Successful Defense | 10 |
| 5.4 | Indemnification of Others | 11 |
TABLE OF CONTENTS
(Continued)
| | | | | | | | | | | |
| | | Page |
| | | |
| 5.5 | Advanced Payment of Expenses | 11 |
| 5.6 | Limitation on Indemnification | 11 |
| 5.7 | Determination; Claim | 11 |
| 5.8 | Non-Exclusivity of Rights | 12 |
| 5.9 | Insurance | 12 |
| 5.10 | Survival | 12 |
| 5.11 | Effect of Repeal or Modification | 12 |
| 5.12 | Certain Definitions | 12 |
| | | |
| Article VI — STOCK | 13 |
| | | |
| 6.1 | Stock Certificates; Partly Paid Shares | 13 |
| 6.2 | Special Designation on Certificates | 13 |
| 6.3 | Lost Certificates | 13 |
| 6.4 | Dividends | 14 |
| 6.5 | Stock Transfer Agreements | 14 |
| 6.6 | Registered Stockholders | 14 |
| 6.7 | Transfers | 14 |
| | | |
| Article VII — MANNER OF GIVING NOTICE AND WAIVER | 14 |
| | | |
| 7.1 | Notice of Stockholder Meetings | 14 |
| 7.2 | Notice by Electronic Transmission | 14 |
| 7.3 | Notice to Stockholders Sharing an Address | 15 |
| 7.4 | Notice to Person with Whom Communication is Unlawful | 15 |
| 7.5 | Waiver of Notice | 16 |
| | | |
| Article VIII — GENERAL MATTERS | 16 |
| | | |
| 8.1 | Fiscal Year | 16 |
| 8.2 | Seal | 16 |
| 8.3 | Annual Report | 16 |
| 8.4 | Construction; Definitions | 16 |
| | | |
| Article IX — AMENDMENTS | 16 |
AMENDED AND RESTATED BYLAWS
ARTICLE I — MEETINGS OF STOCKHOLDERS
1.1 Place of Meetings. Meetings of stockholders of Heartflow, Inc. (the “Company”) shall be held at any place, within or outside the State of Delaware, determined by the Company’s board of directors (the “Board”). The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Company’s principal executive office.
1.2 Annual Meeting. An annual meeting of stockholders shall be held for the election of directors at such date and time as may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting. The Company shall not be required to hold an annual meeting of stockholders, provided that (i) the stockholders are permitted to act by written consent under the Company’s certificate of incorporation and these Amended and Restated Bylaws (“Bylaws”), (ii) the stockholders take action by written consent to elect directors and (iii) the stockholders unanimously consent to such action or, if such consent is less than unanimous, all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.
1.3 Special Meeting. A special meeting of the stockholders may be called at any time by the Board, Chairperson of the Board, Chief Executive Officer or President (in the absence of a Chief Executive Officer) or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.
If any person(s) other than the Board calls a special meeting, the request shall:
(i) be in writing;
(ii) specify the time of such meeting and the general nature of the business proposed to be transacted; and
(iii) be delivered personally or sent by registered mail or by facsimile transmission to the Chairperson of the Board, the Chief Executive Officer, the President (in the absence of a Chief Executive Officer) or the Secretary of the Company.
The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with these Bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 1.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.
1.4 Notice of Stockholders’ Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these Bylaws, the written notice of any meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting.
1.5 Quorum. Except as otherwise provided by law, the certificate of incorporation or these Bylaws, at each meeting of stockholders the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these Bylaws.
If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, in the manner provided in section 1.6, until a quorum is present or represented.
1.6 Adjourned Meeting; Notice. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
1.7 Conduct of Business. Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by the Chief Executive Officer, or in the absence of the foregoing persons by the President, or in the absence of the foregoing persons by a Vice President, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting. The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.
1.8 Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 1.10 of these Bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.
Except as may be otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter in question. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which
could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. If authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission (as defined in Section 7.2 of these Bylaws), provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.
Except as otherwise required by law, the certificate of incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate of incorporation or these Bylaws, directors shall be elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation or these Bylaws.
1.9 Stockholder Action by Written Consent Without a Meeting. Unless otherwise provided in the certificate of incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
An electronic transmission (as defined in section 7.2) consenting to an action to be taken and transmitted by a stockholder or proxy holder, or by a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written, signed and dated for purposes of this section, provided that any such electronic transmission sets forth or is delivered with information from which the Company can determine (i) that the electronic transmission was transmitted by the stockholder or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (ii) the date on which such stockholder or proxy holder or authorized person or persons transmitted such electronic transmission.
In the event that the Board shall have instructed the officers of the Company to solicit the vote or written consent of the stockholders of the Company, an electronic transmission of a stockholder written consent given pursuant to such solicitation may be delivered to the Secretary or the President of the Company or to a person designated by the Secretary or the President. The Secretary or the President of the Company or a designee of the Secretary or the President shall cause any such written consent by electronic transmission to be reproduced in paper form and inserted into the corporate records.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Company as provided in Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed
under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.
1.10 Record Date for Stockholder Notice; Voting; Giving Consents. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which record date:
(i) in the case of determination of stockholders entitled to notice of or to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting;
(ii) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board; and
(iii) in the case of determination of stockholders for any other action, shall not be more than 60 days prior to such other action.
If no record date is fixed by the Board:
(i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;
(ii) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company in accordance with applicable law, or, if prior action by the Board is required by law, shall be at the close of business on the day on which the Board adopts the resolution taking such prior action; and
(iii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided that the Board may fix a new record date for the adjourned meeting.
1.11 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.
1.12 List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Company’s principal place of business. In the event that the Company determines to make the list available on an electronic network, the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
ARTICLE II — DIRECTORS
2.1 Powers. The business and affairs of the Company shall be managed by or under the direction of the Board, except as may be otherwise provided in the DGCL or the certificate of incorporation.
2.2 Number of Directors. The Board shall consist of one or more members, each of whom shall be a natural person. Unless the certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
2.3 Election, Qualification and Term of Office of Directors. Except as provided in Section 2.4 of these Bylaws, and subject to Sections 1.2 and 1.9 of these Bylaws, directors shall be elected at each annual meeting of stockholders. Directors need not be stockholders unless so required by the certificate of incorporation or these Bylaws. The certificate of incorporation or these Bylaws may prescribe other qualifications for directors. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.
2.4 Resignation and Vacancies. Any director may resign at any time upon notice given in writing or by electronic transmission to the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless otherwise provided in the certificate of incorporation or these Bylaws, when one or more directors resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
Unless otherwise provided in the certificate of incorporation or these Bylaws:
(i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the Company should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.
A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.
2.5 Place of Meetings; Meetings by Telephone. The Board may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these Bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
2.6 Conduct of Business. Meetings of the Board shall be presided over by the Chairperson of the Board, if any, or in his or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
2.7 Regular Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board.
2.8 Special Meetings; Notice. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President, the Secretary or any two directors.
Notice of the time and place of special meetings shall be:
(i) delivered personally by hand, by courier or by telephone;
(ii) sent by United States first-class mail, postage prepaid;
(iii) sent by facsimile; or
(iv) sent by electronic mail,
directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Company’s records.
If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the Company’s principal executive office) nor the purpose of the meeting.
2.9 Quorum; Voting. At all meetings of the Board, a majority of the total authorized number of directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these Bylaws.
If the certificate of incorporation provides that one or more directors shall have more or less than one vote per director on any matter, every reference in these Bylaws to a majority or other proportion of directors shall refer to a majority or other proportion of the votes of the directors.
2.10 Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
2.11 Fees and Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these Bylaws, the Board shall have the authority to fix the compensation of directors.
2.12 Removal of Directors. Unless otherwise restricted by statute, the certificate of incorporation or these Bylaws, any director or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.
ARTICLE III — COMMITTEES
3.1 Committees of Directors. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Company. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these Bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Company.
3.2 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.
3.3 Meetings and Actions of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:
(i) Section 2.5 (Place of Meetings; Meetings by Telephone);
(ii) Section 2.7 (Regular Meetings);
(iii) Section 2.8 (Special Meetings; Notice);
(iv) Section 2.9 (Quorum; Voting);
(v) Section 2.10 (Board Action by Written Consent Without a Meeting); and
(vi) Section 7.5 (Waiver of Notice)
with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board and its members. However:
(vii) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;
(viii) special meetings of committees may also be called by resolution of the Board; and
(ix) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws.
Any provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation or these Bylaws.
3.4 Subcommittees. Unless otherwise provided in the certificate of incorporation, these Bylaws or the resolutions of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
ARTICLE IV — OFFICERS
4.1 Officers. The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these Bylaws. Any number of offices may be held by the same person.
4.2 Appointment of Officers. The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance with the provisions of Section 4.3 of these Bylaws.
4.3 Subordinate Officers. The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Company may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board may from time to time determine.
4.4 Removal and Resignation of Officers. Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the Company. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Company under any contract to which the officer is a party.
4.5 Vacancies in Offices. Any vacancy occurring in any office of the Company shall be filled by the Board or as provided in Section 4.3.
4.6 Representation of Shares of Other Corporations. Unless otherwise directed by the Board, the President or any other person authorized by the Board or the President is authorized to vote, represent and exercise on behalf of the Company all rights incident to any and all shares of any other corporation or corporations standing in the name of the Company. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
4.7 Authority and Duties of Officers. Except as otherwise provided in these Bylaws, the officers of the Company shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.
ARTICLE V — INDEMNIFICATION
5.1 Indemnification of Directors and Officers in Third Party Proceedings. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) (other than an action by or in the right of the Company) by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person’s conduct was unlawful.
5.2 Indemnification of Directors and Officers in Actions by or in the Right of the Company. Subject to the other provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
5.3 Successful Defense. To the extent that a present or former director or officer of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 5.1 or Section 5.2, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
5.4 Indemnification of Others. Subject to the other provisions of this Article V, the Company shall have power to indemnify its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate to such person or persons the determination of whether employees or agents shall be indemnified.
5.5 Advanced Payment of Expenses. Expenses (including attorneys’ fees) incurred by an officer or director of the Company in defending any Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of a written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under this Article V or the DGCL. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Company deems appropriate. The right to advancement of expenses shall not apply to any claim for which indemnity is excluded pursuant to these Bylaws.
5.6 Limitation on Indemnification. Subject to the requirements in Section 5.3 and the DGCL, the Company shall not be obligated to indemnify any person pursuant to this Article V in connection with any Proceeding (or any part of any Proceeding):
(i) for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid;
(ii) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);
(iii) for any reimbursement of the Company by such person of any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such person is held liable therefor (including pursuant to any settlement arrangements);
(iv) initiated by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the Company or its directors, officers, employees, agents or other indemnitees, unless (a) the Board authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (b) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (c) otherwise required to be made under Section 5.7 or (d) otherwise required by applicable law; or
(v) if prohibited by applicable law.
5.7 Determination; Claim. If a claim for indemnification or advancement of expenses under this Article V is not paid in full within 90 days after receipt by the Company of the written request
therefor, the claimant shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses. The Company shall indemnify such person against any and all expenses that are incurred by such person in connection with any action for indemnification or advancement of expenses from the Company under this Article V, to the extent such person is successful in such action, and to the extent not prohibited by law. In any such suit, the Company shall, to the fullest extent not prohibited by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.
5.8 Non-Exclusivity of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable law.
5.9 Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of the DGCL.
5.10 Survival. The rights to indemnification and advancement of expenses conferred by this Article V shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
5.11 Effect of Repeal or Modification. Any amendment, alteration or repeal of this Article V shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to such amendment, alteration or repeal.
5.12 Certain Definitions. For purposes of this Article V, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article V, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Article V.
ARTICLE VI — STOCK
6.1 Stock Certificates; Partly Paid Shares. The shares of the Company shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate in bearer form.
The Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
6.2 Special Designation on Certificates. If the Company is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or series of stock; provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the Company shall issue to represent such class or series of stock, a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this Section 6.2 or Sections 156, 202(a) or 218(a) of the DGCL or with respect to this Section 6.2 a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
6.3 Lost Certificates. Except as provided in this Section 6.3, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Company and cancelled at the same time. The Company may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Company may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
6.4 Dividends. The Board, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and pay dividends upon the shares of the Company’s capital stock. Dividends may be paid in cash, in property, or in shares of the Company’s capital stock, subject to the provisions of the certificate of incorporation.
The Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
6.5 Stock Transfer Agreements. The Company shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
6.6 Registered Stockholders. The Company:
(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;
(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and
(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
6.7 Transfers. Transfers of record of shares of stock of the Company shall be made only upon its books by the holders thereof, in person or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.
ARTICLE VII — MANNER OF GIVING NOTICE AND WAIVER
7.1 Notice of Stockholder Meetings. Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Company’s records. An affidavit of the Secretary or an Assistant Secretary of the Company or of the transfer agent or other agent of the Company that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
7.2 Notice by Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these Bylaws, any notice to stockholders given by the Company under any provision of the DGCL, the certificate of incorporation or these Bylaws shall be effective if given by a form of electronic transmission
consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any such consent shall be deemed revoked if:
(i) the Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent; and
(ii) such inability becomes known to the Secretary or an Assistant Secretary of the Company or to the transfer agent, or other person responsible for the giving of notice.
However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Any notice given pursuant to the preceding paragraph shall be deemed given:
(iii) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
(iv) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
(v) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and
(vi) if by any other form of electronic transmission, when directed to the stockholder.
An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.
7.3 Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under the provisions of the DGCL, the certificate of incorporation or these Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice, shall be deemed to have consented to receiving such single written notice.
7.4 Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under the DGCL, the certificate of incorporation or these Bylaws, to any person with
whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.
7.5 Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these Bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these Bylaws.
ARTICLE VIII — GENERAL MATTERS
8.1 Fiscal Year. The fiscal year of the Company shall be fixed by resolution of the Board and may be changed by the Board.
8.2 Seal. The Company may adopt a corporate seal, which shall be in such form as may be approved from time to time by the Board. The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
8.3 Annual Report. The Company shall cause an annual report to be sent to the stockholders of the Company to the extent required by applicable law. If and so long as there are fewer than 100 holders of record of the Company’s shares, the requirement of sending an annual report to the stockholders of the Company is expressly waived (to the extent permitted under applicable law).
8.4 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.
ARTICLE IX — AMENDMENTS
These Bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the Company may, in its certificate of incorporation, confer the power to adopt, amend or repeal these Bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal these Bylaws.
An amendment to these Bylaws adopted by the stockholders entitled to vote which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the Board.
HEARTFLOW, INC.
CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS
The undersigned hereby certifies that he or she is the duly elected, qualified and acting officer of Heartflow, Inc., a Delaware corporation (the “Company”), and that the foregoing amended and restated bylaws, comprising seventeen (17) pages, were adopted as the bylaws of the Company on July 17, 2025.
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| /s/ John C.M. Farquhar |
| (signature) |
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| John C.M. Farquhar |
| (print name) |
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| Chief Executive Officer |
| (title) |
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| 7/17/2025 |
| (date) |
AMENDED AND RESTATED BYLAWS OF
HEARTFLOW, INC.
(THE “CORPORATION”)
ARTICLE I.
OFFICES
Section 1.1.Registered Office. The registered office of the Corporation within the State of Delaware shall be as set forth in the Certificate of Incorporation of the Corporation (as amended and/or restated from time to time, the “Certificate of Incorporation”).
Section 1.2.Additional Offices. The Corporation may, in addition to its registered office in the State of Delaware, have such other offices and places of business, both within and outside the State of Delaware, as the board of directors of the Corporation (the “Board”) may from time to time determine or as the business and affairs of the Corporation may require.
ARTICLE II.
STOCKHOLDERS MEETINGS
Section 2.1.Annual Meetings. The annual meeting of stockholders shall be held at such place, if any, either within or without the State of Delaware, and time and on such date as shall be determined by the Board (or, to the fullest extent permitted by law, any committee of the Board or other person(s) authorized by the Board) and stated in the notice of the meeting; provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 8.5(a). At each annual meeting, the stockholders entitled to vote on such matters shall elect directors and may transact any other business as may properly be brought before the meeting.
Section 2.2.Special Meetings. Subject to the rights, if any, of the holders of any outstanding series of preferred stock of the Corporation (“Preferred Stock”), and to the requirements of applicable law, special meetings of stockholders, for any purpose or purposes, may be called only by the (i) Chair of the Board, (ii) the Chief Executive Officer of the Corporation or (iii) the Secretary of the Corporation (the “Secretary”) at the direction of the Board pursuant to a resolution adopted by a majority of the Board, and may not be called by any other person. Special meetings of stockholders shall be held at such place, if any, either within or without the State of Delaware, and at such time and on such date as shall be determined by the Board (or, to the fullest extent permitted by law, any committee of the Board or other person(s) authorized by the Board) and stated in the Corporation’s notice of the meeting; provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 8.5(a).
Section 2.3.Notices. Notice of each stockholders meeting stating the place, if any, date, and time of the meeting, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and the record date for determining the stockholders entitled to vote at the meeting, if such date
is different from the record date for determining stockholders entitled to notice of the meeting, shall be given in the manner permitted by Section 8.3 to each stockholder entitled to vote thereat as of the record date for determining the stockholders entitled to notice of the meeting, by the Corporation not less than ten (10) nor more than sixty (60) days before the date of the meeting unless otherwise required by the General Corporation Law of the State of Delaware (the “DGCL”). If said notice is for a special meeting, it shall in addition state the purpose or purposes for which the meeting is called, and the business transacted at such meeting shall be limited to the matters so stated in the Corporation’s notice of meeting (or any supplement thereto). Any meeting of stockholders as to which notice has been given may be postponed or rescheduled, and any meeting of stockholders as to which notice has been given may be cancelled, by the Board.
Section 2.4.Quorum. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, the presence, in person or by proxy, at a stockholders meeting of the holders of a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote at such meeting shall constitute a quorum for the transaction of business at such meeting, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. If a quorum shall not be present or represented by proxy at any meeting of the stockholders of the Corporation, the chair of the meeting may adjourn the meeting from time to time in the manner provided in Section 2.6 until a quorum shall attend. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the voting power of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any such other corporation to vote shares held by it in a fiduciary capacity.
Section 2.5.Voting of Shares.
(a)Voting Lists. The Corporation shall prepare, no later than the tenth day before each meeting of stockholders, a complete list of the stockholders of record entitled to vote at such meeting; provided, however, that if the record date for determining the stockholders entitled to vote is less than ten days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order and showing the address and the number and class of shares registered in the name of each stockholder. Nothing contained in this Section 2.5(a) shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of ten days ending on the day before the meeting (i) on a reasonably accessible electronic network (provided that the information required to gain access to such list is provided with the notice of the meeting) or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an
electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list required by this Section 2.5(a) or to vote in person or by proxy at any meeting of stockholders.
(b)Manner of Voting. At any stockholders meeting, every stockholder entitled to vote may vote in person or by proxy. The Board, in its discretion, or the chair of the meeting of stockholders, in such person’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.
(c)Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority. No stockholder shall have cumulative voting rights.
(i)A stockholder, or such stockholder’s authorized officer, director, employee or agent may execute a document authorizing another person or persons to act for such stockholder as proxy.
(ii)A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of an electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission; provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder.
(iii)The authorization of a person to act as a proxy may be documented, signed and delivered in accordance with Section 116 of the DGCL, provided that such authorization shall set forth, or be delivered with information enabling the Corporation to determine, the identity of the stockholder granting such authorization. Any copy, facsimile telecommunication or other reliable reproduction of the document (including any electronic transmission) created pursuant to this Section 2.5(c) may be substituted or used in lieu of the original document for any and all purposes for which the original document could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original document.
(d)Required Vote. Subject to the rights of the holders of one or more series of Preferred Stock, voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred Stock, at all meetings of stockholders at which a quorum is present, the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon. All other matters presented to the stockholders at a meeting at which a quorum is
present shall be determined by the affirmative vote of a majority of the votes cast for or against such matter, unless the matter is one upon which, by applicable law, the Certificate of Incorporation, these Bylaws or applicable stock exchange rules, a different vote is required, in which case such provision shall govern and control the decision of such matter.
(e)Inspectors of Election. The Board may, and shall if required by law, in advance of any meeting of stockholders, designate one or more persons as inspectors of election, who may be employees of the Corporation or otherwise serve the Corporation in other capacities, to act at such meeting of stockholders or any adjournment thereof and to make a written report thereof. The Board may appoint one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspectors of election or alternates are appointed by the Board, the chair of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging 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 ascertain and report the number of outstanding shares and the voting power of each; determine the number of shares present in person or represented by proxy at the meeting and the validity of proxies and ballots; count all votes and ballots and report the results; determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. No person who is a candidate for an office at an election may serve as an inspector at such election. Each report of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors.
Section 2.6.Adjournments. At any meeting of stockholders of the Corporation, if less than a quorum is present, the chair of the meeting or the stockholders by the affirmative vote of a majority of the votes cast for or against such matter, shall have the power to adjourn the meeting from time to time. If a quorum is present, any meeting of stockholders of the Corporation may be adjourned by the chair of the meeting or by the stockholders by the affirmative vote of a majority of the votes cast for or against such matter (including to address a technical failure to convene or continue a meeting using remote communication), and no notice of the adjourned meeting shall be required to be given if the time and place, if any, thereof and the means of remote communication, if any, by which stockholders and proxyholders may be deemed present in person and may vote at such 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 proxyholders to participate in the meeting by means of remote communication or (iii) set forth in the notice of meeting given in accordance with Section 2.3. Any business may be transacted at the adjourned meeting that might have been transacted at the meeting originally noticed. Notwithstanding the foregoing, (i) if the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting and (ii) if after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders
entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date so fixed for notice of such adjourned meeting.
Section 2.7.Advance Notice for Business.
(a)Annual Meetings of Stockholders.
(i)Nominations of persons for election to the Board of the Corporation and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (A) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (B) by or at the direction of the Board or authorized committee thereof or (C) by any stockholder of the Corporation who was a stockholder of record of the Corporation at the time the notice provided for in this Section 2.7 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.7.
(ii)Except as otherwise required by law, for any nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(i) of this Section 2.7, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business (other than the nominations of persons for election to the Board) must constitute a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to 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 one hundred twentieth (120th) day, prior to the first anniversary of the preceding year’s annual meeting (which preceding year’s annual meeting shall, for purposes of the Corporation’s first annual meeting after the Corporation’s shares are first publicly traded, be deemed to have occurred on June 30, 2025); provided, however, that in the event that there was no annual meeting in the prior year or the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by the stockholder must be so delivered not earlier than the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment, recess or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. The number of nominees a stockholder may nominate for election at the annual meeting on its own behalf (or in the case of one or more stockholders giving the notice on behalf of a beneficial owner, the number of nominees such stockholders may collectively 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. In addition, for the avoidance of doubt, a stockholder shall not be entitled to make additional or substitute nominations following the expiration of the time periods set forth in these Bylaws. Such stockholder’s notice shall set forth or provide:
(A)as to each person whom the stockholder proposes to nominate for election as a director:
(1)all information relating to such person 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 and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder;
(2)such person’s written consent to being named as a nominee in any proxy statement relating to the annual meeting and to serving as a director if elected;
(3)a description of all direct and indirect compensation and other material monetary arrangements, agreements or understandings during the past three (3) years, and any other material relationships, if any, between or concerning such stockholder, the beneficial owner, if any, on whose behalf the proposal is made or any of their respective affiliates or associates (such affiliates or associates, the “Stockholder Related Persons”), on the one hand, and the proposed nominee or any of his or her affiliates or associates, on the other hand;
(4)a questionnaire completed and signed by such person (in the form to be provided by the Secretary upon written request of any stockholder of record within ten (10) days of such request) with respect to the background, qualification and independence of such proposed nominee; and
(5)a written representation and agreement (in the form to be provided by the Secretary upon written request of any stockholder of record within ten (10) days of such request) that such proposed nominee:
a.is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, 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 that has not been disclosed to the Corporation or that could limit or interfere with such proposed nominee’s fiduciary duties under applicable law;
b.is not and will not become a party to any agreement, arrangement or understanding with 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 of the Corporation that has not been disclosed to the Corporation; and
c.would be in compliance, if elected as a director of the Corporation, and will comply with, all applicable publicly disclosed corporate governance, code of conduct and ethics, conflict of interest, confidentiality, corporate opportunities, trading and any other policies and guidelines of the Corporation applicable to directors;
(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 text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made;
(C)as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner;
(D)as to the stockholder giving the notice, a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination;
(E)as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, and any Stockholder Related Persons:
(1)the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder, beneficial owner and Stockholder Related Persons, including any shares of any class or series of capital stock of the Corporation as to which such stockholder, beneficial owner or Stockholder Related Persons have a right to acquire beneficial ownership at any time in the future;
(2)a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder, beneficial owners and Stockholder Related Persons, whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit from share price changes (including by providing, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of the shares of capital stock of the Corporation) for,
or increase or decrease the voting power of, such stockholder, beneficial owner or Stockholder Related Persons with respect to securities of the Corporation;
(3)any other information relating to such stockholder, beneficial owner or Stockholder Related Persons, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder;
(4)a description of 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 or understanding pursuant to which such stockholder, beneficial owner or Stockholder Related Persons have or share a right, directly or indirectly, to vote any shares of any class or series of capital stock of the Corporation;
(5)a description of any agreement, arrangement or understanding with respect to 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 stockholder, beneficial owner or Stockholder Related Persons that are separated or separable pursuant to such agreement, arrangement or understanding from the underlying shares of the Corporation;
(6)a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and/or such beneficial owner, Stockholder Related Persons, and any other person, including, in the case of a nomination, the nominee, including any agreements, arrangements or understandings relating to any compensation or payments to be paid to any such proposed nominee(s), pertaining to the nomination(s) or other business proposed to be brought before the meeting of stockholders (which description shall identify the name of each other person who is party to such an agreement, arrangement or understanding);
(7)a representation whether such stockholder, beneficial owner or any Stockholder Related Person intends or is part of a group which intends
a.to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee,
b.otherwise to solicit proxies or votes in support of such proposal or nomination, and/or
c.to solicit proxies in support of any proposed nominee in accordance with Rule 14a-19 promulgated under the Exchange Act, and
(8)with respect to a nomination, the information required to be included in a notice to the Corporation required by paragraph (b) of Rule 14a-19 promulgated under the Exchange Act, including a statement that such person intends to solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote on the election of directors in support of director nominees other than the Corporation’s nominees;
(F)the names and addresses of other stockholders and beneficial owners known by any stockholder giving the notice (and/or beneficial owner, if any, on whose behalf the nomination or proposal is made) to support financially such nomination or proposal, and to the extent known, the class and number of all shares of the Corporation’s capital stock owned beneficially and/or of record by such other stockholder(s) and beneficial owner(s) (the disclosures to be made pursuant to the foregoing clauses (C) through (F) are referred to as “Disclosable Interests”); provided, however, that Disclosable 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 otherwise would be required to disclose Disclosable Interests hereunder solely as a result of being the stockholder directed to prepare and submit the notice required by this Section 2.7 on behalf of a beneficial owner.
The foregoing notice requirements of paragraph (a) of this Section 2.7 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as the Corporation may reasonably require to determine whether such proposed nominee is qualified under the Certificate of Incorporation, these Bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or any law or regulation applicable to the Corporation to serve as a director and/or independent director of the Corporation.
(iii)Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 2.7 to the contrary, in the event that the number of directors to be elected to the Board of the Corporation at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (a)(ii) of this Section 2.7 and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.7 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered
to the Secretary at the principal executive offices 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)Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board or any authorized committee thereof or (ii) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time the notice provided for in this Section 2.7 is delivered to the Secretary of the Corporation, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures set forth in this Section 2.7.
The number of nominees a stockholder may nominate for election at a special meeting at which directors are to be elected on its own behalf (or in the case of one or more stockholders giving the notice on behalf of a beneficial owner, the number of nominees such stockholders may collectively nominate for election at the special meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such special meeting. In the event a special meeting of stockholders is duly called for the purpose of electing one or more directors to the Board, any such stockholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (a)(ii) of this Section 2.7 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which the Corporation first makes a public announcement of the date of the special meeting at which directors are to be elected. In no event shall the public announcement of an adjournment, recess or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.
(c)General.
(i)Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 2.7 shall be eligible to be elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.7. Except as otherwise provided by law, at any meeting of stockholders the chair of the meeting (or, in advance of any meeting of stockholders, the Board or an authorized committee thereof) shall (a) determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.7
(including whether the stockholder, beneficial owner, if any, on whose behalf the nomination or proposal is made, or any Stockholder Related Person solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (a)(ii)(E)(7) of this Section 2.7) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 2.7, declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.7, unless otherwise required by law, if the stockholder does not provide the information required by paragraph (iv) of this Section 2.7(c) within the time period for delivery prescribed therein or if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business advanced by such stockholder, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that such proposal or nomination is set forth in the notice of meeting or other proxy materials and notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.7, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing 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 writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders. Notwithstanding anything to the contrary in these Bylaws, unless otherwise required by law, if any stockholder, beneficial owner or Stockholder Related Person (i) provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act with respect to any proposed nominee (for the avoidance of doubt, such notice must be delivered within the time period provided in paragraph (a)(ii) of this Section 2.7 to be considered timely) and (ii) subsequently fails to comply with the requirements of Rule 14a-19 promulgated under the Exchange Act (or fails to timely provide reasonable evidence sufficient to satisfy the Corporation that such stockholder has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act in accordance with the following sentence), then the nomination of each such proposed nominee shall be disregarded, notwithstanding that the nominee is included as a nominee in the Corporation’s proxy statement, notice of meeting or other proxy materials for any annual meeting (or any supplement thereto) and notwithstanding that proxies or votes in respect of the election of such proposed nominees may have been received by the Corporation (which proxies and votes shall be disregarded). If any stockholder, beneficial owner or Stockholder Related Person provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act, such stockholder shall deliver to the Corporation, no later than five (5) business days prior to the applicable meeting, reasonable evidence that it or such beneficial owner or Stockholder Related Person has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act.
(ii)For purposes of this Section 2.7, “public announcement” shall include disclosure in a press release reported by the Dow Jones News Service, Associated Press or other 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 and the rules and regulations promulgated thereunder.
(iii)Notwithstanding the foregoing provisions of this Section 2.7, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.7; provided however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.7 (including paragraphs (a)(ii)(C) and (b) hereof), and compliance with paragraphs (a)(i)(C) and (b) of this Section 2.7 shall be the exclusive means for a stockholder to make nominations or submit other business (other than, as provided in the penultimate sentence of paragraph (a)(ii) of this Section 2.7, business other than nominations brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time). Nothing in this Section 2.7 shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals other than nominations in the Corporation’s proxy statement pursuant to applicable rules and regulations promulgated under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.
(iv)A stockholder providing notice of a proposed nomination for election to the Board or other business proposed to be brought before a meeting (given pursuant to paragraph (a)(i) of this Section 2.7 or paragraph (b) of this Section 2.7, as applicable) shall update and supplement such notice to the extent necessary so that the information provided or required to be provided in such notice shall be true and correct (x) as of the record date for notice and voting at the meeting and (y) as of the date that is fifteen (15) days prior to the meeting or any adjournment or postponement thereof. Such update and supplement (or a written certification that no such updates or supplements are necessary and that the information previously provided remains true and correct as of the applicable date) shall be delivered in writing to the Secretary of the Corporation at the principal executive offices of the Corporation (a) in the case of any update and supplement required to be made as of the record date for notice of the meeting, not later than five (5) days after the later of such record date and the public announcement of such record date and (b) in the case of any update or supplement required to be made as of fifteen (15) days prior to the meeting or adjournment or postponement thereof, not later than ten (10) days prior to the date for the meeting or any adjournment or postponement thereof. For the avoidance of doubt, the obligation to update and supplement as set forth in this Section 2.7 or any other section of these Bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any stockholder's notice, including, without limitation, any representation required herein, extend any applicable deadlines under these Bylaws or enable or be deemed to permit a stockholder who has previously submitted a stockholder's notice under these Bylaws to change any representation that was previously made pursuant to this Section 2.7, to amend or update any proposal 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 stockholders.
(v)For purposes of this Section 2.7, the following terms have the following meanings:
(A)“affiliates” and “associates” shall have the meanings set forth in Rule 405 under the Securities Act of 1933, as amended;
(B)“business day” means any day other than Saturday, Sunday or a day on which banks are closed in New York City, New York; and
(C)“close of business” means 5:00 p.m. local time at the principal executive offices of the Corporation on any calendar day, whether or not the day is a business day.
(D)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.
Section 2.8.Conduct of Meetings. The chair of each annual and special meeting of stockholders shall be the Chair of the Board or, in the absence (or inability or refusal to act) of the Chair of the Board, the Chief Executive Officer or, in the absence (or inability or refusal to act) of the Chief Executive Officer, such other director or officer of the Corporation as shall be appointed by the Board. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chair of the meeting. The Board may adopt such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with these Bylaws or such rules and regulations as adopted by the Board, the chair of any meeting of stockholders shall have the right and authority to postpone, convene and (for any or no reason) to recess and/or to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chair, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chair of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present (including, without limitation, rules and procedures for removal of disruptive persons from the meeting); (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such 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; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chair of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The chair of any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting (including, without limitation, determinations with respect to the administration and/or interpretation of any of the rules, regulations or procedures of the meeting, whether adopted by the Board or prescribed by the chair of the meeting), shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if the chair of the meeting should so determine, such person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. The secretary of each annual and special meeting of
stockholders shall be the Secretary or, in the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary so appointed to act by the chair of the meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chair of the meeting may appoint any person to act as secretary of the meeting.
Section 2.9.Delivery to the Corporation. Whenever Section 2.7 or Section 3.2 of these Bylaws requires one or more persons (including a record or beneficial owner of stock of the Corporation) to deliver a document or information to the Corporation or any officer, employee or agent thereof (including any notice, request, questionnaire, revocation, representation or other document or agreement), such document or information shall be in writing exclusively (and not in an electronic transmission) and shall be delivered exclusively by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested and the Corporation shall not be required to accept delivery of any document not in such written form or so delivered. For the avoidance of doubt, with respect to any notice from any stockholder of record or beneficial owner of the Corporation’s capital stock under the Certificate of Incorporation, these Bylaws or the DGCL, to the fullest extent permitted by law, the Corporation expressly opts out of Section 116 of the DGCL.
ARTICLE III.
DIRECTORS
Section 3.1.Powers; Number. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation required to be exercised or done by the stockholders. Directors need not be stockholders or residents of the State of Delaware. The number of directors shall be fixed as set forth in the Certificate of Incorporation.
Section 3.2.Advance Notice for Nomination of Directors. Only persons who are nominated in accordance with the procedures of Section 2.7 shall be eligible for election as directors of the Corporation, except as may be otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of holders of one or more series of Preferred Stock to elect directors.
Section 3.3.Chair of the Board. The Corporation may have, at the discretion of the Board, a Chair of the Board. The Chair of the Board shall preside when present at all meetings of the stockholders and the Board. The Chair of the Board shall perform such other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board shall designate from time to time.
ARTICLE IV.
BOARD MEETINGS
Section 4.1.Regular Meetings. Regularly scheduled, periodic meetings of the Board may be held without notice at such times, dates and places (within or without the State of Delaware) as shall from time to time be determined by the Board.
Section 4.2.Special Meetings. Special meetings of the Board (a) may be called by the Chair of the Board or Chief Executive Officer and (b) shall be called by the Chair of the Board, Chief Executive Officer or Secretary on the written request of at least a majority of directors then in office, or the sole director, as the case may be, and shall be held at such time, date and place (within or without the State of Delaware) as may be determined by the person calling the meeting or, if called upon the request of directors or the sole director, as specified in such written request. Notice of each special meeting of the Board shall be given, as provided in Section 8.3, to each director (i) at least 24 hours before the meeting if such notice is oral notice given personally or by telephone or written notice given by hand delivery or by means of a form of electronic transmission and delivery; (ii) at least two days before the meeting if such notice is sent by a nationally recognized overnight delivery service; and (iii) at least five days before the meeting if such notice is sent through the United States mail. Any and all business that may be transacted at a regular meeting of the Board may be transacted at a special meeting. Except as may be otherwise expressly provided by applicable law, the Certificate of Incorporation, or these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice or waiver of notice of such meeting.
Section 4.3.Quorum; Required Vote. A majority of the Board shall constitute a quorum for the transaction of business at any meeting of the Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by applicable law, the Certificate of Incorporation or these Bylaws. If a quorum shall not be present at any meeting, a majority of the directors present may adjourn the meeting from time to time until a quorum is present.
Section 4.4.Consent In Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 4.5.Organization. The chair of each meeting of the Board shall be the Chair of the Board or, in the absence (or inability or refusal to act) of the Chair of the Board, the Chief Executive Officer (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the Chief Executive Officer or if the Chief Executive Officer is not a director, a chair elected from the directors present. The Secretary shall act as secretary of all meetings of the Board. In the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary shall perform the duties of the Secretary at such meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chair of the meeting may appoint any person to act as secretary of the meeting.
ARTICLE V.
COMMITTEES OF DIRECTORS
Section 5.1.Establishment. The Board may by resolution of the Board designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board if and when required by the resolution designating such committee. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee.
Section 5.2.Available Powers. Any committee established pursuant to Section 5.1 hereof, to the extent permitted by applicable law and by resolution of the Board, shall have and may exercise all of the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it.
Section 5.3.Alternate Members. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member.
Section 5.4.Procedures. Unless the Board otherwise provides, the time, date, place, if any, and notice of meetings of a committee shall be determined by such committee. At meetings of a committee, a majority of the number of members of the committee (but not including any alternate member, unless such alternate member has replaced any absent or disqualified member at the time of, or in connection with, such meeting) shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee, except as otherwise specifically provided by applicable law, the Certificate of Incorporation, these Bylaws or the Board. If a quorum is not present at a meeting of a committee, the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. Unless the Board otherwise provides and except as provided in these Bylaws, each committee designated by the Board may make, alter, amend and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board is authorized to conduct its business pursuant to Article III and Article IV of these Bylaws.
ARTICLE VI.
OFFICERS
Section 6.1.Officers. The officers of the Corporation elected by the Board shall be a Chief Executive Officer, a Chief Financial Officer, a Secretary and such other officers (including without limitation, one or more Presidents or Vice Presidents) as the Board from time to time may determine. Officers elected by the Board shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article VI.
Such officers shall also have such powers and duties as from time to time may be conferred by the Board. The Chief Executive Officer may also appoint such other officers (including without limitation one or more Vice Presidents, Assistant Secretaries, Treasurers, Assistant Treasurers and Controllers) as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers shall have such powers and duties and shall hold their offices for such terms as may be provided in these Bylaws or as may be prescribed by the Board or, if such officer has been appointed by the Chief Executive Officer, as may be prescribed by the appointing officer.
(a)Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation, shall have general supervision of the affairs of the Corporation and general control of all of its business subject to the ultimate authority of the Board, and shall be responsible for the execution of the policies of the Board with respect to such matters. In the absence (or inability or refusal to act) of the Chair of the Board, the Chief Executive Officer shall preside when present at all meetings of the stockholders and (if he or she shall be a director) the Board.
(b)Secretary.
(i)The Secretary shall attend all meetings of the stockholders, the Board and (as required) committees of the Board and shall record the proceedings of such meetings in books to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board and shall perform such other duties as may be prescribed by the Board, the Chair of the Board or the Chief Executive Officer. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary, or any Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his or her signature or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his or her signature.
(ii)The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, if one has been appointed, a stock ledger, or duplicate stock ledger, showing the names of the stockholders and their addresses, the number and classes of shares held by each and, with respect to certificated shares, the number and date of certificates issued for the same and the number and date of certificates cancelled.
(c)Chief Financial Officer. The Chief Financial Officer, if any, shall perform all duties commonly incident to that office (including, without limitation, the care and custody of the funds and securities of the Corporation, which from time to time may come into the Chief Financial Officer’s hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board or the Chief Executive Officer may authorize).
Section 6.2.Term of Office; Removal; Vacancies. The elected officers of the Corporation shall be appointed by the Board and shall hold office until their successors are duly elected and qualified by the Board or until their earlier death, resignation, retirement,
disqualification, or removal from office. Any officer may be removed, with or without cause, at any time by the Board. Any officer appointed by the Chief Executive Officer may also be removed, with or without cause, by the Chief Executive Officer, unless the Board otherwise provides. Any vacancy occurring in any elected office of the Corporation may be filled by the Board. Any vacancy occurring in any office appointed by the Chief Executive Officer may be filled by the Chief Executive Officer unless the Board then determines that such office shall thereupon be elected by the Board, in which case the Board shall elect such officer.
Section 6.3.Other Officers. The Board may delegate the power to appoint such other officers and agents, and may also remove such officers and agents or delegate the power to remove same, as it shall from time to time deem necessary or desirable.
Section 6.4.Multiple Officeholders; Stockholder and Director Officers. Any number of offices may be held by the same person unless the Certificate of Incorporation or these Bylaws otherwise provide. Officers need not be stockholders or residents of the State of Delaware.
ARTICLE VII.
SHARES
Section 7.1.Certificated and Uncertificated Shares. The shares of the Corporation may be certificated or uncertificated, subject to the sole discretion of the Board and the requirements of the DGCL.
Section 7.2.Signatures. Each certificate representing capital stock of the Corporation shall be signed by or in the name of the Corporation by two authorized officers of the Corporation (it being understood that each of the Chair of the Board, the Chief Executive Officer, the President, a Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation shall be authorized officer for such purpose). Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar on the date of issue.
Section 7.3.Lost, Destroyed or Stolen Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, destroyed or stolen, and the Corporation may require the owner of the lost, destroyed or stolen certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.
Section 7.4.Transfer of Stock. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the holder of record thereof, by such person’s attorney lawfully constituted in writing and, in the case of certificated shares, upon the surrender of the certificate
thereof, which shall be cancelled before a new certificate or uncertificated shares shall be issued. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.
Section 7.5.Registered Stockholders. Before due presentment for registration of transfer of a certificate representing shares of the Corporation or of an instruction requesting registration of transfer of uncertificated shares, the Corporation may treat the registered owner as the person exclusively entitled to inspect for any proper purpose the stock ledger and the other books and records of the Corporation, vote such shares, receive dividends or notifications with respect to such shares and otherwise exercise all the rights and powers of the owner of such shares, except that a person who is the beneficial owner of such shares (if held in a voting trust or by a nominee on behalf of such person) may, upon providing documentary evidence of beneficial ownership of such shares and satisfying such other conditions as are provided under applicable law, may also so inspect the books and records of the Corporation.
Section 7.6.Regulations. The Board shall have power and authority to make such additional rules and regulations, subject to any applicable requirements of law, as the Board may deem necessary and appropriate with respect to the issue, transfer or registration of transfer of shares of stock or certificates representing shares. The Board may appoint one or more transfer agents or registrars and may require for the validity thereof that certificates representing shares bear the signature of any transfer agent or registrar so appointed.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1.Place of Meetings. If the place of any meeting of stockholders, the Board or committee of the Board for which notice is required under these Bylaws is not designated in the notice of such meeting, such meeting shall be held at the principal business office of the Corporation; provided, however, if the Board has, in its sole discretion, determined that a meeting shall not be held at any place, but instead shall be held by means of remote communication pursuant to Section 8.5 hereof, then such meeting shall not be held at any place.
Section 8.2.Fixing Record Dates.
(a)In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 nor less than ten days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with the foregoing provisions of this Section 8.2(a) at the adjourned meeting.
(b)In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
(c)Unless otherwise restricted by the Certificate of Incorporation, in order that the Corporation may determine the stockholders entitled to express consent to corporate action without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date for determining stockholders entitled to express consent to corporate action without a meeting is fixed by the Board, (i) when no prior action of the Board is required by law, the record date for such purpose shall be the first date on which a signed consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, and (ii) if prior action by the Board is required by law, the record date for such purpose shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.
Section 8.3.Means of Giving Notice.
(a)Notice to Directors. Whenever under applicable law, the Certificate of Incorporation or these Bylaws notice is required to be given to any director, such notice shall be given either (i) in writing and sent by mail, or by a nationally recognized delivery service, (ii) by electronic mail, facsimile telecommunication or other form of electronic transmission (including, without limitation, calendar invitation sent by electronic mail or other electronic transmission), or (iii) by oral notice given personally or by telephone. A notice to a director will be deemed given as follows: (A) if given by hand delivery, orally, or by telephone, when actually received by the director, (B) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the director at the director’s address appearing on the records of the Corporation, (C) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the director at the director’s address appearing on the records of the Corporation, (D) if sent by facsimile telecommunication, when sent to the facsimile transmission number for such director appearing on the records of the Corporation, (E) if sent by electronic
mail, when sent to the electronic mail address for such director appearing on the records of the Corporation, or (F) if sent by any other form of electronic transmission, when sent to the address, location or number (as applicable) for such director appearing on the records of the Corporation.
(b)Notice to Stockholders. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws may be given in writing directed to the stockholder’s mailing address (or by electronic transmission directed to the stockholder’s electronic mail address, as applicable) as it appears on the records of the Corporation. Notice shall be given (i) if mailed, when deposited in the United States mail, postage prepaid, (ii) if delivered by courier service, the earlier of when the notice is received or left at the stockholder’s address, or (iii) if given by electronic mail, when directed to such stockholder’s electronic mail address (unless the stockholder has notified the Corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail or such notice is prohibited by the DGCL to be given by electronic transmission). A notice by electronic mail must include a prominent legend that the communication is an important notice regarding the Corporation. A notice by electronic mail will include any files attached thereto and any information hyperlinked to a website if such electronic mail includes the contact information of an officer or agent of the Corporation who is available to assist with accessing such files or information. Any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws provided by means of electronic transmission (other than any such notice given by electronic mail) may only be given in a form consented to by such stockholder, and any such notice by such means of electronic transmission shall be deemed to be given as provided by the DGCL. The terms “electronic mail,” “electronic mail address,” “electronic signature” and “electronic transmission” as used herein shall have the meanings ascribed thereto in the DGCL.
(c)Notice to Stockholders Sharing Same Address. Without limiting the manner by which notice otherwise may be given effectively by the Corporation to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. A stockholder may revoke such stockholder’s consent by delivering written notice of such revocation to the Corporation. Any stockholder who fails to object in writing to the Corporation within 60 days of having been given written notice by the Corporation of its intention to send such a single written notice shall be deemed to have consented to receiving such single written notice.
Section 8.4.Waiver of Notice. Whenever any notice is required to be given under applicable law, the Certificate of Incorporation, or these Bylaws, a written waiver of such notice, signed by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to such required notice. All such waivers shall be kept with the books of the Corporation. Attendance at a meeting shall constitute a waiver of notice of such meeting, except where a person attends for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business on the ground that the meeting was not lawfully called or convened.
Section 8.5.Meeting Attendance via Remote Communication Equipment.
(a)Stockholder Meetings. If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders entitled to vote at such meeting and proxy holders not physically present at a meeting of stockholders may, by means of remote communication:
(i)participate in a meeting of stockholders; and
(ii)be deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication; provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder, (B) the Corporation shall implement reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and, if entitled to vote, to vote on matters submitted to the applicable stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (C) if any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such votes or other action shall be maintained by the Corporation.
(b)Board Meetings. Unless otherwise restricted by applicable law, the Certificate of Incorporation or these Bylaws, members of the Board or any committee thereof may participate in a meeting of the Board or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting was not lawfully called or convened.
Section 8.6.Dividends. The Board may from time to time declare, and the Corporation may pay, dividends (payable in cash, property or shares of the Corporation’s capital stock) on the Corporation’s outstanding shares of capital stock, subject to applicable law and the Certificate of Incorporation.
Section 8.7.Reserves. The Board may set apart out of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
Section 8.8.Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board.
Section 8.9.Seal. The Board may adopt a corporate seal, which shall be in such form as the Board determines. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 8.10.Books and Records. The books and records of the Corporation may be kept within or outside the State of Delaware at such place or places as may from time to time be designated by the Board.
Section 8.11.Resignation. Any director, committee member or officer may resign by giving notice thereof in writing or by electronic transmission to the Chair of the Board, the Chief Executive Officer, the President or the Secretary. The resignation shall take effect at the time it is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 8.12.Securities of Other Corporations. Powers of attorney, proxies, waivers of notice of meeting, consents in writing and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chair of the Board, the Chief Executive Officer, the President, any Vice President or any officers authorized by the Board. Any such officer, may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation or other entity in which the Corporation may own securities, or to consent in writing, in the name of the Corporation as such holder, to any action by such corporation, and at any such meeting or with respect to any such consent shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed. The Board may from time to time confer like powers upon any other person or persons.
Section 8.13.Amendments. The Board shall have the power to adopt, amend, alter or repeal the Bylaws. The Bylaws also may be adopted, amended, altered or repealed by the stockholders in the manner provided in the Certificate of Incorporation.
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
HEARTFLOW, INC.
WARRANT TO PURCHASE COMMON STOCK
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| No. W-002 | January 19, 2021 |
Void After January 19, 2031
THIS CERTIFIES THAT, for value received, Hayfin Tourmaline Luxco S.a.r.l. or its permitted assignee (the “Holder”) is entitled to subscribe for and purchase at the Exercise Price (as defined below) from HeartFlow, Inc., a Delaware corporation, with its principal office at 1400 Seaport Boulevard, Building B, Redwood City, CA 94063 (the “Company”), the Exercise Shares (as defined below). Subject to the terms and conditions set forth herein, this Warrant shall be exercisable during the period (the “Exercise Period”) commencing on the date hereof and ending on the 10th anniversary of the issue date of this Warrant (the “Expiration Date”).
Upon completion of the Holdings Restructuring, as defined in that certain Credit Agreement and Guaranty (the “Credit Agreement”) entered into in connection with this Warrant, by and among the Company, Hayfin Services LLP and the lenders party thereto the parties shall cause this Warrant to be exchanged for a similar Warrant issued by Holdings, as defined in the Credit Agreement.
1. DEFINITIONS. As used herein, the following terms shall have the following respective meanings:
(a) “Change of Control Transaction” means the consummation of (i) any consolidation or merger of the Company with or into any other corporation or other entity, or any other corporate reorganization (other than a transaction for the purpose of changing the domicile of the Company), in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization do not own, directly or indirectly, capital stock of the entity surviving such merger, consolidation or reorganization (or its parent entity) representing a majority of the combined voting power of the outstanding securities of such entity immediately after such consolidation, merger or reorganization; (ii) any other transaction or series of related transactions, in which capital stock representing in excess of fifty percent (50%) of the Company’s voting power is transferred to any single third-party entity (or group of related third-party entities) that is (or are) not affiliated with the Company; (iii) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company to a third party not affiliated with the Company; or (iv) any consolidation or merger of the Company or a subsidiary of the Company with or into, or any other corporate reorganization undertaken with, a publicly listed shell company or special purpose acquisition company, or a subsidiary of such an entity; provided, that (A) a transaction or series of related transactions with the principal purpose of raising capital or (B) a reorganization effected in accordance with Section 251(g) of the DGCL, shall not be considered a Change of Control Transaction.
(b) “Common Stock” shall mean the common stock of the Company, par value $0.001 per share.
(c) “DGCL” shall mean the Delaware General Corporation Law as currently in effect.
(d) “Direct Listing” shall mean the initial listing of shares of the Common Stock on a national securities exchange by means of a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Act”) (or any successor registration form under the Act subsequently adopted by the Securities and Exchange Commission) filed by the Company with the Securities and Exchange Commission that registers shares of existing capital stock of the Company for resale.
(e) “Exercise Price” shall mean $0.01 per share, subject to adjustment pursuant to Section 5.1 below.
(f) “Exercise Shares” shall initially mean three hundred fifteen thousand eight hundred ten (315,810) shares of Common Stock, subject to adjustment pursuant to the terms herein, including adjustment pursuant to Section 5 below.
(g) “IPO” shall mean the first sale of shares of capital stock of the Company pursuant to an effective registration statement under the Act in an underwritten public offering.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be exercised in full or in part at any time during the Exercise Period, subject to the Company having a sufficient number of authorized shares of its Common Stock, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) via net exercise in accordance with Section 2.2 below; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates (along with a replacement warrant reflecting the balance of the Exercise Shares), shall be issued and delivered to the Holder or such designee within a reasonable time after the rights represented by this Warrant shall have been so exercised and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Exercise Shares for which this Warrant remains exercisable.
The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.
2.2 Net Exercise. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of the Company’s Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
A
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| Where | X = | the number of shares of Common Stock to be issued to the Holder |
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| | Y = | the number of shares of Common Stock purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being exercised (at the date of such calculation) |
| | | |
| | A = | the fair market value of one share of Common Stock (at the date of such calculation) |
| | | |
| | B = | Exercise Price (as adjusted to the date of such calculation) |
For purposes of the above calculation and determining the fair market value of one share of Common Stock, if the Common Stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”), the fair market value of one share of Common Stock shall be the closing price or last sale price of a share of Common Stock reported for the business day immediately before the date on which the Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Common Stock is not traded in a Trading Market, the fair market value of one share of Common Stock shall be determined by the Company’s Board of Directors in good faith.
3. COVENANTS OF THE COMPANY.
3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will, prior to the time this Warrant is exercised by the Holder, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. If the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its share capital to allow for the issuance of such number of shares of Common Stock.
3.2 Notices of Record Date. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, the Company shall mail to the Holder, at least ten (10) days prior to the date specified herein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution.
4. REPRESENTATIONS OF HOLDER.
4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it is acquiring this Warrant and the Exercise Shares for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. Holder has not been formed for the specific purpose of acquiring this Warrant or the Exercise Shares.
4.2 Securities Are Not Registered.
(a) The Holder understands that this Warrant and the Exercise Shares have not been registered under the Act on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention.
(b) The Holder recognizes that this Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register this Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration.
(c) The Holder is aware that neither this Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.
4.3 Accredited Investor Status. The Holder is an “accredited investor” as such term is defined in Rule 501 under the Act. The Holder is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company. The Holder is experienced in making investments of this type and has such knowledge and background in financial and business matters that the Holder is capable of evaluating the merits and risks of this investment and protecting the Holder’s own interests.
4.4 Foreign Investors. If the Holder is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the “Code”)), the Holder hereby represents that he, she or it has satisfied itself as to the full observance of the laws of the Holder’s jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Note, including (a) the legal requirements within the Holder’s jurisdiction for the purchase of this Warrant and the Exercise Shares, (b) any foreign exchange restrictions applicable to such purchase, (c) any governmental or other consents that may need to be obtained, and (d) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of this Warrant and the Exercise Shares. The Holder’s subscription, payment for and continued beneficial ownership of this Warrant and the Exercise Shares will not violate any applicable securities or other laws of the Holder’s jurisdiction.
4.5 No “Bad Actor” Disqualification. The Holder represents and warrants that neither (a) the Holder nor (b) any entity that controls the Holder or is under the control of, or under common control with, the Holder, is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Act (“Disqualification Events”), except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Act and disclosed in writing in reasonable detail to the Company. The Holder represents that the Holder has exercised reasonable care to determine the accuracy of the representation made by the Holder in this Section 4.5 and agrees to notify the Company if the Holder becomes aware of any fact that makes the representation given by the Holder hereunder inaccurate.
4.6 Forward-Looking Statements. With respect to any forecasts, projections of results and other forward-looking statements and information provided to the Holder, the Holder acknowledges that such statements were prepared based upon assumptions deemed reasonable by the Company at the time of preparation. There is no assurance that such statements will prove accurate, and the Company has no obligation to update such statements.
4.7 Disposition of Warrant and Exercise Shares.
(a) The Holder further agrees not to make any disposition of all or any part of this Warrant or Exercise Shares in any event unless and until:
(i) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or
(ii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws.
(b) The Holder understands and agrees that all certificates evidencing Exercise Shares to be issued to the Holder may bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THESE SECURITIES ARE SUBJECT TO A LOCK-UP PERIOD IN THE EVENT OF A PUBLIC OFFERING AS SET FORTH IN AN AGREEMENT BETWEEN THE HOLDER AND THE COMPANY.
5. ANTI-DILUTION ADJUSTMENT FOR CERTAIN EVENTS.
5.1 In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of this Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment; provided, however, that such adjustment shall not be made with respect to, and this Warrant shall terminate if not exercised prior to, the events set forth in Section 7 below. The form of this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant.
5.2 If, upon the first issuance of Next Round Securities in the Next Round (the “Next Round Issuance”) this Warrant is then currently exercisable in whole or in part and the Next Round Price is less than $25.3317 per share (as adjusted for any stock splits, recapitalizations and the like), the number of Exercise Shares shall be increased to equal the quotient obtained by dividing (a) $8,000,000 by (b) the Next Round Price (subject to adjustment thereafter from time to time in accordance with the provisions of Section 5.1 of this Warrant), net of any Exercise Shares issued prior to the Next Round Issuance. As used herein “Next Round” means, at any time prior to the consummation of an IPO or Direct Listing, the first sale or issuance by the Company on or after the original issue date of this Warrant, in a single transaction or series of related transactions, of shares of its convertible preferred stock or other senior equity securities to one or more investors for at least $5 million in gross cash proceeds; “Next Round Securities” means the type, class and series of convertible preferred stock or other senior equity security sold or issued by the Company in the Next Round; and “Next Round Price” means the price per share paid in cash by purchasers of Next Round Securities issued in the Next Round. For example, if the Company issues Next Round Securities at a Next Round Price of $20.00 and the Warrant is then currently outstanding in whole, the number of Exercise Shares shall be increased from 315,810 to 400,000 ($8,000,000 / $20 = 400,000). In the event this Warrant has been exercised in part prior to the Next Round, the increase in the number of Exercise Shares shall be reduced by the number of Exercise Shares previously issued upon partial exercise of this Warrant. No more than one adjustment shall be made pursuant to this Section 5.2.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of an Exercise Share by such fraction.
7. TREATMENT OF WARRANT UPON CERTAIN EVENTS.
7.1 Upon a Change of Control Transaction.
(i) In the event of a Change of Control Transaction in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), and the fair market value of one share of the Company’s Common Stock as determined in accordance with Section 2.2 above would be greater than the Exercise Price in effect on such date immediately prior to such Cash/
Public Acquisition, and Holder has not exercised this Warrant as to all Exercise Shares, then this Warrant shall automatically be deemed to be net exercised pursuant to Section 2.2 above as to all Exercise Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such net exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of this Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Exercise Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one share of the Company’s Common Stock as determined in accordance with Section 2.2 above would be less than the Exercise Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.
(ii) The Company shall provide the Holder with written notice of a Change of Control Transaction (together with such reasonable information as the Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Change of Control Transaction giving rise to such notice), which is to be delivered to the Holder not less than five (5) Business Days prior to the closing of the proposed Change of Control Transaction.
(iii) Upon the closing of any Change of Control Transaction other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Exercise Shares issuable upon exercise of the unexercised portion of this Warrant as if such Exercise Shares were outstanding on and as of the closing of such Change in Control Transaction, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(iv) As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (a) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (b) the class and series of shares or other security of the issuer that would be received by the Holder in connection with the Cash/Public Acquisition were the Holder to exercise this Warrant on or prior to the closing thereof is then traded on a Trading Market, and (c) Holder would be able to publicly re-sell, within six (6) months following the closing of such Acquisition, all of the issuer’s shares and/or other securities that would be received by the Holder in such Cash/Public Acquisition were Holder to exercise this Warrant in full on or prior to the closing of such Cash/Public Acquisition.
7.2 Automatic Exercise at Expiration. To the extent this Warrant is not previously exercised, and if the fair market value of one Warrant share is greater than the Exercise Price, as adjusted, on the Expiration Date, this Warrant shall be deemed automatically exercised in accordance with Section 2.2 hereof (even if not surrendered) immediately prior to the close of business on the Expiration Date (unless the Expiration Date is not a Business Day, in which case, on the Business Day immediately preceding the Expiration Date). To the extent this Warrant is deemed automatically exercised pursuant to this Section 7, the Company agrees to notify the Holder within a reasonable period of time of the number of Warrant shares the Holder is to receive by reason of such automatic exercise. The Company shall not be required to deliver any certificates evidencing any Exercise Shares issuable upon such automatic exercise unless and until the Company has received the original of this Warrant (or an affidavit reasonably satisfactory to the Company that this Warrant has been lost, stolen or destroyed).
8. MARKET STAND-OFF AGREEMENT. Holder hereby agrees that Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock (or other securities) of the Company held by Holder (other than those included in the registration) during the 180-day period following the effective date of the IPO or Direct Listing (or such longer period as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation). Holder further agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriters that are consistent with the foregoing or that are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Act. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common Stock (or other securities) until the end of such period. Holder agrees that any transferee of this Warrant (or other securities of the Company held by Holder) shall be bound by this Section 8 as a condition to the transfer. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 8 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
9. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.
10. INFORMATION AND REGISTRATION RIGHTS.
10.1 Subject to Holder’s entering into a confidentiality agreement in form and substance reasonably acceptable to the Company, the Company will furnish the following reports to Holder so long as this Warrant remains exercisable: (a) as soon as practicable after the end of each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries, as at the end of such fiscal year, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries for such year (the “Fiscal Year Financials”), prepared in accordance with U.S. generally accepted accounting principles consistently applied, with audited Fiscal Year Financials to be provided when available; (b) as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries as at the end of such fiscal quarter, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries for such quarterly period, prepared in accordance with U.S. generally accepted accounting principles consistently applied; and (c) when available, a financial plan and budget for the then current fiscal year. The information rights granted under this Section 10 shall automatically terminate in the event of a Cash/Public Acquisition, an IPO or a Direct Listing and are not transferable to any person not affiliated with the Holder.
10.2 The Exercise Shares shall be “Registrable Securities” as such term is defined in the Amended and Restated Investors’ Rights Agreement, dated as of November 20, 2017 (as amended from time to time, the “Rights Agreement”) for purposes of Sections 2.1 and 2.2 thereof, and Holder shall have the same rights as, and shall be subject to the same terms and conditions set forth in, Sections 2.1 (Requested Registration) and 2.2 (Company Registration) of
the Rights Agreement as a “Holder” thereunder, provided that none of the Exercise Shares shall be counted when determining the Initiating Holders (as defined in the Rights Agreement). Holder shall execute and deliver a joinder to Sections 2.1 and 2.2 of the Rights Agreement following the exercise of this Warrant. The Company shall take such action as may be reasonably necessary to carry out the intent of the foregoing, including, without limitation, amending the Rights Agreement to include the Exercise Shares as Registrable Securities under the Rights Agreement, subject to the limitations set forth in this Section 10.2.
11. TRANSFER OF WARRANT. Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant (including without limitation, delivery of a legal opinion reasonably satisfactory to the Company), this Warrant is transferable, in whole or in part, by the Holder in person or by duly authorized attorney to (a) any affiliate (including related funds) of Holder, or (b) subject to the Company’s consent, which shall not be unreasonably withheld, a person not affiliated with the Holder, in each case, upon delivery of this Warrant and the form of assignment attached hereto to the transferee designated by Holder. In the event of a non-affiliate transfer, the information rights set forth in Section 10 above shall automatically terminate. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company for the purpose of providing the representations and warranties in Section 4 hereof. Upon any such transfer the Company shall issue within a reasonable period of time, an appropriate warrant to the transferee(s). The Company may withhold its consent to a transfer of all or any portion of this Warrant to a direct or indirect competitor of the Company. Holder shall reimburse the Company’s reasonable out of pocket costs and fees (including the Company’s legal fees) for any transfers of this Warrant occurring after the original issue date of this Warrant.
12. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.
13. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed email or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to Holder at Hayfin Capital Management LLP, One Eagle Place, London, SW1Y 6AF, United Kingdom; or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other parties hereto.
14. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
15. GOVERNING LAW. This Warrant and all rights, obligations and liabilities hereunder shall be governed by the laws of the State of Delaware.
[Remainder of the page left intentionally blank.]
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of January 19, 2021.
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| HEARTFLOW, INC. |
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| By: | /s/ Dana Mead |
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| Name: Dana G. Mead, Jr. |
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| Title: President and Chief Executive Officer |
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| Address: 1400 Seaport Boulevard, Building B Redwood City, CA 94063 |
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[Signature Page to Warrant to Purchase Common Stock]
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| ACKNOWLEDGED AND AGREED | | |
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| HAYFIN TOURMALINE LUXCO S.A.R.L. | |
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| By: | /s/ Beatrice Methe | |
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| Name: | Beatrice Methe | |
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| Title: | Manager | |
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| Address: | 15 boulevard F.W. Raiffeisen L-2411 Luxembourg |
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[Signature Page to Warrant to Purchase Common Stock]
NOTICE OF EXERCISE
TO: HEARTFLOW, INC.
(1) o The undersigned hereby elects to purchase ____________ shares of the Common Stock of HEARTFLOW, INC. (the “Company”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
o The undersigned hereby elects to purchase ____________ shares of the Common Stock of HEARTFLOW, INC. (the “Company”) pursuant to the terms of the net exercise provisions set forth in Section 2.2 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:
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| (Name) | |
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| (Address) | |
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| (Date) | | | (Signature) | |
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ASSIGNMENT FORM
(To assign the foregoing Warrant, in whole or part, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
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| Name: | | |
| | (Please Print) |
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| Address: | |
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Dated: __________, 20__
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Holder’s
Signature: | | | |
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Holder’s
Address: | | | | |
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| Signature Guaranteed: | | |
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of this Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
Exhibit 4.3
Execution Version
THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
HEARTFLOW HOLDING, INC.
WARRANT TO PURCHASE COMMON STOCK
Void After March 17, 2032
THIS CERTIFIES THAT, for value received, Hayfin Tourmaline Luxco S.a.r.l. or its permitted assignee (the “Holder”) is entitled to subscribe for and purchase at the Exercise Price (as defined below) from HeartFlow Holding, Inc., a Delaware corporation, with its principal office at 331 E. Evelyn Avenue, Mountain View, CA 94041 (the “Company”), the Exercise Shares (as defined below). Subject to the terms and conditions set forth herein, this Warrant shall be exercisable during the period (the “Exercise Period”) commencing on the date hereof and ending on the 10th anniversary of the issue date of this Warrant (the “Expiration Date”).
1. DEFINITIONS. As used herein, the following terms shall have the following respective meanings:
(a) “Business Day” means any day which is neither a Saturday nor Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or London, England.
(b) “Change of Control Transaction” means the consummation of (i) any consolidation or merger of the Company with or into any other corporation or other entity, or any other corporate reorganization (other than a transaction for the purpose of changing the domicile of the Company), in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization do not own, directly or indirectly, capital stock of the entity surviving such merger, consolidation or reorganization (or its parent entity) representing a majority of the combined voting power of the outstanding securities of such entity immediately after such consolidation, merger or reorganization; (ii) any other transaction or series of related transactions, in which capital stock representing in excess of fifty percent (50%) of the Company’s voting power is transferred to any single third-party entity (or group of related third-party entities) that is (or are) not affiliated with the Company; (iii) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company to a third party not affiliated with the Company; or (iv) any consolidation or merger of the Company or a subsidiary of the Company with or into, or any other corporate reorganization undertaken with, a publicly listed shell company or special purpose acquisition company, or a subsidiary of such an entity; provided, that (A) a transaction or series of related transactions with the principal purpose of raising capital or (B) a reorganization effected in accordance with Section 251(g) of the DGCL, shall not be considered a Change of Control Transaction.
(c) “Common Stock” shall mean the common stock of the Company, par value $0.001 per share.
(d) “DGCL” shall mean the Delaware General Corporation Law as currently in effect.
(e) “Direct Listing” shall mean the initial listing of shares of the Common Stock on a national securities exchange by means of a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Act”) (or any successor registration form under the Act subsequently adopted by the Securities and Exchange Commission) filed by the Company with the Securities and Exchange Commission that registers shares of existing capital stock of the Company for resale.
(f) “Exercise Price” shall mean $0.01 per share, subject to adjustment pursuant to Section 5.1 below.
(g) “Exercise Shares” shall initially mean two hundred twenty-five thousand five hundred seventy-nine (225,579) shares of Common Stock, subject to adjustment pursuant to the terms herein, including adjustment pursuant to Section 5 below.
(h) “IPO” shall mean the first sale of shares of capital stock of the Company pursuant to an effective registration statement under the Act in an underwritten public offering.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be exercised in full or in part at any time during the Exercise Period, subject to the Company having a sufficient number of authorized shares of its Common Stock, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the Exercise Price either (i) in cash or by check, or (ii) via net exercise in accordance with Section 2.2 below; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates (along with a replacement warrant reflecting the balance of the Exercise Shares), shall be issued and delivered to the Holder or such designee within a reasonable time after the rights represented by this Warrant shall have been so exercised and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Exercise Shares for which this Warrant remains exercisable.
The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.
2.2 Net Exercise. Notwithstanding any provisions herein to the contrary, if the fair market value of one share of the Company’s Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may
elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being exercised (at the date of such calculation)
A = the fair market value of one share of Common Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
For purposes of the above calculation and determining the fair market value of one share of Common Stock, if the Common Stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”), the fair market value of one share of Common Stock shall be the closing price or last sale price of a share of Common Stock reported for the Business Day immediately before the date on which the Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Common Stock is not traded in a Trading Market, the fair market value of one share of Common Stock shall be determined by the Company’s Board of Directors in good faith.
3. COVENANTS OF THE COMPANY.
3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will, prior to the time this Warrant is exercised by the Holder, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. If the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its share capital to allow for the issuance of such number of shares of Common Stock.
3.2 Notices of Record Date. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend which is the same as cash dividends paid in previous quarters) or other distribution, the Company shall mail to the Holder, at least ten (10) days prior to the date specified herein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution.
4. REPRESENTATIONS OF HOLDER.
4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it is acquiring this Warrant and the Exercise Shares for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares or any part thereof. Holder has not been formed for the specific purpose of acquiring this Warrant or the Exercise Shares.
4.2 Securities Are Not Registered.
(a) The Holder understands that this Warrant and the Exercise Shares have not been registered under the Act on the basis that no distribution or public offering of the stock of the Company is to be effected. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder has no such present intention.
(b) The Holder recognizes that this Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register this Warrant or the Exercise Shares of the Company, or to comply with any exemption from such registration.
(c) The Holder is aware that neither this Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the existence of a public market for the shares, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations. Holder is aware that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company presently has no plans to satisfy these conditions in the foreseeable future.
4.3 Accredited Investor Status. The Holder is an “accredited investor” as such term is defined in Rule 501 under the Act. The Holder is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company. The Holder is experienced in making investments of this type and has such knowledge and background in financial and business matters that the Holder is capable of evaluating the merits and risks of this investment and protecting the Holder’s own interests.
4.4 Foreign Investors. If the Holder is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the “Code”)), the Holder hereby represents that he, she or it has satisfied itself as to the full observance of the laws of the Holder’s jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Note, including (a) the legal requirements within the Holder’s jurisdiction for the purchase of this Warrant and the Exercise Shares, (b) any foreign exchange restrictions applicable to such purchase, (c) any governmental or other consents that may need to be obtained, and (d) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale or transfer of this Warrant and the Exercise Shares. The Holder’s subscription, payment for and continued beneficial ownership of this Warrant and the Exercise Shares will not violate any applicable securities or other laws of the Holder’s jurisdiction.
4.5 No “Bad Actor” Disqualification. The Holder represents and warrants that neither (a) the Holder nor (b) any entity that controls the Holder or is under the control of, or under common control with, the Holder, is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Act (“Disqualification Events”), except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Act and disclosed in writing in reasonable detail to the Company. The Holder represents that the Holder has exercised reasonable care to determine the accuracy of the representation made by the Holder in this Section 4.5 and agrees to notify the Company if the Holder becomes aware of any fact that makes the representation given by the Holder hereunder inaccurate.
4.6 Forward-Looking Statements. With respect to any forecasts, projections of results and other forward-looking statements and information provided to the Holder, the Holder acknowledges that such statements were prepared based upon assumptions deemed reasonable by the Company at the time of preparation. There is no assurance that such statements will prove accurate, and the Company has no obligation to update such statements.
4.7 Disposition of Warrant and Exercise Shares.
(a) The Holder further agrees not to make any disposition of all or any part of this Warrant or Exercise Shares in any event unless and until:
(i) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or
(ii) The Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Act or any applicable state securities laws.
(b) The Holder understands and agrees that all certificates evidencing Exercise Shares to be issued to the Holder may bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THESE SECURITIES ARE SUBJECT TO A LOCK-UP PERIOD IN THE EVENT OF A PUBLIC OFFERING AS SET FORTH IN AN AGREEMENT BETWEEN THE HOLDER AND THE COMPANY.
5. ANTI-DILUTION ADJUSTMENT FOR CERTAIN EVENTS.
5.1 In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of
shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Exercise Price shall be correspondingly adjusted to give the Holder of this Warrant, on exercise for the same aggregate Exercise Price, the total number, class, and kind of shares as the Holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment; provided, however, that such adjustment shall not be made with respect to, and this Warrant shall terminate if not exercised prior to, the events set forth in Section 7 below. The form of this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant.
5.2 If, upon the first issuance of Next Round Securities in the Next Round (the “Next Round Issuance”) this Warrant is then currently exercisable in whole or in part and the Next Round Price is less than $25.3317 per share (as adjusted for any stock splits, recapitalizations and the like), the number of Exercise Shares shall be increased to equal the quotient obtained by dividing (a) $5,714,300 by (b) the Next Round Price (subject to adjustment thereafter from time to time in accordance with the provisions of Section 5.1 of this Warrant), net of any Exercise Shares issued prior to the Next Round Issuance. As used herein “Next Round” means, at any time prior to the consummation of an IPO or Direct Listing, the first sale or issuance by the Company on or after the original issue date of this Warrant, in a single transaction or series of related transactions, of shares of its convertible preferred stock or other senior equity securities to one or more investors for at least $5 million in gross cash proceeds; “Next Round Securities” means the type, class and series of convertible preferred stock or other senior equity security sold or issued by the Company in the Next Round; and “Next Round Price” means the price per share paid in cash by purchasers of Next Round Securities issued in the Next Round. For example, if the Company issues Next Round Securities at a Next Round Price of $20.00 and the Warrant is then currently outstanding in whole, the number of Exercise Shares shall be increased from 225,579 to 285,715 ($5,714,300 / $20 = 285,715). In the event this Warrant has been exercised in part prior to the Next Round, the increase in the number of Exercise Shares shall be reduced by the number of Exercise Shares previously issued upon partial exercise of this Warrant. No more than one adjustment shall be made pursuant to this Section 5.2.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of an Exercise Share by such fraction.
7. TREATMENT OF WARRANT UPON CERTAIN EVENTS.
7.1 Upon a Change of Control Transaction.
(i) In the event of a Change of Control Transaction in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), and the fair market value of one share of the Company’s Common Stock as determined in accordance with Section 2.2 above would be greater than the Exercise Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant as to all Exercise Shares, then this Warrant shall automatically be deemed to be net exercised pursuant to Section 2.2 above as to all Exercise Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such net exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of this Warrant as of the date thereof and the Company shall
promptly notify the Holder of the number of Exercise Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one share of the Company’s Common Stock as determined in accordance with Section 2.2 above would be less than the Exercise Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.
(ii) The Company shall provide the Holder with written notice of a Change of Control Transaction (together with such reasonable information as the Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Change of Control Transaction giving rise to such notice), which is to be delivered to the Holder not less than five (5) Business Days prior to the closing of the proposed Change of Control Transaction.
(iii) Upon the closing of any Change of Control Transaction other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Exercise Shares issuable upon exercise of the unexercised portion of this Warrant as if such Exercise Shares were outstanding on and as of the closing of such Change in Control Transaction, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(iv) As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (a) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (b) the class and series of shares or other security of the issuer that would be received by the Holder in connection with the Cash/Public Acquisition were the Holder to exercise this Warrant on or prior to the closing thereof is then traded on a Trading Market, and (c) Holder would be able to publicly re-sell, within six (6) months following the closing of such Acquisition, all of the issuer’s shares and/or other securities that would be received by the Holder in such Cash/Public Acquisition were Holder to exercise this Warrant in full on or prior to the closing of such Cash/Public Acquisition.
7.2 Automatic Exercise at Expiration. To the extent this Warrant is not previously exercised, and if the fair market value of one Warrant share is greater than the Exercise Price, as adjusted, on the Expiration Date, this Warrant shall be deemed automatically exercised in accordance with Section 2.2 hereof (even if not surrendered) immediately prior to the close of business on the Expiration Date (unless the Expiration Date is not a Business Day, in which case, on the Business Day immediately preceding the Expiration Date). To the extent this Warrant is deemed automatically exercised pursuant to this Section 7, the Company agrees to notify the Holder within a reasonable period of time of the number of Warrant shares the Holder is to receive by reason of such automatic exercise. The Company shall not be required to deliver any certificates evidencing any Exercise Shares issuable upon such automatic exercise unless and until the Company has received the original of this Warrant (or an affidavit reasonably satisfactory to the Company that this Warrant has been lost, stolen or destroyed).
8. MARKET STAND-OFF AGREEMENT. Holder hereby agrees that Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock (or other securities) of the Company held by Holder (other than those included in the registration) during the 180-day period following the effective date of the IPO or Direct Listing (or such longer period as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation). Holder further agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing
underwriters that are consistent with the foregoing or that are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Act. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to such Common Stock (or other securities) until the end of such period. Holder agrees that any transferee of this Warrant (or other securities of the Company held by Holder) shall be bound by this Section 8 as a condition to the transfer. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 8 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.
9. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.
10. INFORMATION AND REGISTRATION RIGHTS.
10.1 Subject to Holder’s entering into a confidentiality agreement in form and substance reasonably acceptable to the Company, the Company will furnish the following reports to Holder so long as this Warrant remains exercisable: (a) as soon as practicable after the end of each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries, as at the end of such fiscal year, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries for such year (the “Fiscal Year Financials”), prepared in accordance with U.S. generally accepted accounting principles consistently applied, with audited Fiscal Year Financials to be provided when available; (b) as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries as at the end of such fiscal quarter, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries for such quarterly period, prepared in accordance with U.S. generally accepted accounting principles consistently applied; and (c) when available, a financial plan and budget for the then current fiscal year. The information rights granted under this Section 10 shall automatically terminate in the event of a Cash/Public Acquisition, an IPO or a Direct Listing and are not transferable to any person not affiliated with the Holder.
10.2 The Exercise Shares shall be “Registrable Securities” as such term is defined in the Amended and Restated Investors’ Rights Agreement, dated as of November 20, 2017 (as amended from time to time, the “Rights Agreement”) for purposes of Sections 2.1 and 2.2 thereof, and Holder shall have the same rights as, and shall be subject to the same terms and conditions set forth in, Sections 2.1 (Requested Registration) and 2.2 (Company Registration) of the Rights Agreement as a “Holder” thereunder, provided that none of the Exercise Shares shall be counted when determining the Initiating Holders (as defined in the Rights Agreement). Holder shall execute and deliver a joinder to Sections 2.1 and 2.2 of the Rights Agreement following the exercise of this Warrant. The Company shall take such action as may be reasonably necessary to carry out the intent of the foregoing, including, without limitation, amending the Rights Agreement to include the Exercise Shares as Registrable Securities under the Rights Agreement, subject to the limitations set forth in this Section 10.2.
11. TRANSFER OF WARRANT. Subject to applicable laws and the restriction on transfer set forth on the first page of this Warrant (including without limitation, delivery of a legal opinion reasonably satisfactory to the Company), this Warrant is transferable, in whole or in part, by the Holder in person or by duly authorized attorney to (a) any affiliate (including related funds) of Holder, or (b) subject to the Company’s consent, which shall not be unreasonably withheld, a person not affiliated with the Holder, in each case, upon delivery of this Warrant and the form of assignment attached hereto to the transferee
designated by Holder. In the event of a non-affiliate transfer, the information rights set forth in Section 10 above shall automatically terminate. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company for the purpose of providing the representations and warranties in Section 4 hereof. Upon any such transfer the Company shall issue within a reasonable period of time, an appropriate warrant to the transferee(s). The Company may withhold its consent to a transfer of all or any portion of this Warrant to a direct or indirect competitor of the Company. Holder shall reimburse the Company’s reasonable out of pocket costs and fees (including the Company’s legal fees) for any transfers of this Warrant occurring after the original issue date of this Warrant.
12. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.
13. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed email or facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to Holder at Hayfin Capital Management LLP, One Eagle Place, London, SW1Y 6AF, United Kingdom, or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other parties hereto.
14. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
15. GOVERNING LAW. This Warrant and all rights, obligations and liabilities hereunder shall be governed by the laws of the State of Delaware.
[Remainder of the page left intentionally blank.]
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of March 17, 2022.
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| HEARTFLOW HOLDING, INC. |
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| By: /s/ John Farquhar |
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| Name: John Farquhar |
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| Title: President and Chief Executive Officer |
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| Address: 331 E. Evelyn Avenue Mountain View, California 94041 |
[Signature Page to Warrant to Purchase Common Stock]
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| ACKNOWLEDGED AND AGREED |
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| HAYFIN TOURMALINE LUXCO S.A.R.L. |
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| By: /s/ Lina Kavoliune |
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| Name: | Lina Kavoliune |
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| Title: | | | Manager |
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| Address: | 21 rue Glesener |
| | | | | L-1631 Luxembourg |
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[Signature Page to Warrant to Purchase Common Stock]
NOTICE OF EXERCISE
TO: HEARTFLOW HOLDING, INC.
(1) o The undersigned hereby elects to purchase ________ shares of the Common Stock of HEARTFLOW HOLDING, INC. (the “Company”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
o The undersigned hereby elects to purchase ________ shares of the Common Stock of HEARTFLOW HOLDING, INC. (the “Company”) pursuant to the terms of the net exercise provisions set forth in Section 2.2 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:
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| | (Name) | | | |
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| (Date) | | | | (Signature) | |
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| | | | (Print name) | |
ASSIGNMENT FORM
(To assign the foregoing Warrant, in whole or part, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: ______________________________________________________________________________
(Please Print)
Address: ____________________________________________________________________________
(Please Print)
Dated: __________, 20__
Holder’s
Signature: _____________________________________________
Holder’s
Address: ______________________________________________
Signature Guaranteed: ___________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of this Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
HEARTFLOW HOLDING, INC.
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
March 2, 2023
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| Section 1 Definitions | 1 |
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| 1.1 | Certain Definitions | 1 |
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| Section 2 Registration Rights | 5 |
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| 2.1 | Demand Registration | 5 |
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| 2.2 | Company Registration | 7 |
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| 2.3 | Underwriting Requirements | 7 |
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| 2.4 | Obligations of the Company | 9 |
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| 2.5 | Furnish Information | 10 |
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| 2.6 | Expenses of Registration | 10 |
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| 2.7 | Delay of Registration | 11 |
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| 2.8 | Indemnification | 11 |
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| 2.9 | Reports Under Exchange Act | 13 |
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| 2.10 | Limitations on Subsequent Registration Rights | 14 |
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| 2.11 | “Market Stand-Off” Agreement | 14 |
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| 2.12 | Restrictions on Transfer | 15 |
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| 2.13 | Termination of Registration Rights | 16 |
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| 2.14 | Transfer or Assignment of Registration Rights | 17 |
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| Section 3 Covenants of the Company | 17 |
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| 3.1 | Information and Inspection Rights | 17 |
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| 3.2 | Confidentiality | 19 |
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| 3.3 | “Bad Actor” Notice | 19 |
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| 3.4 | Employee Agreements | 19 |
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| 3.5 | Right to Conduct Activities | 20 |
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| 3.6 | Acknowledgement | 20 |
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| 3.7 | Termination of Covenants | 20 |
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| Section 4 Right of First Refusal | 20 |
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| 4.1 | Right of First Refusal to Significant Holders | 20 |
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| Section 5 ADDITIONAL COVENANTS | 22 |
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| 5.1 | Matters Requiring Series F Director Approval | 22 |
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| 5.2 | Insurance | 23 |
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| 5.3 | Successor Indemnification | 23 |
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| 5.4 | Termination of Covenants | 23 |
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| 5.5 | Employee Stock | 23 |
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TABLE OF CONTENTS
(continued)
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| Section 6 MISCELLANEOUS | 24 |
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| 6.1 | Amendment | 24 |
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| 6.2 | Notices | 24 |
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| 6.3 | Governing Law | 25 |
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| 6.4 | Successors and Assigns | 25 |
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| 6.5 | Entire Agreement | 26 |
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| 6.6 | Delays or Omissions | 26 |
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| 6.7 | Severability | 26 |
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| 6.8 | Titles and Subtitles | 26 |
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| 6.9 | Counterparts | 26 |
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| 6.10 | Telecopy Execution and Delivery | 26 |
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| 6.11 | Dispute Resolution | 27 |
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| 6.12 | Further Assurances | 27 |
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| 6.13 | Conflict | 27 |
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| 6.14 | Attorneys’ Fees | 27 |
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| 6.15 | Aggregation of Stock | 27 |
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| 6.16 | Waiver of Right of First Refusal | 28 |
HEARTFLOW HOLDING, INC.
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
This Amended and Restated Investors’ Rights Agreement (this “Agreement”) is dated as of March 2, 2023, and is between HeartFlow Holding, Inc., a Delaware corporation (the “Company”), and the persons and entities listed on Exhibit A (each, an “Investor” and collectively, the “Investors”).
RECITALS
WHEREAS, HeartFlow, Inc. (“HeartFlow”) and the Investors (the “Prior Investors”) entered into that certain Amended and Restated Investors’ Rights Agreement dated November 20, 2017, as amended on March 28, 2018 (as further supplemented from time to time and assumed by the Company, the “Prior Agreement”) in connection with the sale and issuance of shares of the Company’s Series E Preferred Stock.
WHEREAS, pursuant to the Assignment and Assumption Agreement dated March 1, 2021, by and between HeartFlow and the Company, HeartFlow assigned the Prior Agreement to the Company, and the Company assumed the Prior Agreement.
WHEREAS, the Company now proposes to sell shares of the Company’s Series F Preferred Stock (the “Series F Preferred Stock”) and Series F-1 Preferred Stock (the “Series F-1 Preferred Stock”) to certain of the Investors pursuant to the Series F and Series F-1 Preferred Stock Purchase Agreement (the “Purchase Agreement”) of even date herewith (the “Financing”).
WHEREAS, in connection with the Financing the Company and the Prior Investors desire to amend and restate the Prior Agreement in its entirety to read as set forth herein.
WHEREAS, as a condition to the Financing, the Investors have agreed to enter into this Agreement.
The parties therefore agree as follows:
SECTION 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person, and, with respect to the Baillie Gifford Investor, any person that receives, directly
or indirectly, investment management or management advisory services from Baillie Gifford or any of its subsidiaries or owned affiliates.
(b) “Bad Actor Disqualification” means any “bad actor” disqualification described in Rule 506(d)(1)(i) through (viii) under the Securities Act.
(c) “Baillie Gifford” means Baillie Gifford & Co. and any successor or affiliated investment advisor to the Baillie Gifford Investor.
(d) “Baillie Gifford Investor” means Scottish Mortgage Investment Trust plc, together with its permitted transferees and assignees.
(e) “BCLS” means BCLS Fund III Investments, LP, together with its Affiliates.
(f) “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
(g) “Common Stock” means the Common Stock of the Company.
(h) “Competitor” means a Person engaged, directly or indirectly (including through any partnership, limited liability company, corporation, joint venture or similar arrangement (whether now existing or formed hereafter)), in providing coronary cardiac computed tomography angiography-based tests for providing data used in diagnosing coronary artery disease, including FFRct, plaque quantification and characterization and percutaneous coronary intervention planning, but shall not include any financial investment firm or collective investment vehicle that, together with its Affiliates, holds less than ten percent (10)% of the outstanding equity of any Competitor and does not, nor do any of its Affiliates, have a right to designate any members of the board of directors of any Competitor.
(i) “Conversion Stock” shall mean shares of Common Stock issued upon conversion of shares of Preferred Stock.
(j) “Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
(k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(l) “Excluded Registration” means (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.
(m) “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
(n) “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits forward incorporation of substantial information by reference to other documents filed by the Company with the SEC.
(o) “Holder” shall mean any Investor who holds Registrable Securities and any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been duly and validly transferred in accordance with Section 2.14 of this Agreement.
(p) “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, life partner or similar statutorily-recognized domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships of a natural person referred to herein.
(q) “Initial Public Offering” shall mean the closing of the Company’s first firm commitment underwritten public offering of the Company’s Common Stock registered under the Securities Act.
(r) “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.
(s) “New Securities” shall have the meaning set forth in Section 4.1(a).
(t) “Other Selling Stockholders” shall mean persons other than Holders who, by virtue of agreements with the Company, are entitled to include their Other Shares in certain registrations hereunder.
(u) “Other Shares” shall mean shares of Common Stock, other than Registrable Securities (as defined below), with respect to which registration rights have been granted.
(v) “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
(w) “Preferred Director” means any director of the Company that the holders of record of a class, classes or series of Preferred Stock are entitled to elect pursuant to the Restated Certificate (as defined below in Section 4.1(a)(i)).
(x) “Preferred Stock” means the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series F-1 Preferred Stock of the Company.
(y) “Purchase Agreement” shall have the meaning set forth in the Recitals.
(z) “Registrable Securities” shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Preferred Stock, (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company acquired by the Investors after the date hereof, (iii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) above, and (iv) the Warrant Shares; provided, however, that Registrable Securities shall not include any shares of Common Stock described in clause (i) or (ii) above which have previously been registered or which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights under this Agreement are not validly assigned in accordance with this Agreement; and provided further, that holders of Warrant Shares shall be excluded from the definition of “Initiating Holders”.
(aa) “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.
(bb) The terms “register,” “registered” and “registration” shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.
(cc) “Registration Expenses” shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses, fees and disbursements of more than $25,000 to counsel for the Holders and the compensation of regular employees of the Company, which shall be paid in any event by the Company.
(dd) “Restricted Securities” shall mean any Registrable Securities required to bear the first legend set forth in Section 2.12(b).
(ee) “Rule 144” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(ff) “Rule 145” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(gg) “Rule 415” shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.
(hh) “SEC” means the Securities and Exchange Commission.
(ii) “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.
(jj) “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company in accordance with the terms of this Agreement.
(kk) “Significant Holders” shall have the meaning set forth in Section 3.1(b).
(ll) “Warrant Shares” shall mean the shares of Common Stock issued or issuable upon exercise of that certain Warrant to Purchase Common Stock of the Company, issued to Hayfin Tourmaline Luxco S.a.r.l on January 19, 2021 and that certain Warrant to Purchase Common Stock of the Company, issued to Hayfin Tourmaline Luxco S.a.r.l on March 17, 2022.
SECTION 2
REGISTRATION RIGHTS
2.1 Demand Registration.
(a) Form S-1 Demand. If at any time after the earlier of (i) five (5) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the Initial Public Offering, the Company receives a request from Holders of a majority of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to at least forty percent (40%) of the Registrable Securities then outstanding, then the Company shall: (x) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement
under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3.
(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least thirty percent (30%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $10,000,000, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3.
(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board of Directors of the Company (the “Board of Directors”) it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than twice in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such one hundred twenty (120) day period, other than an Excluded Registration.
(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a), (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two (2) registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b). The Company shall not be obligated to effect, or to take
any action to effect, any registration pursuant to Section 2.1(b), (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two (2) registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d); provided, that if such withdrawal is during a period the Company has deferred taking action pursuant to Section 2.1(c), then the Initiating Holders may withdraw their request for registration and such registration will not be counted as “effected” for purposes of this Section 2.1(d).
2.2 Company Registration. If the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration, a registration relating to a demand pursuant to Section 2.1 or the Initial Public Offering), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.
2.3 Underwriting Requirements.
(a) If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Board of Directors and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s 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 Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting; provided, however, that no Holder (or any of their assignees) shall be required to make any representations, warranties or indemnities except as they relate to such Holder’s ownership of shares and
authority to enter into the underwriting agreement and to such Holder’s intended method of distribution, and the liability of such Holder shall be several and not joint, and limited to an amount equal to the net proceeds from the offering received by such Holder.
(b) Notwithstanding any other provision of this Section 2.3, if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering, unless such offering is the Initial Public Offering, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder”
shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
(c) For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.
2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to an additional one hundred twenty (120) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;
(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(h) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.
In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.
2.5 Furnish Information.
(a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
2.6 Expenses of Registration.
(a) All Registration Expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $100,000, of one counsel for the selling Holders selected by Holders of a majority of the Registrable
Securities to be registered (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 (other than fees and disbursements of counsel to any Holder, other than the Selling Holder Counsel, which shall be borne solely by the Holder engaging such counsel) shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.
2.8 Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the
Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Section 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, only to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.
(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in
each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control; provided, however, that any matter expressly provided for or addressed by the foregoing provisions that is not expressly provided for or addressed by the underwriting agreement shall be controlled by the foregoing provisions.
(f) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement or any provision(s) of this Agreement.
2.9 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:
(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the Initial Public Offering;
(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the Initial Public Offering), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
2.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would (i) provide to such holder or prospective holder the right to include securities in any registration on other than on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include; or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to Registrable Securities acquired by any additional Investor that becomes a party to this Agreement in accordance with Section 6.1.
2.11 “Market Stand-Off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Initial Public Offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for the Initial Public Offering, or (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 such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.11 shall apply only to the Initial Public Offering, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Holders only if all officers and directors and all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock) are subject to the
same restrictions. The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto.
2.12 Restrictions on Transfer.
(a) The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement. Notwithstanding the foregoing, the Company shall not require any transferee of shares pursuant to an effective registration statement or, following the Initial Public Offering, SEC Rule 144, in each case, to be bound by the terms of this Agreement. No Holder may transfer any Preferred Stock or Registrable Securities to a Competitor or any officer, director or employee of a Competitor, without the prior written consent of the Company.
(b) Each certificate, instrument, or book entry representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c)) be notated with a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12.
(c) The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2. Before any
proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction or following the Initial Public Offering, the transfer is made pursuant to SEC Rule 144, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer, provided that no such notice shall be required in connection if the intended sale, pledge or transfer complies with SEC Rule 144. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a notice, legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144; or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that with respect to transfers under the foregoing clause (y), each transferee agrees in writing to be subject to the terms of this Section 2.12. Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(b), except that such certificate instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.
2.13 Termination of Registration Rights.
The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Sections 2.1 or 2.2 shall terminate upon the earliest to occur of:
(a) the closing of a Liquidation Event, as such term is defined in the Restated Certificate (as defined in Section 4.1(a) below), in which the consideration received by the Investors in such Liquidation Event is in the form of cash and/or publicly traded securities, or if the Investors receive registration rights from the acquiring company or other successor to the Company reasonably comparable to those set forth in this Section 2;
(b) such time after the Initial Public Offering as SEC Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation, during a three (3)-month period without registration (and without the requirement for the Company to be in compliance with the current public information required under subsection (c)(1) of SEC Rule 144) and such Holder (together with its “affiliates”
determined under SEC Rule 144) holds less than one percent (1%) of the outstanding capital stock of the Company; and
(c) the third (3rd) anniversary of the date the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act (or such later date that is one hundred eighty (180) days following the expiration of all deferrals of the Company’s obligations pursuant to Section 2 that remain in effect as of the third (3rd) anniversary of such date).
2.14 Transfer or Assignment of Registration Rights. The rights to cause the Company to register securities granted to a Holder by the Company under this Section 2 may be transferred or assigned by a Holder (i) to a transferee or assignee of not less than 2,500,000 shares of Registrable Securities (or, in the case of a transfer or assignment by (y) HeartTech InvestCo, LLC, 500,000 shares of Registrable Securities, or (z) Sandbox Advantage Fund, L.P. (“Sandbox”) and/or BlueCross BlueShield Venture Partners II, L.P. (“BCBS”), an amount in the aggregate by both to a single transferee or group of related transferees of not less than 1,000,000 shares of Registrable Securities) (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits, and the like), or (ii) to a subsidiary, parent, general partner, limited partner, retired partner, member or retired member, stockholder or other Affiliate of a Holder that is a corporation, partnership or limited liability company; provided that (a) such transfer or assignment of Registrable Securities is effected in accordance with the terms of Section 2.8 and applicable securities laws, (b) the Company is given written notice before said transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are intended to be transferred or assigned, and (c) the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement, including without limitation the obligations set forth in Section 2.11. For purposes of this Section 2.14, a “partnership”, “corporation”, or “limited liability company” shall also mean any similar or correlative type of entity not organized under the laws of the United States.
SECTION 3
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, as follows:
3.1 Information and Inspection Rights.
(a) Information. The Company will furnish the following reports to each Significant Holder (as defined in 3.1(b) below):
(i) As soon as practicable after the end of each fiscal year of the Company, and in any event (A) with respect to the fiscal year ended December 31, 2022, within one hundred and eighty (180) days after the end of such fiscal year, and (B) with respect to the fiscal year ending December 31, 2023 and for each fiscal year ending thereafter, within one hundred and twenty (120) days after the end of each such fiscal year of the Company, (x) a
consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such fiscal year, (y) consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year and (z) a statement of stockholders’ equity as of the end of such year, in each case of clauses (x)-(z), audited, prepared in accordance with U.S. generally accepted accounting principles consistently applied and certified by independent public accountants of nationally recognized standing selected by the Company;
(ii) As soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty- five (45) days after the end of the first, second, and third quarterly accounting periods in each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such period, prepared in accordance with U.S. generally accepted accounting principles consistently applied, subject to changes resulting from normal year-end audit adjustments;
(iii) As soon as practicable after the end of each month, and in any event within thirty (30) days after the end of each month, an unaudited consolidated balance sheet of the Company as of the end of such monthly period, and unaudited consolidated statements of income and cash flows of the Company for such period, prepared in accordance with U.S. generally accepted accounting principles consistently applied, subject to changes resulting from normal year-end audit adjustments; and
(iv) At least thirty (30) days prior to the beginning of each fiscal year and at other times upon reasonable request, an operating plan and budget for such fiscal year or the then current fiscal year, as applicable that is approved by the Board of Directors.
If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.
(b) Inspection Rights. The Company will afford to each Holder (counting Sandbox and BCBS in the aggregate as a single holder for purposes of determining the following ownership threshold) who owns at least 2,400,000 (or, in the case of HeartTech InvestCo, LLC, 500,000) (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits, and the like) shares of Preferred Stock and/or Conversion Stock (the “Significant Holders”) and to such Holder’s accountants and counsel, reasonable access during normal business hours to all of the Company’s respective properties, books and records. Each Significant Holder shall have such other access to management and information as is necessary for it to comply with applicable laws and regulations and reporting obligations. The Company shall not be required to disclose details of contracts with or work performed for specific customers and other business partners where to do so would violate confidentiality obligations to those parties. Holders may exercise their rights under this Section 3.1(b)only for purposes reasonably related to their interests under this Agreement and related agreements. The rights granted pursuant to this Section 3.1(b) may not be assigned or otherwise conveyed by the
Holders or by any subsequent transferee of any such rights without the prior written consent of the Company except pursuant to a transfer described in Section 2.12 hereof. Notwithstanding the foregoing, the Company shall not be obligated pursuant to this Section 3.1(b) to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
3.2 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor or make decisions with respect to its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.2 by such Investor), (b) is or has been independently developed or conceived by such Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent reasonably necessary to obtain their services in connection with monitoring its investment in the Company; (ii) with the Company’s prior written consent, to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.2; (iii) to any existing Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information and provided further that such Investor shall be responsible for any breach of the confidentiality obligations set forth in this Section 3.2 by any such existing Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor; or (iv) as may otherwise be required by law, regulation, rule, court order or subpoena, provided that such Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure; and provided further, that the Company shall not be required to comply with Section 3.1 in respect of any Holder that is a Competitor or an officer, employee or director of a Competitor.
3.3 “Bad Actor” Notice. Each Investor that is, or will following a Closing (as defined in the Purchase Agreement) be, a beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, will promptly notify the Company in writing if it or, to its knowledge, any person specified in Rule 506(d)(1) under the Securities Act becomes subject to any Bad Actor Disqualification.
3.4 Employee Agreements. The Company will cause (i) each Key Employee (as defined in the Purchase Agreement) and (ii) each person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets, to enter into the Company’s standard form of nondisclosure, nonsolicitation and proprietary rights assignment
agreement or consulting/independent contractor agreement, as applicable. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any stock purchase, stock option, stock restriction or restricted stock agreement between the Company and any Key Employee without the consent of the Board of Directors, including the Series F Director.
3.5 Right to Conduct Activities. The Company hereby agrees and acknowledges that Hadley, the Baillie Gifford Investor and BCLS (each together with their respective Affiliates, a “VC Investor”) are professional investment funds, and as such invest in numerous portfolio companies, some of which may be deemed competitive with the Company’s business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, no VC Investor shall be liable to the Company for any claim arising out of, or based upon, (i) the investment by any VC Investor in any entity competitive with the Company, or (ii) actions taken by any partner, officer or other representative of any VC Investor to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.
3.6 Acknowledgement. The Company acknowledges that certain of the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict an Investor in the business of venture capital investing from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.
3.7 Termination of Covenants. The covenants set forth in this Section 3 shall terminate and be of no further force and effect upon (i) the closing of the Initial Public Offering, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Liquidation Event (as such term is defined in the Restated Certificate, whichever occurs first.
SECTION 4
RIGHT OF FIRST REFUSAL
4.1 Right of First Refusal to Significant Holders. The Company hereby grants to each Significant Holder, the right of first refusal to purchase its pro rata share of New Securities (as defined in this Section 4.1(a)) which the Company may, from time to time, propose to sell and issue after the date of this Agreement. A Significant Holder’s pro rata share, for purposes of this right of first refusal, is equal to the ratio of (a) the number of shares of Common Stock (attributable to and assuming full conversion of the shares of Preferred Stock) owned or held by
such Significant Holder immediately before the issuance of New Securities to (b) the total number of shares of Common Stock outstanding immediately before the issuance of New Securities (assuming full conversion of the shares of Preferred Stock and full conversion or exercise of all outstanding convertible securities, rights, options and warrants). Each Significant Holder shall have a right of over-allotment such that if any Significant Holder fails to exercise its right hereunder to purchase its pro rata share of New Securities, the other Significant Holders may purchase the non-purchasing Significant Holder’s portion on a pro rata basis. This right of first refusal shall be subject to the following provisions:
(a) “New Securities” shall mean any capital stock (including Common Stock and/or Preferred Stock) of the Company whether now authorized or not, and rights, convertible securities, options or warrants to purchase such capital stock, and securities of any type whatsoever that are, or may become, exercisable or convertible into capital stock; provided that the term “New Securities” does not include:
(i) the “Excluded Shares” as defined in the Amended and Restated Certificate of Incorporation of the Company as in effect (the “Restated Certificate”);
(ii) securities issued or issuable as a dividend or distribution on Preferred Stock of the Company or pursuant to any event for which adjustment is made pursuant to the Restated Certificate;
(iii) securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors, including the Series F Director (as defined in the Restated Certificate);
(iv) securities of the Company which are otherwise excluded by the unanimous approval of the Board of Directors;
(v) securities issued pursuant to Section 2.1 of the Purchase Agreement; and
(vi) any right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to subsections (i) through (iv) above.
(b) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Significant Holder written notice of its intention, describing the type of New Securities, and their price and the general terms upon which the Company proposes to issue the same. Each Significant Holder shall have twenty (20) days after any such notice is mailed or delivered to agree to purchase such Holder’s pro rata share of such New Securities and to indicate whether such Holder desires to exercise its over-allotment option for the price and upon the terms specified in the notice by giving written notice to the Company, in substantially the form attached as Schedule 1, and stating therein the quantity of New Securities to be purchased.
(c) In the event the Holders fail to exercise fully the right of first refusal and over-allotment rights, if any, within said twenty (20) day period (the “Election Period”), the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within ninety (90) days from the date of said agreement) to sell that portion of the New Securities with respect to which the Significant Holders’ right of first refusal option set forth in this Section 4.1 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company’s notice to Significant Holders delivered pursuant to Section 4.1(b). In the event the Company has not sold within such ninety (90) day period following the Election Period, or such ninety (90) day period following the date of said agreement, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Significant Holders in the manner provided in this Section 4.1.
(d) The right of first refusal granted under this Agreement shall not be applicable to the Initial Public Offering, and shall expire upon the earlier of (i) the closing of a Liquidation Event and (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act.
(e) A Significant Holder will not have a right of first refusal to purchase a pro rata share of New Securities in accordance with this Section 4 and will not be a Significant Holder for purposes of the right of first refusal granted under this Section 4 if, and for so long as, the Significant Holder, any of its directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members or any person that would be deemed a beneficial owner of the securities of the Company held by the Significant Holder (in accordance with Rule 506(d) of the Securities Act) is subject to any Bad Actor Disqualification, except as set forth in Rule 506(d)(2) or (d)(3) under the Securities Act.
SECTION 5
ADDITIONAL COVENANTS
5.1 Matters Requiring Series F Director Approval. During such time or times as the holders of Series F Preferred Stock and Series F-1 Preferred Stock, voting together as a Single Class are entitled to elect the Series F Director, the Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the Board of Directors, which approval must include the affirmative vote of the then-seated Series F Director:
(a) make any material loan or advance to, or own any material amount of stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly-owned by the Company;
(b) make any material loan or advance to any person, including, any employee or director, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;
(c) guarantee any material indebtedness for borrowed money, except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;
(d) make any investment that does not materially comply with any investment policy approved by the Board of Directors;
(e) incur any indebtedness for borrowed money in excess of $1,500,000 that is not already included in a Board-approved budget, other than trade credit incurred, or other transactions entered into in the ordinary course of business;
(f) change the principal business of the Company, enter new lines of business, or exit the current line of business;
(g) sell, assign, license, pledge or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or
(h) enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of assets greater than $5,000,000.
5.2 Insurance. The Company has obtained and shall maintain, from financially sound and reputable insurers, Directors and Officers liability insurance, in an amount and on terms and conditions satisfactory to the Board of Directors (including the Series F Director), and will cause such insurance policy to be maintained until such time as the Board of Directors (including the Series F Director) determines that such insurance should be discontinued. The policy shall not be cancelled by the Company without prior approval by the Board of Directors (including the Series F Director). Notwithstanding any other provision of this Section 5.2 to the contrary, for so long as a Preferred Director is serving on the Board of Directors, the Company shall not cease to maintain a Directors and Officers liability insurance policy in an amount of at least $3,000,000 unless approved by such Preferred Director.
5.3 Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, the Restated Certificate, or elsewhere, as the case may be.
5.4 Termination of Covenants. The covenants set forth in this Section 5, with the exception of Section 5.3, shall terminate and be of no further force or effect (i) immediately before the consummation of the Initial Public Offering, or (ii) upon the closing of a Liquidation Event (as defined in the Restated Certificate), whichever event occurs first.
5.5 Employee Stock. Unless otherwise approved by the Board of Directors or a subcommittee of the Board of Directors pursuant to a delegation of authority, all future employees of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12)
months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months with respect to their initial grant, and (ii) a market stand-off provision substantially similar to that set forth in Section 6.2 of the Company’s Amended and Restated Right of First Refusal and Co-Sale Agreement, dated as of the date hereof.
SECTION 6
MISCELLANEOUS
6.1 Amendment. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by (i) the Company and (ii) the Holders holding a majority of the Registrable Securities (excluding any of such shares that have been sold to the public or pursuant to Rule 144) then outstanding (including, at least sixty percent (60%) of the outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock); provided, however, that any individual or entity acquiring shares of Preferred Stock after the date of this Agreement may become a party to this Agreement by executing a counterpart signature page to this Agreement, without any amendment of this Agreement pursuant to this paragraph or any consent or approval of any other Holder. Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each Holder and each future holder of all such securities of Holder. Each Holder acknowledges that by the operation of this paragraph, except as otherwise expressly set forth herein, the holders of a majority of the Registrable Securities (excluding any of such shares that have been sold to the public or pursuant to Rule 144) (including, at least sixty percent (60%) of the outstanding shares of Series F Preferred Stock and Series F-1 Preferred Stock) will have the right and power to diminish or eliminate all rights of such Holder under this Agreement provided, however,(i) in no event may any amendment, waiver or modification of any kind adversely treat any Holder in a different or disproportionate manner unless such amendment or waiver is agreed to in writing by such adversely affected Holder, and (ii) Section 3.1(b), Section 4.1 and any other section of this Agreement applicable to the Significant Holders (including this clause (ii) of this Section 6.1) may be amended, modified or waived with only the written consent of the Company and the holders of at least a majority of the Registrable Securities then outstanding and held by the Significant Holders.
6.2 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail (if to an Investor or Holder) or otherwise delivered by hand, messenger or courier service addressed:
(a) if to an Investor, to the Investor’s address, facsimile number or electronic mail address as shown in the Company’s records, as may be updated in accordance with the provisions hereof;
(b) if to any Holder, to such address, facsimile number or electronic mail address as shown in the Company’s records, or, until any such Holder so furnishes an address,
facsimile number or electronic mail address to the Company, then to the address, facsimile number or electronic mail address of the last holder of such shares for which the Company has contact information in its records; or
(c) if to the Company, to the attention of the President or Chief Executive Officer of the Company at 331 E. Evelyn Avenue, Mountain View, California 94041, or at such other current address as the Company shall have furnished to the Investors or Holders, with a copy (which shall not constitute notice) to Laura Bushnell, King & Spalding LLP, 601 S. California Avenue, Suite 100, Palo Alto, CA 94304.
(d) Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day. If there is any conflict between the Company’s books and records and this Agreement or any notice delivered hereunder, the Company’s books and records will control absent fraud or error.
Subject to the limitations set forth in Delaware General Corporation Law §232(e), each Investor and Holder consents to the delivery of any notice to stockholders given by the Company under the Delaware General Corporation Law or the Company’s certificate of incorporation or bylaws by (i) facsimile telecommunication to the facsimile number set forth on Exhibit A (or to any other facsimile number for the Investor or Holder in the Company’s records), (ii) electronic mail to the electronic mail address set forth on Exhibit A (or to any other electronic mail address for the Investor or Holder in the Company’s records), (iii) posting on an electronic network together with separate notice to the Investor or Holder of such specific posting or (iv) any other form of electronic transmission (as defined in the Delaware General Corporation Law) directed to the Investor or Holder. This consent may be revoked by an Investor or Holder by written notice to the Company and may be deemed revoked in the circumstances specified in Delaware General Corporation Law §232.
6.3 Governing Law. This Agreement shall be governed by the internal laws of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.
6.4 Successors and Assigns. This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Investor without the prior written consent of the Company. Any attempt by an Investor without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Subject to the foregoing and except as otherwise
provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.
6.5 Entire Agreement. This Agreement and the exhibits hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof. No party hereto shall be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein. This Agreement amends and restates the Prior Agreement in its entirety.
6.6 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.
6.7 Severability. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.
6.8 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.
6.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument.
6.10 Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.
6.11 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER AGREEMENTS (AS DEFINED IN THE PURCHASE AGREEMENT), THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
6.12 Further Assurances. Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.
6.13 Conflict. If there is any conflict between the terms of this Agreement and the Company’s certificate of incorporation or its bylaws, the terms of the Company’s certificate of incorporation or its bylaws, as the case may be, will control.
6.14 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
6.15 Aggregation of Stock. All shares of capital stock of the Company held or acquired by affiliated entities or persons of an Investor (including but not limited to (i) a constituent partner or a retired partner of an Investor that is a partnership; (ii) a parent, subsidiary
or other Affiliate of an Investor that is a corporation; (iii) an immediate family member living in the same household, a descendant, or a trust, in the case of an Investor who is an individual; or (iv) a member of an Investor that is a limited liability company) shall be aggregated together for the purpose of determining the availability of any rights under this Agreement which are triggered by the beneficial ownership of a threshold number of shares of the Company’s capital stock.
6.16 Waiver of Right of First Refusal. Pursuant to Section 4.1 of the Prior Agreement, each of the undersigned Prior Investors who together hold a majority of the Registrable Securities (as defined in the Prior Agreement) hereby waive on behalf of themselves and all other Investors the right of first refusal and any notice requirements in connection therewith, as set forth in the Prior Agreement, with respect to any sale and issuance by the Company of shares of Series F Preferred Stock, Series F-1 Preferred Stock, or any securities exercisable therefor or convertible thereinto (including without limitation the convertible promissory notes of the Company that are converting into shares of Series F-1 Preferred Stock at the initial closing of the Financing).
(signature page follows)
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| COMPANY: | |
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| HEARTFLOW HOLDING, INC. | |
| a Delaware corporation | |
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| /s/ John Farquhar | |
John Farquhar, President and Chief Executive Officer | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTORS: | |
| | | |
| BCLS FUND III INVESTMENTS, LP |
| | | |
| | | |
| By: BCLS Fund III Investments GP, LLC |
| its general partner |
| By: Bain Capital Life Sciences Fund III, L.P. |
| its member | |
| By: Bain Capital Life Sciences III General Partner, LLC |
| its general partner | |
| By: Bain Capital Life Sciences Investors, LLC |
| its manager | |
| | | |
| | | |
| By: | /s/ Jeffrey Schwartz | |
| | | |
| Name: | Jeffrey Schwartz | |
| Title: | Partner | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| HOST-PLUS PTY LIMITED | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Authorised Signatory of Baillie | |
| Gifford Overseas Limited as agent for and on | |
| behalf of Host-Plus Pty Limited | |
| | |
| | |
| INTERVENTURE EQUITY | |
| INVESTMENTS LIMITED | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Authorised Signatory of Baillie | |
| Gifford Overseas Limited as agent for and on | |
| behalf of Interventure Equity Investments | |
| Limited | |
| | |
| | |
| PLUMBING PENSIONS (U.K.) | |
| LIMITED | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Partner of Baillie Gifford & Co as | |
| agent for and on behalf of Plumbing Pensions | |
| (U.K.) Limited | |
| | |
| | |
| SCOTTISH MORTGAGE | |
| INVESTMENT TRUST PLC | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Partner of Baillie Gifford & Co as | |
| agent for and on behalf of Scottish Mortgage | |
| Investment Trust PLC | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| THE BOARD OF TRUSTEES OF THE | |
| SASKATCHEWAN HEALTHCARE | |
| EMPLOYEES' PENSION PLAN | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Authorised Signatory of Baillie | |
| Gifford Overseas Limited as agent for and on | |
| behalf of The Board of Trustees of the | |
| Saskatchewan Healthcare Employees' | |
| Pension Plan | |
| | |
| | |
| THE SCHIEHALLION FUND LIMITED | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Authorised Signatory of Baillie | |
| Gifford Overseas Limited as agent for and on | |
| behalf of The Schiehallion Fund Limited | |
| | |
| | |
| THE STATES OF JERSEY PUBLIC | |
| EMPLOYEES CONTRIBUTORY | |
| RETIREMENT SCHEME | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Partner of Baillie Gifford & Co as | |
| agent for and on behalf of The States of | |
| Jersey Public Employees Contributory | |
| Retirement Scheme | |
| | |
| | |
| VISION SUPER PTY LTD | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Authorised Signatory of Baillie | |
| Gifford Overseas Limited as agent for and on | |
| behalf of Vision Super Pty Ltd | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| WARMAN INVESTMENTS PTY | |
| LIMITED | |
| | |
| | |
| By: | /s/ Peter Singlehurst | |
| Name: Peter Singlehurst | |
| Title: Authorised Signatory of Baillie | |
| Gifford Overseas Limited as agent for and on | |
| behalf of Warman Investments PTY Limited | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| CAPRICORN HEALTHCARE AND | |
| SPECIAL OPPORTUNITIES, LP | |
| | |
| | |
| By: CHSO Partners II, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Barry Uphoff | |
| Name: Barry Uphoff | |
| Title: Manager | |
| | |
| | |
| CAPRICORN HEALTHCARE AND | |
| SPECIAL OPPORTUNITIES II, LP | |
| | |
| | |
| By: CHSO Partners II, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Barry Uphoff | |
| Name: Barry Uphoff | |
| Title: Manager | |
| | |
| | |
| CAPRICORN HEALTHCARE AND SPECIAL |
| OPPORTUNITIES II-A, LP | |
| | |
| | |
| By: CHSO Partners II, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Barry Uphoff | |
| Name: Barry Uphoff | |
| Title: Manager | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| CHSO SFP, LP | |
| | |
| | |
| By: CHSO Partners, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Barry Uphoff | |
| Name: Barry Uphoff | |
| Title: Manager | |
| | |
| | |
| CHSO TSF, LP | |
| | |
| | |
| By: CHSO Partners, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Barry Uphoff | |
| Name: Barry Uphoff | |
| Title: Manager | |
| | |
| | |
| CHSO CIG, LP | |
| | |
| | |
| By: CHSO Partners, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Barry Uphoff | |
| Name: Barry Uphoff | |
| Title: Manager | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| CAPRICORN S.A. SICAV – SIF – GLOBAL |
| NON-MARKETABLE STRATEGIES SUB |
| FUND | |
| | |
| | |
| By: Capricorn Investment Group LLC | |
| Its Investment Manager | |
| | |
| | |
| | |
| By: | /s/ Eric Techel | |
| Name: Eric Techel | |
| Title: Partner & CFO | |
| | |
| | |
| CARTHAGE, LP | |
| | |
| | |
| By: Capricorn Investment Group, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Eric Techel | |
| Name: Eric Techel | |
| Title: Partner & CFO | |
| | |
| | |
| HIT SPLITTER, LP | |
| | |
| | |
| By: Capricorn Investment Group, LLC | |
| Its General Partner | |
| | |
| | |
| | |
| By: | /s/ Eric Techel | |
| Name: Eric Techel | |
| Title: Partner & CFO | |
| | |
| | |
| PACIFIC SEQUOIA HOLDINGS LLC | |
| | |
| | |
| | |
| By: | /s/ Eric Techel | |
| Name: Eric Techel | |
| Title: Manager | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| THE SKOLL FOUNDATION |
| | |
| | |
| By: Capricorn Investment Group, LLC | |
| Its Investment Manager | |
| | |
| | |
| | |
| By: | /s/ Eric Techel | |
| Name: Eric Techel | |
| Title: Partner | |
| | |
| | |
| SKOLL FUND | |
| | |
| | |
| By: Capricorn Investment Group, LLC | |
| Its Investment Manager | |
| | |
| | |
| | |
| By: | /s/ Eric Techel | |
| Name: Eric Techel | |
| Title: Partner | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| USVP X AFFILIATES, L.P. |
| | |
| | |
| By: Presidio Management Group X, L.L.C. | |
| The General Partner of Each | |
| | |
| | |
| | |
| By: | /s/ Dale Holladay | |
| Name: Dale Holladay | |
| Title: Attorney-In-Fact | |
| | |
| | |
| | |
| U.S. VENTURES PARTNERS X, L.P. | |
| | |
| | |
| By: Presidio Management Group X, L.L.C. | |
| The General Partner of Each | |
| | |
| | |
| | |
| By: | /s/ Dale Holladay | |
| Name: Dale Holladay | |
| Title: Attorney-In-Fact | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| HCPCIV 1, LLC |
| | |
| | |
| By: | HealthCor Partners II, L.P., its Managing |
| Member | |
| By: | HealthCor Partners GP, LLC, its General |
| Manager | |
| | |
| | |
| | |
| By: | /s/ Jeffrey Lightcap | |
| Name: Jeffrey Lightcap | |
| Title: Member | |
| | |
| | |
| HEALTHCOR PARTNERS FUND, LP | |
| | |
| | |
| By: | HealthCor Partners Management, LP, its | |
| Manager | |
| By: | HealthCor Partners Management GP, LLC, its |
| General Partner | |
| | |
| | |
| | |
| By: | /s/ Jeffrey Lightcap | |
| Name: Jeffrey Lightcap | |
| Title: Member | |
| | |
| | |
| HEALTHCOR PARTNERS FUND II, LP |
| | |
| | |
| By: | HealthCor Partners Management, LP, its | |
| Manager | |
| By: | HealthCor Partners Management GP, LLC, its |
| General Partner | |
| | |
| | |
| | |
| By: | /s/ Jeffrey Lightcap | |
| Name: Jeffrey Lightcap | |
| Title: Member | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| JOHN H. STEVENS AND MARCIA K. | |
| STEVENS, TRUSTEES FOR THE JOHN AND |
| MARCIA STEVENS FAMILY TRUST, | |
| DATED FEBRUARY 4, 1994 | |
| | |
| | |
| | |
| By: | /s/ John H. Stevens | |
| Name: John H. Stevens | |
| Title: Trustee | |
| | |
| | |
| JOHN H. STEVENS | |
| | |
| | |
| | |
| /s/ John Stevens | |
| | |
| | |
| | |
| HEADWATERS CAPITAL PARTNERS, LLC |
| | |
| | |
| | |
| By: | /s/ John Stevens | |
| Name: John Stevens | |
| Title: Managing member | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTOR: | |
| | |
| | |
| LYNN SCHUSTERMAN IRREVOCABLE TRUST |
| | |
| | |
| | |
| | |
| By: | /s/ Matthew Schneider | |
| Name: Matthew Schneider | |
| Title: Attorney-in-Fact | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| BLUECROSS BLUESHIELD VENTURE |
| PARTNERS II, L.P. | |
| | |
| | |
| | |
| | |
| By: | /s/ John Banta | |
| Name: John Banta | |
| Title: Managing Director | |
| | |
| | |
| SANDBOX ADVANTAGE FUND, LP | |
| | |
| | |
| | |
| By: | /s/ Matthew Downs | |
| Name: Matthew Downs | |
| Title: Managing Member | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTORS:
| | | | | | | | | | | |
HADLEY HARBOR MASTER INVESTORS (CAYMAN) II L.P. | |
| | | |
By: | Wellington Management Company LLP, as | |
investment adviser | | |
| | | |
| | | |
| | | |
By: | /s/ Jennifer C. Boylan | | |
Name: | Jennifer C. Boylan | | |
Title: | Vice President and Counsel | | |
| | | |
| | | |
TEXAS HIDALGO CO-INVESTMENT FUND, L.P. | |
| | | |
By: | Wellington Management Company LLP, as | |
investment adviser | | |
| | | |
| | | |
| | | |
By: | /s/ Jennifer C. Boylan | | |
Name: | Jennifer C. Boylan | | |
Title: | Vice President and Counsel | | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | | | | | | | | | | |
| HEARTTECH INVESTCO, LLC | |
| | | | |
| | | | |
| By: | /s/ Jesse Du Bey | |
| Name: | Jesse Du Bey | |
| Title: | Manager | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | | | | | | | | | | |
| ADL, LLC | |
| | | | |
| | | | |
| By: | /s/ Tre Brashear | |
| Name: | Tre Brashear | |
| Title: | President | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | |
| Wael Almahmeed | |
| Print Name of Investor | |
| |
| /s/ Wael Almahmeed | |
| Signature | |
| |
| |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | | | | | | | |
BRADFORD C. O'BRIEN AND JUDITH M.
O'BRIEN, TRUSTEES, UTA DTD 7/1/92,
AS AMENDED |
| | | |
| | | |
| By: | /s/ Judith M. O’Brien | |
| Name: | Judith M. O’Brien | |
| Title: | Trustee | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | |
| LAURA BUSHNELL | |
| |
| |
| /s/ Laura Bushnell | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | |
| Dee Dee Carmody | |
| Print Name of Investor | |
| |
| /s/ Dee Dee Carmody | |
| Signature | |
| |
| |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | |
| CHARLES A. TAYLOR | |
| |
| |
| /s/ Charles A. Taylor | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTORS:
| | | | | | | | | | | | | | |
| THE ZARINS FAMILY 1998 TRUST | |
| | | | |
| | | | |
| By: | /s/ Christopher K. Zarins | |
| Name: | Christopher K. Zarins | |
| Title: | Trustee | |
| | | | |
| | | | |
| CHRISTOPHER ZARINS | |
| | | | |
| | | | |
| /s/ Christopher Zarins | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | | | | | | | |
| BERTRAM ZARINS | |
| | | |
| | | |
| /s/ Bertram Zarins | |
| | | |
| | | |
LAIMA I. ZARINS, AS TRUSTEE OF THE BERTRAM ZARINS IRREVOCABLE TRUST – 2012 U/I/T DATED DECEMBER 19, 2012 |
| | | |
| | | |
| By: | /s/ Laima I. Zarins | |
| Name: | Laima I. Zarins | |
| Title: | Trustee | |
| | | |
| | | |
| LAIMA ILZE ZARINS | |
| | | |
| | | |
| /s/ Laima Ilze Zarins | |
| | | |
ZARINS FAMILY IRREVOCABLE TRUST U/D/T AUGUST 19, 2002; TRUSTEE: PHILIP M. BRYNE |
| | | |
| | | |
| By: | /s/ Philip M. Byrne | |
| Name: | Philip M. Byrne | |
| Title: | Trustee | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | | | | | | | |
| BERTRAM ZARINS | |
| | | |
| | | |
| |
| | | |
LAIMA I. ZARINS, AS TRUSTEE OF THE BERTRAM ZARINS IRREVOCABLE TRUST-2012 U/I/T DATED DECEMBER 19, 2012 |
| | | |
| | | |
| By: | | |
| Name: | Laima I. Zarins | |
| Title: | Trustee | |
| | | |
| | | |
| LAIMA ILZE ZARINS | |
| | | |
| | | |
| |
| | | |
ZARINS FAMILY IRREVOCABLE TRUST U/D/T AUGUST 19, 2002; TRUSTEE: PHILIP M. BRYNE |
| | | |
| | | |
| By: | /s/ Philip M. Byrne | |
| Name: | Philip M. Byrne | |
| Title: | Trustee | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | |
| Kristen Smith Dayley | |
| Print Name of Investor | |
| |
| /s/ Kristen Smith Dayley | |
| Signature | |
| |
| |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | |
| Derrick Queen and Vivian Kuan | |
| Print Name of Investor | |
| |
| |
| /s/ Vivian K. Queen | |
| Signature | |
| |
| |
| Vivian Kuan | |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
INVESTOR:
| | | | | |
| Rebecca Smith Eggleston | |
| Print Name of Investor | |
| |
| /s/ Rebecca Smith Eggleston | |
| Signature | |
| |
| |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | |
| INVESTOR: | |
| |
| |
| Emergent Medical Associates, L.P. | |
| By: EMP Partners, L.L.C., Its General Partner |
| |
| |
| /s/ Robert Brownell | |
| Signature | |
| |
| |
| Robert Brownell | |
| Print Name of Signatory, if different | |
| |
| |
| Managing Director | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | |
| INVESTOR: | |
| |
| |
| Emergent Medical Partners, L.P. | |
| By: EMP Partners, L.L.C., Its General Partner |
| |
| |
| /s/ Robert Brownell | |
| Signature | |
| |
| |
| Robert Brownell | |
| Print Name of Signatory, if different | |
| |
| |
| Managing Director | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTOR: | |
| | |
| | |
| FITZ PARTNERS, L.P. | |
| | |
| | |
| By: | /s/ Peter Fitzgerald | |
| Name: Peter Fitzerald | |
| Title: Professor of medicine | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTOR: | |
| | |
| | |
| HAYFIN HEARTFLOW UK LIMITED | |
| | |
| | |
| | |
| By: | /s/ Jennifer Shen | |
| Name: Jennifer Shen | |
| Title: Director | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTOR: | |
| | |
| | |
| HEART-D SERIES OF HCP PRIVATE | |
| EQUITY INVESTORS, LLC | |
| | |
| | |
| | |
| By: | /s/ Gregory P. Hartmann | |
| Name: Gregory P. Hartmann | |
| Title: Manager | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | |
| INVESTOR: | |
| |
| |
| Hiten D Patel and Melissa L Patel, joint tenants with rights of survivorship | |
| Print Name of Investor | |
| |
| |
| /s/ Hiten D Patel | |
| Signature | |
| |
| |
| Hiten Patel | |
| Print Name of Signatory, if different | |
| |
| |
| Trustee | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | |
| INVESTOR: | |
| |
| |
| James J Elacqua Revocable Living Trust | |
| Print Name of Investor | |
| |
| |
| /s/ James J Elacqua | |
| Signature | |
| |
| |
| James J Elacqua | |
| Print Name of Signatory, if different | |
| |
| |
| Trustee | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | |
| INVESTOR: | |
| |
| |
| MARYAM SMITH KEYSER | |
| |
| |
| |
| /s/ Maryam Smith Keyser | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
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| LifeForce Capital-CHS Management, LLC | |
| Print Name of Investor | |
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| /s/ John Noonan | |
| Signature | |
| |
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| John Noonan | |
| Print Name of Signatory, if different | |
| |
| |
| GP | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTORS: | |
| | |
| | |
| LONNIE M. SMITH HEATFLOW GRAT III | |
| | |
| | |
| By: | /s/ Lonnie Smith | |
| Name: Lonnie Smith | |
| Title: Board Member | |
| | |
| | |
| THE LONNIE AND CHERYL SMITH FAMILY TRUST | |
| | |
| | |
| By: | /s/ Lonnie Smith | |
| Name: Lonnie Smith | |
| Title: Trustee | |
| | |
| | |
| LONNIE SMITH | |
| | |
| | |
| | |
| /s/ Lonnie Smith | |
| | |
| MCKRAM INVESTMENT CAPITAL II LLC |
| | |
| | |
| By: | /s/ Lonnie Smith | |
| Name: Lonnie Smith | |
| Title: Board Member | |
| | |
| | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| KENT A. LUCKEN | |
| |
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| /s/ Kent Lucken | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| | |
| | |
| MACARTHUR HOLDINGS, LLC | |
| | |
| | |
| By: | /s/ Philip Katz | |
| Name: Philip Katz | |
| Title: Managing Member | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| | |
| | |
| MARSHFIELD ADVISERS, LLC | |
| | |
| | |
| By: | /s/ Mitch Laubaugh | |
| Name: Mitch Laubaugh | |
| Title: Portfolio Manager | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| Mary A Schedule Irrevocable Trust | |
| Print Name of Investor | |
| |
| |
| /s/ John Schuele | |
| Signature | |
| |
| |
| John Schuele | |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTORS: | |
| | |
| | |
THE MUKESH PATEL ARTICLE FOURTH
TRUST |
| | |
| | |
| By: | /s/ Bhavnaben Mukesh Patel | |
| Name: Bhavnaben Mukesh Patel | |
| Title: Co-Trustee | |
| | |
| | |
| BHAVNABEN MUKESH PATEL | |
| | |
| | |
| /s/ Bhavnaben Mukesh Patel | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
| PMY PARTNERS, LP | |
| | |
| | |
| By: | /s/ Phil Young | |
| Name: Phil Young | |
| Title: Trustee | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| FRANK F. RANGO | |
| Print Name of Investor | |
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| /s/ Frank F. Rango | |
| Signature | |
| |
| |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| RCC SO I | |
| Print Name of Investor | |
| |
| |
| /s/ Roy Patterson | |
| Signature | |
| |
| Roy Patterson | |
| Print Name of Signatory, if different | |
| |
| Manager | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | | |
| | | |
| | | |
| JONATHAN ROOT AND BETSY BLUEMENTHAL REVOCABLE TRUST DATED DECEMBER 3, 2009 | |
| Jonathan Root and Betsy Blumenthal Trustees | |
| | | |
| | | |
| By: | /s/ Jonathan Root | | |
| Name: Jonathan Root | | |
| Title: Trustee | | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTORS: | |
| | |
| | |
| RED LINE TRUST PARTNERS, LLC | |
| | |
| | |
| By: | /s/ Michael Smith | |
| Name: Michael Smith | |
| Title Director | |
| | |
| | |
| MICHAEL SMITH | |
| | |
| | |
| /s/ Michael Smith | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| Robert and Karen May | |
| Print Name of Investor | |
| |
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| /s/ Robert May | |
| Signature | |
| |
| |
| Robert May | |
| Print Name of Signatory, if different | |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| RANDY ROCHMAN | |
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| |
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| /s/ Randy Rochman | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| | |
| | |
ROGER LYLE HAYES AND
NOEMI ESPINOSA HAYES FAMILY TRUST |
| | |
| | |
| | |
| By: | /s/ Nicky Espinosa | |
| Name: Nicky Espinosa | |
| Title Trustee | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| Frederick St. Goar | |
| Print Name of Investor | |
| |
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| /s/ Frederick St. Goar | |
| Signature | |
| |
| |
| |
| Print Name of Signatory, if different | |
| |
| |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| St. Goar/Cassani T/A DTD 9/12/2001 | |
| Print Name of Investor | |
| |
| |
| /s/ Frederick St. Goar | |
| Signature | |
| |
| |
| Frederick St. Goar | |
| Print Name of Signatory, if different | |
| |
| |
| Trustee | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| The Herlick-Zoi Family Trust | |
| Print Name of Investor | |
| |
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| /s/ Zack Herlick | |
| Signature | |
| |
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| Zack Herlick | |
| Print Name of Signatory, if different | |
| |
| |
| Trustee | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| Thomas Fogarty Seperate Property Trust Dated 2/6/87 |
| |
| Print Name of Investor | |
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| |
| /s/ Jonathon David Fogarty | |
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| Signature | |
| |
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| Jonathon David Fogarty | |
| |
| Print Name of Signatory, if different | |
| |
| |
| Trustee | |
| |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
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| Waitt corp Investments, LLC | |
| Print Name of Investor | |
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| /s/ Norm Waitt | |
| Signature | |
| |
| |
| Norm Waitt | |
| Print Name of Signatory, if different | |
| |
| |
| /s/ | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | |
| INVESTOR: | |
| |
| |
| WILLIAM C. WELDON | |
| |
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| /s/ William Weldon | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| WFI Co-Investments, LLC | |
| Print Name of Investor | |
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| /s/ Andrea Dawkins | |
| Signature | |
| |
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| Andrea Dawkins | |
| Print Name of Signatory, if different | |
| |
| |
| Andrea dawkins, manager | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| WS investment Company, LLC (2010A) | |
| Print Name of Investor | |
| |
| |
| /s/ Jim Hinson | |
| Signature | |
| |
| |
| Jim Hinson | |
| Print Name of Signatory, if different | |
| |
| |
| Director | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| West Investment Holdings, LLC | |
| Print Name of Investor | |
| |
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| /s/ Man D Harper | |
| Signature | |
| |
| |
| /s/ Man D Harper | |
| Print Name of Signatory, if different | |
| |
| |
| /s/ Manager | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| | |
| | |
| YOUNG FAMILY TRUST U/T/D 4/13/98 |
| | |
| | |
| By: | /s/ Phil Young | |
Name: Phil Young | |
| Title: Trustee | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| |
| |
| Blue Horizon ex Ventures II Limited | |
| Print Name of Investor | |
| For and on behalf of Mourant Directors One (Guernsey) Limited as Corporate Director |
| |
| |
| /s/ Antony Saunders Roxanne Williams | |
| Signature | |
| |
| |
| Antony Saunders and Roxanne Williams | |
| Print Name of Signatory, if different | |
| |
| |
| Authorised Signatories | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | |
| INVESTOR: | |
| |
| |
The Board of Trustees of the Leland
Stanford Junior University (PVF) | |
| Print Name of Investor | |
| |
| |
| /s/ Jiayan Zhao | |
| Signature | |
| |
| |
| Jiayan Zhao | |
Print Name of Signatory, if different
Authorized Signatory on behalf of The
Board of Trustees of the Leland
Stanford Junior University (PVF) | |
| Print Title, if applicable | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
| | | | | | | | |
| INVESTORS: | |
| | |
| | |
JANUS HENDERSON GLOBAL LIFE
SCIENCES FUND | |
| | |
By: Janus Henderson Investors US LLC,
its investment advisor | |
| | |
| | |
| By: | /s/ Daniel S. Lyons | |
| Name: | Daniel S. Lyons | |
| Title: | Authorized Signatory | |
| | |
| | |
JANUS HENDERSON CAPITAL FUNDS PLC ON
BEHALF OF ITS SERIES JANUS HENDERSON
GLOBAL LIFE SCIENCES FUND |
By: Janus Henderson Investors US LLC,
its investment advisor | |
| | |
| | |
| By: | /s/ Daniel S. Lyons | |
| Name: | Daniel S. Lyons | |
| Title: | Authorized Signatory | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTOR: | |
| | |
| | |
| LEONARD FELNER SPOUSAL LIFETIME ACCESS TRUST |
| | |
| | |
| By: | /s/ Shoshana Feiner | |
| Name: Shoshana Feiner | |
| Title Trustee | |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
The parties are signing this Amended and Restated Investors’ Rights Agreement as of the date stated in the introductory clause.
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| INVESTORS: | |
| | |
| LEFT VENTRICLE LLC | |
| | |
| | |
| By: | /s/ Andy Lam | |
| Name: Andy Lam | |
| Title: Member | |
| | |
| | |
| | |
| UPRISING INVESTORS FUND I, L.P. | |
| | |
| By: Uprising Investors (GP1), LLC | |
| Its: General Partner | |
| | |
| | |
| By: | /s/ Andy Lam | |
| Name: Andy Lam | |
| Title: Member | |
| | |
| | |
| | |
| UPRISING OPPORTUNITY FUND I, L.P. |
| | |
| By: Uprising Investors Opportunity (GP1), LLC |
| Its: General Partner | |
| | |
| | |
| By: | /s/ Andy Lam | |
| Name: Andy Lam | |
| Title: Member | |
| | |
| Address: c/o Uprising Fund, Spaces | |
95 Third St. 2nd Floor | |
| San Francisco, CA 94103 | |
| Tel: 415-891-7562 | |
| |
HeartFlow Holding, Inc. – Amended and Restated Investors’ Rights Agreement
EXHIBIT A
SCHEDULE OF INVESTORS
SCHEDULE 1
NOTICE AND WAIVER/ELECTION OF
RIGHT OF FIRST REFUSAL
I do hereby waive or exercise, as indicated below, my rights of first refusal under the Amended and Restated Investors’ Rights Agreement dated as of [date], 2023 (the “Agreement”):
1. Waiver of [___] days’ notice period in which to exercise right of first refusal: (please check only one)
( ) WAIVE in full, on behalf of all Holders, the [___]-day notice period provided to exercise my right of first refusal granted under the Agreement.
( ) DO NOT WAIVE the notice period described above.
2. Issuance and Sale of New Securities: (please check only one)
( ) WAIVE in full the right of first refusal granted under the Agreement with respect to the issuance of the New Securities.
( ) ELECT TO PARTICIPATE in $_____________ (please provide amount) in New Securities proposed to be issued by HeartFlow Holding, Inc., a Delaware corporation, representing LESS than my pro rata portion of the aggregate of $[_________] in New Securities being offered in the financing.
( ) ELECT TO PARTICIPATE in $_____________ in New Securities proposed to be issued by Heartflow Holding, Inc., a Delaware corporation, representing my FULL pro rata portion of the aggregate of $[_________] in New Securities being offered in the financing.
( ) ELECT TO PARTICIPATE in my full pro rata portion of the aggregate of $[_________] in New Securities being made available in the financing AND, to the extent available, the greater of (x) an additional $_____________ (please provide amount) or (y) my pro rata portion of any remaining investment amount available in the event other Significant Holders do not exercise their full rights of first refusal with respect to the $[_________] in New Securities being offered in the financing.
Date: _________________
_______________________________________
[Insert Investor’s name]
This is neither a commitment to purchase nor a commitment to issue the New Securities described above. Such issuance can only be made by way of definitive documentation related to such issuance. HeartFlow Holding, Inc. will supply you with such definitive documentation upon request or if you indicate that you would like to exercise your first offer rights in whole or in part.
HEARTFLOW HOLDING, INC.
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
1. Background and Purposes.
(a) Background. HeartFlow, Inc. adopted the HeartFlow, Inc. 2009 Equity Incentive Plan in 2009 (the “HeartFlow, Inc. Plan”). HeartFlow, Inc. completed a holding company structure, making HeartFlow Holding, Inc. the parent holding company of HeartFlow, Inc. (the “Reorganization”). In connection with the Reorganization, HeartFlow, Inc. assigned, and HeartFlow Holding, Inc. assumed, the HeartFlow, Inc. Plan and all outstanding Award Agreements. All outstanding Awards granted under the HeartFlow, Inc. Plan automatically converted into a right to receive shares of HeartFlow Holding, Inc., upon the same terms and conditions as otherwise set forth in the Award Agreement. The HeartFlow, Inc. Plan is amended and restated as set forth herein, effective as of March 1, 2021 to reflect the Reorganization and prior amendments which are currently effective.
(b) Purposes. The purposes of this Plan are: (i) to attract and retain the best available personnel for positions of substantial responsibility; (ii) to provide additional incentive to Employees, Directors and Consultants; and (iii) to promote the success of the Company’s business. The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock and Restricted Stock Units.
2. Definitions. As used herein, the following definitions will apply:
(a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan.
(b) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
(c) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, or Restricted Stock Units.
(d) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(e) “Board” means the Board of Directors of the Company.
(f) “Change in Control” means the occurrence of any of the following events:
(i) Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the Company, except that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the Board will not be considered a Change in Control; or
(ii) Change in Effective Control of the Company. If the Company has a class of securities registered pursuant to Section 12 of the Exchange Act, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii) Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this Section 2(f), persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the state of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.
(g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.
(h) “Committee” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board, or by the compensation committee of the Board, in accordance with Section 4 hereof.
(i) “Common Stock” means the common stock of the Company.
(j) “Company” means HeartFlow Holding, Inc., a Delaware corporation, or any successor thereto.
(k) “Consultant” means any individual, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.
(l) “Director” means a member of the Board.
(m) “Disability” means total and permanent disability as defined in Code Section 22(e)(3), provided that in the case of Awards other than Incentive Stock Options, the Administrator in its
discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.
(n) “Employee” means any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(p) “Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have higher or lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced or increased. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.
(q) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator after taking into consideration all factors which it deems appropriate, including, without limitation, the requirements of Code Section 409A and 422.
(r) “Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Code Section 422 and the regulations promulgated thereunder.
(s) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
(t) “Option” means a stock option granted pursuant to the Plan.
(u) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Code Section 424(e).
(v) “Participant” means the holder of an outstanding Award.
(w) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.
(x) “Plan” means the HeartFlow Holding, Inc. Amended and Restated 2009 Equity Incentive Plan as stated herein, as may be amended from time to time. The Plan was previously known as the HeartFlow, Inc. 2009 Equity Incentive Plan.
(y) “Restricted Stock” means Shares issued pursuant to an Award of Restricted Stock under Section 8 of the Plan, or issued pursuant to the early exercise of an Option.
(z) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(aa) “Service Provider” means an Employee, Director or Consultant.
(bb) “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.
(cc) “Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.
(dd) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter exist-ing, as defined in Code Section 424(f).
3. Stock Subject to the Plan.
(a) Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and sold under the Plan is 16,385,301 Shares. The Shares may be authorized but unissued, or reacquired Common Stock.
(b) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted Stock or Restricted Stock Units, is forfeited to or repurchased by the Company due to the failure to vest, the unpurchased Shares (or for Awards other than Options or Stock Appreciation Rights the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to Stock Appreciation Rights, only Shares actually issued pursuant to a Stock Appreciation Right will cease to be available under the Plan; all remaining Shares under Stock Appreciation Rights will remain available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock or Restricted Stock Units are repurchased by the Company or are forfeited to the Company due to the failure to vest, such Shares will become available for future grant under the Plan. Shares used to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided in Section 13, the maximum
number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Code Section 422 and the Treasury Regulations promulgated thereunder, any Shares that become available for issuance under the Plan pursuant to Section 3(b).
(c) Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan.
(ii) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which Committee will be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;
(vi) to institute and determine the terms and conditions of an Exchange Program;
(vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 18(c) of the Plan), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards and to extend the maximum term of an Option (subject to Section 6(d));
(x) to allow Participants to satisfy withholding tax obligations in a manner prescribed in Section 14;
(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that otherwise would be due to such Participant under an Award; and
(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards.
(d) Awards to Foreign Nationals and Employees Outside the United States. To the extent the Administrator deems it necessary, appropriate or desirable to comply with non-U.S. law or practices and to further the purposes of the Plan, the Administrator may (i) establish rules applicable to Awards granted to Participants who are foreign nationals, are employed outside the United States, or both, including rules that differ from those set forth in this Plan, and (ii) grant Awards to such Participants in accordance with those rules.
5. Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, and Restricted Stock Units may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. Stock Options.
(a) Grant of Options. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Options in such amounts as the Administrator, in its sole discretion, will determine.
(b) Option Agreement. Each Award of an Option will be evidenced by an Award Agreement that will specify the exercise price, the term of the Option, the number of Shares subject to the Option, the exercise restrictions, if any, applicable to the Option, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(c) Limitations. Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. Notwithstanding such designation, however, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(c), Incentive Stock Options will be taken into account in the order in which they were granted, the Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted, and calculation
will be performed in accordance with Code Section 422 and Treasury Regulations promulgated thereunder.
(d) Term of Option. The term of each Option will be stated in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(e) Option Exercise Price and Consideration.
(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option will be determined by the Administrator, but will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee who owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 6(e)(i), Options may be granted with a per Share exercise price of less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Code Section 424(a).
(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.
(iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note, to the extent permitted by Applicable Laws; (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company under cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan; (6) by net exercise; (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator will consider if acceptance of such consideration may be reasonably expected to benefit the Company.
(f) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable tax withholding). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within thirty (30) days of termination, or such longer period of time as is specified in the Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to the extent that the Option is vested on the date of termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within six (6) months of termination, or such longer period of time as is specified in the Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to the extent the Option is vested on the date of termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised within six (6) months following the Participant’s death, or within such longer period of time as is specified in the Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to the extent that the Option is vested on the date of death, by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to the Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so
exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
7. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
(b) Number of Shares. The Administrator will have complete discretion to determine the number of Shares subject to any Award of Stock Appreciation Rights.
(c) Exercise Price and Other Terms. The per Share exercise price for the Shares that will determine the amount of the payment to be received upon exercise of a Stock Appreciation Right as set forth in Section 7(f) will be determined by the Administrator and will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. Otherwise, the Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan.
(d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) relating to the maximum term and Section 6(f) relating to exercise also will apply to Stock Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
8. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the
Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.
(c) Transferability. Except as provided in this Section 8 or as the Administrator determines, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction or at such other time as the Administrator may determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g) Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares, unless the Administrator provides otherwise. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(h) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
9. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units, it will advise the Participant in an Award Agreement of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units.
(b) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment or service), or any other basis determined by the Administrator in its discretion.
(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding the foregoing, at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.
(d) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) determined by the Administrator and set forth in the
Award Agreement. The Administrator, in its sole discretion, may settle earned Restricted Stock Units in cash, Shares, or a combination of both.
(e) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.
10. Compliance With Code Section 409A. Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A. Notwithstanding the foregoing, neither the Company nor the Administrator will have any liability to any Participant for such tax or penalty.
11. Leaves of Absence/Transfer Between Locations. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
12. Limited Transferability of Awards.
(a) Unless determined otherwise by the Administrator, Awards may not be sold, pledged, assigned, hypothecated, or otherwise transferred in any manner other than by will or by the laws of descent and distribution, and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award may only be transferred (i) by will, (ii) by the laws of descent and distribution, or (iii) as permitted by Rule 701 of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act, an Option, or prior to exercise, the Shares subject to the Option, may not be pledged, hypothecated or otherwise transferred or disposed of, in any manner, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than to (i) persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders, or (ii) to an executor or guardian of the Participant upon the death or disability of the Participant. Notwithstanding the foregoing sentence, the Administrator, in its sole discretion, may determine to permit transfers to the Company or in connection with a Change in Control or other acquisition transactions involving the Company to the extent permitted by Rule 12h-1(f).
13. Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award; provided, however, that the Administrator will make such adjustments to an Award required by Section 25102(o) of the California Corporations Code to the extent the Company is relying upon the exemption afforded thereby with respect to the Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
(c) Merger or Change in Control. In the event of a merger or Change in Control, each outstanding Award will be treated as the Administrator determines without a Participant’s consent, including, without limitation, that (i) Awards will be assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; (ii) upon written notice to a Participant, that the Participant’s Awards will terminate upon or immediately prior to the consummation of such merger or Change in Control (subject to the provisions of the preceding paragraph); (iii) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such merger or Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of such merger of Change in Control; (iv) (A) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under this Section 13(c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
In the event that the successor corporation does not assume or substitute for the Award (or portion thereof), the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a merger or Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.
For the purposes of this Section 13(c), an Award will be considered assumed if, following the merger or Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, for each Share subject to such Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or Change in Control.
Notwithstanding anything in this Section 13(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.
Notwithstanding anything in this Section 13(c) to the contrary, if a payment under an Award Agreement is subject to Code Section 409A and if the change in control definition contained in the Award Agreement does not comply with the definition of “change of control” for purposes of a distribution under Code Section 409A, then any payment of an amount that is otherwise accelerated under this Section will be delayed until the earliest time that such payment would be permissible under Code Section 409A without triggering any penalties applicable under Code Section 409A.
14. Tax Withholding.
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the statutory amount required to be withheld, provided the delivery of such Shares will not result in any adverse accounting consequences, as the Administrator determines in its sole discretion, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.
15. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
16. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.
17. Term of Plan. Subject to Section 21 of the Plan, the Plan will become effective upon its adoption by the Board. Unless sooner terminated under Section 18, it will continue in effect for a term of ten (10) years from the later of (a) the effective date of the Plan, or (b) the earlier of the most recent Board or stockholder approval of an increase in the number of Shares reserved for issuance under the Plan.
18. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
19. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
20. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.
21. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.
22. Information to Participants. Beginning on the earlier of (i) the date that the aggregate number of Participants under this Plan is five hundred (500) or more and the Company is relying on the exemption provided by Rule 12h-1(f)(1) under the Exchange Act and (ii) the date that the Company is required to deliver information to Participants pursuant to Rule 701 under the Securities Act, and until such time as the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, is no longer relying on the exemption provided by Rule 12h-1(f)(1) under the Exchange Act or is no longer required to deliver information to Participants pursuant to Rule 701 under the Securities Act, the Company shall provide to each Participant the information described in paragraphs (e)(3), (4), and (5) of Rule 701 under the Securities Act not less frequently than every six (6) months with the financial statements being not more than 180 days old and with such information provided either by physical or electronic delivery to the Participants or by written notice to the Participants of the availability of the information on an Internet site that may be password-protected and of any password needed to access the information. The Company may request that Participants agree to keep the information to be provided pursuant to this section confidential. If a Participant does not agree to keep the information to be provided pursuant to this section confidential, then the Company will not be required to provide the information unless otherwise required pursuant to Rule 12h-1(f)(1) under the Exchange Act or Rule 701 of the Securities Act.
HEARTFLOW HOLDING, INC.
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Amended and Restated 2009 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Stock Option Agreement (the “Option Agreement”).
I. NOTICE OF STOCK OPTION GRANT
Name: «Name»
The undersigned Participant has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
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| Date of Grant: | «Grant_Date» |
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| Vesting Commencement Date: | «Vesting_Commencement_Date» |
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| Exercise Price per Share: | «Price_Per_Share» |
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| Total Number of Shares Granted: | «Number_of_Shares» |
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| Total Exercise Price : | «Total_Purchase_Price» |
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| Type of Option: | «Type_of_Option» |
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Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the following vesting schedule:
«Vesting_Schedule»
Termination Period:
This Option shall be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option shall be exercisable for twelve (12) months after Participant ceases to be a Service Provider. Notwithstanding the foregoing sentence, in no event may this Option be exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 13(c) of the Plan.
II. AGREEMENT
1. Grant of Option. The Administrator of the Company hereby grants to the Participant named in the Notice of Stock Option Grant in Part I of this Agreement (“Participant”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Stock Option Grant, at the exercise price per Share set forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 18(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Stock Option Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event shall the Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Stock Option Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable tax withholding.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Participant on the date on which the Option is exercised with respect to such Shares.
3. Participant’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Participant shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Participant hereby agrees that Participant shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Participant (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Participant shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Participant agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Participant:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option.
(a) This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.
(b) Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of Options under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer this Option or, prior to exercise, the Shares subject to this Option, in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act of 1933, as amended) through gifts or domestic relations orders, or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the Options and, prior to exercise, the Shares subject to this Option, may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.
9. Tax Obligations.
(a) Tax Withholding. Participant agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Participant) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(c) Code Section 409A. Under Code Section 409A, an Option that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “discount option”) may be considered “deferred compensation.” An Option that is a “discount option” may result in (i) income recognition by Participant prior to the exercise of the Option, (ii) an additional twenty percent (20%)
federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty and interest tax to the Participant. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. This Agreement is governed by the internal substantive laws but not the choice of law rules of California.
11. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Participant has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Participant further agrees to notify the Company upon any change in the residence address indicated below.
[Signature Page Follows]
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| PARTICIPANT | | HEARTFLOW HOLDING, INC. |
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EXHIBIT A
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
HeartFlow Holding, Inc.
1700 Seaport Blvd
Suite 400
Redwood City, CA 94063
Attention: Corporate Secretary
1. Exercise of Option. Effective as of today, ________________, ____, the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase ________________ shares of the Common Stock (the “Shares”) of HeartFlow Holding, Inc. (the “Company”) under and pursuant to the 2009 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated «Grant_Date» (the “Option Agreement”).
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to an Award, notwithstanding the exercise of the Option. The Shares shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Company’s Right of First Refusal. Before any Shares held by Participant or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 5 (the “Right of First Refusal”).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the
Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section 5 shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 5, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred and twenty (120) days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section 5 shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section 5 notwithstanding, the transfer of any or all of the Shares during the Participant’s lifetime or on the Participant’s death by will or intestacy to the Participant’s immediate family or a trust for the benefit of the Participant’s immediate family shall be exempt from the provisions of this Section 5. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section 5, and there shall be no further transfer of such Shares except in accordance with the terms of this Section 5.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.
6. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents
that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF TIME FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER PRIOR TO THE EXPIRATION OF SUCH PERIOD WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.
(b) Stop-Transfer Notices. Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
10. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of California. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant.
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| Submitted by: | | Accepted by: |
| PARTICIPANT | | HEARTFLOW HOLDING, INC. |
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| Address: | | Address: |
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
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| PARTICIPANT | : | «NAME» |
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| COMPANY | : | HEARTFLOW HOLDING, INC. |
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| SECURITY | : | COMMON STOCK |
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In connection with the purchase of the above-listed Securities, the undersigned Participant represents to the Company the following:
(a) Participant is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Participant is acquiring these Securities for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Participant acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. In this connection, Participant understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Participant’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Participant further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Securities. Participant understands that the certificate evidencing the Securities shall be imprinted with any legend required under applicable state securities laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise shall be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including in the case of affiliates (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three (3) month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction”, transactions directly with a “market maker” or “riskless principal transactions” (as those terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and (iii) in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.
(d) Participant further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption shall be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 shall have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption shall be available in such event.
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HEARTFLOW HOLDING, INC.
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Amended and Restated 2009 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Restricted Stock Purchase Agreement (the “Agreement”).
I. NOTICE OF GRANT OF RESTRICTED STOCK
«Participant»
The undersigned Participant has been granted a right to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Agreement, as follows:
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| Date of Grant: | «Date_of_Grant» |
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| Vesting Commencement Date: | «Vesting_Commencement_Date» |
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| Purchase Price per Share: | «Price_Per_Share» |
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| Repurchase Price per Share: | «Repurchase_Price» |
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| Total Number of Shares Granted: | «Shares» |
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| Total Purchase Price: | «Total_Purchase_Price» |
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| Expiration Date: | «Expiration_Date» |
Vesting Schedule:
Subject to any accelerated vesting provisions in the Plan, «Vesting_Schedule»
Any of the Shares which have not yet been released from the Company’s Repurchase Option are referred to herein as “Unreleased Shares.” The Shares which have been released from the Company’s Repurchase Option shall be delivered to Participant at Participant’s request (see Section 11 of Part II of this Agreement).
YOU MUST EXERCISE THIS RESTRICTED STOCK AWARD BEFORE THE EXPIRATION DATE OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
II. AGREEMENT
1. Sale of Stock. The Administrator of the Company hereby agrees to sell to the Participant named in the Notice of Grant of Restricted Stock in Part I of this Agreement (“Participant”), and Participant hereby agrees to purchase the number of Shares set forth in the Notice of Grant of Restricted Stock, at the Purchase Price per Share set forth in the Notice of Grant of Restricted Stock (the “Purchase Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 18(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Agreement, the terms and conditions of the Plan shall prevail.
2. Payment of Purchase Price. Participant herewith delivers to the Company the aggregate Purchase Price for the Shares by cash or check, together with any and all withholding taxes due in connection with the purchase of the Shares.
3. Participant’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Restricted Stock Award is exercised, Participant shall, if required by the Company, concurrently with the exercise of all or any portion of this Restricted Stock Award, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit A.
4. Lock-Up Period. Participant hereby agrees that Participant shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Participant (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Participant shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction
on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Participant agrees that any transferee of the Restricted Stock Award or shares acquired pursuant to the Restricted Stock Award shall be bound by this Section 4.
5. Non-Transferability of Restricted Stock. This Restricted Stock Award may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.
6. Tax Consequences. Participant has reviewed with Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of the transactions contemplated by this Agreement. Participant understands that Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the purchase price for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, “restriction” includes the right of the Company to buy back the Shares pursuant to the Repurchase Option. Participant understands that Participant may elect to be taxed at the time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code with the IRS within thirty (30) days from the date of purchase. The form for making this election is attached as Exhibit B-3 hereto.
THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PARTICIPANT’S BEHALF.
7. Tax Withholding. Pursuant to such procedures as the Administrator may specify from time to time, the Company shall withhold the minimum amount required to be withheld for the payment of income, employment and other taxes which the Company determines must be withheld (the “Withholding Taxes”) with respect to Shares released from the Company’s Repurchase Option by, in the Administrator’s discretion: (i) withholding otherwise deliverable Shares upon release from the Company’s Repurchase Option having a Fair Market Value equal the amount of such Withholding Taxes, (ii) withholding the amount of such Withholding Taxes from Participant’s paycheck(s), (iii) requiring Participant to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Participant) for the satisfaction of all Withholding Taxes, or (iv) a combination of the foregoing. The Company shall not retain fractional Shares to satisfy any portion of the Withholding Taxes. Accordingly, if any withholding is done through the withholding of Shares, Participant shall pay to the Company an amount in cash sufficient to satisfy the remaining Withholding Taxes due and payable as a result
of the Company not retaining fractional Shares. Should the Company be unable to procure such cash amounts from Participant, Participant agrees and acknowledges that Participant is giving the Company permission to withhold from Participant’s paycheck(s) an amount equal to the remaining Withholding Taxes due and payable as a result of the Company not retaining fractional Shares. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of purchase.
8. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE RELEASE OF SHARES FROM THE REPURCHASE OPTION OF THE COMPANY PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
9. Repurchase Option.
(a) In the event Participant’s continuous status as a Service Provider terminates for any or no reason (including death or Disability), the Company shall, upon the date of such termination (as reasonably fixed and determined by the Company), have an irrevocable, exclusive option for a period of ninety (90) days from such date to repurchase up to that number of Shares which constitute the Unreleased Shares (as defined in Part I of this Agreement) at the Repurchase Price per Share set forth in the Notice of Grant of Restricted Stock (the “Repurchse Price”) (the “Repurchase Option”).
(b) The Repurchase Option shall be exercised by the Company by delivering written notice to Participant or Participant’s executor (with a copy to the Escrow Holder (as defined in Section 11)) AND, at the Company’s option, (i) by delivering to Participant or Participant’s executor a check in the amount of the aggregate Repurchase Price, or (ii) by the Company canceling an amount of Participant’s indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals such aggregate Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price in any of the ways described above, the Company shall become the legal and beneficial owner of the Unreleased Shares being repurchased and all rights and interests therein or relating thereto, and the Company
shall have the right to retain and transfer to its own name the number of Unreleased Shares being repurchased by the Company.
(c) Whenever the Company shall have the right to repurchase the Unreleased Shares hereunder, the Company may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company’s Repurchase Option to purchase all or a part of the Unreleased Shares. If the Fair Market Value of the Unreleased Shares to be repurchased on the date of such designation or assignment (the “Repurchase FMV”) exceeds the aggregate Repurchase Price of the Unreleased Shares, then each such designee or assignee shall pay the Company cash equal to the difference between the Repurchase FMV and the aggregate Repurchase Price of Unreleased Shares to be purchased.
(d) If the Company or its assignee does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following Participant’s termination as a Service Provider, the Repurchase Option shall terminate.
10. Restriction on Transfer. Except for the escrow described in Section 11 or transfer of the Shares to the Company or its assignees contemplated by this Agreement, none of the Shares or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of in any way until the release of such Shares from the Company’s Repurchase Option in accordance with the provisions of this Agreement, other than by will or the laws of descent and distribution. Any distribution or delivery to be made to Participant under this Agreement shall, if Participant is then deceased, be made to Participant’s designated beneficiary, or if no beneficiary survives Participant, to the administrator or executor of Participant’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.
11. Escrow of Shares.
(a) To ensure the availability for delivery of Participant’s Unreleased Shares upon exercise of the Repurchase Option by the Company, Participant will, upon execution of this Agreement, deliver and deposit with an escrow holder designated by the Company (the “Escrow Holder”) the share certificates representing the Unreleased Shares, together with the Assignment Separate from Certificate (the “Stock Assignment”) duly endorsed in blank, attached hereto as Exhibit B-1. The Unreleased Shares and Stock Assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company and Participant attached as Exhibit B-2 hereto, until such time as the Company’s Repurchase Option expires.
(b) The Escrow Holder shall not be liable for any act it may do or omit to do with respect to holding the Unreleased Shares in escrow and while acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises its Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice of such option exercise from the
proposed transferee, shall take all steps necessary to accomplish such transfer. Participant hereby appoints the Escrow Holder with full power of substitution, as Participant’s true and lawful attorney-in-fact with irrevocable power and authority in the name and on behalf of Participant to take any action and execute all documents and instruments, including, without limitation, stock powers which may be necessary to transfer the certificate or certificates evidencing such Unreleased Shares to the Company upon such termination.
(d) When the Repurchase Option has been exercised or expires unexercised or a portion of the Shares has been released from such Repurchase Option, upon Participant’s request the Escrow Holder shall promptly cause a new certificate to be issued for such released Shares and shall deliver such certificate to the Company or Participant, as the case may be.
(e) Subject to the terms hereof, Participant shall have all the rights of a shareholder with respect to such Shares while they are held in escrow, including without limitation, the right to vote the Shares and receive any cash dividends declared thereon.
(f) In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, share combination, or other change in the corporate structure of the Company affecting the Common Stock, the Shares shall be increased, reduced or otherwise changed, and by virtue of any such change Participant shall in his or her capacity as owner of Unreleased Shares that have been awarded to him or her be entitled to new or additional or different shares of stock, cash or securities (other than rights or warrants to purchase securities); such new or additional or different shares, cash or securities shall thereupon be considered to be “Unreleased Shares” and shall be subject to all of the conditions and restrictions which were applicable to the Unreleased Shares pursuant to this Agreement. If Participant receives rights or warrants with respect to any Unreleased Shares, such rights or warrants may be held or exercised by Participant, provided that until such exercise any such rights or warrants and after such exercise any shares or other securities acquired by the exercise of such rights or warrants shall be considered to be Unreleased Shares and shall be subject to all of the conditions and restrictions which were applicable to the Unreleased Shares pursuant to this Agreement. The Administrator in its absolute discretion at any time may accelerate the vesting of all or any portion of such new or additional shares of stock, cash or securities, rights or warrants to purchase securities or shares or other securities acquired by the exercise of such rights or warrants.
12. Company’s Right of First Refusal. Subject to Section 10, before any Shares held by Participant or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 12 (the “Right of First Refusal”).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (“Right of First Refusal Price”) for the Shares purchased by the Company or its assignee(s) under this Section 12 shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board in good faith.
(d) Payment. Payment of the Right of First Refusal Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 12, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred and twenty (120) days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section 12 shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section 12 notwithstanding, the transfer of any or all of the Shares during Participant’s lifetime or on Participant’s death by will or intestacy to Participant’s immediate family or a trust for the benefit of Participant’s immediate family shall be exempt from the provisions of this Section 12. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Agreement, including but not limited to this Section 12 and Section 9, and there shall be no further transfer of such Shares except in accordance with the terms of this Section 12.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company
to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.
13. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL, AND A REPURCHASE OPTION HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT OF FIRST REFUSAL AND REPURCHASE OPTION ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF TIME FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER PRIOR TO THE EXPIRATION OF SUCH PERIOD WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.
(b) Stop-Transfer Notices. Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
14. Notices. Any notice, demand or request required or permitted to be given by either the Company or Participant pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at the addresses of the parties set forth at the end of this Agreement or such other address as a party may request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company’s address with a copy to the other party not sending the notice.
15. No Waiver. Either party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party from thereafter enforcing each and every other provision of this Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances.
16. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. The rights and obligations of Participant under this Agreement may only be assigned with the prior written consent of the Company.
17. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
18. Additional Documents. Participant agrees upon request to execute any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement.
19. Governing Law; Severability. This Agreement is governed by the internal substantive laws, but not the choice of law rules, of California. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect.
20. Entire Agreement. The Plan is incorporated herein by reference. The Plan and this Agreement (including the exhibits referenced herein) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter
hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant.
Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Participant has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below.
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EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PARTICIPANT : «PARTICIPANT»
COMPANY : HEARTFLOW HOLDING, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned Participant represents to the Company the following:
(a) Participant is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Participant is acquiring these Securities for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Participant acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. In this connection, Participant understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Participant’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Participant further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Securities. Participant understands that the certificate evidencing the Securities shall be imprinted with any legend required under applicable state securities laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Restricted Stock Award to Participant, the exercise shall be exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including in the case of affiliates (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three (3) month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction”, transactions directly with a “market maker” or “riskless principal transactions” (as those terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Restricted Stock Award, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and (iii) in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.
(d) Participant further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption shall be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 shall have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption shall be available in such event.
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EXHIBIT B-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign and transfer unto HeartFlow Holding, Inc. _____________ shares of the Common Stock of HeartFlow Holding, Inc. standing in my name on the books of said corporation represented by Certificate No. _____ herewith and do hereby irrevocably constitute and appoint __________________________ to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between HeartFlow Holding, Inc. and the undersigned dated ______________, _____ (the “Agreement”).
Dated: _______________,____ Signature:___________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its “repurchase option,” as set forth in the Agreement, without requiring additional signatures on the part of the Participant.
EXHIBIT B-2
JOINT ESCROW INSTRUCTIONS
_________________, ____
Corporate Secretary
HeartFlow Holding, Inc.
1700 Seaport Blvd
Suite 400
Redwood City, CA 94063
Dear _________________:
As Escrow Agent for both HeartFlow Holding, Inc.(the “Company”), and the undersigned purchaser of stock of the Company (the “Participant”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (the “Agreement”) between the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the “Company”) exercises the Company’s repurchase option set forth in the Agreement, the Company shall give to Participant and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Participant and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the stock assignments, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company’s repurchase option.
3. Participant irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Participant does hereby irrevocably constitute and appoint you as Participant’s attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Participant shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.
4. Upon written request of the Participant, but no more than once per calendar year, unless the Company’s repurchase option has been exercised, you shall deliver to Participant a certificate or certificates representing so many shares of stock as are not then subject to the Company’s repurchase option. Within one hundred and twenty (120) days after cessation of Participant’s continuous employment by or services to the Company, or any parent or subsidiary of the Company, you shall deliver to Participant a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company’s repurchase option.
5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Participant, you shall deliver all of the same to Participant and shall be discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Participant while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten (10) days advance written notice to each of the other parties hereto.
16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by the internal substantive laws, but not the choice of law rules, of California.
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| PARTICIPANT | | HEARTFLOW HOLDING, INC. |
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| Dated: | | |
EXHIBIT B-3
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income or alternative minimum taxable income, as the case may be, for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below.
1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:
NAME: ________________________________ SPOUSE: __________________________
ADDRESS: ________________________________
________________________________
TAXPAYER IDENTIFICATION NO.: _____________________ TAXABLE YEAR: ________
2. The property with respect to which the election is made is described as follows: __________ shares (the “Shares”) of the Common Stock of HeartFlow Holding, Inc. (the “Company”).
3. The date on which the property was transferred is:___________________ ,______.
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.
5. The Fair Market Value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms shall never lapse, of such property is: $_________________.
6. The amount (if any) paid for such property is: $_________________.
The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.
Dated: ______________________, _____ __________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ______________________, _____ __________________________________________
Spouse of Taxpayer
AMENDMENT TO THE HEARTFLOW HOLDING, INC.
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
This AMENDMENT is hereby made by HeartFlow Holding, Inc., a Delaware corporation (the “Company”) to the Company’s Amended and Restated 2009 Equity Incentive Plan (the “Plan”).
WHEREAS, on March 1, 2021, HeartFlow, Inc. became a wholly-owned subsidiary of the Company, and the Company assumed all of HeartFlow, Inc.'s rights and obligations;
WHEREAS, on March 1, 2021, the Company, as a successor-in-interest to HeartFlow, Inc., assumed the Predecessor Plan (including all option awards granted and outstanding thereunder) as part of the Plan;
WHEREAS, the Company desires to increase the number of shares of common stock available for issuance under the Plan and on May 24, 2025, the Board of Directors of the Company (the “Board”) approved an additional 1,000,000 shares of common stock available for issuance under Plan.
NOW, THEREFORE, the Company agrees as follows:
1. Amendment. Section 3(a) of the Plan shall be deleted and replaced in its entirety as follows:
“(a) Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be subject to Awards and sold under the Plan is 31,787,082 Shares, which includes 21,018,730 Shares from the Plan and 10,768,352 Shares from the HeartFlow, Inc. Plan that was assumed by the Company of March 1, 2021. The Shares may be authorized but unissued, or reacquired Common Stock.”
2. Board and Stockholder Approval. The foregoing amendment was approved and adopted by the Board, effective as of May 24, 2025, and by the holders of the requisite number of shares of capital stock of the Company, effective as of May 28, 2025.
3. No Further Changes. Except as noted in this Amendment, all other terms of the Plan shall remain in full force and effect.
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| HeartFlow Holding, Inc. |
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| By: | /s/ John Farquhar |
| Name: John Farquhar |
| Title: Chief Executive Officer |
HEARTFLOW, INC.
2025 PERFORMANCE INCENTIVE PLAN
1. PURPOSE OF PLAN
The purpose of this Heartflow, Inc. 2025 Performance Incentive Plan (this “Plan”) of Heartflow, Inc., a Delaware corporation (the “Corporation”), is to promote the success of the Corporation by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons and to enhance the alignment of the interests of the selected participants with the interests of the Corporation’s stockholders.
2. ELIGIBILITY
The Administrator (as such term is defined in Section 3.1) may grant awards under this Plan only to those persons that the Administrator determines to be Eligible Persons. An “Eligible Person” is any person who is either: (a) an officer (whether or not a director) or employee of the Corporation or one of its Subsidiaries; (b) a director of the Corporation or one of its Subsidiaries; or (c) an individual consultant or advisor who renders or has rendered bona fide services (other than services in connection with the offering or sale of securities of the Corporation or one of its Subsidiaries in a capital-raising transaction or as a market maker or promoter of securities of the Corporation or one of its Subsidiaries) to the Corporation or one of its Subsidiaries and who is selected to participate in this Plan by the Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this Plan only if such participation would not adversely affect either the Corporation’s eligibility to use Form S-8 to register under the Securities Act of 1933, as amended (the “Securities Act”), the offering and sale of shares issuable under this Plan by the Corporation or the Corporation’s compliance with any other applicable laws. An Eligible Person who has been granted an award (a “participant”) may, if otherwise eligible, be granted additional awards if the Administrator shall so determine. As used herein, “Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation; and “Board” means the Board of Directors of the Corporation.
3. PLAN ADMINISTRATION
3.1 The Administrator. This Plan shall be administered by and all awards under this Plan shall be authorized by the Administrator. The “Administrator” means the Board or one or more committees (or subcommittees, as the case may be) appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan. Any such committee shall be comprised solely of one or more directors or such number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee so constituted. The Board or a committee comprised solely of directors may also delegate, to the extent permitted by
applicable law, to one or more officers of the Corporation, its authority under this Plan. The Board or another committee (within its delegated authority) may delegate different levels of authority to different committees or persons with administrative and grant authority under this Plan. Unless otherwise provided in the Bylaws of the Corporation or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute action by the acting Administrator.
3.2 Powers of the Administrator. Subject to the express provisions of this Plan, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within any express limits on the authority delegated to that committee or person(s)), including, without limitation, the authority to:
(a) determine eligibility and, from among those persons determined to be eligible, determine the particular Eligible Persons who will receive an award under this Plan;
(b) grant awards to Eligible Persons, determine the price (if any) at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons (in the case of securities-based awards), determine the other specific terms and conditions of awards consistent with the express limits of this Plan, establish the installment(s) (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance-based exercisability or vesting requirements, determine the circumstances in which any performance-based goals (or the applicable measure of performance) will be adjusted and the nature and impact of any such adjustment, determine the extent (if any) to which any applicable exercise and vesting requirements have been satisfied, establish the events (if any) on which exercisability or vesting may accelerate (which may include, without limitation, retirement and other specified terminations of employment or services, or other circumstances), and establish the events (if any) of termination, expiration or reversion of such awards;
(c) approve the forms of any award agreements (which need not be identical either as to type of award or among participants);
(d) construe and interpret this Plan and any agreements defining the rights and obligations of the Corporation, its Subsidiaries, and participants under this Plan, make any and all determinations under this Plan and any such
agreements, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the awards granted under this Plan;
(e) cancel, modify, or waive the Corporation’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent under Section 8.6.5;
(f) accelerate, waive or extend the vesting or exercisability, or modify or extend the term of, any or all such outstanding awards (in the case of options or stock appreciation rights, within the maximum term of such awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a retirement or other termination of employment or services, or other circumstances) subject to any required consent under Section 8.6.5;
(g) adjust the number of shares of Common Stock subject to any award, adjust the price of any or all outstanding awards or otherwise waive or change previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to Sections 4 and 8.6;
(h) determine the date of grant of an award, which may be a designated date after but not before the date of the Administrator’s action to approve the award (unless otherwise designated by the Administrator, the date of grant of an award shall be the date upon which the Administrator took the action approving the award);
(i) determine whether, and the extent to which, adjustments are required pursuant to Section 7.1 hereof and take any other actions contemplated by Section 7 in connection with the occurrence of an event of the type described in Section 7;
(j) acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash, stock of equivalent value, or other consideration; and
(k) determine the fair market value of the Common Stock or awards under this Plan from time to time and/or the manner in which such value will be determined.
3.3 Availability of Repricing. Notwithstanding anything to the contrary in Section 3.2 and in accordance with Section 7.1, the Administrator may (1) amend an outstanding stock option or SAR to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or SAR in exchange
for an option or SAR with an exercise or base price that is less than the exercise or base price of the original award.
3.4 Binding Determinations. Any determination or other action taken by, or inaction of, the Corporation, any Subsidiary, or the Administrator relating or pursuant to this Plan (or any award made under this Plan) and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board nor any other Administrator, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any award made under this Plan), and all such persons shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time. Neither the Board nor any other Administrator, nor any member thereof or person acting at the direction thereof, nor the Corporation or any of its Subsidiaries, shall be liable for any damages of a participant should an option intended as an ISO (as defined below) fail to meet the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to ISOs, should any other award(s) fail to qualify for any intended tax treatment, should any award grant or other action with respect thereto not satisfy Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or otherwise for any tax or other liability imposed on a participant with respect to an award.
3.5 Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of experts, including employees and professional advisors to the Corporation. No director, officer or agent of the Corporation or any of its Subsidiaries shall be liable for any such action or determination taken or made or omitted in good faith.
3.6 Delegation. The Administrator may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Corporation or any of its Subsidiaries or to third parties.
4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS
4.1 Shares Available. Subject to the provisions of Section 7.1, the capital stock that may be delivered under this Plan shall be shares of the Corporation’s authorized but unissued Common Stock and any shares of its Common Stock held as treasury shares. For purposes of this Plan, “Common Stock” shall mean the common stock of the Corporation and such other securities or property as may become the subject of awards under this Plan, or may become subject to such awards, pursuant to an adjustment made under Section 7.1.
4.2 Aggregate Share Limit. The maximum number of shares of Common Stock that may be delivered pursuant to awards granted to Eligible Persons under this Plan (the “Share Limit”) is equal to the sum of the following:
(1) an aggregate number of shares of Common Stock equal to ten percent (10%) of the total number of fully diluted shares of Common Stock outstanding (including, without limitation, any outstanding warrants) as of the date of commencement of trading of the shares of Common Stock on the Exchange (the “Initial Trading Date”), plus
(2) the number of shares of Common Stock available for additional award grant purposes under the Corporation’s Amended and Restated 2009 Equity Incentive Plan (the “2009 Plan”) as of the Initial Trading Date and determined immediately prior to the termination of the authority to grant new awards under the 2009 Plan as of the Initial Trading Date, plus
(3) the number of any shares subject to stock options granted under the 2009 Plan and outstanding on the Initial Trading Date which expire, or for any reason are cancelled or terminated, after the Initial Trading Date without being exercised (which, for purposes of clarity, shall become available for award grants under this Plan on a one-for-one basis).
In addition, the Share Limit will automatically increase if, on the last day of the Corporation’s fiscal year, the Share Limit has not increased during such fiscal year pursuant to any Board-approved increase(s) by an aggregate amount equal to or greater than five percent (5%) of the total number of shares of Common Stock outstanding on the first day of such fiscal year (the “Minimum Annual Increase”), then in an amount equal to the difference between the Minimum Annual Increase and the aggregate amount in which the Share Limit increased pursuant to any Board-approved increase(s) during such fiscal year, effective as of the last day of such fiscal year. Notwithstanding the foregoing, the Board may act prior to the last day of such fiscal year to provide that an increase in the Share Limit will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence. As required under Treasury Regulation Section 1.422-2(b)(3)(i), in no event will the number of shares of Common Stock that may be delivered pursuant to incentive stock options granted under this Plan exceed the Share Limit.
4.3 Additional Share Limits. The following limits also apply with respect to awards granted under this Plan. These limits are in addition to, not in lieu of, the aggregate Share Limit in Section 4.2.
(a) The maximum number of shares of Common Stock that may be delivered pursuant to options qualified as incentive stock options granted under this Plan is 2,000,000 shares.
(b) Awards that are granted under this Plan during any one calendar year to any person who, on the grant date of the award, is a non-employee director are subject to the limits of this Section 4.3(b). The maximum number of shares of Common Stock subject to those awards that are granted under this Plan during any one calendar year to any person who, on the grant date of the award, is a non-employee director shall not exceed the number of shares that produce a grant date fair value for the award that, when combined with (i) the grant date fair value of any other awards granted under this Plan during that same calendar year to that individual in his or her capacity as a non-employee director and (ii) the dollar amount of all other cash compensation payable by the Corporation to such non-employee director for his or her services in such capacity during that same calendar year (regardless of whether deferred and excluding any interest or earnings on any portion of such amount that may be deferred), is $750,000; provided that this limit is $1,000,000 as to any new non-employee director for the calendar year in which the non-employee director is first elected or appointed to the Board. For purposes of this Section 4.3(b), a “non-employee director” is an individual who, on the grant date of the award, is a member of the Board who is not then an officer or employee of the Corporation or one of its Subsidiaries. For purposes of this Section 4.3(b), “grant date fair value” means the value of the award as of the date of grant of the award and as determined using the equity award valuation principles applied in the Corporation’s financial reporting. The limits of this Section 4.3(b) do not apply to, and shall be determined without taking into account, any award granted to an individual who, on the grant date of the award, is an officer or employee of the Corporation or one of its Subsidiaries. The limits of this Section 4.3(b) apply on an individual basis and not on an aggregate basis to all non-employee directors as a group.
4.4 Share-Limit Counting Rules. The Share Limit shall be subject to the following provisions of this Section 4.4:
(a) Shares that are subject to or underlie awards granted under this Plan which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.
(b) Except as provided below, to the extent that shares of Common Stock are delivered pursuant to the exercise of a stock appreciation right granted under this Plan, the number of underlying shares which are actually issued in payment of the award shall be counted against the Share Limit. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised in full at a time when the payment due to the participant is
15,000 shares, 15,000 shares shall be counted against the Share Limit with respect to such exercise and the 85,000 shares not issued shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.)
(c) Shares that are exchanged by a participant or withheld by the Corporation as full or partial payment in connection with any stock option or stock appreciation right granted under this Plan, as well as any shares exchanged by a participant or withheld by the Corporation or one of its Subsidiaries to satisfy the tax withholding obligations related to any stock option or stock appreciation right granted under this Plan, shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan. Shares that are exchanged by a participant or withheld by the Corporation as full or partial payment in connection with any award granted under this Plan shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.
(d) In addition, shares that are exchanged by a participant or withheld by the Corporation after the Initial Trading Date as full or partial payment in connection with any award granted under the 2009 Plan, as well as any shares exchanged by a participant or withheld by the Corporation or one of its Subsidiaries after the Initial Trading Date to satisfy the tax withholding obligations related to any award granted under the 2009 Plan, shall be available for new awards under this Plan.
(e) To the extent that an award granted under this Plan is settled in cash or a form other than shares of Common Stock, the shares that would have been delivered had there been no such cash or other settlement shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.
(f) In the event that shares of Common Stock are delivered in respect of a dividend equivalent right granted under this Plan, the number of shares delivered with respect to the award shall be counted against the Share Limit. (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Corporation pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the Share Limit). Except as otherwise provided by the Administrator, shares delivered in respect of dividend equivalent rights shall not count against any individual award limit under this Plan other than the aggregate Share Limit.
(g) The Corporation may not increase the Share Limit by repurchasing shares of Common Stock on the market (by using cash received through the exercise of stock options or otherwise).
Refer to Section 8.10 for application of the share limits of this Plan, including the limits in Sections 4.2 and 4.3, with respect to assumed awards. Each of the numerical limits and references in Sections 4.2 and 4.3, and in this Section 4.4, is subject to adjustment as contemplated by Sections 7 and 8.10.
4.5 No Fractional Shares; Minimum Issue. Unless otherwise expressly provided by the Administrator, no fractional shares shall be delivered under this Plan. The Administrator may pay cash in lieu of any fractional shares in settlements of awards under this Plan. The Administrator may from time to time impose a limit (of not greater than 100 shares) on the minimum number of shares that may be purchased or exercised as to awards (or any particular award) granted under this Plan unless (as to any particular award) the total number purchased or exercised is the total number at the time available for purchase or exercise under the award.
5. AWARDS
5.1 Type and Form of Awards. The Administrator shall determine the type or types of award(s) to be made to each selected Eligible Person. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Corporation or one of its Subsidiaries. The types of awards that may be granted under this Plan are:
5.1.1 Stock Options. A stock option is the grant of a right to purchase a specified number of shares of Common Stock during a specified period as determined by the Administrator. An option may be intended as an incentive stock option within the meaning of Section 422 of the Code (an “ISO”) or a nonqualified stock option (an option not intended to be an ISO). The agreement evidencing the grant of an option will indicate if the option is intended as an ISO; otherwise it will be deemed to be a nonqualified stock option. The maximum term of each option (ISO or nonqualified) shall be ten (10) years. The per share exercise price for each option shall be not less than 100% of the fair market value of a share of Common Stock on the date of grant of the option. When an option is exercised, the exercise price for the shares to be purchased shall be paid in full in cash or such other method permitted by the Administrator consistent with Section 5.4.
5.1.2 Additional Rules Applicable to ISOs. To the extent that the aggregate fair market value (determined at the time of grant of the applicable option) of stock with respect to which ISOs first become exercisable by a participant in any calendar year exceeds $100,000, taking into account both Common Stock subject to ISOs under this Plan and stock subject to ISOs under all other plans of the Corporation or one of its Subsidiaries (or any parent or predecessor corporation to the extent required by and within the meaning of Section 422 of the Code and the regulations promulgated thereunder), such options shall be treated as nonqualified
stock options. In reducing the number of options treated as ISOs to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an ISO. ISOs may only be granted to employees of the Corporation or one of its subsidiaries (for this purpose, the term “subsidiary” is used as defined in Section 424(f) of the Code, which generally requires an unbroken chain of ownership of at least 50% of the total combined voting power of all classes of stock of each subsidiary in the chain beginning with the Corporation and ending with the subsidiary in question). No ISO may be granted to any person who, at the time the option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of outstanding Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation, unless the exercise price of such option is at least 110% of the fair market value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted. If an otherwise-intended ISO fails to meet the applicable requirements of Section 422 of the Code, the option shall be a nonqualified stock option.
5.1.3 Stock Appreciation Rights. A stock appreciation right or “SAR” is a right to receive a payment, in cash and/or Common Stock, equal to the excess of the fair market value of a specified number of shares of Common Stock on the date the SAR is exercised over the “base price” of the award, which base price shall be set forth in the applicable award agreement and shall be not less than 100% of the fair market value of a share of Common Stock on the date of grant of the SAR. The maximum term of a SAR shall be ten (10) years.
5.1.4 Other Awards; Dividend Equivalent Rights. The other types of awards that may be granted under this Plan include: (a) stock bonuses, restricted stock, performance stock, stock units, restricted stock units, deferred shares, phantom stock or similar rights to purchase or acquire shares, whether at a fixed or variable price (or no price) or fixed or variable ratio related to the Common Stock, and any of which may (but need not) be fully vested at grant or vest upon the passage of time, the occurrence of one or more events, the satisfaction of performance criteria or other conditions, or any combination thereof; or (b) cash awards. The types of cash awards that may be granted under this Plan include the opportunity to receive a payment for the achievement of one or more goals established by the Administrator, on such terms as the Administrator may provide, as well as discretionary cash awards. Dividend equivalent rights may be granted as a separate award or in connection with another award under this Plan; provided, however, that dividend equivalent rights may not be granted as to a stock option or SAR granted under this Plan. In addition, any dividends and/or dividend equivalents as to the portion of an award that is subject to unsatisfied vesting requirements will be subject to termination and forfeiture to the same extent as the
corresponding portion of the award to which they relate in the event the applicable vesting requirements are not satisfied.
5.2 Award Agreements. Each award shall be evidenced by a written or electronic award agreement or notice in a form approved by the Administrator (an “award agreement”), and, in each case and if required by the Administrator, executed or otherwise electronically accepted by the recipient of the award in such form and manner as the Administrator may require.
5.3 Deferrals and Settlements. Payment of awards may be in the form of cash, Common Stock, other awards or combinations thereof as the Administrator shall determine, and with such restrictions (if any) as it may impose. The Administrator may also require or permit participants to elect to defer the issuance of shares or the settlement of awards in cash under such rules and procedures as it may establish under this Plan. The Administrator may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares.
5.4 Consideration for Common Stock or Awards. The purchase price (if any) for any award granted under this Plan or the Common Stock to be delivered pursuant to an award, as applicable, may be paid by means of any lawful consideration as determined by the Administrator, including, without limitation, one or a combination of the following methods:
(a) services rendered by the recipient of such award;
(b) cash, check payable to the order of the Corporation, or electronic funds transfer;
(c) notice and third party payment in such manner as may be authorized by the Administrator;
(d) the delivery of previously owned shares of Common Stock;
(e) by a reduction in the number of shares otherwise deliverable pursuant to the award; or
(f) subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards.
In no event shall any shares newly-issued by the Corporation be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable state law. Shares of Common Stock
used to satisfy the exercise price of an option shall be valued at their fair market value. The Corporation will not be obligated to deliver any shares unless and until it receives full payment of the exercise or purchase price therefor and any related withholding obligations under Section 8.5 and any other conditions to exercise or purchase have been satisfied. Unless otherwise expressly provided in the applicable award agreement, the Administrator may at any time eliminate or limit a participant’s ability to pay any purchase or exercise price of any award or shares by any method other than cash payment to the Corporation.
5.5 Definition of Fair Market Value. For purposes of this Plan, “fair market value” shall mean, unless otherwise determined or provided by the Administrator in the circumstances, the closing price (in regular trading) for a share of Common Stock on the principal securities exchange on which the Common Stock is listed or admitted to trade (the “Exchange”) for the date in question or, if no sales of Common Stock were reported on the Exchange on that date, the closing price (in regular trading) for a share of Common Stock on the Exchange on the last day preceding the date in question on which sales of Common Stock were reported on the Exchange. The Administrator may, however, provide with respect to one or more awards that the fair market value shall equal the closing price (in regular trading) for a share of Common Stock on the Exchange on the last trading day preceding the date in question or the average of the high and low trading prices of a share of Common Stock on the Exchange for the date in question or the most recent trading day. If the Common Stock is no longer listed or is no longer actively traded on an established securities exchange as of the applicable date, the fair market value of the Common Stock shall be the value as reasonably determined by the Administrator for purposes of the award in the circumstances. The Administrator also may adopt a different methodology for determining fair market value with respect to one or more awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular award(s) (for example, and without limitation, the Administrator may provide that fair market value for purposes of one or more awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).
5.6 Transfer Restrictions.
5.6.1 Limitations on Exercise and Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 5.6 or required by applicable law: (a) all awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b) awards shall be exercised only by the participant; and (c) amounts payable or shares issuable pursuant to any award shall be delivered only to (or for the account of) the participant.
5.6.2 Exceptions. The Administrator may permit awards to be exercised by and paid to, or otherwise transferred to, other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Administrator may, in its sole discretion, establish in writing. Any permitted transfer shall be subject to compliance with applicable federal and state securities laws and shall not be for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting interests are held by the Eligible Person or by the Eligible Person’s family members).
5.6.3 Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in Section 5.6.1 shall not apply to:
(a) transfers to the Corporation (for example, in connection with the expiration or termination of the award);
(b) the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution;
(c) subject to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if received by the Administrator;
(d) if the participant has suffered a disability, permitted transfers or exercises on behalf of the participant by his or her legal representative; or
(e) the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and any limitations imposed by the Administrator.
5.7 International Awards. One or more awards may be granted to Eligible Persons who provide services to the Corporation or one of its Subsidiaries outside of the United States. Any awards granted to such persons may be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to this Plan and approved by the Administrator from time to time. The awards so granted need not comply with other specific terms of this Plan, provided that stockholder approval of any deviation from the specific terms of this Plan is not required by applicable law or any applicable listing agency.
6. EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS
6.1 General. The Administrator shall establish the effect (if any) of a termination of employment or service on the rights and benefits under each award under this
Plan and in so doing may make distinctions based upon, inter alia, the cause of termination and type of award. If the participant is not an employee of the Corporation or one of its Subsidiaries, is not a member of the Board, and provides other services to the Corporation or one of its Subsidiaries, the Administrator shall be the sole judge for purposes of this Plan (unless a contract or the award otherwise provides) of whether the participant continues to render services to the Corporation or one of its Subsidiaries and the date, if any, upon which such services shall be deemed to have terminated.
6.2 Events Not Deemed Terminations of Employment. Unless the express policy of the Corporation or one of its Subsidiaries, or the Administrator, otherwise provides, or except as otherwise required by applicable law, the employment relationship shall not be considered terminated in the case of: (a) medical leave, (b) military leave, or (c) any other leave of absence authorized by the Corporation or one of its Subsidiaries, or the Administrator; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law or the Administrator otherwise provides, such leave is for a period of not more than three months. In the case of any employee of the Corporation or one of its Subsidiaries on an approved leave of absence, continued vesting of the award while on leave from the employ of the Corporation or one of its Subsidiaries may be suspended until the employee returns to service, unless the Administrator otherwise provides or applicable law otherwise requires. In no event shall an award be exercised after the expiration of any applicable maximum term of the award.
6.3 Effect of Change of Subsidiary Status. For purposes of this Plan and any award, if an entity ceases to be a Subsidiary of the Corporation a termination of employment or service shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of the Corporation or another Subsidiary that continues as such after giving effect to the transaction or other event giving rise to the change in status unless the Subsidiary that is sold, spun-off or otherwise divested (or its successor or a direct or indirect parent of such Subsidiary or successor) assumes the Eligible Person’s award(s) in connection with such transaction.
7. ADJUSTMENTS; ACCELERATION
7.1 Adjustments.
(a) Subject to Section 7.2, upon (or, as may be necessary to effect the adjustment, immediately prior to): any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, conversion or other reorganization; any spin-off, split-up, or extraordinary dividend distribution in respect of the Common Stock; or any exchange of Common Stock or other securities of the Corporation, or any similar, unusual or extraordinary corporate transaction in respect of the Common
Stock; then the Administrator shall equitably and proportionately adjust: (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of awards (including the specific share limits, maximums and numbers of shares set forth elsewhere in this Plan); (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any outstanding awards; (3) the grant, purchase, or exercise price (which term includes the base price of any SAR or similar right) of any outstanding awards; and/or (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the then-outstanding awards.
(b) Without limiting the generality of Section 3.4, any good faith determination by the Administrator as to whether an adjustment is required in the circumstances pursuant to this Section 7.1, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.
7.2 Corporate Transactions - Assumption and Termination of Awards.
(a) Upon any event in which the Corporation does not survive, or does not survive as a public company in respect of its Common Stock (including, without limitation, a dissolution, merger, combination, consolidation, conversion, exchange of securities, or other reorganization, or a sale of all or substantially all of the business, stock or assets of the Corporation, in any case in connection with which the Corporation does not survive or does not survive as a public company in respect of its Common Stock), then the Administrator may make provision for a cash payment in settlement of, or for the termination, assumption, substitution or exchange of any or all outstanding awards or the cash, securities or property deliverable to the holder of any or all outstanding awards, based upon, to the extent relevant under the circumstances, the distribution or consideration payable to holders of the Common Stock upon or in respect of such event. Upon the occurrence of any event described in the preceding sentence in connection with which the Administrator has made provision for the award to be terminated (and the Administrator has not made a provision for the substitution, assumption, exchange or other continuation or settlement of the award): (1) unless otherwise provided in the applicable award agreement, each then-outstanding option and SAR shall become fully vested, all shares of restricted stock then outstanding shall fully vest free of restrictions, and each other award granted under this Plan that is then outstanding shall become payable to the holder of such award (with any performance goals applicable to the award in each case being deemed met, unless otherwise provided in the award agreement, at the “target” performance level); and (2) each award (including any award or portion thereof that, by its terms, does not accelerate and vest in the circumstances) shall terminate upon the related event; provided that the holder of an option or SAR shall be given reasonable advance notice of the impending termination and a reasonable
opportunity to exercise his or her outstanding vested options and SARs (after giving effect to any accelerated vesting required in the circumstances) in accordance with their terms before the termination of such awards (except that in no case shall more than ten days’ notice of the impending termination be required and any acceleration of vesting and any exercise of any portion of an award that is so accelerated may be made contingent upon the actual occurrence of the event).
(b) Without limiting the preceding paragraph, in connection with any event referred to in the preceding paragraph or any change in control event defined in any applicable award agreement, the Administrator may, in its discretion, provide for the accelerated vesting of any award or awards as and to the extent determined by the Administrator in the circumstances.
(c) For purposes of this Section 7.2, an award shall be deemed to have been “assumed” if (without limiting other circumstances in which an award is assumed) the award continues after an event referred to above in this Section 7.2, and/or is assumed and continued by the surviving entity following such event (including, without limitation, an entity that, as a result of such event, owns the Corporation or all or substantially all of the Corporation’s assets directly or through one or more subsidiaries (a “Parent”)), and confers the right to purchase or receive, as applicable and subject to vesting and the other terms and conditions of the award, for each share of Common Stock subject to the award immediately prior to the event, the consideration (whether cash, shares, or other securities or property) received in the event by the stockholders of the Corporation for each share of Common Stock sold or exchanged in such event (or the consideration received by a majority of the stockholders participating in such event if the stockholders were offered a choice of consideration); provided, however, that if the consideration offered for a share of Common Stock in the event is not solely the ordinary common stock of a successor corporation or a Parent, the Administrator may provide for the consideration to be received upon exercise or payment of the award, for each share subject to the award, to be solely ordinary common stock of the successor corporation or a Parent equal in fair market value to the per share consideration received by the stockholders participating in the event.
(d) The Administrator may adopt such valuation methodologies for outstanding awards as it deems reasonable in the event of a cash or property settlement and, in the case of options, SARs or similar rights, but without limitation on other methodologies, may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise or base price of the award. In the case of an option, SAR or similar right as to which the per share amount payable upon or in respect of such event is less than or equal to the exercise or base price of the award, the Administrator may terminate such award in connection with an event referred to in this Section 7.2 without any payment in respect of such award.
(e) In any of the events referred to in this Section 7.2, the Administrator may take such action contemplated by this Section 7.2 prior to such event (as opposed to on the occurrence of such event) to the extent that the Administrator deems the action necessary to permit the participant to realize the benefits intended to be conveyed with respect to the underlying shares. Without limiting the generality of the foregoing, the Administrator may deem an acceleration and/or termination to occur immediately prior to the applicable event and, in such circumstances, will reinstate the original terms of the award if an event giving rise to an acceleration and/or termination does not occur.
(f) Without limiting the generality of Section 3.4, any good faith determination by the Administrator pursuant to its authority under this Section 7.2 shall be conclusive and binding on all persons.
(g) The Administrator may override the provisions of this Section 7.2 by express provision in the award agreement and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the award agreement or otherwise, in such circumstances as the Administrator may approve. The portion of any ISO accelerated in connection with an event referred to in this Section 7.2 (or such other circumstances as may trigger accelerated vesting of the award) shall remain exercisable as an ISO only to the extent the applicable $100,000 limitation on ISOs is not exceeded. To the extent exceeded, the accelerated portion of the option shall be exercisable as a nonqualified stock option under the Code.
8. OTHER PROVISIONS
8.1 Compliance with Laws. This Plan, the granting and vesting of awards under this Plan, the offer, issuance and delivery of shares of Common Stock, and/or the payment of money under this Plan or under awards are subject to compliance with all applicable federal, state, local and foreign laws, rules and regulations (including, but not limited to, state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Corporation or one of its Subsidiaries, provide such assurances and representations to the Corporation or one of its Subsidiaries as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.
8.2 No Rights to Award. No person shall have any claim or rights to be granted an award (or additional awards, as the case may be) under this Plan, subject to any express contractual rights (set forth in a document other than this Plan) to the contrary.
8.3 No Employment/Service Contract. Nothing contained in this Plan (or in any other documents under this Plan or in any award) shall confer upon any Eligible
Person or other participant any right to continue in the employ or other service of the Corporation or one of its Subsidiaries, constitute any contract or agreement of employment or other service or affect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Corporation or one of its Subsidiaries to change a person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause. Nothing in this Section 8.3, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract other than an award agreement.
8.4 Plan Not Funded. Awards payable under this Plan shall be payable in shares or from the general assets of the Corporation, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. No participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the Corporation or one of its Subsidiaries by reason of any award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Corporation or one of its Subsidiaries and any participant, beneficiary or other person. To the extent that a participant, beneficiary or other person acquires a right to receive payment pursuant to any award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Corporation.
8.5 Tax Withholding. Upon any exercise, vesting, or payment of any award or upon any other tax withholding event with respect to any award, arrangements satisfactory to the Corporation shall be made to provide for any taxes the Corporation or any of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment. Such arrangements may include (but are not limited to) any one of (or a combination of) the following:
(a) The Corporation or one of its Subsidiaries shall have the right to require the participant (or the participant’s personal representative or beneficiary, as the case may be) to pay or provide for payment of the amount of any taxes which the Corporation or one of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment.
(b) The Corporation or one of its Subsidiaries shall have the right to deduct from any amount otherwise payable in cash (whether related to the award or otherwise) to the participant (or the participant’s personal representative or beneficiary, as the case may be) the amount of any taxes which the Corporation or one of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment.
(c) In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Administrator may in its sole discretion (subject to Section 8.1) require or grant (either at the time of the award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, that the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their fair market value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy any applicable withholding obligation on exercise, vesting or payment.
8.6 Effective Date, Termination and Suspension, Amendments.
8.6.1 Effective Date. This Plan was approved by the Board as of July 17, 2025 and by stockholders as of July 17, 2025. This Plan shall become effective as of the Initial Trading Date (the “Effective Date”). Unless earlier terminated by the Board and subject to any extension that may be approved by stockholders, this Plan shall terminate at the close of business on the day before the tenth anniversary of the Effective Date. After the termination of this Plan either upon such stated termination date or its earlier termination by the Board, no additional awards may be granted under this Plan, but previously granted awards (and the authority of the Administrator with respect thereto, including the authority to amend such awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.
8.6.2 Board Authorization. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part. No awards may be granted during any period that the Board suspends this Plan.
8.6.3 Stockholder Approval. To the extent then required by applicable law or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to stockholder approval.
8.6.4 Amendments to Awards. Without limiting any other express authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on awards to participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a participant, and (subject to the requirements of Sections 3.2 and 8.6.5) may make other changes to the terms and conditions of awards.
8.6.5 Limitations on Amendments to Plan and Awards. No amendment, suspension or termination of this Plan or amendment of any outstanding award agreement shall, without written consent of the participant, affect in any manner materially adverse to the participant any rights or benefits of the participant or
obligations of the Corporation under any award granted under this Plan prior to the effective date of such change. Changes, settlements and other actions contemplated by Section 7 shall not be deemed to constitute changes or amendments for purposes of this Section 8.6.
8.7 Privileges of Stock Ownership. Except as otherwise expressly authorized by the Administrator, a participant shall not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the participant. Except as expressly required by Section 7.1 or otherwise expressly provided by the Administrator, no adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
8.8 Governing Law; Severability.
8.8.1 Choice of Law. This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the State of Delaware, notwithstanding any Delaware or other conflict of law provision to the contrary.
8.8.2 Severability. If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
8.9 Captions. Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.
8.10 Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other Corporation. Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee stock options, SARs, restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Corporation or one of its Subsidiaries, in connection with a distribution, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Corporation or one of its Subsidiaries, directly or indirectly, of all or a substantial part of the stock or assets of the employing entity. The awards so granted need not comply with other specific terms of this Plan, provided the awards reflect adjustments giving effect to the assumption or substitution consistent with any conversion applicable to the common stock (or the securities otherwise subject to the award) in the transaction and any change in the issuer of the security. Any shares that are delivered and any awards that are granted by, or become obligations of, the Corporation, as a result of the assumption by the Corporation of, or in substitution for, outstanding awards previously granted or assumed by an acquired company (or previously granted or assumed by a
predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Corporation or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares available for issuance under this Plan.
8.11 Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.
8.12 No Corporate Action Restriction. The existence of this Plan, the award agreements and the awards granted hereunder shall not limit, affect, or restrict in any way the right or power of the Corporation or any Subsidiary (or any of their respective shareholders, boards of directors or committees thereof (or any subcommittees), as the case may be) to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Corporation or any Subsidiary, (b) any merger, amalgamation, consolidation or change in the ownership of the Corporation or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the capital stock (or the rights thereof) of the Corporation or any Subsidiary, (d) any dissolution or liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of all or any part of the assets or business of the Corporation or any Subsidiary, (f) any other award, grant, or payment of incentives or other compensation under any other plan or authority (or any other action with respect to any benefit, incentive or compensation), or (g) any other corporate act or proceeding by the Corporation or any Subsidiary. No participant, beneficiary or any other person shall have any claim under any award or award agreement against any member of the Board or the Administrator, or the Corporation or any employees, officers or agents of the Corporation or any Subsidiary, as a result of any such action. Awards need not be structured so as to be deductible for tax purposes.
8.13 Other Company Benefit and Compensation Programs. Payments and other benefits received by a participant under an award made pursuant to this Plan shall not be deemed a part of a participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Corporation or any Subsidiary, except where the Administrator expressly otherwise provides or authorizes in writing. Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans, arrangements or authority of the Corporation or its Subsidiaries.
8.14 Clawback Policy. The awards granted under this Plan are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect
from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any shares of Common Stock or other cash or property received with respect to the awards (including any value received from a disposition of the shares acquired upon payment of the awards).
HEARTFLOW, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The purpose of this Plan is to assist Eligible Employees in acquiring a stock ownership interest in the Corporation, at a favorable price and upon favorable terms, pursuant to a plan which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. This Plan is also intended to encourage Eligible Employees to remain in the employ of the Corporation (or a Subsidiary which may be designated by the Committee as a “Participating Subsidiary”) and to provide them with an additional incentive to advance the best interests of the Corporation.
2. DEFINITIONS
Capitalized terms used herein which are not otherwise defined shall have the following meanings.
“Account” means the bookkeeping account maintained by the Corporation, or by a recordkeeper on behalf of the Corporation, for a Participant pursuant to Section 7(a).
“Board” means the Board of Directors of the Corporation.
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.
“Commission” means the U.S. Securities and Exchange Commission.
“Committee” means the committee appointed by the Board to administer this Plan pursuant to Section 12.
“Common Stock” means the common stock, par value $0.001 per share, of the Corporation, and such other securities or property as may become the subject of Purchase Options pursuant to an adjustment made under Section 17.
“Compensation” means an Eligible Employee’s regular gross pay before any tax-qualified pre-tax deductions. Any other form of remuneration is excluded from Compensation, including (but not limited to) the following: severance pay, overtime payments, commissions, prizes, awards, relocation or housing allowances, stock option exercises, stock appreciation right payments, the vesting or grant of restricted stock, the payment of stock units, performance awards, auto allowances, tuition reimbursement, perquisites, non-cash compensation and other forms of imputed income, bonuses, incentive compensation, special payments, fees and allowances. Notwithstanding the foregoing, Compensation shall not
include any amounts deferred under or paid from any nonqualified deferred compensation plan maintained by the Corporation or any Subsidiary.
“Contributions” means all bookkeeping amounts credited to the Account of a Participant pursuant to Section 7(a).
“Corporation” means Heartflow, Inc., a Delaware corporation, and its successors.
“Effective Date” means the date of commencement of trading of the shares of Common Stock on the Exchange.
“Eligible Employee” means any employee of the Corporation, or of any Subsidiary which has been designated in writing by the Committee as a “Participating Subsidiary” (including any Subsidiaries which have become such after the date that this Plan is approved by the stockholders of the Corporation). Notwithstanding the foregoing and unless otherwise provided by the Committee in advance of the applicable Offering Period, “Eligible Employee” shall not include any employee:
(a) whose customary employment is for not more than five (5) months in a calendar year; or
(b) whose customary employment is for twenty (20) hours or less per week.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time.
“Fair Market Value” on any date means:
(a) if the Common Stock is listed or admitted to trade on a national securities exchange, the closing price of a share of Common Stock on such date on the principal national securities exchange on which the Common Stock is so listed or admitted to trade (the “Exchange”), or, if there is no trading of the Common Stock on such date, then the closing price of a share of Common Stock on such exchange on the next preceding date on which there was trading in the shares of Common Stock;
(b) in the absence of exchange data required to determine Fair Market Value pursuant to the foregoing, the value as established by the Committee as of the relevant time for purposes of this Plan.
“Grant Date” means the first day of each Offering Period, as determined by the Committee and announced to potential Eligible Employees.
“Individual Limit” has the meaning given to such term in Section 4(b).
“New Purchase Date” has the meaning given to such term in Section 18.
“Offering Period” means the period of six (6) consecutive months commencing on each Grant Date; provided, however, that the Committee may declare, as it deems appropriate and in advance of the applicable Offering Period, a shorter (not to be less than three months) Offering Period or a longer (not to exceed 27 months) Offering Period; provided, further, that the Committee may provide, as it deems appropriate and in advance of the applicable Offering Period, that such Offering Period will consist of multiple “purchase periods,” with a Purchase Date to occur at the end of each such purchase period. In no event will the Grant Date for an Offering Period occur on or before the Purchase Date (or the final Purchase Date, as the case may be) for the immediately preceding Offering Period.
“Parent” means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation in which each corporation (other than the Corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
“Participant” means an Eligible Employee who has elected to participate in this Plan and who has filed a valid and effective Subscription Agreement to make Contributions pursuant to Section 6.
“Participating Subsidiary” means any Subsidiary that has been designated in writing by the Committee as a Participating Subsidiary for purposes of this Plan.
“Plan” means this Heartflow, Inc. Employee Stock Purchase Plan, as amended from time to time.
“Purchase Date” means, with respect to an Offering Period, the last day of that Offering Period.
“Purchase Option” means the stock option to acquire shares of Common Stock granted to a Participant pursuant to Section 8.
“Purchase Price” means the per share exercise price of a Purchase Option as determined in accordance with Section 8(b).
“Rule 16b-3” means Rule 16b-3 as promulgated by the Commission under Section 16, as amended from time to time.
“Share Limit” has the meaning given to such term in Section 4(a).
“Subscription Agreement” means the written enrollment agreement or applicable electronic form of enrollment agreement filed by an Eligible Employee with the Corporation (or its designee) pursuant to Section 6 to participate in this Plan.
“Subsidiary” means any corporation (other than the Corporation) in an unbroken chain of corporations (beginning with the Corporation) in which each corporation (other than the last corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain.
3. ELIGIBILITY
Any person employed as an Eligible Employee as of a Grant Date shall be eligible to participate in this Plan during the Offering Period in which such Grant Date occurs, subject to the Eligible Employee satisfying the requirements of Section 6.
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS
(a) Aggregate Share Limit. Subject to the provisions of Section 17, the capital stock that may be delivered under this Plan will be shares of the Corporation’s authorized but unissued Common Stock and any of its shares of Common Stock held as treasury shares. The maximum number of shares of Common Stock that may be delivered pursuant to Purchase Options granted under this Plan is an aggregate number of shares equal to one and a half percent (1.5%) of the total number of fully diluted shares of Common Stock outstanding (including, without limitation, any outstanding warrants) as of the date of commencement of trading of the shares of Common Stock on the Exchange (the “Initial Trading Date”), subject to adjustments pursuant to Section 17 (the “Share Limit”).
In addition, subject to adjustments pursuant to Section 17, the Share Limit shall automatically increase on the first trading day in January of each of the calendar years during the term of this Plan, with the first such increase to occur in January 2026, by an amount equal to the lesser of (i) one percent (1%) of the total number of shares of Common Stock issued and outstanding on December 31 of the immediately preceding calendar year or (ii) such number of shares of Common Stock as may be established by the Board.
In the event that during a particular Offering Period all of the shares of Common Stock made available under this Plan are subscribed prior to the expiration of this Plan, this Plan and all outstanding Purchase Options hereunder shall terminate at the end of that Offering Period and the shares available shall be allocated for purchase by Participants in that Offering Period on a pro-rata basis determined with respect to Participants’ Account balances.
(b) Individual Share Limit. The maximum number of shares of Common Stock that any one individual may acquire upon exercise of his or her Purchase Option with respect to any one Offering Period shall equal 50,000 (the “Individual Limit”); provided, however, that the Committee may amend such Individual Limit, effective no earlier than the first Offering Period commencing after the adoption of such amendment, without stockholder approval. The Individual Limit may, at
the discretion of the Committee, be proportionately increased for any Offering Period of greater than six months or proportionately decreased for any Offering Period of less than six months.
(c) Shares Not Actually Delivered. Shares that are subject to or underlie Purchase Options, which for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall again, except to the extent prohibited by law, be available for subsequent Purchase Options under this Plan.
5. OFFERING PERIODS
During the term of this Plan, the Corporation will offer Purchase Options to purchase Shares in each Offering Period to all Participants in that Offering Period. Unless otherwise specified by the Committee in advance of the Offering Period, Offering Periods will be of six (6) months duration. The Committee will specify in advance of each Offering Period when the Offering Period will commence and the Grant Date of the Offering Period. Each Purchase Option shall become effective on the Grant Date of that Offering Period. The term of each Purchase Option shall be the duration of the related Offering Period and shall end on the Purchase Date of that Offering Period. Offering Periods shall continue until this Plan is terminated in accordance with Section 18 or 19, or, if earlier, until no Shares remain available for Purchase Options pursuant to Section 4.
6. PARTICIPATION
(a) Enrollment. An Eligible Employee may become a Participant in this Plan by completing a Subscription Agreement on a form approved by and in a manner prescribed by the Committee (or its delegate). To become effective, a Subscription Agreement must be signed by the Eligible Employee and filed with the Corporation (or its designee) at the time specified by the Committee, but in all cases prior to the start of the Offering Period with respect to which it is to become effective, and must set forth a whole percentage (or, if the Committee so provides, a stated amount) of the Eligible Employee’s Compensation to be credited to the Participant’s Account as Contributions each pay period.
(b) Contribution Limits. Notwithstanding the foregoing, a Participant’s Contribution election shall be subject to the following limitations:
(i) the $25,000 annual limitation set forth in Section 8(c);
(ii) a Participant may not elect to contribute more than fifteen percent (15%) of his or her Compensation each pay period as Plan Contributions; and
(iii) such other limits, rules, or procedures as the Committee may prescribe.
(c) Content and Duration of Subscription Agreements. Subscription Agreements shall contain the Eligible Employee’s authorization and consent to the Corporation’s withholding from his or her Compensation the amount of his or her Contributions. An Eligible Employee’s Subscription Agreement, and his or her participation election and withholding consent thereon, shall remain valid for all Offering Periods until (i) the Eligible Employee’s participation terminates pursuant to the terms hereof, (ii) the Eligible Employee files a new Subscription Agreement that becomes effective, or (iii) the Committee requires that a new Subscription Agreement be executed and filed with the Corporation.
7. METHOD OF PAYMENT OF CONTRIBUTIONS
(a) Participation Account. The Corporation shall maintain on its books, or cause to be maintained by a recordkeeper, an Account in the name of each Participant. The percentage (or amount, as applicable) of Compensation elected to be applied as Contributions by a Participant shall be deducted from such Participant’s Compensation on each payday during the period for payroll deductions set forth below and such payroll deductions shall be credited to that Participant’s Account as soon as administratively practicable after such date. A Participant may not make any additional payments to his or her Account. A Participant’s Account shall be reduced by any amounts used to pay the Purchase Price of shares acquired, or by any other amounts distributed pursuant to the terms hereof.
(b) Commencement of Payroll Deductions. Payroll deductions with respect to an Offering Period shall commence as of the first day of the payroll period which coincides with or immediately follows the applicable Grant Date and shall end on the last day of the payroll period which coincides with or immediately precedes the applicable Purchase Date, unless sooner terminated by the Participant as provided in this Section 7 or until his or her Plan participation terminates pursuant to Section 11.
(c) Withdrawal During an Offering Period. A Participant may terminate his or her Contributions during an Offering Period (and receive a distribution of the balance of his or her Account in accordance with Section 11) by completing and filing with the Corporation (or its designee), in such form and on such terms as the Committee (or its delegate) may prescribe, a written withdrawal form or applicable electronic withdrawal form which shall be completed by the Participant. Such termination shall be effective as soon as administratively practicable after its receipt by the Corporation. A withdrawal election pursuant to this Section 7(c) with respect to an Offering Period shall only be effective, however, if it is received by the Corporation prior to the Purchase Date of that Offering Period (or such earlier deadline that the Committee may reasonably require to process the withdrawal prior to the Purchase Date). Partial withdrawals of Accounts, and other modifications or suspensions of Subscription Agreements, except as provided in Section 7(d) or 7(e), are not permitted.
(d) Change in Contribution Elections for the Following Offering Period. A Participant may discontinue, increase, or decrease the level of his or her Contributions (within Plan limits) by completing and filing with the Corporation (or its designee), on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. Subject to any additional timing requirements that the Committee may impose, an election pursuant to this Section 7(d) shall be effective with the first Offering Period that commences after the Corporation’s receipt of such election.
(e) Discontinuing Contributions During an Offering Period. A Participant may discontinue his or her Contributions (but not increase or otherwise decrease the level of his or her Contributions) during an Offering Period, by filing with the Corporation (or its designee), on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. An election pursuant to this Section 7(e) shall be effective no earlier than the first payroll period that starts after the Corporation’s receipt of such election. If a Participant elects to discontinue his or her Contributions pursuant to this Section 7(e), the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Purchase Option as of the applicable Purchase Date in accordance with Section 9 (unless the Participant makes a timely withdrawal election in accordance with Section 7(c), in which case the Participant’s Account will be paid to him or her in cash in accordance with Section 11(a)).
8. GRANT OF PURCHASE OPTION
(a) Grant Date; Number of Shares. On each Grant Date, each Eligible Employee who is a Participant during that Offering Period shall be granted an Option to purchase a number of shares of Common Stock. The Purchase Option shall be exercised on the Purchase Date. The number of shares subject to the Purchase Option shall be determined by dividing the Participant’s Account balance as of the applicable Purchase Date by the Purchase Price.
(b) Purchase Price. The Purchase Price per share of the shares subject to a Purchase Option for an Offering Period shall be the lesser of: (i) 85% of the Fair Market Value of a Share on the Grant Date of that Offering Period; or (ii) 85% of the Fair Market Value of a Share on the Purchase Date of that Offering Period; provided, however, that the Committee may provide prior to the start of any Offering Period that the Purchase Price for that Offering Period shall be determined by applying a discount amount (not to exceed 15%) to either (1) the Fair Market Value of Common Shares on the Grant Date of the Offering Period, or (2) the Fair Market Value of Common Shares on the Purchase Date of that Offering Period, or (3) the lesser of the Fair Market Value of Common Shares on the Grant Date of the Offering Period or the Fair Market Value of Common Shares on the Purchase Date of that Offering Period. Notwithstanding anything to the contrary in the
preceding provisions of this Section 8(b), in no event shall the Purchase Price per share be less than the par value of a share of Common Stock.
(c) Limits on Share Purchases. Notwithstanding anything else contained herein, a person who is otherwise an Eligible Employee shall not be granted any Purchase Option (or any Purchase Option granted shall be subject to compliance with the following limitations) or other right to purchase shares under this Plan to the extent:
(i) it would, if exercised, cause the person to own stock (within the meaning of Section 423(b)(3) of the Code) possessing 5% or more of the total combined voting power or value of all classes of stock of the Corporation, or of any Parent, or of any Subsidiary; or
(ii) such Purchase Option causes such individual to have rights to purchase stock under this Plan and any other plan of the Corporation, any Parent, or any Subsidiary which is qualified under Section 423 of the Code which accrue at a rate which exceeds $25,000 of the fair market value of the stock of the Corporation, of any Parent, or of any Subsidiary (determined at the time the right to purchase such stock is granted, before giving effect to any discounted purchase price under any such plan) for each calendar year in which such right is outstanding at any time.
For purposes of the foregoing, a right to purchase stock accrues when it first becomes exercisable during the calendar year. In determining whether the stock ownership of an Eligible Employee equals or exceeds the 5% limit set forth above, the rules of Section 424(d) of the Code (relating to attribution of stock ownership) shall apply, and stock which the Eligible Employee may purchase under outstanding options shall be treated as stock owned by the Eligible Employee.
9. EXERCISE OF PURCHASE OPTION
Unless a Participant withdraws from an Offering Period pursuant to Section 7(c) or the Participant’s Plan participation is terminated as provided in Section 11, his or her Purchase Option for the purchase of shares shall be exercised automatically on the Purchase Date for that Offering Period, without any further action on the Participant’s part, and the maximum number of whole shares subject to such Purchase Option (subject to the Individual Limit set forth in Section 4(b) and the limitations contained in Section 8(c)) shall be purchased at the Purchase Price with the balance of such Participant’s Account.
If any amount which is not sufficient to purchase a whole share remains in a Participant’s Account after the exercise of his or her Purchase Option on the Purchase Date, such amount shall be refunded to such Participant as soon as administratively practicable after
such date; provided that the Committee may provide in advance of an Offering Period for any such amount with respect to that Offering Period to be credited to the Participant’s Account for the next Offering Period, if he or she is a Participant in such next Offering Period.
If the Share Limit of Section 4(a) is reached, any amount that remains in a Participant’s Account after the exercise of his or her Purchase Option on the Purchase Date to purchase the number of Shares that he or she is allocated shall be refunded to the Participant as soon as administratively practicable after such date.
If any amount which exceeds the Individual Limit set forth in Section 4(b) or one of the limitations set forth in Section 8(c) remains in a Participant’s Account after the exercise of his or her Purchase Option on the Purchase Date, such amount shall be refunded to the Participant as soon as administratively practicable after such date.
10. DELIVERY OF SHARES
As soon as administratively practicable after the Purchase Date, the Corporation shall, in its discretion, either deliver to each Participant a certificate representing the shares of Common Stock purchased upon exercise of his or her Purchase Option, provide for the crediting of such shares in book entry form in the name of the Participant, or provide for an alternative arrangement for the delivery of such shares to a broker or recordkeeping service for the benefit of the Participant. In the event the Corporation is required to obtain from any commission or agency authority to issue any such certificate or otherwise deliver such shares, the Corporation will seek to obtain such authority. If the Corporation is unable to obtain from any such commission or agency authority which counsel for the Corporation deems necessary for the lawful issuance of any such certificate or other delivery of such shares, or if for any other reason the Corporation cannot issue or deliver shares of Common Stock and satisfy Section 21, the Corporation shall be relieved from liability to any Participant except that the Corporation shall return to each Participant to whom such shares cannot be issued or delivered the amount of the balance credited to his or her Account that would have otherwise been used for the purchase of such shares.
11. TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS
(a) General. Except as provided in the next paragraph, if a Participant ceases to be an Eligible Employee for any reason at any time prior to the last day of an Offering Period in which he or she participates, or if the Participant timely elects to terminate Contributions and withdraw from the Plan pursuant to Section 7(c), such Participant’s Account shall be paid to him or her (or, in the event of the Participant’s death, to the person or persons entitled thereto under Section 13) in cash, and such Participant’s Purchase Option and participation in the Plan shall be automatically terminated.
(b) Change in Employment Status or Leave of Absence. If a Participant (i) ceases to be an Eligible Employee during an Offering Period but remains an employee of
the Corporation or a Participating Subsidiary through the Purchase Date, or (ii) during an Offering Period commences a sick leave, military leave, or other leave of absence approved by the Corporation or a Participating Subsidiary, and the leave meets the requirements of Treasury Regulation Section 1.421-1(h)(2) and the Participant is an employee of the Corporation or a Participating Subsidiary or on such leave as of the applicable Purchase Date, such Participant’s Contributions shall cease, and the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Purchase Option as of the applicable Purchase Date in accordance with Section 9 (unless the Participant makes a timely election to terminate Contributions and withdraw from the Plan in accordance with Section 7(c), in which case such Participant’s Account shall be paid to him or her in cash in accordance with Section 11(a)).
(c) Re-Enrollment. A Participant’s termination from Plan participation precludes the Participant from again participating in this Plan during that Offering Period. However, such termination shall not have any effect upon his or her ability to participate in any succeeding Offering Period, provided that the applicable eligibility and participation requirements are again then met. A Participant’s termination from Plan participation shall be deemed to be a revocation of that Participant’s Subscription Agreement and such Participant must file a new Subscription Agreement to resume Plan participation in any succeeding Offering Period.
(d) Change in Subsidiary Status. For purposes of this Plan, if a Participating Subsidiary ceases to be a Subsidiary, each person employed by that Subsidiary will be deemed to have terminated employment for purposes of this Plan and will no longer be an Eligible Employee, unless the person continues as an Eligible Employee in respect of the Corporation or another Participating Subsidiary.
12. ADMINISTRATION
(a) The Committee. The Board shall appoint the Committee, which shall be composed of not less than two members of the Board. Subject to the preceding sentence, the Board may, at any time, increase or decrease the number of members of the Committee, may remove from membership on the Committee all or any portion of its members, and may appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal, resignation, or otherwise. The Board may also, at any time, assume or change the administration of this Plan.
(b) Powers and Duties of the Committee. The Committee shall administer this Plan and shall have full power and discretion to adopt, amend and rescind any rules it considers desirable and appropriate for the administration of this Plan and not inconsistent with the terms of this Plan (including, without limitation, rules and deadlines for making elections under the Plan, which deadlines may be more restrictive than the deadlines otherwise set forth in this Plan), to further define the
terms used in this Plan, and to make all other determinations necessary or advisable for the administration of this Plan or the effectuation of its purposes. The Committee shall act by majority vote or by unanimous written consent. No member of the Committee shall be entitled to act on or decide any matter relating solely to himself or herself or solely to any of his or her rights or benefits under this Plan. The Committee shall have full power and discretionary authority to construe and interpret the terms and conditions of this Plan and any agreements defining the rights and obligations of the Corporation, any Subsidiary, and any Participant or other person under this Plan, which construction or interpretation shall be final and binding on all parties including the Corporation, Subsidiaries, Participants and beneficiaries. Notwithstanding anything else contained in this Plan to the contrary, the Committee may also adopt rules, procedures, separate offerings, or sub-plans applicable to particular Subsidiaries or locations, which separate offerings or sub-plans may be designed to be outside the scope of Section 423 of the Code and need not comply with the otherwise applicable provisions of this Plan. The Committee may delegate ministerial non-discretionary functions to third parties, including individuals who are officers or employees of the Corporation or Participating Subsidiaries.
(c) Decisions of the Committee are Binding; Reliance on Experts. Subject only to compliance with the express provisions hereof, the Board and Committee may act in their absolute discretion in matters within their authority related to this Plan. Any action taken by, or inaction of, the Corporation, any Participating Subsidiary, the Board or the Committee relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. In making any determination or in taking or not taking any action under this Plan, the Board or Committee, as the case may be, may obtain and may rely on the advice of experts, including professional advisors to the Corporation. No member of the Board or Committee, or officer or agent of the Corporation, will be liable for any action, omission or decision under the Plan taken, made or omitted in good faith.
(d) Indemnification. Neither the Board nor any Committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan, and all such persons shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.
13. DEATH BENEFITS
In the event of the death of a Participant, the Corporation shall deliver such shares and/or cash payable pursuant to the terms hereof to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Corporation), the Corporation, in its sole discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Corporation, then to such other person as the Corporation may designate.
14. TRANSFERABILITY
Neither Contributions credited to a Participant’s Account nor any Purchase Options or rights with respect to the exercise of Purchase Options or right to receive shares under this Plan may be anticipated, alienated, encumbered, assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 13) by the Participant. Any such attempt at anticipation, alienation, encumbrance, assignment, transfer, pledge or other disposition shall be without effect and all amounts shall be paid and all shares shall be delivered in accordance with the provisions of this Plan. Amounts payable or shares deliverable pursuant to this Plan shall be paid or delivered only to (or credited in the name of, as the case may be) the Participant or, in the event of the Participant’s death, as provided in Section 13.
The Corporation may require a Participant to hold any shares the Participant acquires under this Plan in a brokerage account identified by the Corporation until the date the shares are transferred, sold or otherwise disposed of in any way by the Participant, or such earlier time as the Corporation may determine.
15. USE OF FUNDS; INTEREST
All Contributions received or held by the Corporation under this Plan will be included in the general assets of the Corporation and may be used for any corporate purpose. Notwithstanding anything else contained herein to the contrary, no interest will be paid to any Participant or credited to his or her Account under this Plan (in respect of Account balances, refunds of Account balances, or otherwise).
16. REPORTS
Statements shall be provided or made available (in writing or electronically) to Participants as soon as administratively practicable following each Purchase Date. Each Participant’s statement shall set forth, as of such Purchase Date, that Participant’s Account balance immediately prior to the exercise of his or her Purchase Option, the Purchase Price, the number of whole shares purchased and his or her remaining Account balance, if any.
17. ADJUSTMENTS OF AND CHANGES IN THE STOCK
Upon or in contemplation of any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), or reverse stock split; any merger, combination, consolidation, or other reorganization; split-up, spin-off, or any similar extraordinary dividend distribution in respect of the Common Stock (whether in the form of securities or property); any exchange of Common Stock or other securities of the Corporation, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; or a sale of substantially all the assets of the Corporation as an entirety occurs; then the Committee shall, in such manner, to such extent (if any) and at such time as it deems appropriate and equitable in the circumstances:
(a) proportionately adjust any or all of (i) the number and type of shares of Common Stock or the number and type of other securities that thereafter may be made the subject of Purchase Options (including the specific maximum and numbers of shares set forth elsewhere in this Plan), (ii) the number, amount and type of shares (or other securities or property) subject to any or all outstanding Purchase Options, (iii) the Purchase Price of any or all outstanding Purchase Options, or (iv) the securities, cash or other property deliverable upon exercise of any outstanding Purchase Options, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the then-outstanding Purchase Options; or
(b) make provision for a cash payment in settlement of, or for the substitution or exchange of, any or all outstanding Purchase Options or the cash, securities or property deliverable to the holder of any or all outstanding Purchase Options based upon the distribution or consideration payable to holders of the Common Stock upon or in respect of such event.
The Committee may adopt such valuation methodologies for outstanding Purchase Options as it deems reasonable in the event of a cash or property settlement and, without limitation on other methodologies, may base such settlement solely upon the excess (if any) of the amount payable upon or in respect of such event over the Purchase Price of the Purchase Option.
In any of such events, the Committee may take such action sufficiently prior to such event to the extent that the Committee deems the action necessary to permit the Participant to realize the benefits intended to be conveyed with respect to the underlying shares in the same manner as is or will be available to stockholders generally.
Without limiting the generality of Section 12, any good faith determination by the Committee as to whether an adjustment is required in the circumstances pursuant to this Section 17, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.
18. POSSIBLE EARLY TERMINATION OF PLAN AND PURCHASE OPTIONS
Upon a dissolution or liquidation of the Corporation, or any other event described in Section 17 that the Corporation does not survive, or does not survive as a publicly-traded company in respect of its Shares, subject to any provision that has been expressly made by the Board for the survival, substitution, assumption, exchange or other settlement of the Purchase Options that are then outstanding under the Plan, each Offering Period then in progress shall be shortened and a new Purchase Date shall be established by the Board or the Committee (the “New Purchase Date”), as of which date the Plan and any Offering Period then in progress shall terminate and all then-outstanding Purchase Options under this Plan shall be automatically exercised in accordance with the terms hereof; provided, however, that the New Purchase Date shall not be more than ten (10) days before the date of the consummation of such dissolution, liquidation or other event. The Purchase Price on the New Purchase Date shall be determined as provided in Section 8(b), and the New Purchase Date shall be treated as the “Purchase Date” for purposes of determining such Purchase Price.
19. TERM OF PLAN; AMENDMENT OR TERMINATION
(a) Effective Date; Termination. This Plan was approved by the Board as of July 17, 2025 and by stockholders as of July 17, 2025. This Plan shall become effective as of the Effective Date. No new Offering Periods shall commence on or after the tenth (10th) anniversary of the Effective Date, and this Plan shall terminate as of the Purchase Date on or immediately following such date unless sooner terminated pursuant to Section 4, Section 18 or this Section 19.
(b) Board Amendment Authority. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part, without notice. Stockholder approval for any amendment or modification shall not be required, except to the extent required by law or applicable stock exchange rules, or required under Section 423 of the Code in order to preserve the intended tax consequences of this Plan. No Purchase Options may be granted during any suspension of this Plan or after the termination of this Plan, but the Committee will retain jurisdiction as to Purchase Options then outstanding in accordance with the terms of this Plan. No amendment, modification, or termination pursuant to this Section 19(b) shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of such Participant or obligations of the Corporation under any Purchase Option granted under this Plan prior to the effective date of such change. Changes contemplated by Section 17 or Section 18 shall not be deemed to constitute changes or amendments requiring Participant consent. Without limiting the generality of the Committee’s amendment authority, the Committee shall have the right to designate from time to time the Subsidiaries whose employees may be eligible to participate in this Plan (including, without limitation, any Subsidiary that may become such after the Effective Date), to change the service and other
qualification requirements set forth under the definition of Eligible Employee in Section 2, and to change the definition of Compensation set forth in Section 2 (in each case, subject to the requirements of Section 423(b) of the Code and applicable rules and regulations thereunder). Any such change shall not take effect earlier than the first Offering Period that starts on or after the effective date of such change. Any such change shall not constitute an amendment to this Plan requiring stockholder approval.
20. NOTICES
All notices or other communications by a Participant to the Corporation contemplated by this Plan shall be deemed to have been duly given when received in the form and manner specified by the Committee (or its delegate) at the location, or by the person, designated by the Committee (or its delegate) for that purpose.
21. CONDITIONS UPON ISSUANCE OF SHARES
This Plan, the granting of Purchase Options under this Plan and the offer, issuance and delivery of shares of Common Stock are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Corporation and as a condition precedent to the exercise of his or her Purchase Option, provide such assurances and representations to the Corporation as the Committee may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.
22. PLAN CONSTRUCTION
(a) Section 16. It is the intent of the Corporation that transactions involving Purchase Options under this Plan (other than “Discretionary Transactions” as that term is defined in Rule 16b-3(b)(1) promulgated by the Commission under Section 16 of the Exchange Act, to the extent there are any Discretionary Transactions under this Plan), in the case of Participants who are or may be subject to the prohibitions of Section 16 of the Exchange Act, satisfy the requirements for exemption under Rule 16b-3(c) promulgated by the Commission under Section 16 of the Exchange Act to the maximum extent possible. Notwithstanding the foregoing, the Corporation shall have no liability to any Participant for Section 16 consequences of Purchase Options or other events with respect to this Plan.
(b) Section 423. Except as the Committee may expressly provide in the case of one or more separate offerings or sub-plans adopted pursuant to Section 12(b), this Plan and Purchase Options are intended to qualify under Section 423 of the Code.
(c) Interpretation. If any provision of this Plan or of any Purchase Option would otherwise frustrate or conflict with the intents expressed above, that provision to the extent possible shall be interpreted so as to avoid such conflict. If the conflict remains irreconcilable, the Committee may disregard the provision if it concludes that to do so furthers the interest of the Corporation and is consistent with the purposes of this Plan as to such persons in the circumstances.
23. EMPLOYEES’ RIGHTS
(a) No Employment Rights. Nothing in this Plan (or in any Subscription Agreement or other document related to this Plan) will confer upon any Eligible Employee or Participant any right to continue in the employ or other service of the Corporation or any Subsidiary, constitute any contract or agreement of employment or other service or effect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Corporation or any Subsidiary to change such person’s compensation or other benefits or to terminate his or her employment or other service, with or without cause. Nothing contained in this Section 23(a), however, is intended to adversely affect any express independent right of any such person under a separate employment or service contract other than a Subscription Agreement.
(b) No Rights to Assets of the Corporation. No Participant or other person will have any right, title or interest in any fund or in any specific asset (including shares of Common Stock) of the Corporation or any Subsidiary by reason of any Purchase Option hereunder. Neither the provisions of this Plan (or of any Subscription Agreement or other document related to this Plan), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Corporation or any Subsidiary, on the one hand, and any Participant or other person, on the other hand. To the extent that a Participant or other person acquires a right to receive payment pursuant to this Plan, such right will be no greater than the right of any unsecured general creditor of the Corporation. No special or separate reserve, fund or deposit will be made to assure any such payment.
(c) No Stockholder Rights. A Participant will not be entitled to any privilege of stock ownership as to any Shares not actually delivered to and held of record by the Participant. Except as expressly required by Section 17, no adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
24. MISCELLANEOUS
(a) Governing Law; Severability. This Plan, the Purchase Options, Subscription Agreements, and other documents related to this Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware. If any provision
shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
(b) Captions and Headings. Captions and headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such captions and headings shall not be deemed in any way material or relevant to the construction of interpretation of this Plan or any provision hereof.
(c) No Effect on Other Plans or Corporate Authority. The adoption of this Plan shall not affect any other Corporation or Subsidiary compensation or incentive plans in effect. Nothing in this Plan will limit or be deemed to limit the authority of the Board or Committee (i) to establish any other forms of incentives or compensation for employees of the Corporation or any Subsidiary (with or without reference to the Common Stock), or (ii) to grant or assume options (outside the scope of and in addition to those contemplated by this Plan) in connection with any proper corporate purpose; to the extent consistent with any other plan or authority.
(d) No Effect on Other Compensation. Benefits received by a Participant under a Purchase Option granted pursuant to this Plan shall not be deemed a part of the Participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Corporation or any Subsidiary, except where the Committee or the Board (or the Board of Directors of the Subsidiary that sponsors such plan or arrangement, as applicable) expressly otherwise provides in writing.
25. TAX WITHHOLDING
Notwithstanding anything else contained herein to the contrary, the Corporation may deduct from a Participant’s Account balance as of a Purchase Date, before the exercise of the Participant’s Purchase Option is given effect on such date, the amount of any taxes which the Corporation reasonably determines it or any Subsidiary may be required to withhold with respect to such exercise. In such event, the maximum number of whole shares of Common Stock subject to such Purchase Option (subject to the other limits set forth in this Plan) shall be purchased at the Purchase Price with the balance of the Participant’s Account (after reduction for the tax withholding amount).
Should the Corporation for any reason be unable, or elect not to, satisfy its or any Subsidiary’s tax withholding obligations in the manner described in the preceding paragraph with respect to a Participant’s exercise of a Purchase Option, or should the Corporation or any Subsidiary reasonably determine that it or an affiliated entity has a tax withholding obligation with respect to a disposition of shares acquired pursuant to the exercise of a Purchase Option prior to satisfaction of the holding period requirements of Section 423 of the Code or at any other time in respect of a Participant’s participation in this Plan, the Corporation or Subsidiary, as the case may be, shall have the right at its option to (i) require the Participant to pay or provide for payment of the amount of any
taxes which the Corporation or Subsidiary reasonably determines that it or any affiliate is required to withhold with respect to such event or (ii) deduct from the Participant’s Account or from any amount otherwise payable to or for the account of the Participant the amount of any taxes which the Corporation or Subsidiary reasonably determines that it or an affiliate is required to withhold with respect to such event.
26. NOTICE OF SALE
Any person who has acquired shares under this Plan shall give prompt written notice to the Corporation of any sale or other transfer of the shares if such sale or transfer occurs (1) within the two-year period after the Grant Date of the Offering Period with respect to which such shares were acquired, or (2) within the twelve-month period after the Purchase Date of the Offering Period with respect to which such shares were acquired.
HEARTFLOW, INC.
SENIOR LEADERSHIP SEVERANCE POLICY
1.Purpose.
1.1This Senior Leadership Severance Policy (this “Policy”) establishes criteria and conditions for the provision of termination benefits to Participants (as defined below) of Heartflow, Inc. or any of its subsidiaries (collectively, the “Company”) upon a termination of their employment under certain circumstances.
1.2This Policy is effective as of July 17, 2025 (the “Effective Date”), and, with the exception of Section 4.3 below, it hereby supersedes and replaces any and all prior severance policies (including any severance provisions of a Participant’s employment agreement) of the Company. This Policy shall be administered by the Compensation Committee of Heartflow, Inc.’s Board of the Directors (the “Board”), or its delegate with respect to any participant who is not an “officer” as defined in Rule 16a-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (collectively, the “Administrator”).
1.3This Policy is designed to be an “employee welfare benefit plan,” as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and accordingly, this Policy is governed by ERISA. This document constitutes both the official plan document and the required summary plan description under ERISA.
2.Eligibility.
2.1This Policy applies to each full-time employee of the Company serving as a senior vice president or above (each, a “Participant”).
2.2In the event a Participant’s employment with the Company is involuntarily terminated other than for “Cause” (and other than due to death or Disability) or a Participant resigns his or her employment with the Company for “Good Reason” (a “Qualifying Termination”), in each case, as defined below, provided that the Participant complies with the requirements of Section 5 hereof, the Participant will be eligible to receive the severance benefits as set forth in Section 4.1 below. In the event of a Participant’s Qualifying Termination occurring within three (3) months prior to or twelve (12) months following a Change in Control (as defined below) (a “Qualifying CIC Termination”), provided that the Participant complies with the requirements of Section 5 hereof, the Participant will be eligible to receive the severance benefits as set forth in Section 4.2 below.
3.Definitions.
3.1“Accrued Obligations” for purposes of this Policy shall mean (i) any base salary that had accrued but had not been paid (including accrued and unpaid vacation time) on or before the date of the Participant’s termination of employment (the “Termination Date”) and (ii) any reimbursement due to the Participant for expenses reasonably incurred by the Participant on or
before the Termination Date and documented and pre-approved, to the extent applicable, in accordance with the Company’s expense reimbursement policies in effect at the applicable time.
3.2“Cause” for purposes of this Policy shall mean: (i) an act of dishonesty made by a Participant in connection with a Participant's services to the Company, (ii) a Participant's conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude, (iii) a Participant’s gross misconduct, (iv) a Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom a Participant owes an obligation of nondisclosure as a result of a Participant's relationship with the Company; (v) a Participant’s willful breach of any obligations under any written agreement or covenant with the Company; (vi) a Participant’s continued failure to perform his or her duties to the Company after a Participant has received a written demand of performance from the Company which specifically sets forth the factual basis for the Company's belief that a Participant has not substantially performed a Participant’s duties and has failed to cure such non-performance to the Company's satisfaction within 10 business days after receiving such notice, or (vii) a Participant’s willful violation of any of a Participant’s statutory or common law duties to the Company.
3.3“Change in Control” for purposes of this Policy shall mean that one or more of the following have occurred: (i) consummation of a change in the ownership of Heartflow, Inc. which occurs on the date that any one person, or more than one person acting as a group ("Person"), acquires ownership of the stock of Heartflow, Inc. that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of Heartflow, Inc., (ii) if Heartflow, Inc. has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a change in the effective control of Heartflow, Inc. which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election (and for purposes of this clause (ii), if any Person is considered to be in effective control of Heartflow, Inc., the acquisition of additional control of the Company by the same Person will not be considered a Change in Control, or (iii) a change in the ownership of a substantial portion of the Company's assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (A) its sole purpose is to change the state of Heartflow Inc.’s incorporation, or (B) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held Heartflow Inc.'s securities immediately before such transaction.
3.4“Disability” for purposes of this Policy, shall mean a Participant’s physical or mental illness or incapacity that has rendered or will render the Participant unable to perform his or her duties with or without reasonable accommodation as required by applicable law (including some additional period of leave) for a period of 120 consecutive days (including weekends and holidays) or for 180 days within any twelve (12) month period.
3.5“Good Reason” for purposes of this Policy shall mean a Participant's resignation within 30 days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without a Participant’s consent: (i) the material reduction of a Participant’s authority, duties or responsibilities; (ii) a material reduction of a Participant's base compensation, provided that, prior to a Change in Control, an across-the-board reduction in the salary level of all other Participants by the same percentage amount as part of a general salary level reduction shall not constitute a material reduction of a Participant's base compensation; and (iii) a material change in the geographic location at which a Participant must perform the Participant's services; provided that in no instance will the relocation of a Participant to a facility or a location of 50 miles or less from a Participant's then current office location be deemed material for purposes of this Policy. A Participant will not resign based on Good Reason, and no such resignation based on Good Reason shall be effective, without first providing the Company with written notice of the acts or omissions constituting the grounds for Good Reason within 90 days of the initial existence of the grounds for Good Reason and a reasonable cure period of not less than 30 days following the date of such notice.
4.Severance Benefits.
Severance benefits are as set forth below, except as modified by Exhibit A attached hereto.
4.1Severance Benefits Upon a Qualifying Termination. Upon a Participant’s Qualifying Termination, in addition to any Accrued Obligations, the Participant will be entitled to receive the following benefits:
(a)The Company shall continue to pay the Participant, subject to tax withholding and other authorized deductions, the Participant’s base salary for the number of months noted in the table below at the annualized rate in effect on the Termination Date (the “Base Salary Continuation”). Subject to Section 7.1 below, the Company shall pay the Base Salary Continuation to the Participant in equal monthly installments (rounded down to the nearest whole cent) over the number of months of Base Salary Continuation provided, with the first installment payable on (or within ten (10) days following) the sixtieth (60th) day following the Participant’s Termination Date and to include each such installment that was otherwise (but for such 60-day delay) scheduled to be paid following the Participant’s Termination Date and prior to the date of such payment.
(b)The Company shall pay or reimburse the Participant for his or her premiums charged to continue medical coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at the same or reasonably equivalent medical coverage for the Participant (and, if applicable, the Participant’s eligible dependents) as in effect immediately prior to the Termination Date, to the extent that the Participant elects such continued coverage
for the number of months noted in the table below (the “COBRA Continuation Coverage”); provided that the Company’s obligation with respect to the COBRA Continuation Coverage shall cease upon the first to occur of the Participant’s death, the date the Participant becomes eligible for coverage under the health plan of a future employer, or the date the Company ceases to offer group health coverage to its active Participant employees or the Company is otherwise under no obligation to offer COBRA Continuation Coverage to the Participant; and provided, further, that the Company’s obligations with respect to such continued coverage are subject to the Company’s ability to comply with applicable law and provide such benefit without resulting in adverse tax consequences.
| | | | | | | | | | | |
| Severance Benefits Upon a Qualifying Termination |
| CEO | C-Level | SVP-Level |
| Base Salary Continuation | 12 months | 9 months | 6 months |
| COBRA Continuation Coverage | 12 months | 9 months | 6 months |
4.2Severance Benefits Upon a Qualifying CIC Termination. Upon a Participant’s Qualifying CIC Termination, in addition to any Accrued Obligations, the Participant will be entitled to receive the following benefits:
(a)The Company shall continue to pay the Participant, subject to tax withholding and other authorized deductions, a sum equal to the Participant’s base salary for the number of months noted in the table below at the annualized rate in effect on the Termination Date plus the Participant’s target bonus for the year of termination (the “Severance Payments”). Subject to Section 7.1 below, the Company shall pay the Severance Payments to the Participant in equal monthly installments (rounded down to the nearest whole cent) over the number of months of base salary continuation provided, with the first installment payable on (or within ten (10) days following) the sixtieth (60th) day following the Participant’s Termination Date and to include each such installment that was otherwise (but for such 60-day delay) scheduled to be paid following the Participant’s Termination Date and prior to the date of such payment. To the extent a Participant’s Qualifying CIC Termination occurs during the 3-month period prior to a Change in Control, a Participant will initially be paid the cash payments set forth in Section 4.1 above, and will receive a true-up payment for the target bonus component of the Severance Payments that would have been payable prior to the date of the Change in Control within 10 days following the date of the Change in Control.
(b)All of the Participant’s outstanding equity awards, to the extent unvested, shall become fully vested and exercisable as of the Participant’s Termination Date.
(c)The Company shall provide the Participant COBRA Continuation Coverage in accordance with the terms set forth in Section 4.1(b) above for the number of months noted in the table below.
| | | | | | | | | | | |
| Severance Benefits Upon a Qualifying CIC Termination |
| CEO | C-Level | SVP-Level |
| Severance Payments (Base Salary and Target Bonus) | 18 months | 12 months | 9 months |
| COBRA Continuation Coverage | 18 months | 12 months | 9 months |
4.3A Participant with an employment or other agreement that provide for severance benefits will receive such benefits in lieu of the benefits provided under this Policy unless the benefits applicable to a Participant provided under this Policy exceed the aggregate benefits payable under such agreement(s), in which case a Participant will receive the severance benefits payable hereunder in lieu of receiving the severance benefits under such agreement(s).
5.Conditions to Receipt of Severance.
5.1All severance offered under this Policy will be expressly conditioned on a Participant’s (i) execution and non-revocation, in accordance with the timing and other requirements set forth in this paragraph, of a written separation agreement in a form to be provided by the Company that includes a full release and waiver of any and all claims and potential claims of Participant, along with other standard provisions (other than any new or additional restrictive covenants) in a form acceptable to the Company (the “Separation Agreement”), and (ii) adherence to any restrictive covenants entered into with the Company to which the Participant is bound. The Company shall provide the final form of Separation Agreement to a Participant not later than seven (7) days following the Participant’s Termination Date, and a Participant shall be required to execute and return the Separation Agreement to the Company within twenty-one (21) days (or forty-five (45) days if such longer period of time is required to make the Separation Agreement maximally enforceable under applicable law) after being provided the Separation Agreement.
6.Additional Terms.
6.1Like all other policies, the Company reserves the right to revise or terminate this Policy at its discretion and without advance notice, provided that this Policy may not be amended in any way that is detrimental to a Participant following a Change in Control. Nothing in this Policy shall be interpreted as altering the at-will status of employment, nor as creating a contract, express or implied. This Policy will at all times be entirely unfunded and no Participant will have any interest in any particular asset of the Company by reason of any right to receive benefits under this Policy and any such Participant will have only the rights of a general unsecured creditor of the Company with respect to any rights under this Policy. This Policy will be
governed by and enforced in accordance with the laws of the State of Delaware, except to the extent such laws are preempted by federal law, including ERISA. Nothing in this Policy prohibits a Participant from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. A Participant does not need the prior authorization of the Company’s Legal Department to make any such reports or disclosures and is not required to notify the Company that a Participant has made such reports or disclosures.
7.Tax Provisions.
7.1All benefits provided under this Policy will be subject to any required federal, state and local tax withholding and deductions. This Policy and any severance benefits payable under it are intended to be exempt from or, if not exempt, to otherwise comply with Section 409A of the Internal Revenue Code of 1986, where applicable, and will be interpreted and applied in a manner consistent with that intention. Notwithstanding any provision of this Policy to the contrary, to the extent that a payment or benefit provided hereunder is subject to Section 409A and payable on account of a Participant’s “separation from service” (as defined in Section 409A and the related regulations), such payment will be delayed for a period of six months after the Participant’s separation date (or if earlier within thirty (30) days of the Participant’s date of death following the date of such separation) if the Participant is a “specified employee” (as defined in Section 409A and the related regulations) of the Company, as determined in accordance with the regulations issued under Section 409A and the procedures established by the Company. Notwithstanding the foregoing, this provision will not apply to (i) all payments on separation from service that satisfy the short-term deferral rule of Treas. Reg. §1.409A-1(b)(4), (ii) to the portion of the payments on separation from service that satisfy the requirements for separation pay due to an involuntary separation from service under Treas. Reg. §1.409A-1(b)(9)(iii), and (iii) to any payments that are otherwise exempt from the six month delay requirement of the Treasury Regulations under Section 409A. Notwithstanding anything to the contrary herein, to the extent necessary to comply with Section 409A, a termination of employment will not be deemed to have occurred for purposes of a payment of amounts or benefits under this Policy upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of this Policy, references to a “resignation,” “termination,” “termination of employment,” or like terms will mean a separation from service to the extent required. For purposes of Section 409A of the Code, each payment made under this Policy will be designated as a “separate payment” within the meaning of the Section 409A.
7.2Notwithstanding anything contained in this Policy to the contrary, to the extent that the payments and benefits provided under this Policy and benefits provided to, or for the benefit of, the Participant under any other Company plan or agreement (such payments or benefits are collectively referred to as the “Benefits”) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Benefits shall be reduced (but not below zero) if and to the extent that a reduction in the
Benefits would result in a Participant retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if a Participant received all of the Benefits (such reduced amount is referred to hereinafter as the “Limited Benefit Amount”).
8.Administration.
8.1The Administrator will be empowered to construe and interpret the provisions of this Policy and to perform and exercise all of the duties and powers granted to it under the terms of this Policy, including the determination of benefits payable hereunder. The Administrator may adopt such rules and regulations for the administration of this Policy as are consistent with the terms hereof. All interpretations and decisions made (both as to law and fact) and other action taken by the Administrator with respect to this Policy will be conclusive and binding upon all parties having or claiming to have an interest under this Policy. Not in limitation of the foregoing, the Administrator will have sole discretion and authority to decide any factual or interpretative issues that may arise in connection with its administration of this Policy (including without limitation any determination as to claims for benefits hereunder), and the Administrator’s exercise of such authority shall be conclusive and binding on all affected parties. Notwithstanding the foregoing, for purposes of ERISA, the Administrator will be the “named fiduciary” of this Policy.
9.Claims and Review.
9.1All inquiries and claims respecting this Policy must be made in writing and directed to the Administrator or the Administrator’s designee.
(a)In the case of a claim respecting a benefit, a written determination allowing or denying the claim shall be furnished to the claimant within ninety (90) days following receipt of the claim (unless the Administrator determines that special circumstances require an extension of time for processing such claim, in which case the Administrator will furnish the claimant written notice of such extension within the initial 90-day period, which shall set forth the special circumstances and the date by which the Administrator expects to render a determination). A denial or partial denial of a claim shall be dated (the “Determination Date”) and signed by the Company and shall clearly set forth the following information in a manner calculated to be understood by the claimant:
(i)the specific reason or reasons for the denial;
(ii)a specific reference to pertinent Policy provisions on which the denial is based;
(iii)a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
(iv)an explanation of the claim review procedure and the time limits applicable thereto, including a statement of the claimant's right to bring a civil action under section 502(a) of the Employee Retirement Income Security Act of 1974 following denial.
(b)A claimant may obtain review of an adverse determination by filing a written notice of appeal with the Administrator within sixty (60) days after the Determination Date. The Administrator shall then appoint one or more persons who shall conduct a full and fair review. As part of such review, the claimant shall have the right:
(i)to submit written comments, documents, records and other information relating to the claim;
(ii)to be provided, upon the claimant’s request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits; and
(iii)to be provided a review taking into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
(c)A decision shall be rendered no more than sixty (60) days after the request for review of an adverse determination (unless the Administrator determines that special circumstances require an extension of time for processing such claim, in which case the Administrator will furnish the claimant written notice of such extension within the initial 60-day period, which shall set forth the special circumstances and the date by which the Administrator expects to render a determination). The decision shall (i) set forth findings of fact and the specific reasons for the decision written in a manner calculated to be understood by the claimant, (ii) contain specific reference to pertinent Policy provisions on which the decision is based, and (iii) provide that, upon the claimant’s request and free of charge, the claimant shall be granted reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits.
9.2The Administrator may appoint any person or persons, whether or not connected with the Company, to review a claim. All applicable governmental regulations regarding claims and review shall be observed by the Company in connection with its administration of this Policy.
10.Statement of ERISA Rights.
10.1Employees are entitled to certain rights and protections under ERISA. ERISA provides that all employees eligible to participate under this Policy shall be entitled to:
1.Examine, without charge, at the Company’s corporate office, all documents relating to this Policy, including this document.
2.Obtain copies of these documents and other Policy information upon written request to the Company. The Company may make a reasonable charge for the copies.
10.2In addition to creating rights for eligible employees, ERISA imposes duties upon the people who are responsible for the operation of this Policy. The people who operate this Policy, called “fiduciaries,” have a duty to do so prudently and in the interest of eligible employees.
10.3Neither the Company nor any other person may discriminate against an employee in any way to prevent him or her from obtaining benefits or exercising his or her rights under ERISA.
10.4If a claim for benefits is denied or ignored, in whole or in part, an eligible employee has a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules. The employee has the right to have the Company review and reconsider the employee’s claim.
10.5If a Participant has any questions about this Section 10 or about his or her rights under ERISA, the Participant should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in the telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor at 200 Constitution Avenue, N.W., Washington, D.C. 20210. A Participant may also obtain certain publications about his or her rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration at 1-866-444-3272.
Plan Information
| | | | | | | | |
| a.Plan Name: | Heartflow, Inc. Senior Leadership Severance Policy |
| | |
| b.Plan Sponsor: | Heartflow, Inc. 331 E. Evelyn Avenue, Mountain View CA 94041 (650) 241-1221 |
| | |
| c.EIN: | 26-0506743 |
| | |
| d.Plan Administrator: | Compensation Committee of the Company’s Board of the Directors (or its delegate with respect to any participant who is not an “officer” as defined in Rule 16a-1 of the Exchange Act) |
| | |
| | Heartflow, Inc. 331 E. Evelyn Avenue, Mountain View CA 94041 (650) 241-1221 |
| | |
| e.Plan Type: | Employee welfare benefit plan |
| | |
| f.Agent for Legal Process | Plan Administrator and Plan Sponsor |
| | |
| g.Plan Number: | |
| | |
| h.Plan Year: | January 1 through December 31 (except that the first Plan Year will run from the Effective Date set forth below through the following December 31) |
| | |
| i.Effective Date | July 17, 2025 |
| | |
| | |
ii.This Policy is not covered by the Pension Benefit Guaranty Company |
EXHIBIT A
1.For so long as John Farquhar serves as the Chief Executive Officer of the Company, upon a Qualifying Termination of his employment, 25% of his outstanding equity awards, to the extent unvested, shall become vested and exercisable as of Mr. Farquhar’s Termination Date.
2.For so long as Campbell Rogers serves as the Chief Medical Officer of the Company or in a comparable or higher position with the Company (as determined by the Administrator), upon a Qualifying Termination of his employment, he shall receive a prorated bonus for the portion of the year of termination that Mr. Rogers’ was employed by the Company based on his target bonus for such year.
3.For purposes of clarity, if the position of Chief Executive Officer and/or Chief Medical Officer become filled on a temporary or permanent basis by individual other than Mr. Farquhar and Mr. Rogers, respectively, the individual filling such position will not be entitled to the benefits set forth on this Exhibit A, unless otherwise determined by the Administrator.
HEARTFLOW, INC.
DIRECTOR COMPENSATION POLICY
(Effective , 2025)
Directors of Heartflow, Inc., a Delaware corporation (the “Company”), who are not employed by the Company or one of its subsidiaries (“non-employee directors”) are entitled to the compensation set forth below, effective as of , 2025, for their service as a member of the Board of Directors (the “Board”) of the Company. The Board has the right to amend this policy from time to time.
| | | | | | | | |
| Cash Compensation | |
| Annual Cash Retainer | $50,000 |
| Annual Chairperson Retainer | $45,000 |
| Annual Audit Committee Chairperson Retainer | $20,000 |
| Annual Compensation Committee Chairperson Retainer | $15,000 |
| Annual Nominating and Corporate Governance Committee Chairperson Retainer | $10,000 |
| Annual Audit Committee Member Retainer | $10,000 |
| Annual Compensation Committee Member Retainer | $7,500 |
| Annual Nominating and Corporate Governance Committee Member Retainer | $5,000 |
| Equity Compensation | |
| Initial Equity Award (new director) | $500,000 |
| Annual Equity Award (continuing director) | $250,000 |
Cash Compensation
Each non-employee director will be entitled to an annual cash retainer while serving on the Board in the amount set forth above (the “Annual Cash Retainer”). A non-employee director who serves as the Chairperson of the Board will be entitled to an additional annual cash retainer while serving in that position in the amount set forth above (the “Annual Chairperson Retainer”). A non-employee director who serves as the Chairperson of the Audit Committee will be entitled to an additional annual cash retainer while serving in that position in the amount set forth above (the “Annual Audit Committee Chairperson Retainer”). A non-employee director who serves as the Chairperson of the Compensation Committee will be entitled to an additional annual cash retainer while serving in that position in the amount set forth above (the “Annual Compensation Committee Chairperson Retainer”). A non-employee director who serves as the Chairperson of the Nominating and Corporate Governance Committee will be entitled to an additional annual cash retainer while serving in that position in the amount set forth above (the “Annual Nominating and Governance Committee Chairperson Retainer”). A non-employee director who serves as a member of the Audit Committee (other than the Chairperson of the Audit Committee) will be entitled to an additional annual cash retainer while serving in that position in the amount set forth above (the “Annual Audit Committee Member Retainer”). A non-employee director who serves as a member of the Compensation Committee (other than the Chairperson of the Compensation Committee) will be entitled to an additional annual cash retainer while serving in that position in the amount set forth above (the “Annual Compensation Committee Member Retainer”). A non-employee director who serves as a member of the Nominating and Corporate Governance Committee (other than the Chairperson of the Nominating and Corporate Governance Committee) will be entitled to an additional annual cash retainer while serving in that position in the amount set forth above (the “Annual Nominating and Governance Committee Member Retainer”). No non-employee director will be entitled to a meeting fee for attending in-person or telephonically any Board or committee meetings.
The amounts of the Annual Cash Retainer, Annual Chairperson Retainer, Annual Audit Committee Chairperson Retainer, Annual Compensation Committee Chairperson Retainer, Annual Nominating and Governance Committee Chairperson Retainer and Annual Audit Committee Member Retainer, Annual Compensation Committee Member Retainer and Annual Nominating and Governance Committee Member Retainer are expressed as annualized amounts. These retainers will be paid on a quarterly basis, following the end of each calendar quarter in
arrears, and will be pro-rated if a non-employee director serves (or serves in the corresponding position, as the case may be) for only a portion of the calendar quarter (with the proration based on the number of calendar days in the quarter that the director served as a non-employee director or held the particular position, as the case may be).
Equity Awards
Annual Equity Awards for Continuing Board Members
On the date of the Company’s initial public offering (“IPO”) and on the date of each annual meeting of the Company’s stockholders thereafter, each non-employee director then in office will automatically be granted an annual equity award with a value equal to that set forth in the table above, which award shall be one hundred percent (100%) in nonstatutory stock options (the “Annual Equity Award”). The number of stock options underlying the Annual Equity Award will be determined on the date of grant by dividing the Annual Equity Award value by the fair value of a stock option calculated using the same pricing model and assumptions used in the Company’s financial statements and the per-share closing price of a share of the Company’s common stock (“Common Stock”) on the date of the IPO or the trailing 20 trading day average closing stock price of a share of Common Stock on the date of the annual meeting, as applicable. Subject to the non-employee director’s continued service, the Annual Equity Award will vest in one installment on the first anniversary of the date of grant. Should the annual meeting of the Company’s stockholders in the year following the year in which the Annual Equity Award was granted occur prior to the vesting date of the Annual Equity Award, the outstanding and unvested portion of the Annual Equity Award will vest on the day prior to that annual meeting. In the event that more than one annual meeting of the Company’s stockholders occurs during a given fiscal year, Annual Equity Awards will be made only in connection with the first such meeting to occur in that year.
Equity Awards for New Board Members
For each new non-employee director appointed or elected to the Board (or any non-employee director serving on the Board prior to the IPO who has not received compensation for such services prior to such date), on the date that the new non-employee director first becomes a member of the Board or the date of the IPO, as applicable, the new non-employee director will automatically be granted an equity award with a value equal to that set forth in the table above, which award shall be one hundred percent (100%) in nonstatutory stock options (the “New Director Equity Award”), with the number of stock options subject to such New Director Equity Award to be determined in the same manner as described above with respect to Annual Equity Awards. Subject to the non-employee director’s continued service, 1/3 of the New Director Equity Award will vest on the first anniversary of the grant date and the remaining 2/3 of the New Director Equity Award will vest in 24 substantially equal monthly installments thereafter.
Provisions Applicable to All Equity Awards
Each Annual Equity Award and New Director Equity Award will be made under and subject to the terms and conditions of the Company’s 2025 Performance Incentive Plan or any successor equity compensation plan approved by the Company’s stockholders and in effect at the time of grant, and will be evidenced by, and subject to the terms and conditions of, any award agreement in the form approved by the Board to evidence such type of grant pursuant to this policy.
Expense Reimbursement
All directors will be entitled to reimbursement from the Company for their reasonable travel (including airfare and ground transportation), lodging and meal expenses incident to meetings of the Board or committees thereof or in connection with other Board related business.
LEASE
by and between
MV CAMPUS OWNER, LLC,
a Delaware limited liability company
(“Landlord”)
and
HEARTFLOW, INC.,
a Delaware corporation
(“Tenant”)
August 9, 2021
For Premises Located At:
331 E. Evelyn Avenue
Mountain View, California
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| | TABLE OF CONTENTS | |
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| 1. | Lease of Premises | 1 |
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| 2. | Term | 2 |
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| 3. | Possession | 2 |
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| 4. | Rental Payments; Advance Rent | 4 |
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| 5. | Base Rental | 4 |
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| 6. | Additional Rental | 4 |
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| 7. | Operating Expenses | 6 |
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| 8. | Tenant Taxes; Rent Taxes | 9 |
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| 9. | Payments | 10 |
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| 10. | Late Charges | 10 |
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| 11. | Use Rules | 11 |
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| 12. | Alterations | 11 |
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| 13. | Repairs | 13 |
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| 14. | Landlord’s Right of Entry | 15 |
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| 15. | Insurance | 16 |
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| 16. | Waiver of Subrogation | 16 |
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| 17. | Default | 18 |
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| 18. | Waiver of Breach | 20 |
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| 19. | Assignment and Subletting | 20 |
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| 20. | Destruction | 23 |
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| 21. | Tenant’s Property | 24 |
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| 22. | Services to the Premises | 24 |
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| 23. | Waiver of Jury Trial | 26 |
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| 24. | Time | 27 |
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| 25. | Subordination and Attornment | 27 |
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| 26. | Estoppel Certificates | 28 |
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| 27. | Cumulative Rights | 28 |
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| 28. | Holding Over | 28 |
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| | TABLE OF CONTENTS | |
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| 29. | Surrender of the Premises | 29 |
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| 30. | Notices | 29 |
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| 31. | Damage or Theft of Personal Property | 30 |
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| 32. | Eminent Domain | 30 |
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| 33. | Parties | 31 |
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| 34. | Liability of Tenant | 31 |
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| 35. | Force Majeure | 32 |
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| 36. | Landlord’s Liability | 32 |
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| 37. | Landlord’s Covenant of Quiet Enjoyment | 33 |
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| 38. | Letter of Credit | 33 |
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| 39. | Hazardous Substances | 37 |
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| 40. | Broker | 38 |
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| 41. | Signage | 38 |
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| 42. | Attorney Fees | 39 |
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| 43. | Tenant’s Emergency Generator | 39 |
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| 44. | Terrace Rights | 40 |
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| 45. | Miscellaneous | 40 |
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| Exhibit A | Legal Description of the Land | A-l |
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| Exhibit B-l | Floor Plans of the Premises | B-l |
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| Exhibit B-2 | Site Plan of Project | B-2 |
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| Exhibit C | Work Letter | D-l |
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| Exhibit D | Rules and Regulations | G-l |
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| Exhibit E | Form of Tenant Estoppel Certificate | H-l |
LEASE
Basic Lease Information
The following Basic Lease Information is incorporated in and made a part of the Lease to which it is attached. If there is any conflict between the Basic Lease Information and the remainder of the Lease, the Basic Lease Information shall control.
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Effective Date: | August 9, 2021 |
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Landlord: | MV CAMPUS OWNER, LLC, a Delaware limited liability company |
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Landlord’s Address: | c/o Rockwood Capital, LLC 140 East 45th Street, 34th Floor New York, NY 10017 Attn: General Counsel/Chief Compliance Officer |
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with a copy to: | c/o Rockwood Capital, LLC 50 California Street, 30th Floor San Francisco, CA 94111 Attn: 301 – 381 E Evelyn Asset Manager |
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and to: | Kennedy, Lamishaw & Rossi LLP 707 Wilshire Boulevard, Suite 1400 Los Angeles, CA 90017 Attn: William J. Birney, Esq. |
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| Tenant | HEARTFLOW, INC., a Delaware corporation |
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Tenant’s Address: | Before the Lease Commencement Date: | 1400 Seaport Blvd., Bldg. B Redwood City, CA 94063 Attn: CFO With a copy to: 1400 Seaport Blvd., Bldg. B Redwood City, CA 94063 Attn: Legal |
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| After the Lease
Commencement Date: | 331 E. Evelyn Avenue Mountain View, CA 94041 Attn: CFO With a copy to: 331 E. Evelyn Avenue Mountain View, CA 94041 Attn: Legal |
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| Building: | Building 331- 331 E. Evelyn Avenue, Mountain View, CA 94041 |
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| Project: | The buildings shown on the exhibit attached hereto as Exhibit B-2, the Land, any other improvements now or hereafter constructed on the Land, and the Common Areas, which collectively are commonly referred to as the Mountain View Corporate Center. |
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Premises Rentable Square Feet: | 61,496 rentable square feet (“RSF”). See Section 1(b). |
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Building Rentable Square Feet: | 67,048 RSF. See Section 1(b). |
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Project Rentable Square Feet: | 288,638 RSF. See Section 1(b). |
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Delivery Date: | Within three (3) Business Days after the complete execution of this Lease. |
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Lease Term: | Eight (8) years after the Rent Commencement Date. |
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Premises: | 61,496 RSF in the Building. |
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Use of Premises: | General office, research and development (“R&D”), and ancillary uses thereto. |
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Base Rental: | Initially $5.85 per RSF of the Premises per month, for a total per month initially of $359,751.60. Base Rental shall increase by three percent (3.0%) on each anniversary of the Lease Commencement Date during the Lease Term. |
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Lease Commencement Date: | January 1, 2022. | |
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Rent Commencement Date: | September 1, 2022. | |
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Expiration Date: | August 31, 2030. | |
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Advance Rent: | $359,751.60, payable on the execution and delivery of this Lease. See Section 4(c). |
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| Tenant’s Share | 91.72% of the Building, 21.31% of the Project. |
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Letter of Credit: | $4,317,019.20, due upon the execution and delivery of this Lease and subject to reduction as provided in Section 38. |
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Tenant Improvement Allowance: | The maximum amount of $1,844,880.00 (i.e., $30.00 per RSF in the Premises). |
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Broker(s): | Newmark Cornish & Carey, representing Landlord and Cushman & Wakefield, representing Tenant. See Section 40. |
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LEASE
This Lease (together with the Basic Lease Information and the Exhibits, which are hereby incorporated into the Lease by this reference, collectively, the “Lease”) is made as of the date specified in the Basic Lease Information, by and between MV CAMPUS OWNER, LLC, a Delaware limited liability company (“Landlord”), and HEARTFLOW, INC., a Delaware corporation (“Tenant”), who hereby agree as follows:
1. Lease of Premises.
(a) Lease of Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, for the Lease Term (as defined below) and subject to the covenants to be performed by Tenant, those certain premises (the “Premises”) as described in the Basic Lease Information located in that certain building described in the Basic Lease Information (the “Building”) located on that certain tract of land (the “Land”) more particularly described on Exhibit A attached hereto. The Premises are outlined on the floor plan attached hereto as Exhibit B-l. Tenant shall have the non-exclusive right and privilege to use the Common Areas of the Project in common with other tenants in the Project. The “Common Areas” shall mean all areas, improvements, space, and special services, if any, within the Building or on the Land made available by Landlord from time to time, if at all, for the common or joint use and benefit of all tenants, customers, and invitees of the Building, including, without limitation, those parking areas, parking garages and facilities, access roads, service drives, service areas, driveways, entrances, exits and other means of access, retaining walls, landscaped areas, truck serviceways, loading docks or ramps, pedestrian walkways, overstreet walkways, connecting malls, atriums, walls, ceilings, patios, courtyards, garden areas, plaza areas, park areas, concourses, ramps, sidewalks, corridors, washrooms, signs, maintenance buildings, utility buildings, hallways, lobbies, elevators, elevator foyers, escalators, stairs, common window areas, and trash, garbage or rubbish areas, but specifically excluding any space made available exclusively for the use or benefit of other tenants at the Project. Landlord or its successors or assigns hereby reserve the right from time to time in its sole discretion to change or modify the size, use, shape, location or nature of any of the Project and/or the Common Areas other than the Premises (except as otherwise permitted hereunder), or eliminate them altogether, all without any liability to Tenant, so long as Tenant’s access to, and use of, the Premises is not materially impaired. There is no easement for light, view or air included in the Premises or being granted hereunder. Except as specifically set forth in this Lease and in the Work Letter attached hereto as Exhibit C (the “Work Letter”), Landlord shall not be obligated to provide or pay for any improvement, work or services related to the Premises or the Project. Tenant acknowledges that Landlord has made no representation or warranty regarding the condition of the Premises, the Building, the Common Areas or the Project except as specifically set forth in this Lease.
(b) Calculation of RSF. Notwithstanding anything set forth in this Lease to the contrary, Landlord and Tenant hereby stipulate and agree that the RSF of the Premises, the Building and the Project are as set forth in the Basic Lease Information. The RSF shall not be subject to recalculation, except with respect to new construction, additions or alterations which increase the floor area of the Premises or the Project, as applicable.
(c) Tenant Requirements. Concurrent with the execution and delivery of this Lease, Tenant shall deliver to Landlord the following: (i)the Advance Rent (as described in the Basic Lease Information), (ii) the Letter of Credit (as described in the Basic Lease Information), (iii) policies of insurance or duly executed certificates of insurance with respect thereto in accordance with Section 15 below.
(d) Furniture, Fixtures and Equipment. Upon Landlord's tender of possession of the Premises to Tenant, Landlord shall simultaneously transfer, assign and convey to Tenant all of Landlord's right, title and interest, if any, in and to furniture, fixtures and equipment currently located within the Premises (the "FF&E"). The FF&E is hereby conveyed by Landlord to Tenant without charge to Tenant in is its current "AS IS", "WHERE IS", and "WITH ALL FAULTS" condition and without any representation or warranty by Landlord whatsoever, including, without limitation, that the FF&E is operational and suitable to Tenant's requirements, any implied warranties of merchantability and fitness for any particular purpose, warranties created by any affirmation of fact or promise or by any description of the FF&E conveyed hereunder. In connection with the foregoing, and as material consideration for Landlord transferring, assigning and conveying the FF&E to Tenant, Tenant hereby agrees that Landlord shall have no obligations with respect to the FF&E or compliance with any applicable requirements relating thereto nor shall Landlord be responsible for any damage that may be caused to or by the FF&E. Upon the expiration or earlier termination of this Lease, Tenant shall, at Tenant's sole cost and expense, remove the FF&E from the Premises and repair any damage to the Premises and Building caused thereby.
2. Term.
The term of this Lease (“Lease Term”) shall commence on the Lease Commencement Date and, unless sooner terminated as provided in this Lease, shall end on the expiration of the period designated in the Lease Term above (“Expiration Date”). However, if the Expiration Date would not otherwise fall on the last day of a calendar month, then the Expiration Date shall be the last day of the calendar month in which the Expiration Date would otherwise occur.
3. Possession.
(a) Landlord shall deliver possession of the Premises on the Delivery Date with the mechanical, electrical and HVAC systems serving the Premises (the “Building Systems”) in good condition (herein, the “Delivery Condition”. No delay in delivery of possession of the Premises shall operate to extend the term of this Lease or amend Tenant’s obligations under this Lease; provided, however, that the Rent Commencement Date shall be delayed day for day for each day after the Delivery Date that Landlord does not deliver the Premises to Tenant. In the event that as of the Delivery Date (i) the Building Systems are not in the Delivery Condition and (ii) Tenant delivers to Landlord written notice of the existence of the item or items not in the Delivery Condition (the “Delivery Condition Notice”) by the date which is ninety (90) days after the Delivery Date (the “Delivery Condition Outside Date”), then Landlord shall, at Landlord’s sole cost and expense which expense shall not be included in Additional Rental or otherwise chargeable to Tenant, do that which is necessary to put the applicable components of the Building Systems described in the Delivery Notice into the Delivery Condition within thirty (30) days after Landlord’s receipt of the Delivery Notice; provided, however, that to the extent any such failure in the Delivery Condition is caused by the Tenant Improvements to be constructed in the Premises pursuant to Exhibit C, then Tenant shall perform such work at Tenant’s sole cost and expense. If Tenant fails to deliver the Delivery Condition Notice to Landlord on or prior to the Delivery Condition Outside Date, Landlord shall have no obligation to perform the work described in the foregoing provisions of this Section 3(a); provided that Landlord shall remain responsible for making all alterations and improvements which are Landlord's responsibility to make pursuant to Section 13(a) below.
(b) Tenant shall have the right to occupy the Premises during the period from the Delivery Date until the day before the Lease Commencement Date (the “Beneficial Occupancy Period”), provided that (i) Tenant has accepted the Premises and shall have confirmed same in a writing delivered to Landlord, and (ii) all of the terms and conditions of this Lease shall apply, including, without limitation, Tenant's obligation to pay to Landlord all sums and charges required to be paid by Tenant
under this Lease, including Tenant’s payment of all Additional Rental from and after the Additional Rental Commencement Date pursuant to Section 4(a) below, as though the Rent Commencement Date had occurred (although the Rent Commencement Date shall not actually occur until the occurrence of the same pursuant to the terms set forth in the Basic Lease Information) upon such occupancy of any portion of the Premises by Tenant; provided however, during such Beneficial Occupancy Period, Tenant shall not be obligated to pay Base Rental until the Rent Commencement Date actually occurs.
(c) Except as set forth herein, Tenant acknowledges and agrees that it has inspected the Premises and agrees to accept the same on the Delivery Date, “AS IS” and “WITH ALL FAULTS”. TENANT ACKNOWLEDGES THAT LANDLORD HAS NOT MADE, AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTIES TO TENANT WITH RESPECT TO THE QUALITY OF CONSTRUCTION OF ANY LEASEHOLD IMPROVEMENTS OR TENANT FINISH WITHIN THE PREMISES OR AS TO THE CONDITION OF THEPREMISES, EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD’S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY (xiv) OPERATION, (xv) THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, HAZARDOUS CONDITION OR HAZARDOUS ACTIVITY OR (xvi) COMPLIANCE OF THE PREMISES WITH ANY REGULATIONS OR EASEMENT AGREEMENTS; AND ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE PREMISES IS OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE PREMISES HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE PREMISES OF ANY NATURE, WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 3(c) HAVE BEEN NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE. TENANT’S OBLIGATION TO PAY RENT UNDER THIS LEASE IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES.
(d) Tenant shall, at Tenant’s sole cost and expense, promptly comply with all laws, ordinances, codes, rules, regulations, orders and other requirements of any government or public authority now in force or which may hereafter be in force, with all requirements of any board of fire underwriters or similar body now or hereafter constituted, and with all directions, temporary and permanent certificates of occupancy and other relevant rules and regulations of interpretations thereof issued pursuant to any law by any governmental agency or officer, including, without limitation, the Americans with Disabilities Act of 1990 (as amended) (collectively, “Laws”), insofar as any of the foregoing relate to or are required by the condition, use or occupancy of the Premises or the operation, use or maintenance of any personal property, trade fixtures, machinery, equipment or improvements in the Premises. The judgment of any court of competent jurisdiction or the admission of either party in any judicial action, regardless of whether the other party is a party thereto, that such party has violated any of the foregoing Laws shall be conclusive of that fact as between Landlord and Tenant.
4. Rental Payments; Advance Rent.
(a) Commencing on the earlier of (i) Lease Commencement Date and (ii) the date that Tenant commences business operations in the Premises (herein, the “Additional Rental Commencement Date”), and continuing throughout the Lease Term, Tenant hereby agrees to pay all Rent due and payable under this Lease. Notwithstanding the foregoing, Base Rental shall not be due or payable by Tenant until the Rent Commencement Date. Tenant’s Operating Expense Rental, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, including without limitation any and all other sums that may become due by reason of any default of Tenant or failure on Tenant’s part to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant, are hereinafter collectively referred to as the “Additional Rental,” and the Base Rental and the Additional Rental are herein collectively referred to as “Rent.” Base Rental and Tenant’s Forecast Additional Rental shall be due and payable in twelve (12) equal installments (subject to Landlord’s right to vary Tenant’s Forecast Additional Rental pursuant to Section 6(a)) on the first day of each calendar month, commencing on the Lease Commencement Date and continuing thereafter throughout the Lease Term and any extensions or renewals thereof. Tenant hereby agrees to pay such Rent to Landlord at Landlord’s address as provided herein (or such other address as Landlord designates from time to time) monthly in advance. Tenant shall pay all Rent and other sums of money which are due and payable by Tenant to Landlord at the times and in the manner provided in this Lease, without demand, set off, counterclaim or abatement (except as specifically provided to the contrary herein).
(b) Tenant shall deposit with Landlord upon execution of this Lease the sum set forth under “Advance Rent” in the Basic Lease Information. Such amount shall be applied by Landlord to the first monthly installment of Base Rental following the Rent Commencement Date as it becomes due hereunder. In the event Tenant fails to take possession of the Premises when required or otherwise fails to comply with any of Tenant’s obligations or warranties hereunder, the Advance Rent shall be retained by Landlord for application in reduction, but not in satisfaction, of damages suffered by Landlord as a result of Tenant’s breach. Landlord shall not be required to keep the Advance Rent separate from its general accounts, or to pay interest thereon.
5. Base Rental.
From and after the Rent Commencement Date, Tenant shall pay to Landlord a base monthly rental (herein called “Base Rental”) equal to the Base Rental set forth in the Basic Lease Information.
6. Additional Rental.
(a) For purposes of this Lease, “Tenant’s Forecast Additional Rental” means Landlord’s reasonable estimate of Tenant’s Operating Expense Rental for the initial period of the Lease Term from the Lease Commencement Date until the end of the first calendar year of the Lease Term, and for all subsequent calendar years or portions thereof occurring during the balance of the Lease Term. If at any time it reasonably appears to Landlord that Tenant’s Operating Expense Rental for the current calendar year will vary from Landlord’s estimate, Landlord shall have the right to reasonably revise its estimate for such year by notice to Tenant and subsequent payments by Tenant for such year shall be based upon such revised estimate. Failure to make such a revision shall not prejudice Landlord’s right to collect the full amount of Tenant’s Operating Expense Rental. Prior to the Lease Commencement Date and thereafter prior to the beginning of each calendar year during the Lease Term, including any extensions thereof, Landlord shall present to Tenant a statement of Tenant’s Forecast Additional Rental for such calendar year; provided, however, that if such statement is not given prior to the beginning of any
calendar year, Tenant shall continue to pay during the next ensuing calendar year on the same basis as in the prior calendar year until the month after such statement is delivered to Tenant. Commencing with the first day of the calendar month following the month in which the Tenant’s Forecast Additional Rental was delivered to Tenant, Tenant shall pay Tenant’s Forecast Additional Rental (less amounts, if any, previously paid toward such excess for such year) to Landlord in equal monthly installments over the remainder of such calendar year in advance on the first day of each month.
(b) For purposes of this Lease, “Tenant’s Operating Expense Rental” means for each calendar year (or portion thereof) during the Lease Term Tenant’s Share of Operating Expenses (as defined below). “Expense Year” means each calendar year during the Lease Term and each portion of a calendar year at the beginning and end of the Lease Term. Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive-month period. In the event of any such change, Tenant’s Operating Expense Rental shall be equitably adjusted for any Expense Year involved in any change. “Tenant’s Share” as it relates to Operating Expenses for the Building shall be determined by dividing the RSF of the Premises by the total number of RSF in the Building, expressed as a percentage. “Tenant’s Share” as it relates to Operating Expenses for the Project other than the Building shall be determined by dividing the RSF of the Premises by the total number of RSF in the Project, expressed as a percentage. In the event during any Expense Year the Building is less than one hundred percent (100%) occupied on an average annualized basis, Operating Expenses that vary with occupancy of the Building (“Variable Operating Expenses”) shall be adjusted to reflect the Operating Expenses of the Building as though they were one hundred percent (100%) occupied for such year on an average annualized basis, and the increase or decrease in the sums owed pursuant to this Section 6 shall be based upon such Operating Expenses as so adjusted. Therefore, if the Variable Operating Expenses actually incurred by Landlord are lower than would be incurred if at least than one hundred percent (100%) of the Building were occupied or if Landlord is not furnishing any particular item(s) of work or services (the cost of which would otherwise be included within Operating Expenses) to portions of the Building because (A) such portions are not occupied, (B) such item of work or services is not required or desired by the tenant of such portion and the same is not included in such tenant’s Operating Expenses under its lease, or (C) such tenant is itself obtaining such item of work or services and the same is not included in such tenant’s Operating Expenses under its lease, then appropriate adjustments shall be made to determine Variable Operating Expenses for such calendar year as though the Building were actually occupied to the extent less than one hundred percent (100%) of the number of RSF in the Building and as though Landlord had furnished such item of work or services. For the purposes of calculating any management fee payable as part of Operating Expenses, the monthly Base Rental due commencing on the Additional Rental Commencement date shall be deemed to be the applicable amount as set forth in the Basic Lease Information for the first payment of Base Rental hereunder.
(c) Within one hundred fifty (150) days after the end of (i) the calendar year in which the Lease Commencement Date occurs and (ii) each Expense Year thereafter during the Lease Term, or as soon thereafter as practicable, Landlord shall provide Tenant a statement showing the Operating Expenses for said Expense Year, as prepared by Landlord, and a statement prepared by Landlord comparing Tenant’s Forecast Additional Rental with Tenant’s Operating Expense Rental (the “Reconciliation Statement”). In the event Tenant’s Forecast Additional Rental paid exceeds Tenant’s Operating Expense Rental for said Expense Year, Landlord shall credit such excess against Rent next due hereunder or, if the Lease Term has expired or is about to expire, refund such excess to Tenant within thirty (30) days after Landlord’s delivery of such Reconciliation Statement if Tenant is not in default under this Lease (in the instance of a default such excess shall be held as additional security for Tenant’s performance, may be applied by Landlord to cure any such default, and shall not be refunded until any such default is cured to Landlord’s reasonable satisfaction). In the event that Tenant’s Operating Expense
Rental exceeds Tenant’s Forecast Additional Rental paid for said Expense Year, Tenant shall pay Landlord, within thirty (30) days of receipt of the statement, an amount equal to such difference. The provisions of this paragraph (c) shall survive the expiration or earlier termination of this Lease.
(d) For so long as Tenant is not in default under this Lease beyond any applicable notice and cure period, Landlord’s books and records pertaining to the calculation of Operating Expenses for any Expense Year within the Lease Term may be audited, at Tenant’s expense, by an Authorized Representative of Tenant for a period of one hundred eighty (180) days following the delivery of a Reconciliation Statement (or any Statement revising the same); provided, that Tenant shall give Landlord not less than ten (10) Business Days’ (as defined in Section 45(u) below) prior written notice of any such audit. For purposes hereof, an “Authorized Representative” of Tenant shall mean a bona fide employee of Tenant, any national or regional accounting firm, or any other party reasonably approved in writing by Landlord, in each case who is not representing, and agrees not to represent, any other tenant or subtenant in the Project regarding Additional Rental and is not working on a contingency basis. In no event shall an Authorized Representative of Tenant include the owner of any office building in the Silicon Valley area or any affiliate of such owner. Prior to the commencement of any audit, Tenant shall cause its Authorized Representative to agree in writing for the benefit of Landlord that such Authorized Representative will keep the results of the audit confidential and that such representative will not disclose or divulge the results of such audit except to Tenant and Landlord and except in connection with any dispute between Landlord and Tenant relating to Operating Expenses. Such audit shall be conducted during reasonable business hours at Landlord’s office where Landlord’s books and records are maintained. Tenant shall cause a written audit report to be prepared by its Authorized Representative following any such audit and shall provide Landlord with a copy of such report promptly after receipt thereof by Tenant. If Landlord’s calculation of Tenant’s Operating Expense Rental for the audited Expense Year is incorrect, then Tenant shall be entitled to a prompt refund of any overpayment or Tenant shall promptly pay to Landlord the amount of any underpayment, as the case may be. Tenant agrees to pay the cost of such certification and the investigation with respect thereto unless it is determined that the Operating Expenses stated in the Reconciliation Statement were overstated in Landlord’s favor by five percent (5%) or more, in which case Landlord shall pay the reasonable cost of same, not to exceed Five Thousand Dollars ($5,000.00). Tenant waives the right to dispute or contest, and shall have no right to dispute or contest, any matter relating to the calculation of Operating Expenses or other forms of Rent under the Lease (and waives the right to inspect Landlord’s records with respect thereto) with respect to each Expense Year during the Lease Term for which a Reconciliation Statement is given to Tenant if no claim or dispute with respect thereto is asserted by Tenant in writing to Landlord within one hundred eighty (180) days of delivery to Tenant of the original or most recent Reconciliation Statement with respect thereto.
(e) Landlord shall have the right, from time to time, to equitably allocate some or all of the Operating Expenses for the Project among different portions or occupants of the Project (the “Cost Pools”), in Landlord’s reasonable discretion. Such Cost Pools may include, but shall not be limited to, the office space tenants of a building of the Project or of the Project, and the retail space tenants of a building of the Project or of the Project. The Operating Expenses within each such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner.
7. Operating Expenses.
(a) For the purposes of this Lease, “Operating Expenses” shall mean all expenses, costs, and disbursements (but not specific costs billed to or paid directly by specific tenants of the Project) of every kind and nature, computed on the accrual basis, relating to or incurred or paid by Landlord in
connection with the ownership, management, operation, repair and maintenance of the Project, including but not limited to, the following:
(1) wages, salaries and other costs of all on-site and off-site employees at or below the level of general manager or senior property manager engaged either full or part time in the operation, management, maintenance or access control of the Project, including taxes, insurance and benefits relating to such employees, allocated based upon the time such employees are engaged directly in providing such services;
(2) the cost of all supplies, tools, equipment, materials and personal property used in the operation, management, maintenance and access control of the Project or otherwise made available in the Common Areas;
(3) the cost of all utilities for the Common Areas of the Project, including but not limited to the cost of heat, light, steam, electricity, gas, water and sewer services;
(4) the cost of all cleaning, maintenance and service agreements for the Project and the equipment therein to the extent provided by Landlord, including but not limited to, as applicable, any security and/or alarm service, window cleaning, elevator maintenance, HVAC and other air conditioning maintenance, elevator maintenance, waste recycling service, landscaping maintenance, customary landscaping replacement, and maintenance (including striping and painting) of the surface and structured parking area;
(5) the cost of repairs and general maintenance of the Project, including the cost of repair following a casualty to the extent not reimbursed by insurance proceeds or other payments from a third party;
(6) the acquisition and/or installation costs of capital investment items (including security and energy management equipment) which are installed for the purpose of reducing operating expenses, increasing energy efficiency, promoting safety, complying with governmental regulations and requirements not in effect as of the Lease Commencement Date, or maintaining capital investment items which are replacements of items which are obsolete or cannot be repaired in an economically feasible manner, costing less than $.75 per RSF of the Premises on an aggregate annual basis, or to the extent costs per year exceeds $.75 per RSF of the Premises, such costs shall be amortized over their respective useful lives as determined in accordance with generally accepted accounting principles, together with reasonable financing charges (whether or not actually incurred);
(7) the cost of casualty, rental loss, liability and other insurance, including earthquake, applicable to the Building and the Project, including commercially reasonable deductibles, and endorsements thereto; provided, however, in the event that Tenant’s Share of any earthquake deductible is in excess of $150,000 for any particular earthquake event, then Tenant’s Share of such earthquake deductible shall be amortized on a straight-line basis without interest, with Tenant making equal monthly payments of such amount based upon the unexpired portion of the Lease Term;
(8) the cost of any transportation services made available to Tenant;
(9) the cost of trash, waste and garbage removal, recycling, air quality audits, vermin extermination, and snow, ice and debris removal;
(10) the cost of legal and accounting services incurred by Landlord in connection with the management, maintenance, operation and repair of the Project, excluding the owner’s
or Landlord’s general accounting, such as partnership statements and tax returns, and excluding services described in Section 7(b)( 12) below;
(11) the cost of complying with the rules and regulations applicable to the Project as mandated by governmental authorities with jurisdiction over the Project, including without limitation any costs related to licenses, permits and inspection fees;
(12) all “Tax Expenses,” which means all taxes, assessments and governmental charges attributable to the Project, whether or not directly paid by Landlord, whether federal, state, county or municipal and whether they be by taxing districts or authorities presently taxing the Project or by others subsequently created or otherwise, and any other taxes and assessments attributable to the Project or its operation (and the costs of contesting any of the same), including community improvement district taxes, sales, use and service taxes, and business license taxes and fees, excluding, however, taxes and assessments imposed on the personal property of the tenants of the Project, federal and state taxes on income, death taxes, franchise taxes, penalties (but only if Landlord is negligent in paying such taxes in a timely manner), interest, transfer taxes, and any taxes (other than business license taxes and fees and taxes on Landlord’s rental income from the Project but not its other income) imposed or measured on or by the income of Landlord from the operation of the Project;
(13) management fees and expenses (including fees and expenses for property management, accounting, financial management, data processing and information services) not to exceed 3% of gross rents of the Building; and
(14) any other commercially reasonable expenses of any other kind whatsoever incurred in managing, operating, overseeing, maintaining, and repairing the Project.
(b) For purposes of this Lease, and notwithstanding anything in any other provision of this Lease to the contrary, “Operating Expenses” shall not include the following:
(1) the cost of any special work or service performed for any tenant (including Tenant) at such tenant’s cost;
(2) the cost of installing, operating and maintaining any specialty service, such as an observatory, broadcasting facility, luncheon club, restaurant, cafeteria, retail store, sundry shop, newsstand, or concession, but only to the extent such costs exceed those which would normally be expected to be incurred had such space been general office space;
(3) compensation paid to officers and executives of Landlord (but it is understood that property management employees may carry a title such as vice president and the salaries and related benefits of these officers/employees of Landlord would be allowable Operating Expenses under Section 7(a)( 1) above);
(4) the cost of any items for which Landlord is reimbursed by insurance, condemnation or warranties;
(5) the cost of any additions, improvements, changes, replacements, and other items which are made in order to prepare for a new tenant’s occupancy;
(6) the cost of repairs incurred by reason of fire or other casualty to the extent reimbursed by insurance proceeds (other than business interruption and rent loss insurance proceeds) under policies maintained or required to be maintained by Landlord;
(7) insurance premiums to the extent Landlord is directly reimbursed therefor, other than through Operating Expenses;
(8) interest on debt or amortization payments on any mortgage or deed of trust and rental under any ground lease or other underlying lease except to the extent, in each case, that the debt which is being amortized was incurred to pay for an expense which is properly included in Operating Expenses pursuant to Section 7(a);
(9) any real estate brokerage commissions or other costs, including attorneys’ fees for the negotiation of leases for tenants, incurred in procuring tenants or any fee in lieu of such commissions;
(10) any advertising and promotional expenses incurred in connection with the marketing of any space that is available for lease;
(11) any expenses for repairs or maintenance which are covered by warranties and service contracts, to the extent such maintenance and repairs are made at no cost to Landlord;
(12) legal expenses arising out of the enforcement or negotiation of the provisions of any lease affecting the Land including without limitation this Lease, or relating to the sale, financing, or refinancing of the Project or any interest therein except to the extent directly related to financing in connection with the management, maintenance, operation or repair of the Project;
(13) fines and penalties assessed by a court or governmental agency to the extent such fines and penalties are based on Landlord’s violation of law or negligence in failing to perform an act or pay an amount due;
(14) costs of removing or remediating any Hazardous Substances (as defined in Section 39 below) in, on or under the Land to the extent such Hazardous Substances are (i) in existence as of the Delivery Date and in violation of applicable Laws in effect as of the Delivery Date (or become in violation of applicable Laws due to the actions of Landlord or its agents, employees, or contractors or due to Landlord’s breach of its obligations under this Lease), or (ii) introduced onto the Project after the Delivery Date by Landlord or any of Landlord's agents, employees, contractors, invitees, occupants or tenants (other than Tenant) in violation of applicable Laws in effect at the date of introduction;
(15) costs of capital improvements or expenditures except as provided in Section 7(a)(6) above;
(16) any costs or expenses that Tenant incurs directly with its maintenance of the Premises where the inclusion of such expense as an Operating Expense would be duplicative;
(17) reserves of any kind; bad debt loss; or
(18) legal, accounting or consulting and other costs incurred in connection with the acquisition, financing, refinancing or disposition of the Project.
8. Tenant Taxes; Rent Taxes.
(a) Tenant shall pay promptly when due all taxes directly or indirectly imposed or assessed upon Tenant’s gross sales, business operations, machinery, equipment, trade fixtures and other
personal property or assets, whether the aforementioned are owned or leased by Tenant, and whether such taxes are assessed against Tenant, Landlord, the Building or the Project. In the event that such taxes are imposed or assessed against Landlord, the Building or the Project, Landlord shall furnish Tenant with all applicable tax bills, public charges and other assessments or impositions and Tenant shall forthwith pay the same either directly to the taxing authority or, at Landlord’s option, to Landlord, in which event Landlord shall pay such amounts to the taxing authority promptly after receipt of the funds from Tenant. In addition, in the event there is imposed at any time a tax upon and/or measured by the rental payable by Tenant under this Lease, whether by way of a sales or use tax or otherwise, Tenant shall be responsible for the payment of such tax and shall pay the same on or prior to the due date thereof; provided, however, that the foregoing shall not include any inheritance, estate, succession, transfer, gift or income tax imposed on Landlord.
(b) Tenant will be responsible for ad valorem taxes on its personal property, whether owned or leased by Tenant and on the value of the leasehold improvements in the Premises (and if the taxing authorities do not separately assess Tenant’s leasehold improvements, Landlord may make an appropriate allocation of the ad valorem taxes allocated to the Project to give effect to this sentence), and such taxes relating to other tenants of the Project will not be included in Operating Expenses.
9. Payments.
All payments of Rent and other payments to be made to Landlord shall be made on a timely basis, without demand, notice, abatement (except as expressly set forth herein), deduction or set-off, and shall be payable to Landlord or as Landlord may otherwise designate. All such payments shall be mailed or delivered to Landlord’s Address designated in the Basic Lease Information above or at such other place or in some other manner as Landlord may designate from time to time in writing. If mailed, all payments shall be mailed in sufficient time and with adequate postage thereon to be received in Landlord’s account by no later than the due date for such payment. Following Landlord’s written request Tenant shall deliver payments of Rent and any amounts otherwise due hereunder via wire transfer of immediately available funds to such account or accounts as Landlord may designate. Tenant agrees to pay to Landlord Two Hundred Fifty Dollars ($250.00) for each check presented to Landlord in payment of any obligation of Tenant which is not paid by the bank on which it is drawn. Any sums due to Landlord from Tenant not paid when due shall bear interest at the Interest Rate from the date due until paid. The “Interest Rate” shall mean ten percent (10%) per annum compounded (not to exceed the maximum rate permitted by law).
10. Late Charges.
Any Rent or other amounts payable to Landlord under this Lease, if not paid by the fifth (5th) day of the month with respect to Base Rental and Additional Rental, or within five (5) days after the due date specified on any invoice from Landlord for any other amounts payable hereunder, shall incur a late charge of five percent (5%) of the overdue amount (the “Late Charge”) for Landlord’s administrative expense in processing such delinquent payment and in addition thereto shall bear interest at the Interest Rate from andafter the due date for such payment; provided, however, that such Late Charge and Interest shall not apply to any such delinquency unless either (i) such delinquency is not cured within five (5) Business Days after notice from Landlord, or (ii) Tenant previously received notice from Landlord of a delinquency that occurred earlier in the same calendar year. Tenant agrees that this Late Charge represents a fair and reasonable estimate of the cost Landlord will incur by reason of Tenant’s late payment. Accepting any Late Charge shall not constitute a waiver by Landlord of Tenant’s default with respect to any overdue amount nor prevent Landlord from exercising any other rights or remedies available to Landlord.
11. Use Rules.
The Premises shall be used solely for the purposes set forth in the Basic Lease Information and no other purposes and consistent with the character of the Building and the Project as a Class “A” office building and office campus. Tenant shall comply with all Laws regarding the use of the Premises. Noise-producing equipment, including fans and vents, shall be oriented away from residential areas or appropriately screened and muffled. No outside storage, unenclosed uses or outside activity areas shall be permitted except screened refuse disposal containers and equipment reasonably approved by Landlord. Tenant covenants and agrees to abide by the Rules and Regulations attached as Exhibit D in all respects as now set forth or as reasonably changed from time to time by Landlord. Landlord shall have the right at all times during the Lease Term to establish and enforce such reasonable and non-discriminating rules and regulations as it deems necessary in its reasonable discretion to protect the tenantability, safety, operation, and welfare of the Premises and the Project. In the event of any inconsistency between the Lease and the Rules and Regulations, the Lease shall prevail.
(a) No Obstruction. Tenant shall not obstruct the areas outside of Tenant’s doors, or any portion of the Common Areas of the Project with any item, including, without limitation, trash or other debris.
(b) Advertisement. Except as expressly permitted by Section 41 below, Tenant shall not place or permit to be placed any sign, marquee, awning, decoration or other attachment on or to the storefront, windows (inside or outside), doors (inside or outside), or exterior walls of the Premises or at any other location in or adjacent to the Premises except with the prior written consent of Landlord. Landlord may, without liability to Tenant, enter upon the Premises and remove any such sign, marquee, awning, decoration or attachment affixed in violation of this Section 11, and Tenant agrees to pay the cost of any such removal. Tenant shall not exhibit or affix flags, pennants, banners or similar items on or to the exterior of the Premises or the Building of which the Premises are a part. No advertising medium shall be utilized by Tenant which can be heard or experienced outside the Premises, including, without limitation, flashing lights, searchlights, loudspeakers, phonographs, radios or television. Tenant shall not display, paint, or place, or cause to the displayed, painted or placed, any handbills, bumper stickers or other advertising devices in the Common Areas of the Project or on any vehicle parked in the surface of structured parking area of the Project, including those belonging to Tenant, or to Tenant’s agent or any other person; nor shall Tenant distribute or cause to be distributed in the Project any handbills or other advertising devices. Except as expressly permitted by Section 41 below, any signs, notices, logos, pictures, names or advertisements which are installed or placed outside of the Premises and that have not been individually approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Except as expressly permitted by Section 41 below, Tenant may not, without the prior written approval of Landlord, install any signs on the exterior of the Building or in the Common Areas of the Building or the Project, or install any other items visible from the exterior of the Premises or Building.
(c) Deliveries. Tenant agrees to cause its deliveries (including loading and unloading) to be made in such a way as to cause as little inconvenience as reasonably possible to other tenants and neighbors of the Project. In any event, Tenant shall comply with all Laws and reasonable regulations of the Project promulgated by Landlord concerning deliveries, including restrictions on noise levels, loading zones and traffic patterns.
12. Alterations.
(a) Tenant shall not make, suffer or permit to be made any alterations, additions or improvements to or of the Premises or any part thereof, or remove any portion of the Premises which is
affixed thereto, or permanently attach any fixtures or equipment thereto (collectively, the “Alterations”), without first notifying Landlord of such proposed Alterations and obtaining Landlord’s written consent, which consent shall not be unreasonably withheld and which consent shall be requested by Tenant not legs than ten (10) days prior to the commencement of any such work. Landlord shall notify Tenant of its consent or disapproval to Alterations within ten (10) days following the later to occur of (x) receipt of Tenant’s notice requesting such consent and (y) the date upon which Landlord receives all documents and information reasonably requested in connection with its evaluation of the proposed Alteration. Tenant’s request for Landlord’s consent to any proposed Alterations shall include a description of the proposed Alterations and shall be accompanied by materials sufficient to enable Landlord to evaluate the request. Depending on the nature and extent of the proposed Alterations, it is anticipated that such materials could range from paint chips, internally prepared diagrams, plans and specifications prepared by licensed architects and engineers, a description of proposed construction means and methods, the identity of any contractor or subcontractor to be employed in the construction of the Alterations, the estimated cost of such work and the estimated time for performance thereof. Tenant’s notice requesting consent shall describe the Alterations and the anticipated commencement date thereon so that Landlord may file a notice of nonresponsibility described in Sections 3094 and 3129 of the California Civil Code. The construction of the Tenant Improvements (as defined in the Work Letter) shall be governed by the terms of the Work Letter. However, Tenant shall not be obligated to obtain Landlord’s consent for a particular Alteration (although the above notice will always be required) in the following circumstances (“Minor Alterations”): (i) the cost of the Alteration in question and all work being done by Tenant in the Premises in connection with such Alteration does not exceed $150,000 and all prior Alterations for which Landlord’s consent was not required will not exceed $300,000 in any twelve (12) month period; (ii) the Alteration in question will have no effect on the various systems of the Building, including without limitation, the HVAC, plumbing and fire protection systems, the Building structure or the exterior appearance of the Building, and (iii) such Alteration will not cause Tenant to exceed the maximum floor load for the Building. Except for Minor Alterations, Tenant shall pay to Landlord on demand an amount equal to two percent (2%) of all hard costs incurred by Tenant or its contractors or agents in connection with any Alterations to cover Landlord’s overhead and expenses for plan review, coordination, scheduling and supervision. In addition, except for Minor Alterations, upon demand, Tenant shall reimburse Landlord for all reasonable out-of-pocket costs incurred by Landlord in connection with any Alterations, including, without limitation, the costs of any third-party architects, engineers or consultants hired by Landlord to review drawings for Alterations.
(b) Landlord may impose, as a condition of its consent to all Alterations such requirements as Landlord reasonably deems desirable including, but not limited to: (i) the requirement that upon Landlord’s request, made at the time such consent is given, Tenant shall, at Tenant’s expense, remove such Alterations upon the expiration or any early termination of the Lease Term and repair any damage to the Premises and Building caused by such removal; (ii) the requirement that Tenant utilize for such purposes only contractors, materials, mechanics and materialmen selected by Tenant and approved by Landlord, which approval shall not be unreasonably withheld or delayed; and/or (iii) require that Tenant fully comply with the provisions of Section 8700 of the California Civil Code or submit evidence satisfactory to Landlord that Tenant is exempt from the requirements of such Section 8700. Notwithstanding the foregoing, to the extent any Alterations would materially affect the systems of the Building, including without limitation, the HVAC, plumbing, and fire protection systems, the exterior of the Building or any equipment located on the exterior of the Building, any portion of the Project outside of the Building or any structural component of the Building, such Alterations shall be subject to Landlord’s consent in the exercise of its sole discretion; to the extent such Alterations would merely affect the systems of the Building, including without limitation, the HVAC, plumbing, and fire protection systems, but not materially, Tenant shall observe reasonable rules relating thereto established by
Landlord. Tenant shall construct such Alterations and perform any repairs which Tenant is obligated to perform hereunder at Tenant’s cost and in conformance with any and all applicable rules and regulations of any federal, state, county or municipal code or ordinance and pursuant to a valid building permit, issued by the city and/or county in which the Building is located, in conformance with Landlord’s construction rules and regulations. Neither Landlord’s selection or approval of a contractor nor its approval of the plans, specifications and working drawings for Alterations shall create any responsibility or liability on the part of Landlord for the quality or adequacy of the contractor, for the completeness, design sufficiency, or compliance of such plans, specifications and working drawings with all laws, rules and regulations of governmental agencies or authorities. All work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. Tenant shall cause all work to be performed in such manner as not to obstruct access to the Project or the Common Areas for any other tenant of the Project, and as not to obstruct the business of Landlord or other tenants in the Project, or unreasonably interfere with the labor force working on the Project. Promptly upon completion of any Alterations, if required by code, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 8182 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to Landlord a reproducible copy of the “as built” drawings of the Alterations and, if available, such drawings in “CAD” format.
(c) All Alterations which may be installed or placed in or about the Premises, and all signs installed in, on or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord, other than trade fixtures and equipment which may be removed without material damage to the Premises on the expiration of the Lease Term or its earlier termination; provided, however, that to the extent any trade fixtures and equipment were installed or placed in or about the Premises at the cost and expense of Landlord, such trade fixtures and equipment shall remain the property of Landlord upon expiration of the Lease Term or its earlier termination. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations, then as a matter which shall survive termination of this Lease, Landlord may do so and may charge the cost thereof to Tenant. Tenant hereby indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner relating to the installation, placement, removal or financing of any Alterations by Tenant or at Tenant’s behest.
13. Repairs.
(a) Except as otherwise expressly provided in this Lease, Landlord shall have no obligation to alter, remodel, improve, repair, renovate, redecorate or paint all or any part of the Premises. Landlord shall repair, maintain and replace as necessary and in good condition, as part of Operating Expenses to the extent provided in Section 7 hereof, the foundation and structural elements of the Building (including structural load bearing walls and roof structure and roof membrane and skylights), and the Building’s and Project’s Common Areas; provided, however, to the extent such maintenance, repairs or replacements are required as a result of any act, neglect, fault or omission of Tenant or any of Tenant’s agents, contractors, employees, invitees, licensees, tenants or assigns (the “Tenant’s Parties”) or because of Tenant’s specific use of or Alterations to the Premises, Tenant shall pay to Landlord, as Additional Rental, the costs of such maintenance, repairs and replacements to the extent such costs are not covered by insurance proceeds (subject to the waiver of subrogation below). Landlord shall not be liable for any failure to make any such repairs, or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to Landlord by Tenant. There shall be no abatement of rent and no liability of Landlord by reason of any
injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Project, Building or the Premises or in or to fixtures, appurtenances and equipment therein. Landlord shall not be required to make any repairs or improvements to the Premises other than as expressly required under this Lease.
(b) Except for Landlord’s obligations specifically set forth elsewhere in this Lease, Tenant shall at all times and at Tenant’s sole cost and expense, manage and maintain the Premises (including all Building systems) in a good condition consistent with similar Class “A” buildings in Mountain View and shall keep, maintain, clean, repair, and replace, as necessary, the Premises and all parts thereof, including, without limitation, plumbing/pipes and conduits at the point of entry into the Premises and inside the Premises, all HVAC systems located within the Premises, all windows, restrooms, ceilings, interior walls, interior and demising walls, doors, electrical and lighting equipment, sprinkler systems, loading dock areas and doors, fences, signs, sprinkler and electrical systems within the Premises, fire and life safety systems and lighting and HVAC control systems, and any Tenant Improvements and Alterations, so as to keep the Premises in such good condition and repair, reasonable wear and tear and casualty damage excepted. Additionally, Tenant shall be responsible for the expense of installation, operation, and maintenance of its telephone and other communications cabling from the point of entry into the Project to the Premises and throughout the Premises. Tenant shall at once report, in writing, to Landlord any defective or dangerous condition known to Tenant. Tenant shall maintain the Building’s systems which are located in the interior of the Premises. At Landlord’s option, if Tenant fails to maintain the Premises or to make such repairs beyond any applicable notice and cure period, Landlord may, but need not, perform such maintenance or make such repairs, in which case Tenant shall pay Landlord the cost thereof, including a percentage of the cost (not to exceed 10%) thereof sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement upon being billed for same. Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs and maintenance to the Premises or to any equipment located in the Building as Landlord shall be required to maintain hereunder or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. To the fullest extent permitted by Law, Tenant hereby waives and releases all rights to make repairs at the expense of Landlord or in lieu thereof to vacate the Premises as may be provided byany law, statute or ordinance now or hereafter in effect, including Sections 1941 and 1942 of the California Civil Code. Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, except as specifically and expressly herein set forth. Notwithstanding the foregoing, if (i) a capital repair or replacement to any item described in this Section 13(b) is necessary or required, (ii) such repair or replacement would normally be capitalized under normal accounting practice and is in excess of Twenty Thousand Dollars ($20,000), and (iii) if as a result of such expenditure the useful life of item being repair or replaced (as such useful life is based on the estimated actual life pursuant to generally accepted accounting practices) will extend beyond the Lease Term, then, subject to the requirements set forth in this Section 13, Landlord will reimburse Tenant for Landlord's prorata share thereof within thirty (30) days following the substantial completion of the applicable repair or replacement. Landlord's prorata share of such expenditure shall be a fraction, the numerator of which is the number of months remaining on the useful life of the item being repaired or replaced after the expiration or sooner termination of this Lease, and the denominator of which is the total number of months of the useful life of the repaired or replaced item. As a condition precedent to Landlord's obligation to reimburse Tenant for a prorata share of any such expenditure, Tenant shall first obtain Landlord's prior written approval of the contractor, the plans and specifications, the amount of any such expenditure and the useful life resulting from such expenditure, which approval shall not be unreasonably withheld or delayed. Upon such approval, either party shall, at the other party's request, enter into an amendment of this Lease identifying the amount subject to reimbursement by Landlord.
(c) Tenant shall, at Tenant’s sole cost and expense, procure and maintain regularly scheduled preventive maintenance/service contracts (copies of which shall be delivered to Landlord upon request), in form and substance approved by Tenant, for: (a) heating, air conditioning and ventilation equipment; (b) boiler, fired or unfired pressure vessels; (c) fire sprinkler and/or standpipe and hose or other automatic fire extinguishing systems, including fire alarm and/or smoke detection; and (d) elevators, to the extent solely within the Premises. All maintenance/service contracts shall include all services recommended by the equipment manufacturer within the operation/maintenance manual and shall become effective (and a copy thereof delivered to Landlord) within thirty (30) days following the Lease Commencement Date. The term of any such service contracts shall not extend beyond the Lease Term.
(d) If Tenant refuses or neglects to repair and maintain the Premises properly as required hereunder to the reasonable satisfaction of Landlord, then at any time following fifteen (15) days from the date on which Landlord makes a written demand on Tenant to effect such repair and maintenance and which is not cured by Tenant, Landlord may (i) enter upon the Premises and perform such maintenance and/or make such repairs, and upon completion thereof, Tenant agrees to pay to Landlord as Additional Rental, Landlord’s costs for making such repairs plus ten percent (10%) of such costs for overhead, within 30 days after receipt from Landlord of a written itemized bill therefor, or (ii) take over Tenant’s repair obligations for the remainder of the Term (including any Option Terms), and include the cost of same in Operating Expenses. Any amounts not reimbursed by Tenant within the aforementioned 30-day period will bear interest at the Interest Rate until paid by Tenant. Notwithstanding the foregoing, the initial 15-day period set forth above shall be five (5) days in the event of an emergency which constitutes a dangerous condition to persons or property.
14. Landlord’s Right of Entry.
Notwithstanding anything to the contrary contained in this Section 14, Landlord shall retain duplicate keys to all doors of the Premises and Landlord or any Landlord Party may enter the Premises at any time to: (a) examine and inspect the Premises (including to confirm Tenant’s compliance with its obligations under this Lease), (b) show the Premises to prospective investors, purchasers, mortgagees, lessors or lessees, (c) make such repairs, alterations, replacements or additions to the Premises (i) which Landlord may elect to perform following Tenant’s failure to perform or in the event of an emergency, or (ii) for which Landlord is responsible, (d) comply with any Laws, (e) post notices of nonresponsibility and (f) exercise Landlord’s remedies upon the occurrence and during the continuation of a Default all without being liable to Tenant in any manner whatsoever for any damages arising therefrom; provided, however, that Landlord shall, except in case of emergency, afford Tenant such prior notification of an entry into the Premises as shall be reasonably practicable under the circumstances, but not less than twenty-four (24) hours, unless otherwise agreed to by Tenant. Landlord shall be allowed to take into and through the Premises any and all materials that may be required to make any such repairs, additions, alterations or improvements. Any such entries shall be without the abatement of Rent and shall include the right to take such reasonable steps as are required to accomplish the stated purposes. Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenant’s business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises in the circumstances and manner described in this Section 14 shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises. In connection with any entry, Landlord and its agents shall comply with Tenant’s reasonable security measures.
15. Insurance.
(a) Tenant shall procure at its expense and maintain throughout the Lease Term the following policies of insurance:
(1) commercial general liability insurance including contractual liability and broad form property damage with an each-occurrence limit of Five Million Dollars ($5,000,000) and a general aggregate limit of Five Million Dollars ($5,000,000). Such insurance shall name Landlord and its property manager and their respective officers, partners, members and employees and such additional persons or entities as Landlord may from time-to-time designate in writing as an additional insured, shall specifically include the liability assumed hereunder by Tenant, and is intended to be primary insurance, and not excess over or contributory with any other valid, existing, and applicable insurance in force for or on behalf of Landlord, and shall provide that Landlord shall receive thirty (30) days’ written notice from the insurer prior to any cancellation or change of coverage. Such insurance shall, in addition, extend to provide contractual liability coverage, extending to the indemnities by Tenant provided for in this Lease and to any liability assumed in any contract entered into in the course of Tenant’s business;
(2) automobile liability insurance covering owned, hired and non-owned automobiles in amount not less than $1,000,000 each accident;
(3) “all risk” property insurance on a “special causes of loss” basis (including boiler and machinery (if applicable); business income and extra expense; sprinkler damage, including earthquake sprinkler leakage, vandalism and malicious mischief) on the Tenant Improvements, any Alterations installed in the Premises by or on behalf of Tenant, all leasehold improvements installed in the Premises by Tenant at its expense, and all of Tenant’s personal property, such insurance to include a building ordinance provision (as to those Alterations for which such a provision will apply), a waiver of subrogation from Tenant’s insurer in favor of Landlord and any parties reasonably designated by Landlord. Such insurance shall be an amount equal to full replacement cost of the aggregate of the foregoing and for business income and extra expense shall equal 12 months of income and shall provide coverage comparable to the coverage in the standard ISO “special causes of loss” form, when such form is supplemented with the coverages required above, and the property insurance for leasehold improvements and Alterations shall name Landlord as a loss payee as their interest may appear;
(4) worker’s compensation insurance, statutory and employer’s liability coverage in an amount not less than $1,000,000 Disease-Policy Limit; and
(5) such other insurance as may be required by Law or reasonably required by Landlord.
Additionally, Tenant shall at a minimum require all of its contractors, subcontractors, and vendors to maintain commercial general liability insurance meeting the commercially reasonable requirements of Landlord, automobile liability per Section 15(a)(2) and workers’ compensation coverage including employers liability per Section 15(a)(4) in addition such coverage shall include a Waiver of Subrogation in favor of Landlord, its property manager and their respective officers, partners, members and employees and such additional persons or entities as Landlord may from time-to-timedesignate in writing, and provide evidence of insurance as required by Landlord. At a minimum they shall be required to provide evidence of coverage and such other insurance as may be required by Landlord. Additionally, contractors, subcontractors and vendors participating in the construction of the Tenant Improvements shall be required to provide the insurance specified in the Work Letter.
All insurance policies required under Section 15(a) shall be issued by carriers licensed to do business in the State of California each with a Best’s Insurance Reports policy holder’s rating of not less than A- and a financial size category of not less than Class VIII, shall be written on an “occurrence basis,” which shall afford coverage for all claims based on acts, omissions, injury and damage, which occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period and shall be non-cancellable and not subject to material change except after thirty (30) days’ written notice to Landlord and any mortgagee or underlying ground lessor of Landlord except for non-payment of premium in which case ten (10) days’ notice shall be given. Tenant shall deliver policies of such insurance or certificates thereof to Landlord prior to the date that Tenant occupies the Premises for any reason, and evidence of renewals of such policies shall be delivered to Landlord at least ten (10) days prior to the expiration of each respective policy term. In the event Tenant shall fail to procure and keep such insurance in full force and effect during the Term, or to deliver such policies or certificates within said time frame, Landlord may, at its option, procure same for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rental within five (5) Business Days after delivery to Tenant of bills therefor. Tenant shall have the right to satisfy the foregoing insurance requirements pursuant to so-called “umbrella”, “blanket” or “excess” insurance coverage so long as the minimum coverages described above are applicable to the Premises, Landlord and the Project, as applicable. Landlord has the right to reasonably amend and/or increase the insurance requirements contained in this Section 15; provided that Landlord provides Tenant with at least thirty (30) days’ prior notice to comply with such amended policies and/or increase coverage amounts, but in no event shall such amended policies and/or increase coverage amounts be in excess of that required by landlords of comparable buildings within the vicinity of the Building for tenants of comparable financial strength and consistent with the size of the space leased by such tenants.
(b) Landlord shall maintain at its expense (but with the expense to be included in Operating Expenses) throughout the Lease Term insurance on the Building against fire and risks covered by “special causes of loss” form (excluding earthquake and flood) on a 100% “replacement cost” basis. At Landlord’s election, in its sole and absolute discretion, Landlord may procure earthquake coverage as a part of such insurance. Landlord’s insurance shall: (i) cover the Building; (ii) not cover any Alterations installed in the Premises by or on behalf of Tenant; (iii) have a building ordinance provision; and (iv) provide for rental interruption insurance covering a period of twelve (12) full months. Landlord shall also maintain at its expense (but with the expense to be included inOperating Expenses) commercial general liability insurance including contractual liability coverage (or with contractual liability endorsement) on an occurrence basis in amounts not less than Five Million Dollars ($5,000,000) per occurrence and general aggregate limit of Five Million Dollars ($5,000,000) with respect to bodily injury or death and property damage. Notwithstanding the foregoing obligations of Landlord to carry insurance, Landlord may (x) modify the foregoing coverages if and to the extent it is commercially reasonable to do so, and (y) carry additional insurance, including without limitation earthquake and flood, at its sole discretion, and the cost thereof shall be included in Operating Expenses. Any insurance required or permitted to be carried by Landlord hereunder may be carried under blanket policies covering other properties of Landlord and/or its partners and/or their respective related or affiliated corporations so long as such blanket policies provide insurance at all times for the Project as required by this Lease.
16. Waiver of Subrogation. Notwithstanding anything to the contrary in this Lease, to the extent that this waiver does not invalidate or impair their respective insurance policies, Landlord and Tenant waive any right of recovery against the other party for any loss of or damage to property which loss or damage is (or, if the insurance required hereunder had been carried, would have been) covered by the waiving party’s property insurance, and Landlord and Tenant shall each obtain from their respective insurers under all policies of fire, theft, and other property insurance maintained by either of them at any time during the Term insuring or covering the Project or any portion thereof of its contents therein, a
waiver of all rights of subrogation which the insurer of one party might otherwise, if at all, have against the other party. This provision shall not operate to prevent Landlord from including the cost of the deductibles of such insurance in Operating Expenses.
17. Default.
(a) The following events shall be deemed to be events of default by Tenant under this Lease (each, a “Default”): (i) Tenant shall fail to pay when due any installment of Rent or any other charge or assessment against Tenant pursuant to the terms hereof, and shall fail to cure such breach within five (5) days after written notice that such amount is past due, but if any such notice shall be given more than once during the twelve (12) month period commencing with the date of the first (1st) such notice, the second (2nd) failure to pay within five (5) business days after due any Rent or any other charge required to be paid to Landlord under this Lease during such twelve (12) month period shall be an Default, without notice; (ii) Tenant shall fail to perform any obligation of Tenant or to comply with any provision of this Lease, other than the payment of the Rent or any other charge or assessment payable by Tenant or compliance with the items in clauses (iii) through (xi) hereof, and shall not cure such failure within thirty (30) days after written notice thereof to Tenant; provided however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 or any similar or successor law; and provided further, that if the nature of such failure is that it cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period, notifies Landlord within such period that it cannot reasonably complete such cure within thirty (30)days and thereafter diligently proceeds to cure said failure as soon as possible but in no event later than ninety (90) days after receipt of Landlord’s notice; (iii) abandonment of the Premises by Tenant as defined in California Civil Code Section 1951.3; (iv) Tenant shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a petition in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or shall file a petition in any proceeding seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or shall file an answer admitting or fail timely to contest the material allegations of a petition filed against it in any such proceeding, which is not dismissed within forty-five (45) days; (v) a proceeding is commenced against Tenant seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, and such proceeding shall not have been dismissed within forty-five (45) days after the commencement thereof; (vi) a receiver or trustee shall be appointed for the Premises or for all or substantially all of the assets of Tenant; (vii) Tenant shall fail to take possession of the Premises as provided in this Lease; (viii) Tenant shall do or permit to be done anything which creates a lien upon the Premises or the Project and such lien is not removed or discharged within fifteen (15) days after the filing thereof; (ix) Tenant shall fail to return a properly executed instrument to Landlord in accordance with Section 25 hereof within the time period provided therein, which is not cured within three (3) Business Days after notice; or (x) Tenant shall fail to return a properly executed estoppel certificate to Landlord in accordance with Section 26 hereof within the time period provided therein, which is not cured within three (3) Business Days after notice.
(b) In the event of any such Default by Tenant, in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to terminate this
Lease and all rights of Tenant hereunder and to remove Tenant from the Premises in accordance with law. In the event that Landlord shall elect to so terminate this Lease then Landlord may recover from Tenant:
(i) the worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom.
As used in clauses (i) and (ii) above, the “worth at the time of award” is computed by allowing interest at the maximum rate permitted by law per annum. As used in clause (iii) above, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
(c) In the event of any Default by Tenant, Landlord shall also have the right, with or without terminating this Lease, but subject to applicable law, to re-enter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant for such period of time as may be required by applicable law after which time Landlord may dispose of such property in accordance with applicable law. No re-entry or taking possession of the Premises by Landlord pursuant to this Section 17(c) shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. In addition to its other rights under this Lease, Landlord has the remedy described in California Civil Code Section 1951.4 (Landlord may continue the Lease in effect after Tenant’s breach and abandonment and recover the rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations).
(d) Upon the occurrence of a Default, Landlord shall have the right to exercise and enforce all rights and remedies granted or permitted by law. The remedies provided for in this Lease are cumulative and in addition to all other remedies available to Landlord at law or in equity by statute or otherwise. Exercise by Landlord of any remedy shall not be deemed to be an acceptance of surrender of the Premises by Tenant, either by agreement or by operation of law. Surrender of the Premises can be affected only by the written agreement of Landlord and Tenant.
(e) No reentry or taking possession of the Premises by Landlord or any other action taken by or on behalf of Landlord shall be construed to be an acceptance of a surrender of this Lease or an election by Landlord to terminate this Lease unless written notice of such intention is given to Tenant. Tenant agrees to pay to Landlord all costs and expenses incurred by Landlord in the enforcement of this Lease, including, without limitation, the reasonable fees of Landlord’s attorneys. Tenant waives any right of redemption arising as a result of Landlord’s exercise of its remedies under this Section 17.
18. Waiver of Breach.
No waiver of any breach of the covenants, warranties, agreements, provisions, or conditions contained in this Lease shall be construed as a waiver of said covenant, warranty, provision, agreement or condition or of any subsequent breach thereof, and if any breach shall occur and afterwards be cured, compromised, settled or adjusted, this Lease shall continue in full force and effect as if no breach had occurred.
19. Assignment and Subletting.
(a) Tenant may not directly or indirectly, voluntarily or by operation of law (i) assign this Lease or any interest herein or in the Premises, or mortgage, pledge, encumber, hypothecate or otherwise transfer or sublet the Premises or any part thereof or (ii) permit the use of the Premises by any party other than Tenant, including another tenant of the Project (all of the foregoing are hereinafter sometimes referred to collectively as “Transfer,” and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a “Transferee”) without Landlord’s prior written consent in each instance, which shall not be unreasonably withheld or delayed and subject to Sections 19(c), 19(h) and 19(i), below. In addition, Tenant shall not create or distribute materials or information intended to market the Premises in this Lease to any potential Transferee without disclosing any such materials or information to Landlord prior to distribution. Consent to one or more Transfers shall not operate to waive this requirement for Landlord’s consent, and all subsequent Transfers shall likewise be made only upon obtaining the prior written consent of Landlord in accordance with this Lease.
(b) If Tenant desires to effect any Transfer, Tenant shall notify Landlord in writing, which notice (the “Transfer Notice”) shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the “Subject Space”), (iii) all of the terms of the proposed Transfer and the consideration therefor, including a calculation of the “Transfer Premium” (defined below), the name and address of the proposed Transferee, and a copy of all existing and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and (v) any other information reasonably required by Landlord which will enable Landlord to determine the financial responsibility, character, and reputation of the proposed Transferee, nature of such Transferee’s business and proposed use of the Subject Space. Within twenty (20) days after Landlord’s receipt of such Transfer Notice, Landlord shall recapture (to the extent permitted pursuant to Section 19(h)), approve, or reasonably disapprove such Transfer. Any Transfer (except to a Permitted Transferee pursuant to Section 19(i) below) made without Landlord’s prior written consent or deemed approval shall, at Landlord’s option,be void and shall constitute a Default. Whether or not Landlord grants consent, Tenant shall pay Landlord’s reasonable review and processing fees, as well as any reasonable legal fees and other out of pocket costs incurred by Landlord, within thirty (30) days after written request by Landlord. If Landlord consents to any Transfer (and does not exercise any recapture rights Landlord may have under Section 19(h) below), Tenant may within six (6) months after Landlord’s consent, enter into such agreement to Transfer the Premises or portion thereof, upon materially the same terms and conditions as are set forth in the Transfer Notice.
(c) Notwithstanding Section 19(a) above, without otherwise limiting the criteria upon which Landlord may withhold its consent to any proposed Transfer, it shall be reasonable for Landlord to withhold its consent to Transfer if (i) the proposed Transferee is a party who would (or whose
use would) detract from the character of the Project as Class “A” office building, such as, without limitation, a dental, medical or chiropractic office or a governmental office; (ii) the proposed assignment or subletting is to a governmental subdivision or agency or any person or entity who enjoys diplomatic or sovereign immunity; (iii) such proposed Transferee is an existing tenant of the Project, and Landlord has comparable space available or becoming available in the Project to meet the Transferee’s needs; (iv) such proposed assignment, subletting or use would contravene any restrictive covenant (including any exclusive use) granted to any other tenant of the Project; (v) the proposed assignee or subtenant is a person or entity then negotiating with Landlord for the lease of space in the Project, and Landlord has comparable space available or becoming available in the Project to meet the Transferee’s needs; or (vi) the creditworthiness of the proposed assignee is not reasonably acceptable to Landlord (e.g. there does not exist reasonable evidence that assignee can pay the rent and additional rent to be charged to assignee).
(d) Sublessees or transferees of the Premises shall become directly liable to Landlord for all obligations of Tenant hereunder pertaining to that portion of the Premises covered by their subleases or other instruments of transfer (e.g., an assignment) without relieving Tenant of any liability therefor (provided that sublessees liability for rent and security deposit shall be as set forth in the sublease), and Tenant shall remain obligated for all liability to Landlord arising under this Lease during the entire remaining Lease Term including any extensions thereof, whether or not authorized herein.
(e) If Tenant is a partnership, an aggregate withdrawal or change, whether voluntary, involuntary or by operation of law, of partners owning a controlling interest in Tenant shall be deemed a voluntary assignment of this Lease and subject to the foregoing provisions. A change or series of changes in ownership of stock or other ownership interests which would result in direct or indirect change in ownership of less than fifty percent (50%) of the outstanding stock of or other ownership interests in such Tenant as of the date of the execution and delivery of this Lease shall not be considered a change of control. If neither Tenant nor any affiliate which controls Tenant is a corporation, partnership or other entity that is publicly traded on a recognized national stock exchange, then any transaction or series of related or unrelated transactions (including, without limitation, any dissolution, merger, consolidation or other reorganization, any withdrawal or admission of a partner or change in a partner’s interest, or any issuance, sale, gift, transfer or redemption of any capital stock of or ownership interest in such entity, whether voluntary, involuntary or by operation of law, or any combination of any of the foregoing transactions) resulting in the transfer of control of such Tenant, shall be deemed to be an assignment of this Lease subject to the provisions of this Section 19. The term “control” as used in this Section 19(e) means the power to directly or indirectly direct or cause the direction of the management or policies of Tenant. Any transfer of control of a subtenant which is a corporation or other entity shall be deemed an assignment of any sublease by such subtenant. However, the lack of a consent requirement shall not relieve Tenant of the obligation to deliver a timely Transfer Notice to Landlord.
(f) Fifty percent (50%) of any consideration, net of Tenant’s reasonable, out-of-pocket costs incurred in the assignment or subletting (including Tenant’s reasonable expenses in constructing improvements specifically for the subtenant or assignee and reasonable brokerage commissions in connection with the Transfer), which is in excess of the Rent and other amounts due and payable by Tenant under this Lease, and which is due to Tenant by any assignee of this Lease or successor to Tenant (including pursuant to Section 19(b)) for its assignment, or by any sublessee under or in connection with its sublease, or otherwise due to Tenant by another party for use and occupancy of the Premises or any portion thereof, on a per-rentable-square foot basis if less than all of the Premises is transferred (the “Transfer Premium”), shall be promptly remitted by Tenant to Landlord as Additional Rental hereunder and Tenant shall have no right or claim thereto as against Landlord.
(g) No assignment of this Lease consented to by Landlord shall be effective unless and until Landlord shall receive an original assignment and assumption agreement, in form and substance reasonably satisfactory to Landlord, signed by Tenant and Tenant’s proposed assignee, whereby the assignee assumes due performance of this Lease to be done and performed for the balance of the then remaining Lease Term. No subletting of the Premises, or any part thereof, shall be effective unless and until there shall have been delivered to Landlord an agreement, in form and substance reasonably satisfactory to Landlord, signed by Tenant and the proposed sublessee, whereby the sublessee acknowledges the right of Landlord to continue or terminate any sublease, in Landlord’s sole discretion, upon termination of this Lease, and such sublessee agrees to recognize and attorn to Landlord in the event that Landlord elects under such circumstances to continue such sublease.
(h) Notwithstanding anything to the contrary contained in this Section 19 except paragraph (i) below, upon receipt of any Transfer Notice which contemplates a Transfer that (i) will result in Tenant or its Permitted Transferees (as hereinafter defined) no longer occupying at least fifty percent (50%) of the RSF of the Premises or (ii) has a term that is longer than seventy five percent (75%) of the then remaining Lease Term, Landlord shall have the option exercisable by written notice to Tenant given within twenty (20) days after receipt of the Transfer Notice, to recapture the space proposed to be sublet or assigned (“Transfer Space”). If Landlord exercises its option to recapture, the Lease shall terminate with respect to the Transfer Space on the commencement date specified in the Transfer Notice, and if there is no such date then thirty (30) days after Landlord sends its written notice of recapture. In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, Landlord and Tenant shall enter into an appropriate amendment to this Lease confirming such partial termination of this Lease, providing for a prorata reduction in and apportionment of Base Rental and Tenant’s Share on a straight square footage basis, adding commercially reasonable lease provisions for a multi-tenant Building, if applicable, such as reasonable and appropriate access to the Transfer Space through the remainder of the Building and the equitable use of common facilities and parking, and Landlord shall have the right to use or relet the Transfer Space for any legal purpose in its sole discretion. If Landlord elects to recapture the Transfer Space, then Landlord shall separately demise the portion of the Premises so recaptured by Landlord from the balance of the Premises, including, without limitation, capping, re-routing or reconfiguring all mechanical, electrical, plumbing, life-safety and other systems and equipment serving the affected portions of the Premises and construct such other improvements as may be required by law or which Landlord reasonably deems to be necessary or appropriate to so demise the portion of the Premises so recaptured and the reasonable cost of such work shall be paid by Tenant at its sole cost. If Landlord declines or fails to elect in a timely manner to recapture the Transfer Space within such 20-day period, then, provided Landlord has consented or is deemed to have consented to the proposed Transfer, Tenant shall be entitled to proceed to transfer the Transfer Space to the proposed Transferee, subject to the provisions of the last sentence of this grammatical paragraph. Any subsequent proposed Transfer of the applicable space shall be subject to this Section 19. If a proposed Transfer is not consummated within six (6) months after the date of the relevant Transfer Notice, Tenant shall be required to submit a new Transfer Notice to Landlord with respect to any contemplated Transfer of the Transfer Space described in the first Transfer Notice.
(i) Notwithstanding Sections 19(a) and (b), an assignment or subletting by Tenant of all or a portion of the Premises or this Lease to (i) an entity which controls, is under common control, or is controlled or owned by Tenant, directly or indirectly; (ii) any entity which purchases all or substantially all of the assets of Tenant or majority of its stock; (iii) any entity into which Tenant is merged or consolidated; or (iv) the sale or transfer of a controlling interest of the capital stock of Tenant as provided hereinbelow (all such persons or entities described in (i), (ii), (iii) and (iv) being sometimes hereinafter referred to as “Affiliates”), shall not require Landlord’s consent and shall not be deemed a Transfer under
this Section 19, provided that (A) any such Affiliate was not formed as a subterfuge to avoid the obligations of this Section 19; (B) Tenant gives Landlord at least twenty (20) days’ prior notice of any such assignment or sublease to an Affiliate (or within 20 days thereafter if prior notice is prohibited by law or confidentiality obligations); (C) such Affiliate shall have, as of the effective date of any such assignment or sublease, a Tangible Net Worth which is equal to or greater than the net worth of Heartflow, Inc., a Delaware corporation (“Original Tenant”) as of the Lease Commencement Date; (D) any such assignment or sublease shall be subject and subordinate to all of the terms and provisions of this Lease, and such Affiliate shall assume, in a written document reasonably satisfactory to Landlord and delivered to Landlord upon or prior to the effective date of such assignment or sublease, all the obligations of Tenant under this Lease with respect to the portion of the Premises which is the subject of such assignment or sublease (other than the amount of Base Rental payable by Tenant with respect to a sublease); and (E) Tenant shall remain fully liable for all obligations to be performed by Tenant under this Lease. Any Affiliate to whom Tenant may assign this Lease or sublease a portion of the Premises as permitted by this Section 19(i) shall be deemed to be a “Permitted Transferee”. The terms and provisions of Sections 19(f) and 19(h) shall not be applicable to a Transfer described in this Section I9(i). However, no assignment or subletting under this Section 19(i) shall be effective until Tenant and the assignee or sublessee have complied with Section 19(g) above.
20. Destruction.
(a) If the Premises are damaged by fire or other casualty, the same shall be repaired as speedily as practicable, subject to reasonable delay for insurance adjustment or other matters beyond Landlord’s reasonable control under the circumstances, at the expense of Landlord (subject to Section 20(c) below), unless this Lease is terminated as provided in this Section 20. Beginning on the date of such casualty and continuing during the period required for repair, a just and proportionate part of the Base Rental and Tenant’s Operating Expense Rental shall be abated for the time and to the extent the Premises are unfit for occupancy for the purposes permitted under this Lease, and not occupied by Tenant as a result thereof, unless such damage to the Premises is due to the negligence or willful misconduct of Tenant or Tenant’s employees, contractors, licensees, or invitees, in which event Base Rental and Additional Rental shall be abated only to the extent Landlord is reimbursed from the proceeds of rental income or interruption insurance purchased by Landlord as part of Operating Expenses.
(b) If the Premises are (i) damaged to such an extent that repairs cannot, in Landlord’s judgment, be completed within twelve (12) months after the date of the casualty; (ii) damaged or destroyed as a result of a risk which is not insured under standard special form/all risk insurance policies or any other insurance carried (or required to be carried) by Landlord under this Lease; (iii) damaged and the holder of any mortgage on the Project or ground or underlying lessor with respect to the Project and/or the Building requires that the insurance proceeds or any portion thereof be used to retire the mortgage debt or terminates the ground or underlying lease, as the case may be; or (iv) substantially damaged or destroyed during the last twelve (12) months of the Lease Term, as extended if permitted herein, then in any such event Landlord may at its option terminate this Lease by notice in writing given to Tenant within sixty (60) days after the date of such damage or destruction. If the Premises are damaged to such an extent that repairs cannot, in Landlord’s judgment, be completed within twelve (12) months after the date of the casualty or if the Premises are substantially damaged during the last twelve (12) months of the Lease Term, as it may have been extended if permitted herein, then in either such event Tenant may elect to terminate this Lease by notice in writing to Landlord within thirty (30) days after notice from Landlord of the estimated repair time (which estimate shall be given within sixty [60] days after the date of damage). Unless Landlord or Tenant elects to terminate this Lease as hereinabove provided, this Lease will remain in full force and effect and Landlord shall repair such damage to the
extent required in this Section 20 as expeditiously as possible under the circumstances. If Landlord or Tenant terminates the Lease pursuant to this Section 20, then Tenant shall pay the Base Rental and Additional Rental properly apportioned (and as the same may have been abated in accordance with Section 20(a) above) up to such date of termination or casualty, as the case may be, and both parties hereto shall thereafter be freed and discharged of all further obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term.
(c) If Landlord should elect or be obligated pursuant to Section 20(a) above to repair because of any damage or destruction, Landlord’s obligation shall be limited solely to restoration of the Building to the condition provided to Tenant on the Delivery Date and shall not extend to any leasehold improvements in the Premises made by Tenant, furniture, equipment, supplies, trade fixtures or other personal property owned or leased by Tenant, its employees, contractors, invitees or licensees. If the cost of performing such repairs and restoration exceeds the actual proceeds of insurance paid or payable to Landlord on account of such casualty (other than deductible amounts), or if Landlord’s mortgagee under a mortgage or the lessor under an underlying lease shall require that any insurance proceeds from a casualty loss be paid to it, Landlord may terminate this Lease.
(d) In no event shall Landlord be liable for any loss or damage sustained by Tenant or its visitors, or injury to Tenant’s business by reason of casualties mentioned hereinabove or any other accidental casualty.
(e) The provisions of this Lease, including this Section 20, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or any other portion of the Project. Any statute or regulation of the state in which the Building is located including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or any other portion of the Project.
21. Tenant’s Property.
Tenant shall be permitted to remove its trade fixtures, personal property, equipment and furniture from the Premises at any time during the Lease Term and any extensions thereof, and at the expiration or termination of the Lease, subject to and in accordance with the terms and conditions of this Lease otherwise governing the same.
22. Services to the Premises.
(a) Subject to the Rules and Regulations attached hereto as Exhibit D and unless access to the Premises is restricted by casualty, condemnation, Force Majeure or any governmental action, Tenant shall have access to the Premises 24 hours per day, 365 days per year, during the Lease Term.
(b) Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler system charges, janitorial services, trash collection services, and other utilities and services used on or from the Premises, together with any taxes, penalties, and surcharges or the like pertaining thereto and any maintenance charges for utilities. Tenant shall furnish all electric light bulbs, tubes and ballasts, battery packs for emergency lighting and fire extinguishers. If any such services are not separately metered to Tenant, Tenant shall pay such proportion of all charges jointly metered with other premises as
determined by Landlord, in its reasonable discretion. Any such charges paid by Landlord and assessed against Tenant shall be immediately payable to Landlord on demand and shall be Additional Rent hereunder. In addition, if applicable, to the extent any utility is not separately metered to the Premises, Landlord may, at its sole expense, install and shall have access to the Premises to monitor a separate meter (or submeter) to determine the actual use of any utility in the Premises or any shared common area and may make available and share actual whole-project energy and water usage data as necessary to maintain the Building's "green building" certification, if any. If there is no meter or submeter in the Premises, then, upon request, Tenant shall provide monthly utility usage to Landlord in electronic or paper format or provide permission for Landlord to request information regarding Tenant's utility usage directly from the utility company. Tenant will not, without the written consent of Landlord, contract with a utility provider to service the Premises with any utility, including, but not limited to, telecommunications, electricity, water, sewer or gas, which is not previously providing such service to other tenants in the Building. Except as provided in Section 22(f) below, Landlord shall in no event be liable for any interruption or failure of utility services on or to the Premises. If Tenant is billed directly by a public utility with respect to Tenant's energy usage at the Premises, then,upon request, Tenant shall provide monthly energy utility usage for the Premises to Landlord for the period of time requested by Landlord (in electronic or paper format) or, at Landlord's option, provide any written authorization or other documentation required for Landlord to request information regarding Tenant's energy usage with respect to the Premises directly from the applicable utility company.
(c) At the time of Landlord’s approval of Tenant’s Final Working Drawings (as such term is defined in the Work Letter) and of any proposed Alterations, Landlord may designate any improvements which Landlord reasonably determines in good faith will cause there to be wear and tear of any related dedicated HVAC system(s) or other building systems within the Premises or the Project (“Tenant’s Wear and Tear”) that is significantly greater than that which would be customary for premises being used for normal general office uses (“Normal Wear and Tear”), because of the hours during which such dedicated HVAC system(s) or building systems will be in use, the impact which equipment being operated by Tenant within the Premises will have on such dedicated HVAC system(s) or building systems, or other similar factors (the extent to which Tenant’s Wear and Tear exceeds Normal Wear and Tear being referred to herein as “Excess Wear and Tear”). If Landlord makes such a designation and Tenant constructs the improvements in question, then the incremental cost of operating the dedicated HVAC system(s) and/or building systems due to the Excess Wear and Tear along with the incremental cost of maintaining, repairing and replacing all or any portion of the dedicated HVAC system(s) and/or building systems resulting from such Excess Wear and Tear shall be paid by Tenant within thirty (30) days after written demand from Landlord as Additional Rental.
(d) HVAC shall be supplied to the Premises from 8:00 A.M. to 6:00 P.M. Monday through Friday and 9:00 A.M. to 1:00 P.M., Saturdays (collectively, the “Business Hours”), except for the date of observation of New Year’s Day, Independence Day, Labor Day, Memorial Day, Thanksgiving Day, and Christmas Day, and at Landlord’s good faith discretion, other state and nationally recognized holidays selected by Landlord (collectively, the “Holidays”); provided, however, that if Tenant desires HVAC to be provided to the Premises during hours (“Non-Business Hours”) other than Business Hours (“After Hours HVAC”), Tenant shall provide Landlord with prior written notice (which at a minimum shall be 24 hours’ written notice of Tenant’s desired After Hours HVAC use and upon such additional conditions as shall be determined by Landlord from time to time, unless the controls are in the Premises in which case Tenant may turn on such HVAC. Tenant shall pay to Landlord Landlord’s then prevailing charges (reflecting Landlord’s good faith estimate of Landlord’s actual direct and indirect cost of providing such After Hours HVAC to an individual floor or zone including, without limitation, the cost of utility service, accelerated wear and tear and depreciation of Building systems, labor required for
processing Tenant After Hours HVAC requests and operating the Building HVAC system, together with a reasonable administration fee) (the “After Hours HVAC Rate”) for supplying such After Hours HVAC within thirty (30) days of receipt of a bill therefor, which fee is currently $100 per hour. Tenant shall be responsible for and shall pay to Landlord any reasonable additional costs (including, without limitation, the costs of installation of additional HVAC equipment) incurred by Landlord because of the failure of the HVAC system to perform its function due to the occupancy of the Premises by more than one (1) person per 150 feet of RSF of the Premises, arrangement of partitioning in the Premises or changes or alterations thereto or from any use by Tenant of heat-generating machinery or equipment other than normal office equipment.
(e) Except as provided in Section 22(f) below, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service or utility, or for any diminution in the quality or quantity thereof, whether such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements, by Force Majeure, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or, except as expressly provided in this Lease, relieve Tenant from paying Rent or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant’s business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure of Tenant to receive any of the services or utilities as set forth in this Section 22.
(f) In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof as a result of (i) Landlord's failure to provide to the Premises any of the essential utilities, repairs and/or services required to be provided by Landlord pursuant to this Section 22, or (ii) any failure by Landlord to provide access to the Premises (each such event herein referred to as an “Abatement Event”), then Tenant shall give Landlord notice of such Abatement Event. If such Abatement Event continues for five (5) consecutive Business Days after Landlord's receipt of any such notice from Tenant (“Eligibility Period”), then Tenant's obligation to pay Base Rental shall be abated or reduced, as the case may be, from and after the first (1st) day following the Eligibility Period and continuing until such time that Tenant is no longer prevented from using, and does not use, the Premises or a portion thereof. Such abatement shall be calculated in the proportion that the rentable square feet of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total rentable square feet of the Premises. Notwithstanding the foregoing, Tenant shall only be entitled to such abatement of rent pursuant to this Section if the Abatement Event is caused by Landlord's negligence or willful misconduct or breach of this Lease. To the extent Tenant shall be entitled to abatement of rent because of a damage or destruction pursuant to Section 20 or a taking pursuant to Section 32, then the Eligibility Period shall not be applicable.
23. Waiver of Jury Trial.
If either party commences litigation against the other for the specific performance of this Lease, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder or at law, the parties hereto agree to and hereby do waive any right to a trial by jury.
24. Time.
Time is of the essence of this Lease and each of its provisions and whenever a certain day is stated for payment or performance of any obligation of Tenant or Landlord, the same enters into and becomes a part of the consideration hereof.
25. Subordination and Attornment.
(a) Except to the extent that Landlord’s mortgagee (or lessor under a ground lease) elects to make the Lease senior to the mortgage (or ground lease) pursuant to Section 25(b), Tenant agrees that this Lease and all rights of Tenant hereunder are and shall be subject and subordinate to any ground or underlying lease which may hereafter be in effect regarding the Project or any component thereof, to any mortgage now or hereafter encumbering the Premises or the Project or any component thereof, to all advances made or hereafter to be made upon the security of such mortgage, to all amendments, modifications, renewals, consolidations, extensions, and restatements of such mortgage, and to any replacements and substitutions for such mortgage, provided that Tenant’s possession of the Premises shall not be disturbed so long as Tenant is not in Default under this Lease. The terms of this provision shall be self-operative, and no further instrument of subordination shall be required. Tenant, upon request of any party in interest, shall execute within ten (10) Business Days of request by Landlord such instrument or certificates as may be reasonably required to carry out the intent hereof, whether said requirement is that of Landlord or any other party in interest, including, without limitation, any mortgagee. If Landlord or its mortgagee requests the same, Tenant agrees to execute, acknowledge and deliver within ten (10) Business Days following demand a subordination, non-disturbance and attornment agreement upon such mortgagee’s standard and commercially reasonable form evidencing such subordination of this Lease to the lien of the mortgage or lease. Tenant hereby irrevocably authorizes Landlord to execute and deliver in the name of Tenant any such instrument or instruments if Tenant fails to do so within the time period provided above, provided that such authorization shall in no way relieve Tenant from the obligation of executing such instruments or certificates.
(b) If any mortgagee or lessor under a ground or underlying lease elects to have this Lease superior to its mortgage or lease and signifies its election in the instrument creating its lien or lease or by separate recorded instrument, then this Lease shall be superior to such mortgage or lease, as the case may be. The term “mortgage”, asused in this Lease, includes any deed of trust, deed to secure debt, or security deed and any other instrument creating a lien in connection with any other method of financing or refinancing. The term “mortgagee”, as used in this Lease, refers to the holder(s) of the indebtedness secured by a mortgage.
(c) In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage covering the Premises or the Project, or in the event the interests of Landlord under this Lease shall be transferred by reason of deed in lieu of foreclosure or other legal proceedings, or in the event of termination of any lease under which Landlord may hold title, Tenant shall attorn to the transferee or purchaser at foreclosure or under power of sale, or the lessor of Landlord upon such lease termination, as the case may be (sometimes hereinafter called “such person”), without any deductions or off set whatsoever, and shall recognize and be bound and obligated hereunder to such person as the Landlord under this Lease; provided, however, that no such person shall be (i) bound by any payment of Rent for more than one (1) month in advance, except prepayments in the nature of security for the performance by Tenant of its obligations under this Lease (and then only if such prepayments have been deposited with and are under the control of such person); (ii) bound by any amendment or modification of this Lease made without the express written consent of the mortgagee or lessor of the Landlord, as the case may be; (iii) obligated to cure any defaults under this Lease of any prior landlord
(including Landlord); provided, however, that such person shall be responsible for ongoing maintenance and repair obligations of the Landlord; (iv) liable for any act or omission of any prior landlord (including Landlord); (v) subject to any offsets or defenses which Tenant might have against any prior landlord (including Landlord); or (vi) bound by any warranty or representation of any prior landlord (including Landlord) relating to work performed by any prior landlord (including Landlord) under this Lease. Tenant agrees to execute any attornment agreement not in conflict herewith requested by Landlord, the mortgagee or such person. Tenant’s obligation to attorn to such person shall survive the exercise of any such power of sale, foreclosure or other proceeding. Tenant agrees that the institution of any suit, action or other proceeding by any mortgagee to realize on Landlord’s interest in the Premises or the Building pursuant to the powers granted to a mortgagee under its mortgage, shall not, by operation of law or otherwise, result in the cancellation or termination of the obligations of the Tenant hereunder.
26. Estoppel Certificates.
Within ten (10) Business Days after request therefor from Landlord, Tenant agrees to execute and deliver to Landlord in recordable form an estoppel certificate addressed to Landlord, any mortgagee or assignee of Landlord’s interest in, or purchaser of, the Premises or the Project or any part thereof, which shall be substantially in the form of Exhibit E attached hereto or in such other commercially reasonable form as may be required by same. Such certificate shall also include such other information as may reasonably be required by such mortgagee, assignee, purchaser or Landlord. Any such certificate may be relied upon by Landlord, any mortgagee, proposed mortgagee, assignee, purchaser and any other party to whom such certificate is addressed. Failure of Tenant to timely execute and deliver such estoppel certificate or other instruments shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the form of estoppel certificate delivered by Landlord are true and correct, without exception.
27. Cumulative Rights.
All rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative to, but not restrictive of, or in lieu of those conferred by law.
28. Holding Over.
If Tenant remains in possession after expiration or termination of the Lease Term with or without the Landlord’s written consent, Tenant shall become a tenant-at-sufferance, and there shall be no renewal or extension of this Lease by operation of law. During the period of any such holding over, all provisions of this Lease shall be and remain in effect except that the monthly Base Rental shall be (i) one hundred fifty percent (150%) percent of the amount of Base Rental (including any adjustments as provided herein) payable for the last full calendar month of the Lease Term, including renewals or extensions, for the initial three (3) months of holdover and (ii) from and after the beginning of the fourth (4th) month of holdover two hundred percent (200%) of the amount of Base Rental (including any adjustments as provided herein) payable for the last full calendar month of the Lease Term, including renewals or extensions. The inclusion of the preceding sentence in this Lease shall not be construed as the Landlord’s consent for Tenant to hold over. Landlord hereby expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Section 28 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys’ fees) and liability resulting from such
failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender, any consequential damages and any lost profits resulting therefrom.
29. Surrender of the Premises.
Upon the expiration or other termination of this Lease, Tenant shall quit and surrender to Landlord the Premises and every part thereof, and any Alterations, broom clean and in good condition and state of repair, reasonable wear and tear and damage due to casualty or condemnation excepted. Tenant shall remove all personalty and equipment not permanently attached to the Premises that it has placed upon the Premises, and repair any damage caused by such removal. At Landlord’s option, Tenant shall also be responsible for the removal of all wires and cables installed by Tenant in the Premises and within any risers or other portions of the Building to serve Tenant’s telecommunications and computer systems in the Premises; provided that the removal of such wires, cables and risers shall be effected by Tenant without damage to the Premises or the Building and without interference with the business or operations of Landlord or any other tenant of the Project. If Tenant shall fail or refuse to remove all of Tenant’s effects, personalty and equipment from the Premises upon the expiration or termination of this Lease for any cause whatsoever or upon the Tenant being dispossessed by process of law or otherwise, such effects, personalty and equipment shall be deemed conclusively to be abandoned and may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord without written notice to Tenant or any other party and without obligation to account for them. Tenant shall pay Landlord on demand any and all expenses incurred by Landlord in the removal of such property, including, without limitation, the cost of repairing any damage to the Building or Project caused by the removal of such property and storage charges (if Landlord elects to store such property). Tenant and Landlord shall, at least sixty (60) days before the last day of the Lease Term, arrange to meet together for a joint inspection of the Premises. In the event of either party’s failure to arrange and participate in such joint inspection, the participating party’s inspection at Tenant’s vacation of the Premises shall be deemed correct for purposes of determination of Tenant’s responsibility for repairs and restoration. The covenants and conditions of this Section 29 shall survive any expiration or termination of this Lease.
30. Notices.
All notices required or permitted to be given hereunder shall be in writing and may be delivered in person to either party or may be sent by nationally recognized overnight courier or by United States mail, certified, return receipt requested, postage prepaid. Any such notice shall be deemed received by the party to whom it was sent (i) in the case of personal delivery or courier delivery, on the date of delivery to such party, and (ii) in the case of certified mail, on the date receipt is acknowledged on the return receipt for such notice or, if delivery is rejected or refused or the U.S. Postal Service is unable to deliver same because of changed address of which no notice was given pursuant hereto, the first date of such rejection, refusal or inability to deliver. All such notices shall be addressed to Landlord or Tenant at their respective address set forth hereinabove in the Basic Lease Information or at such other address as either party shall have theretofore given to the other by notice as herein provided. If Tenant is notified in writing of the identity and address of the Landlord’s mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant’s exercising any remedy available to Tenant.
31. Damage or Theft of Personal Property.
As a material part of the consideration to Landlord, all personal property brought into Premises by Tenant, or Tenant’s employees or business visitors, shall be at the risk of Tenant only, and Landlord shall not be liable for theft thereof or any damage thereto occasioned by any act or omission of co-tenants, occupants, invitees or other users of the Building or any other person. Tenant acknowledges Landlord shall not be providing any security for the Premises, Building or Project. Landlord shall not at any time be liable for damage to any property in or upon the Premises which results from power surges or other deviations from the constancy of electrical service or from gas, smoke, water, or rain, which issues or leaks from or forms upon any part of the Building or from the pipes or plumbing work of the same, or from any other place whatsoever.
32. Eminent Domain.
(a) If all or part of the Premises is taken for any public or quasi-public use by virtue of the exercise of the power of eminent domain or by private purchase in lieu thereof, this Lease shall terminate as to the part so taken as of the date of taking, and, in the case of a partial taking, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Premises by written notice to the other within thirty (30) days after such date; provided, however, that a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Premises taken shall be of such extent and nature as substantially to handicap, impede or impair Tenant’s use of the balance of the Premises. If title to so much of the Building is taken that a reasonable amount of reconstruction thereof will not in Landlord’s sole discretion result in the Building being a practical improvement and reasonably suitable for use for the purpose for which it is designed, then this Lease shall terminate on the date that the condemning authority actually takes possession of the part so condemned or purchased.
(b) If this Lease is terminated under the provisions of this Section 32, Rent shall be apportioned and adjusted as of the date of termination.
(c) If there is a partial taking of the Building and this Lease is not thereupon terminated under the provisions of this Section 32, then this Lease shall remain in full force and effect, and Landlord shall, within a reasonable time thereafter, repair or reconstruct the remaining portion of the Building to the extent necessary to make the same a complete architectural unit; provided that in complying with its obligations hereunder Landlord shall not be required to expend more than the net proceeds of the condemnation award which are paid to Landlord, and which the Landlord’s mortgagee permits Landlord to use for this purpose.
(d) All compensation awarded or paid upon a total or partial taking of the Premises, or the Building shall belong to and be the property of Landlord without any participation by Tenant. Nothing herein shall be construed to preclude Tenant from prosecuting any claim directly against the condemning authority for moving expenses, loss of business, for damage to, and cost of removal of, trade fixtures, furniture and other personal property belonging to Tenant, and for the unamortized cost of leasehold improvements to the extent same were installed at Tenant’s expense (and not with the proceeds of the Tenant Improvement Allowance); provided, however, that no such claim shall diminish or adversely affect Landlord’s award. In no event shall Tenant have or assert a claim for the value of any unexpired term of this Lease. Subject to the foregoing provisions of this Section 32, Tenant hereby assigns to Landlord any and all of its right, title and interest in or to any compensation awarded or paid for the fee as a result of any such taking.
(e) Notwithstanding anything to the contrary contained in this Section 32, if, during the Lease Term, the use or occupancy of any part of the Building or the Premises shall be taken or appropriated temporarily for a period of one hundred eighty (180) days or less for any public or quasi-public use under any governmental law, ordinance, or regulations, or by right of eminent domain, this Lease shall be and remain unaffected by such taking or appropriation and Tenant shall continue to pay in full all Rent payable hereunder by Tenant during the Lease Term. In the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the loss of use or occupancy of the Premises during the Lease Term, and Landlord shall be entitled to receive that portion of any award which represents the cost of restoration and compensation for the loss of use or occupancy of the Premises after the end of the Lease Term.
33. Parties.
The term “Landlord,” as used in this Lease, shall include Landlord and its assigns and successors. Should Landlord’s interest in the Premises cease to exist for any reason during the Lease Term, then notwithstanding the happening of such event, this Lease nevertheless shall remain in full force and effect, and Tenant hereby agrees to attorn to the then owner of the Premises so long as such owner assumes all of the obligations of Landlord hereunder. The term “Tenant” shall include Tenant and its heirs, legal representatives and successors, and shall also include Tenant’s assignees, if this Lease shall be validly assigned for the balance of the Lease Term or any renewals or extensions thereof. Landlord’s right to transfer or assign Landlord’s interest in and to the Premises, or any part or parts thereof, shall be unrestricted; in the event of any such transfer or assignment by Landlord which includes the Premises, upon the assignee’s or transferee’s assumption of the obligations of Landlord arising after the effective date of the transfer, Landlord’s obligations first arising thereafter to Tenant hereunder shall cease as of the date of transfer and assumption and Tenant shall look only and solely to Landlord’s assignee or transferee for performance thereof.
34. Liability of Tenant.
(a) Tenant hereby assumes all risk of damage to property and injury to persons, in, on, or about the Premises from any cause whatsoever including without limiting the generality of the foregoing, whether caused by water leakage of any character from the roof, walls, or other portion of the Premises or the Building, the Project, or caused by gas, fire, oil, electricity, or any cause whatsoever (other than the intentional or willful misconduct or gross negligence of Landlord and its agents and employees), in, on, or about the Premises, the Building, the Project or any part thereof and agrees that Landlord, and its partners, joint venturers, members, shareholders, lenders and mortgagees, and their respective officers, agents, property managers, servants, employees, and independent contractors (collectively, “Landlord Parties”) shall not be liable for, and are hereby released from any responsibility for, any damage to property or injury to persons or resulting from the loss of use thereof, which damage or injury is sustained by Tenant or by other persons claiming through Tenant.
(b) Except for the gross negligence, willful misconduct or breach of this Lease by Landlord or any Landlord Parties, Tenant shall indemnify and hold the Landlord Parties harmless from and defend Landlord and the other Landlord Parties against any and all loss, cost, damage, injury, expense and liability, including, without limitation, court costs and reasonable attorneys’ fees (collectively, “Claims”): (i) incurred in connection with or arising from any cause in or on the Premises (including, without limitation, Tenant’s installation, placement and removal of Tenant Improvements, Alterations, fixtures and/or equipment in, on or about the Premises); (ii) occurring in, on, or about any other portion of the Project to the extent such injury or damage shall be caused by the negligence or willful misconduct of Tenant or of the contractors, agents, servants, employees, licensees, invitees, guests or visitors of Tenant
(collectively, the “Tenant Parties”) in, on or about the Premises, Building and Project; or (iii) arising from any breach of this Lease by Tenant. Tenant further agrees to indemnify and hold the Landlord Parties harmless from, and defend the Landlord Parties against, any and all Claims arising from the conduct of any work or business of Tenant Parties in or about the Project, including any release, discharge, storage or use of any Hazardous Substance, hazardous waste, toxic substance, oil, explosives, asbestos, or similar material. In the event of a discrepancy between the terms of this Section 34 and the terms of Section 39 (concerning Hazardous Substance liability), the latter shall control. Nothing in this Section 34 is intended to nor shall it be deemed to override the provisions of Section 16.
35. Force Majeure.
Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, acts of war, terrorist acts, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, moratorium, adverse weather, delays in receipt of permits, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease (collectively, a “Force Majeure”), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party’s performance caused by a Force Majeure. The foregoing shall in no event be deemed to cause an extension of the Lease Commencement Date or Expiration Date, or in any way eliminate or defer any obligation of Tenant to pay Rent for the period in which a Force Majeure event occurs, except to the extent set forth in Section 20 hereof.
36. Landlord’s Liability.
(a) Landlord and the Landlord Parties shall have no personal liability with respect to any of the provisions of this Lease. If Landlord is in default with respect to its obligations under this Lease, Tenant shall look solely to the equity of Landlord in and to the Project for satisfaction of Tenant’s remedies, if any. It is expressly understood and agreed that Landlord’s liability under the terms of this Lease shall in no event exceed the amount of its interest in and to said Project. In no event shall any of the Landlord Parties be personally liable with respect to any of the provisions of this Lease and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. Under no circumstances shall Landlord or any of the Landlord Parties be liable for injury to Tenant’s business or for any loss of income or profit therefrom. All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord’s obligations hereunder.
(b) Except to the extent caused by the negligence or willful misconduct of any Tenant Party, Landlord shall indemnify and hold Tenant harmless from and against any and all claims or liability for any injury or damage to any person or property including any reasonable attorney’s fees (but excluding any consequential damages or loss of business) occurring in, on, or about the Project to the extent such injury or damage is caused by the gross negligence, intentional or willful misconduct of Landlord, its employees, its property manager, or its property manager’s employees; provided, however, that the foregoing indemnity shall not include claims or liability to the extent waived by Tenant pursuant to Section 34. Further, (i) in the event of a discrepancy between the terms of this Section and the terms of Section 39 concerning Hazardous Substances liability, the latter shall control; and (ii) nothing in this Section 36(b) is intended to nor shall it be deemed to override the provisions of Section 16.
(c) Notwithstanding anything contained in this Lease to the contrary, Landlord shall in no event be liable to Tenant or any other person for any consequential damages, special or punitive damages, or for loss of business, revenue, income or profits even if caused by the active or passive negligence, or intentional or willful misconduct, of any Landlord Party, and Tenant hereby waives any and all claims for any such damages. Except for Tenant’s holding over in the Premises, Tenant shall in no event be liable to Landlord or any other person for any consequential damages, special or punitive damages, or for loss of business, revenue, income, or profits even if caused by the active or passive negligence, or intentional or willful misconduct, of Tenant, and Landlord hereby waives any and all claims for any such damages. The provisions of this Section 36 shall survive the expiration or sooner termination of this Lease.
37. Landlord’s Covenant of Quiet Enjoyment.
Provided Tenant performs the terms, conditions and covenants of this Lease, and subject to the terms and provisions hereof, including Landlord’s right to perform any Construction Work, and the rights of any mortgagees or ground lessors of the Project, Landlord covenants and agrees to take all necessary steps to secure and to maintain for the benefit of Tenant the quiet and peaceful possession of the Premises, for the Lease Term, without hindrance, claim or molestation by Landlord or any other person lawfully claiming under Landlord. The foregoing covenant is in lieu of any other covenant, express or implied.
38. Letter of Credit.
(a) Delivery of Letter of Credit. Concurrently with the execution and delivery of this Lease, Tenant shall deliver to Landlord, as protection for the full and faithful performance by Tenant of all of its obligations under this Lease and for all losses and damages Landlord may suffer (or which Landlord reasonably estimates that it may suffer) as a result of any breach or default by Tenant under this Lease, an irrevocable and unconditional negotiable standby letter of credit (the “Letter of Credit”) containing the terms required herein, running in favor of Landlord, issued by, a solvent, nationally recognized bank with a long term rating from Standard and Poor’s Professional Rating Service of A or a comparable rating from Moody’s Professional Rating Service or higher, under the supervision of the Superintendent of Banks of the State of California, or a national banking association (the “Bank”), and payable upon presentation to an operating retail branch located in San Francisco, California (or, subject to Landlord’s subsequent agreement with the applicable Bank and without delay in the Bank’s processing of any applicable draw on the Letter of Credit, payable upon delivery of a facsimile draw) of such Approved Issuer, in an amount equal to Four Million Three Hundred Seventeen Thousand Nineteen and 20/100 Dollars ($4,317,019.20) (the “Letter of Credit Amount”), as the same may be reduced pursuant to Section 38(f) below. The Letter of Credit shall (i) be “callable” at sight, irrevocable and unconditional, (ii) be maintained in effect, whether through renewal (pursuant to a so-called “evergreen provision”) or extension, for the period from the Delivery Date and continuing until the date (the “LC Expiration Date”) that is sixty (60) days after the expiration of the Term, and Tenant shall deliver to Landlord a new Letter of Credit, certificate of renewal or extension amendment at least sixty (60) days prior to the expiration of the Letter of Credit then held by Landlord, without any action whatsoever on the part of Landlord, (iii) be fully transferrable by Landlord, its successors and assigns, (iv) permit partial draws and multiple presentations and drawings, and (v) be otherwise subject to the Uniform Customs and Practices for Documentary Credits (2007-Rev), International Chamber of Commerce Publication #600, or the International Standby Practices-ISP 98, International Chamber of Commerce Publication #590. In addition to the foregoing, the form and terms of the Letter of Credit (and the Bank issuing the same) shall be acceptable to Landlord, in Landlord’s reasonable discretion. If Landlord notifies Tenant in writing that
the Bank which issued the Letter of Credit has become financially unacceptable because the above requirements are not met or the Bank has filed bankruptcy or reorganization proceedings or is placed into a receivership or conservatorship, or the financial condition of the Bank has changed in any other materially adverse way, then Tenant shall have thirty (30) days to provide Landlord with a substitute Letter of Credit complying with all of the requirements of this Section 38. If Tenant does not so provide Landlord with a substitute Letter of Credit within such thirty (30) day period, then Landlord, or its then managing agent, shall have the right to draw upon the then current Letter of Credit. In addition to Landlord’s rights to draw upon the Letter of Credit in Section 38(d) below and as otherwise described in this Section 38, Landlord, or its then managing agent, shall have the right to draw down an amount up to the face amount of the Letter of Credit if any of the following shall have occurred or be applicable: (A) such amount is past-due beyond applicable notice and cure periods under the terms and conditions of this Lease; (B) Tenant has filed a voluntary petition under the U.S. Bankruptcy Code or any state bankruptcy code (collectively, “Bankruptcy Code”), (C) an involuntary petition has been filed against Tenant under the Bankruptcy Code, (D) the Bank has notified Landlord that the Letter of Credit will not be renewed or extended through the LC Expiration Date, or (E) Tenant has failed to deliver a new Letter of Credit or amendment to the existing Letter of Credit increasing the stated amount as required under the terms of this Lease. The Letter of Credit will be honored by the Bank regardless of whether Tenant disputes Landlord’s right to draw upon the Letter of Credit. Tenant shall be responsible for paying the Bank’s fees in connection with the issuance of any Letter of Credit, certificate of renewal or extension amendment.
(b) Transfer of Letter of Credit. The Letter of Credit shall provide that Landlord, its successors and assigns, may, at any time and without notice to Tenant and without first obtaining Tenant’s consent thereto, transfer (one or more times) all or any portion of its interest in and to the Letter of Credit to a successor owner of Landlord or its mortgagee. In the event of a transfer of Landlord’s interest in the Building, Landlord shall transfer the Letter of Credit, in whole or in part, to the transferee and thereupon Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor arising after such transfer, and it is agreed that the provisions hereof shall apply to every transfer or assignment of the whole or any portion of said Letter of Credit to a new landlord. In connection with any such transfer of the Letter of Credit by Landlord, Tenant shall, at Tenant’s sole cost and expense, execute and submit to the Bank such applications, documents and instruments as may be necessary to effectuate such transfer, and Tenant shall be responsible for paying the Bank’s transfer and processing fees in connection therewith.
(c) In General. If, for any reason, the amount of the Letter of Credit becomes less than the Letter of Credit Amount, Tenant shall within ten (10) Business Days thereafter, either provide Landlord with a cash security deposit equal to such difference or provide Landlord with additional letter(s) of credit in an amount equal to the deficiency (or a replacement letter of credit in the total Letter of Credit Amount), and any such additional (or replacement) letter of credit shall comply with all of the provisions of this Section 38, and if Tenant fails to comply with the foregoing, then, notwithstanding anything to the contrary contained in Section 17(a) above, the same shall constitute an incurable default by Tenant under this Lease (without the need for any additional notice and/or cure period). Tenant further covenants and warrants that it will neither assign nor encumber the Letter of Credit or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Without limiting the generality of the foregoing, if the Letter of Credit expires earlier than the LC Expiration Date, Landlord will accept a renewal thereof (such renewal letter of credit to be in effect and delivered to Landlord, as applicable, not later than sixty (60) days prior to the expiration of the Letter of Credit), which shall be irrevocable and automatically renewable as above provided through the LC Expiration Date upon the same terms as the
expiring Letter of Credit or such other terms as may be acceptable to Landlord in its reasonable discretion. However, if the Letter of Credit is not timely renewed, or if Tenant fails to maintain the Letter of Credit in the amount and in accordance with the terms set forth in this Section 38, Landlord shall have the right to present the Letter of Credit to the Bank in accordance with the terms of this Section 38, and the proceeds of the Letter of Credit may be applied by Landlord against any Rent payable by Tenant under this Lease that is not paid when due (subject to applicable notice and cure periods) and/or to pay for all losses and damages that Landlord has suffered or that Landlord reasonably estimates that it will suffer as a result of any breach or default by Tenant under this Lease (subject to applicable notice and cure periods), including, but not limited to, all damages or rent due upon termination of this Lease pursuant to Section 1951.2 of the California Civil Code. Any unused proceeds shall constitute the property of Landlord and need not be segregated from Landlord’s other assets. Landlord agrees to pay to Tenant within thirty (30) days after the LC Expiration Date the amount of any proceeds of the Letter of Credit received by Landlord and not applied against any Rent payable by Tenant under this Lease that was not paid when due or used to pay for any losses and/or damages suffered by Landlord (or reasonably estimated by Landlord that it will suffer) as a result of any breach or default by Tenant under this Lease (including, but not limited to, all damages or rent due upon termination of this Lease pursuant to Section 1951.2 of the California Civil Code); provided, however, that if prior to the LC Expiration Date a voluntary petition is filed by Tenant, or an involuntary petition is filed against Tenant by any of Tenant’s creditors, under the Bankruptcy Code, then Landlord shall not be obligated to make such payment in the amount of the unused Letter of Credit proceeds until either all preference issues relating to payments under this Lease have been resolved in such bankruptcy or reorganization case or such bankruptcy or reorganization case has been dismissed.
(d) Application of Letter of Credit. Tenant hereby acknowledges and agrees that Landlord is entering into this Lease in material reliance upon the ability of Landlord to draw upon the Letter of Credit upon the occurrence of any breach or default on the part of Tenant under this Lease. If Tenant shall breach any provision of this Lease or otherwise be in default hereunder, in each case beyond applicable notice and cure periods, Landlord may, but without obligation to do so, and without notice to Tenant, draw upon the Letter of Credit, in part or in whole, to cure any breach or default of Tenant and/or to compensate Landlord for any and all damages of any kind or nature sustained, or that Landlord reasonably estimates that it will sustain, resulting from Tenant’s breach or default, including, but not limited to, all damages or rent due upon termination of this Lease pursuant to Section 1951.2 of the California Civil Code. The use, application or retention of the Letter of Credit, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by any Laws, it being intended that Landlord shall not first be required to proceed against the Letter of Credit, and the use, application or retention of the Letter of Credit shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the Letter of Credit, either prior to or following a “draw” by Landlord of any portion of the Letter of Credit, regardless of whether any dispute exists between Tenant and Landlord as to Landlord’s right to draw upon the Letter of Credit. No condition or term of this Lease shall be deemed to render the Letter of Credit conditional to justify the issuer of the Letter of Credit in failing to honor a drawing upon such Letter of Credit in a timely manner. Tenant agrees and acknowledges that (i) the Letter of Credit constitutes a separate and independent contract between Landlord and the Bank, (ii) Tenant is not a third party beneficiary of such contract, (iii) Tenant has no property interest whatsoever in the Letter of Credit or the proceeds thereof, and (iv) in the event Tenant becomes a debtor under any chapter of the Bankruptcy Code, neither Tenant, any trustee, nor Tenant’s bankruptcy estate shall have any right to restrict or limit Landlord’s claim and/or rights to the Letter of
Credit and/or the proceeds thereof by application of Section 502(b)(6) of the U.S. Bankruptcy Code or otherwise.
(e) Security Deposit. Any proceeds drawn under the Letter of Credit and not applied as set forth above shall be held by Landlord as a security deposit (the “Deposit”). No trust relationship is created herein between Landlord and Tenant with respect to the Deposit, and Landlord shall not be required to keep the Deposit separate from its general accounts. The Deposit shall be held by Landlord as security for the faithful performance by Tenant of all of the provisions of this Lease to be performed or observed by Tenant. If Tenant fails to pay any Rent, or otherwise defaults with respect to any provision of this Lease, Landlord may (but shall not be obligated to), and without prejudice to any other remedy available to Landlord, use, apply or retain all or any portion of the Deposit for the payment of any Rent in default or for the payment of any other sum to which Landlord may become obligated by reason of Tenant’s default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby, including, without limitation, prospective damages and damages recoverable pursuant to California Civil Code Section 1951.2. Tenant waives the provisions of California Civil Code Section 1950.7, or any similar or successor laws now or hereinafter in effect, that restrict Landlord’s use or application of the Deposit, or that provide specific time periods for return of the Deposit. Without limiting the generality of the foregoing, Tenant expressly agrees that if Landlord terminates this Lease due to an Event of Default or if Tenant terminates this Lease in a bankruptcy proceeding, Landlord shall be entitled to hold the Deposit until the amount of damages recoverable pursuant to California Civil Code Section 1951.2 is finally determined. If Landlord uses or applies all or any portion of the Deposit as provided above, Tenant shall within ten (10) days after demand therefor, deposit cash with Landlord in an amount sufficient to restore the Deposit to the full amount thereof, and Tenant’s failure to do so shall, at Landlord’s option, be an Event of Default under this Lease. At any time that Landlord is holding proceeds of the Letter of Credit pursuant to this Section 38, Tenant may deposit a Letter of Credit that complies with all requirements of this Section 38, in which event Landlord shall return the Deposit to Tenant within ten (10) days after receipt of the Letter of Credit. If Tenant performs all of Tenant’s obligations hereunder, the Deposit, or so much thereof as has not previously been applied by Landlord, shall be returned, without payment of interest or other increment for its use, to Tenant (or, at Landlord’s option, to the last assignee, if any, of Tenant’s interest hereunder) within 60 days following the later of the expiration of the Term or Tenant’s vacation and surrender of the Premises in accordance with the requirements of this Lease. Landlord’s return of the Deposit or any part thereof shall not be construed as an admission that Tenant has performed all of its obligations under this Lease. Upon termination of Landlord’s interest in this Lease, if Landlord transfers the Deposit (or the amount of the Deposit remaining after any permitted deductions) to Landlord’s successor in interest, and thereafter notifies Tenant of such transfer and the name and address of the transferee, then Landlord shall be relieved of any further liability with respect to the Deposit. Thereafter, Tenant shall look solely to the new owner or lessor for the return of said Deposit. The Deposit shall not be mortgaged, assigned or encumbered by Tenant. In the event of a permitted assignment under this Lease by Tenant, the Deposit may be held by Landlord as a deposit made by the permitted assignee in which event the Landlord shall have no further liability with respect to the return of said Deposit to the original Tenant.
(f) So long as Tenant is not in monetary or material non-monetary default under this Lease beyond any applicable notice and cure period, the Letter of Credit Amount shall be subject to reduction pursuant to the following provisions of this Section 38(f):
(1) If (i) Tenant shall have received, in the aggregate, after the date of execution of this Lease, $325,000,000.00 or more in private equity investment(s) and (ii) has at least $350,000,000.00 in cash shown on Tenant’s balance sheet, the Letter of Credit Amount shall be reduced
by $1,079,254.80 (such that the remaining Letter of Credit Amount shall be $3,237,764.40) upon the date which is fifteen (15) days after Landlord's receipt of such certified financial statements and Tenant's notice to Landlord that Tenant has met such financial criteria; and
(2) Upon Tenant reaching (i) positive net cash used in operating activities for two (2) consecutive calendar quarters as evidenced on an audited statement of cash flows and (ii) Tenant showing evidence as of such date of notice that it has a minimum of 350,000,000.00 in cash shown on Tenant’s balance sheet, the Letter of Credit Amount shall be further reduced by $1,079,254.80 (such that the remaining Letter of Credit Amount shall be $2,158,509.60) upon the date which is fifteen (15) days after Landlord's receipt of such certified financial statements and Tenant's notice to Landlord that Tenant has met such financial criteria.
Any such reduction in the Letter of Credit Amount shall be accomplished through amendment or replacement Letter of Credit to be provided by Tenant to Landlord at Tenant's sole cost and expense.
39. Hazardous Substances.
Tenant hereby covenants and agrees that Tenant shall not cause or permit any “Hazardous Substances” (as hereinafter defined) to be generated, placed, held, stored, used, located or disposed of at the Project or any part thereof, except for such Hazardous Substances as are commonly and legally used or stored as a consequence of using the Premises for general office, R&D and administrative purposes, but only so long as the use or storage thereof do not pose a threat to public health or to the environment or would necessitate a “response action”, as that term is defined in “CERCLA” (as hereinafter defined), and so long as Tenant strictly complies or causes compliance with all applicable governmental rules and regulations concerning the use, storage, production, transportation and disposal of such Hazardous Substances. Promptly upon receipt of Landlord’s request, Tenant shall submit to Landlord true and correct copies of any reports filed by Tenant with any governmental or quasi-governmental authority regarding the generation, placement, storage, use, treatment or disposal of Hazardous Substances on or about the Premises. For purposes of this Section 39, “Hazardous Substances” shall mean and include those elements or compounds which are contained in the list of Hazardous Substances adopted by the United States Environmental Protection Agency (“EPA”) or in any list of toxic pollutants designated by Congress or the EPA or which are defined as hazardous, toxic, pollutant, infectious or radioactive by any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability (including, without limitation, strict liability) or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereinafter in effect (collectively “Environmental Laws”). Tenant hereby agrees to indemnify Landlord and hold Landlord harmless from and against any and all losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys’ fees, costs of settlement or judgment and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Landlord by any person, entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence in, or the escape, leakage, spillage, discharge, emission or release from, the Premises of any Hazardous Substances during the Term (including, without limitation, any losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys’ fees, costs of any settlement or judgment or claims asserted or arising under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), any so called federal, state or local “Superfund” or “Superlien” laws or any other Environmental Law. The obligations of Tenant under this Section 39 shall survive any expiration or termination of this Lease.
40. Broker.
Landlord and Tenant represent and warrant to each other that (except with respect to the Brokers identified in the Basic Lease Information) no broker, agent, commission salesperson, or other person has represented Landlord or Tenant in the negotiations for and procurement of this Lease and of the Premises and that (except with respect to the Brokers) no commissions, fees, or compensation of any kind are due and payable in connection herewith to any broker, agent, commission salesperson, or other person as a result of any act or agreement of Landlord or Tenant. Landlord and Tenant agree to indemnify and hold each other harmless from all loss, liability, damage, claim, judgment, cost or expense (including reasonable attorneys’ fees and court costs) suffered or incurred by the other party as a result of a breach by Landlord or Tenant, as applicable, of the representation and warranty contained in the immediately preceding sentence or as a result of Landlord’s or Tenant’s failure to pay commissions, fees, or compensation due to any broker who represented Landlord or Tenant, whether or not disclosed, or as a result of any claim for any fee, commission or similar compensation with respect to this Lease made by any broker, agent or finder (other than the Brokers) claiming to have dealt with Landlord or Tenant, whether or not such claim is meritorious. Landlord shall pay the Brokers a commission pursuant to a separate agreement.
41. Signage.
(a) Subject to Tenant’s compliance with the provisions of this Section 41 and Landlord’s reasonable approval, Tenant shall have the right to install signage on the monument sign for the Building and on the exterior or interior of the Building. If Landlord approves of the installation of any signage, the graphics, materials, color, design, lettering, lighting, size, illumination, specifications and exact location of Tenant's signage shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, and shall be consistent and compatible with the quality and nature of the Project and Landlord's standard signage program. In addition, Tenant's signage shall be subject to Tenant's receipt of all required governmental permits and approvals and shall be subject to all applicable Laws and to any covenants, conditions and restrictions affecting the Project. Tenant shall be responsible, at its sole cost and expense, for all costs associated with the design, fabrication, permitting, installation, repair, maintenance, replacement, removal of all Tenant’s signs and the repair of any damage to the Building resulting from the removal of such signage. Any signage rights granted by Landlord to signs on the exterior of the Building are personal to the Original Tenant executing this Lease and may not be assigned, voluntarily or involuntarily, to any person or entity other than the Original Tenant or a Permitted Transferee; provided, however, that the name of such Permitted Transferee is not an Objectionable Name. The sign rights granted to the Original Tenant hereunder are not assignable separate and apart from the Lease, nor may any sign right granted herein be separated from the Lease in any manner, either by reservation or otherwise without Landlord’s consent or as otherwise expressly permitted in this Lease. “Objectionable Name” shall mean any name which relates to an entity which is of a character or reputation, or is associated with a political orientation or faction, which is inconsistent with the quality of the Project, or which would otherwise reasonably offend landlords of Class “A” buildings in Mountain View.
(b) Any signs, notices, logos, pictures, names or advertisements which are installed outside of the Premises and that are not permitted by the terms of this Lease may be removed without notice by Landlord at the sole expense of Tenant.
(c) Notwithstanding anything herein to the contrary, Tenant is solely responsible for obtaining all approvals, consents and permits, if any, from the City of Mountain View and/or any other applicable governmental agency necessary for Tenant to install and/or construct Tenant’s signage on the
Building or on any existing monument sign, and Landlord does not represent to Tenant that any signage will be permitted by the City of Mountain View and/or any other applicable governmental agency. Landlord shall at no cost or expense to Landlord, reasonably cooperate with Tenant in securing permits, variances, and all other necessary approvals for the purposes of installing such signage, including signage not permitted as of the date hereof but is sought by Tenant.
(d) Tenant’s right to maintain the exterior signage granted hereunder is expressly conditioned upon Tenant (or a Permitted Transferee) occupying for the conduct of its business not less than fifty percent (50%) of the Premises.
42. Attorney Fees.
In the event of any legal action or proceeding brought by either party against the other arising out of this Lease, the Prevailing Party in such action shall be entitled to recover from the non-Prevailing Party therein reasonable attorneys’ fees and costs incurred in such action (including, without limitation, all costs of appeal) and such amount shall be included in any judgment rendered in such proceeding. For purposes of this Lease a party shall be considered the “Prevailing Party” to the extent that (1) such party initiated the litigation and substantially obtained the relief which it sought whether by judgment, voluntary agreement or action of the other party, trial or alternative dispute resolution process, (2) such party did not initiate the litigation and did not receive judgment in its favor, but the party receiving the judgment did not substantially obtain the relief which it sought, or (3) the other party to the litigation withdrew its claim or action without having substantially received the relief which it was seeking. Notwithstanding the foregoing, however, Landlord shall be deemed the Prevailing Party in any unlawful detainer or other action or proceeding instituted by Landlord based upon any default or alleged default of Tenant hereunder if (i) judgment is entered in favor of Landlord, or (ii) prior to trial or judgment Tenant pays all or any portion of the rent claimed by Landlord, vacates the Premises, or otherwise cures the default claimed by Landlord. If Landlord becomes involved in any litigation or dispute, threatened or actual, by or against anyone not a party to this Lease, but arising by reason of or related to any act or omission of Tenant or any Tenant Party, Tenant agrees to pay Landlord’s reasonable attorneys’ fees and other costs incurred in connection with the litigation or dispute, regardless of whether a lawsuit is actually filed.
43. Tenant’s Emergency Generator.
Tenant shall be permitted to install, at Tenant’s sole cost and expense, one (1) back-up emergency generator (“Tenant’s Emergency Generator”), subject to Landlord’s reasonable approval of the size and location outside the Building where Tenant’s Emergency Generator will be located and Tenant’s compliance all other terms and conditions of this Lease. Such generator shall be of such specifications, and include such platforms, fencing, enclosures, sheds and other related materials and equipment, as shall be reasonably approved by Landlord prior to installation. Upon the expiration or earlier termination of this Lease, Tenant shall remove the Tenant’s Emergency Generator, including, without limitation all electrical switch gear, underground conduit and feeders, enclosure and/or modifications to the generator site, repair any damage caused thereby, and restore the site and other facilities of the Building to their condition existing prior to the installation of Tenant’s Emergency Generator. For the purposes of determining Tenant's obligations with respect to its use of Tenant’s Emergency Generator herein provided, the location in which Tenant’s Emergency Generator is situated shall be deemed to be a portion of the Premises; consequently, all of the provisions of this Lease with respect to Tenant's obligations hereunder shall apply to the installation, use and maintenance of the Tenant’s Emergency Generator, including without limitation, provisions relating to compliance with requirements as to insurance, indemnity, repairs and maintenance, and compliance with Laws.
44. Terrace Rights.
Tenant’s use of the balconies and terraces affixed to the Building (collectively, the “Terraces”) shall at all times be in compliance with applicable Laws, rules, regulations and requirements, and on the terms and conditions set forth herein. Tenant shall not make any improvements or alterations to the Terraces or affix or place graphics, signs and/or insignias, and/or the like, and/or furniture, fixtures, equipment or other items of any kind whatsoever on the Terraces (“Tenant Terrace Property”) without Landlord's consent, and subject to any terms and conditions Landlord may impose on the use and installation thereof, all in Landlord’s reasonable discretion, provided that such Tenant Terrace Property is consistent with Building standards and are new and of a first-class and clean condition. Any such Tenant Terrace Property shall comply with the load requirements of the Terraces (it being understood that Tenant shall not place a load upon either of the Terraces that exceeds fifty (50) pounds per square foot of area "live load"). Any such Tenant Terrace Property must be secured to each applicable Terrace, and the method by which any such items are secured to such Terrace shall be subject to Landlord's prior written approval. Notwithstanding Landlord's review and approval of the method by which the Tenant Terrace Property is secured, Tenant shall remain solely liable for any liability arising from Tenant's placement of Tenant Terrace Property on the Terraces, and Landlord shall have no liability in connection therewith. Landlord shall have in its sole discretion the right to access the Terraces, to landscape and display plants on the Terraces, to make use of the Terraces, to place furniture, fixtures and equipment thereon, and to make any desired alterations or modifications to the Terraces, including the right to construct staircases that connect the same to the ground floor. Tenant, at its sole cost and expense, shall keep the Terraces in a clean condition. Tenant shall remove any Tenant Terrace Property upon the expiration or earlier termination of this Lease and shall return the affected portion of the Terraces to the condition that the Terraces would have been in had no such Tenant Terrace Property been placed or installed thereon.
45. Miscellaneous.
(a) Submission of Lease. The submission of this Lease for examination or execution does not constitute an offer to lease and this Lease shall be effective only upon execution and delivery hereof by Landlord and Tenant.
(b) Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, the remainder of this Lease shall not be affected thereby, and in lieu of each clause or provision of this Lease which is illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as nearly identical to the said clause or provision as may be legal, valid and enforceable.
(c) Entire Agreement. This Lease contains the entire agreement of the parties with respect to the subject matter of this Lease, and no representations, inducements, promises or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect. This Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements, and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. This Lease may not be altered, waived, amended or extended except by an instrument in writing signed by Landlord and Tenant. This Lease is not in recordable form, and Tenant agrees not to record or cause to be recorded this Lease or any short form or memorandum thereof.
(d) Headings. The use of headings herein is solely for the convenience of indexing the various paragraphs hereof and shall in no event be considered in construing or interpreting any provision of this Lease.
(e) Governing Law. The laws of the State of California shall govern the validity, performance and enforcement of this Lease.
(f) Authority. If Tenant executes this Lease as a corporation, each of the persons executing this Lease on behalf of Tenant does hereby personally represent and warrant that Tenant is a duly incorporated or a duly qualified (if a foreign corporation) corporation and is fully authorized and qualified to do business in the State of California, that the corporation has full right and authority to enter into this Lease, and that each person signing on behalf of the corporation is an officer of the corporation and is authorized to sign on behalf of the corporation. If Tenant signs as a partnership, joint venture, or sole proprietorship or other business entity (each being herein called “Entity”), each of the persons executing on behalf of Tenant does hereby covenant and warrant that Tenant is a duly authorized and existing Entity, that Tenant has full right and authority to enter into this Lease, that all persons executing this Lease on behalf of the Entity are authorized to do so on behalf of the Entity, and that such execution is fully binding upon the Entity and its partners, joint venturers, members or principals, as the case may be. Upon the request of Landlord, Tenant shall deliver to Landlord documentation satisfactory to Landlord evidencing Tenant’s compliance with this Section 45(f), and Tenant agrees to promptly execute all necessary and reasonable applications or documents as reasonably requested by Landlord or required by the jurisdiction in which the Premises is located, to permit the issuance of necessary permits and certificates for Tenant’s use and occupancy of the Premises.
(g) financial Statements. Upon Landlord’s written request therefor, but not more often than twice per year, Tenant shall promptly furnish to Landlord its financial statement with respect to Tenant for its most recent fiscal year prepared in accordance with generally accepted accounting principles and certified by a firm of nationally recognized certified public accountants as fairly presenting the financial condition of Tenant and the results of its operations for the previous twelve (12) months, which statement Landlord agrees to keep confidential and not use except in connection with Landlord’s administration and monitoring of this Lease and any proposed sale, loan or other transactions related to the Project. Notwithstanding the foregoing, for so long as Tenant’s (but not any Affiliate of Tenant) stock is publicly traded on a nationally recognized stock exchange and Tenant’s financial statements are publicly filed, the foregoing requirement shall be inapplicable to Tenant.
(h) Joint and Several Liability. If Tenant comprises more than one person, corporation, partnership or other entity, the liability hereunder of all such persons, corporations, partnerships or other entities shall be joint and several.
(i) Non-Waiver. No waiver of any provision of this Lease shall be implied by any failure of Landlord or Tenant to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently. Any waiver by Landlord or Tenant of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than the one specified in such waiver and that one only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant’s right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final
judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.
(j) Landlord’s Right to Cure Default and Payments by Tenant.
(i) All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and expense and without any reduction of Rent. If Tenant shall fail to perform any of its performance obligations under this Lease, within a reasonable time after such performance is required by the terms of this Lease, Landlord may, but shall not be obligated to, after reasonable prior notice to Tenant, make any such payment or perform any such act on Tenant’s part without waiving its right based upon any default of Tenant and without releasing Tenant from any obligations hereunder.
(ii) Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of statements therefor: (x) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenant’s defaults pursuant to the provisions of this Section 45(j); (y) sums equal to all losses, costs, liabilities, damages and expenses referred to in Sections 15 and 34 of this Lease; and (z) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent that is past due or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all legal fees and other amounts so expended. Tenant’s obligations under this Section 45(j) shall survive the expiration or sooner termination of the Lease Term.
(k) Terms. The necessary grammatical changes required to make the provisions hereof apply either to corporations, partnerships, limited liability companies, individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed.
(l) Relationship of Parties. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venture or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant.
(m) Application of Payments. Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant’s designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.
(n) Building Name and Signage. Subject to Tenant’s rights under Section 41 above, Landlord shall have the right at any time to change the name of the Project and to install, affix and maintain any and all signs on the exterior of any portion of the Project as Landlord may, in Landlord’s sole discretion, desire. Tenant shall not use the name of the Building or Project or use pictures or illustrations of the Building or Project in advertising or other publicity, without the prior written consent of Landlord.
(o) Exhibits. Exhibits and any other attachments specified in the Basic Lease Information, are attached to and made a part of this Lease and incorporated into this Lease by this reference.
(p) Transportation Management. Tenant shall fully comply with all present or future programs intended to manage parking, transportation or traffic in and around the Project, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities. Such programs may include, without limitation: (i) restrictions on the number of peak-hour vehicle trips generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of an in-house ridesharing program and an employee transportation coordinator; (iv) working with employees and any Project or area-wide ridesharing program manager; (v) instituting employer-sponsored incentives (financial or in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work shifts for employees. Landlord may obtain or has obtained shuttle or similar transportation services (which may include joining an existing shuttle route) in order to provide transportation between the Project and the Mountain View Caltrain station or other locations as determined by Landlord (“Shuttle Services”). The cost of any such Shuttle Services shall be an Operating Expense pursuant to Sections 6 and 7 hereof.
(q) Parking. Tenant is entitled, at no additional charge, to the non-exclusive use of the parking facilities, as they exist from time to time and subject Landlord’s rules and regulations regarding the same, including, initially, the right to use three (3) parking spaces per 1,000 RSF of the Premises. The foregoing shall not be deemed to provide Tenant with an exclusive right to any parking spaces or any guaranty of the availability of any particular parking spaces or any specific number of parking spaces throughout the Term. Tenant shall not, at any time, park or permit to be parked any recreational vehicles, inoperative vehicles or equipment in the Common Areas or on any portion of the Project. Landlord may at its election upon ten (10) days’ written notice to Tenant reasonably designate in a non-discriminatory manner the locations within the Project in which Tenant and Tenant’s employees and visitors may park. Landlord shall be permitted to install and utilize a valet parking system to satisfy Tenant’s parking requirements hereunder. Tenant agrees to notify its employees and invitees of the parking provisions contained herein. If Tenant or its employees park any vehicle within the Project in violation of these provisions, then Landlord may, upon prior written notice to Tenant giving Tenant one (1) day to remove such vehicle(s), in addition to any other remedies Landlord may have under this Lease, charge Tenant, as Additional Rental, and Tenant agrees to pay, as Additional Rental, One Hundred Dollars ($100) per day for each day or partial day that each such vehicle is so parked within the Project. Landlord reserves the right to grant easements and access rights to others for use of the parking areas on the Project so long as Tenant’s parking is not reduced materially below Tenant’s proportional share of non-exclusive use of the parking facilities as they exist from time to time.
(r) Outdoor Amenities. Tenant acknowledges that Landlord may make available at the Project certain furniture, equipment, playgrounds, sport courts and other outdoor amenities (“Outdoor Amenities”) and that Landlord may require any and all persons, including any Tenant Parties, to sign a waiver or release on a form provided by Landlord in connection with the use of such Outdoor Amenities. Tenant shall indemnify and hold the Landlord Parties harmless from and defend Landlord and the other Landlord Parties against any and all Claims incurred in connection with the use of the Outdoor Amenities by Tenant and/or any Tenant Parties.
(s) [Intentionally Deleted].
(t) [Intentionally Deleted].
(u) Business Days. As used herein, the term “Business Day” shall mean a day that is not a Saturday, Sunday or legal holiday in the State of California. In the event that the date for the performance of any covenant or obligation under this Lease shall fall on a Saturday, Sunday or legal
holiday under the laws of the State of California, the date for performance thereof shall be extended to the next Business Day.
(v) Construction. Tenant acknowledges that Landlord may during the Lease Term renovate, improve, alter, or modify the Building, the Project and/or construct additional buildings and improvements at the Project or any adjacent property whether now or hereafter owned by Landlord or its Affiliate (“Construction Work”). Such Construction Work shall be done at Landlord’s sole discretion and may include, without limitation, the temporary relocation, restriping, or reconfiguration of the parking areas, the replacement and installation of landscaping and hardscaping, application for building permits and other development approvals, parcelization, lot combination or merger, or lot line adjustment of the Project, as well as any modifications to the exterior of the Building desired by Landlord, including without limitation the replacement of all exterior glass and windows and affixing art, graphics, designs and lighting to the Building exterior. In connection with such Construction Work, Landlord may, among other things, erect scaffolding or other necessary structures outside the Building or elsewhere on the Project, temporarily limiting or eliminating access to portions of the Project, including portions of the Common Areas, or perform work on the Project, which work may create noise in the Premises or leave dust or debris on the Project. Tenant hereby agrees that such Construction Work and Landlord’s actions in connection with such Construction Work shall in no way constitute a breach of the covenant of quiet enjoyment, a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent except as provided in Section 22(f) above. Tenant agrees to execute such reasonable documents and take such actions as reasonably necessary to assist Landlord with such efforts and actions, including without limitation executing any necessary amendments following parcelization, lot combination, merger or lot line adjustment to conform the descriptions of the Project, the Common Areas and the Land to any such parcelization, lot combination, merger or lot line adjustment. Provided that Tenant shall at all times retain access to the Premises, Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant’s business arising from the Construction Work, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or the Project or of Tenant’s personal property or improvements resulting from the Construction Work or Landlord’s actions in connection with such Construction Work, or for any inconvenience or annoyance occasioned by such Construction Work or Landlord’s actions in connection with such Construction Work.
(w) Sustainability. Tenant acknowledges that Landlord may voluntarily cooperate with the efforts of governmental agencies and/or utility suppliers in reducing energy or other resource consumption within the Project. Tenant shall not be entitled to terminate this Lease or to any reduction in or abatement of rent by reason of such cooperation. Tenant agrees at all times to cooperate fully with Landlord and to abide by all rules established by Landlord (i) in order to maximize the efficient operation of the electrical, heating, ventilating and air conditioning systems and all other energy or other resource consumption systems with the Project and/or (ii) in order to comply with the recommendations of utility suppliers and governmental agencies regulating the consumption of energy and/or other resources. Tenant further acknowledges that Landlord may, at its sole cost and not as an Operating Expense, submit the Building for certification under the Leadership in Energy and Environmental Design (“LEED”) or other similar rating system and that Landlord may adopt rules and regulations in accordance with such rating system and any applicable laws for operation of the Premises, the Building, and/or the balance of the Project so as to minimize environmental impact and waste, reduce energy and water consumption and carbon footprint, and implement sustainable practices. Such measures may include, without limitation, the installation of energy-efficient glass and windows, electric vehicle charging stations and energy-efficient (i.e., LED) lighting systems. Tenant agrees to cooperate with all such efforts and to assist with Landlord’s efforts to comply with any such rating system or applicable law. In addition to the foregoing, Landlord
may in its sole discretion require Tenant to sort and separate its waste and debris for recycling in accordance with rules and regulations adopted by Landlord, LEED standards or applicable law.
(x) OF AC. Tenant, and all beneficial owners of Tenant, are currently (a) in compliance with and shall at all times during the Lease Term remain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and any statute, executive order, or regulation relating thereto (collectively, the “OFAC Rules”), (b) not listed on, and shall not during the term of this Lease be listed on, the Specially Designated Nationals and Blocked Persons List maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authority pursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conducting business under the OFAC Rules.
(y) Energy Usage Disclosures. Tenant acknowledges that Landlord has complied with California Public Resource Code § 25402.10 and the disclosure regulations issued in connection therewith (e.g., California Code of Regulations, Title 20,Sections 1680 – 1684) by, among other things, delivering to Tenant the Disclosure Summary Sheet, Statement of Energy Performance, Data Checklist and Facility Summary (as such terms are defined in California Code of Regulations, Title 20, Section 1681) for the Buildings prior to the date hereof. By Tenant’s execution of this Lease, Tenant acknowledges Tenant’s receipt of the Disclosure Summary Sheet, Statement of Energy Performance, Data Checklist and Facility Summary.
(z) Certified Access Specialist. Tenant acknowledges that Landlord has not engaged a Certified Access Specialist, as such term is defined in California Civil Code Section 55.52, to inspect the Project.
(aa) Counterparts. This Lease may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together will constitute one and the same instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto except having additional signature pages executed by other parties to this Lease attached thereto. The parties may deliver their signatures to this Lease by facsimile, electronic mail, or other electronic transmission (“Electronic Signatures”) and agree to accept such digital image of this Lease, as executed, as a true and correct original and admissible as if such signatures were original, executed versions of this Lease. Facsimile or electronic signatures to this Lease shall be binding upon the parties and the parties agree to exchange ink-signed originals within three (3) Business Days after the date of this Lease; provided, however, that the failure to deliver such original signature pages shall not diminish the binding nature of any Electronic Signatures.
[Signatures are on the next page]
IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above written.
| | | | | | | | | | | | | | | | | |
| LANDLORD: | |
| | | | | |
MV CAMPUS OWNER, LLC,
a Delaware limited liability company | |
| | | | | |
| By: | | /s/ Peter Kaye | |
| Name: | | Peter Kaye | |
| Its: | | Authorized Signatory | |
| | | | | |
| TENANT: | |
| | | | | |
HEARTFLOW, INC.,
a Delaware corporation | |
| | | | | |
| By: | | | |
| Name: | | | |
| Its: | | | | | |
IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above written.
| | | | | | | | | | | | | | | | | |
| LANDLORD: | |
| | | | | |
MV CAMPUS OWNER, LLC,
a Delaware limited liability company | |
| | | | | |
| By: | | | |
| Name: | | | |
| Its: | | Authorized Signatory | |
| | | | | |
| TENANT: | |
| | | | | |
HEARTFLOW, INC.,
a Delaware corporation | |
| | | | | |
| By: | | /s/ John Stevens | |
| Name: | | John Stevens | |
| Its: | | CEO | |
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF MOUNTAIN VIEW, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
Parcel 1, as shown on that Parcel Map filed for record in the Office of the Recorder of the County of Santa Clara, State of California on February 26, 1988, in Book 584 of Maps, Page(s) 3 and 4, and as amended by Certificate of Correction recorded August 2, 1988 in Book K626, Page 1148, Official Records.
EXHIBIT B-l
FLOOR PLANS OF PREMISES
[Attached as the immediately following pages.]
EXHIBIT B-2
SITE PLAN OF PROJECT
[Attached as the immediately following page.]
This site plan is intended only to show the general layout of the property or a part thereof. Landlord reserves the right to alter, vary, add to, or omit in whole or in part, any structures, and/or improvements, and/or Common Areas shown on this plan. This plan is not to scale, and all measurements and distances are approximate.
EXHIBIT C
WORK LETTER
This Work Letter (the “Work Letter”) supplements the Lease (the “Lease”) dated August 9, 2021, by and between MVCC Campus Owner, LLC, a Delaware limited liability company, as landlord (“Landlord”), and Heartflow, Inc., a Delaware corporation, as tenant (“Tenant”), covering certain premises described in the Lease (the “Premises”). All terms not defined in this Work Letter shall have the meanings set forth for them, respectively, in the Lease.
SECTION 1.
BASE BUILDING CONSTRUCTION
Landlord has previously constructed the base, shell, and core (i) of the Premises and (ii) of the floors of the Building on which the Premises are located (collectively, the "Base, Shell, and Core"), and Tenant shall accept the Base, Shell and Core in its current "As-Is" condition existing as of the date of the Lease and the Delivery Date, subject to Section 3(a) of the Lease. Landlord shall install in the Premises certain "Tenant Improvements" (as defined below) pursuant to the provisions of this Work Letter. Except for the disbursement of the Tenant Improvement Allowance set forth below, Landlord shall not be obligated to make any other alterations or improvements to the Premises, the Building or the Land.
SECTION 2.
TENANT IMPROVEMENTS
2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time tenant improvement allowance (the “Tenant Improvement Allowance”) of up to, but not exceeding, $1,844,880.00 (i.e., $30.00 per RSF in the Premises) for the costs of the design (including, but not limited to, permitting, space planning, working drawings and engineering) and construction of Tenant’s improvements which are built by Tenant pursuant to this Work Letter and permanently affixed to the Premises (the “Tenant Improvements”) or as set forth below in this Work Letter. In no event shall Landlord be obligated to make disbursements on account of Tenant Improvements which exceed the Tenant Improvement Allowance. All Tenant Improvements for which the Tenant Improvement Allowance has been made available shall be deemed Landlord’s property under Section 12(c) of the Lease.
2.2 Disbursement of the Tenant Improvement Allowance. Except as otherwise set forth in this Work Letter, the Tenant Improvement Allowance shall be disbursed pursuant to Section 4,5 hereof for costs paid to the Contractor or others for the design, permitting and completion of construction of the Tenant Improvements and for the following items and costs (collectively, the “Tenant Improvement Allowance Items”): (i) payment of the fees of the “Architect” and the “Engineers” (defined in Section 3.1 below), and payment of the actual, reasonable fees incurred by, and the costs of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the review of the “Drawings” (defined in Section 3.1 below); (ii) the cost of any changes to the Drawings or Tenant Improvements required by applicable building codes (collectively, the “Codes”); (iii) the cost of miscellaneous fees relating to the cost of construction of the Tenant Improvements, including without limitation, permit fees, testing and inspection costs, and trash removal costs; (iv) data and telecom cabling and wiring; (v) project management fees; (vi) IT/AV equipment; (vii) the purchase and installation of furniture, fixtures and equipment; (viii) the cost of fabricating and installing Tenant’s
signage; (ix) Tenant moving costs; and (x) any and all other hard and soft costs related to the construction of the Tenant Improvements to and/or Tenant’s move into the Premises.
2.3 Application of Tenant Improvement Allowance Against Base Rental. Tenant shall use commercially reasonable efforts to substantially complete the Tenant Improvements by January 1, 2023. Notwithstanding the foregoing, Tenant shall have the right, exercisable by written notice to Landlord (the “Unused Allowance Exercise Notice”), to elect to use a portion of the Tenant Improvement Allowance then available, but not in excess $1,475,904.00 (i.e., 80% of the Tenant Improvement Allowance (the "Unused Allowance Amount"), to receive a credit against future installments of Base Rental first coming due under the Lease on and after January 1, 2023 specified in the Unused Allowance Exercise Notice.
SECTION 3.
DRAWINGS
3.1 Selection of Architect/Drawings. Tenant shall retain a reputable architect/space planner reasonably approved by Landlord (“Architect”) to prepare the “Final Space Plan,” “Design Development Drawings,” and “Final Working Drawings,” all as defined herein below and collectively referred to as “Drawings.” Tenant shall retain reputable engineering consultants reasonably designated or selected by Tenant and approved by Landlord (“Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, life safety, and sprinkler work of the Tenant Improvements. All Drawings shall be subject to Landlord’s approval, which approval shall not be unreasonably conditioned, withheld or delayed. Tenant and Architect shall not rely on any drawings supplied by Landlord and shall verify, in the field, all relevant dimensions and conditions relating to the base Building and shall be solely responsible for the same. Landlord’s review of the Drawings as set forth in this Section 3 shall be for its own purposes and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, compliance with the Codes or other like matters. Accordingly, notwithstanding that any Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance that may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no responsibility or liability whatsoever in connection therewith, including any omissions or errors contained in the Drawings, and Tenant’s waiver and indemnity set forth in Section 34 of the Lease shall specifically apply to the Drawings.
3.2 Space Plan. Tenant and Architect shall prepare and deliver to Landlord with a request for its approval (in at least ten-point type in all capital letters specifying this Section 3), which approval shall not be unreasonably withheld or delayed, the proposed space plan for the Premises. Notwithstanding the preceding sentence, Landlord may withhold its consent, in its sole discretion, to any element of the proposed space plan which would materially and adversely affect the systems of the Building, including without limitation, the HVAC, plumbing and fire protection systems, the Building’s equipment, the structural integrity of the Building, and/or the exterior appearance of the Building. Landlord shall notify Tenant of its approval or disapproval (with reasons for such disapproval specified) of the proposed space plan within five (5) Business Days after receipt thereof. If Landlord disapproves the proposed space plan, this process shall be repeated until Landlord’s approval is obtained (except the 5-Business Day period shall be reduced to three (3) Business Days); provided, however, that Tenant shall only make such changes to the proposed space plan which address the reasons Landlord specified for its disapproval of the proposed space plan. The approved space plan is hereinafter referred to as the “Final Space Plan.” Upon Tenant’s written request at the time the Final Working Drawings are submitted to
Landlord, Landlord shall, at the time of Landlord’s approval of the Final Space Plan, designate in writing by written notice to Tenant, which, if any, of the Tenant Improvements will need to be removed at the expiration or termination of the Lease Term.
3.3 Design Development Drawings. Tenant and Architect shall prepare and deliver to Landlord with a request for its approval (in at least ten-point type in all capital letters specifying this Section 3), which approval shall not be unreasonably withheld or delayed, the proposed design development drawings, which shall be the formalization of the Final Space Plan and the initial set of drawings. Notwithstanding the preceding sentence, Landlord may withhold its consent, in its sole discretion, to any element of the proposed design development drawings which would materially and adversely affect the systems of the Building, including without limitation, the HVAC, plumbing and fire protection systems, the Building’s equipment, the structural integrity of the Building, and/or the exterior appearance of the Building. Landlord shall notify Tenant of its approval or disapproval (with reasons for such disapproval specified) of the proposed design development drawings within five (5) Business Days after receipt thereof. If Landlord disapproves the proposed design development drawings, this process shall be repeated until Landlord’s approval is obtained (except the 5-Business Day period shall be reduced to three (3) Business Days); provided, however, that Tenant shall only make such changes to the proposed design development drawings which address the reasons Landlord specified for its disapproval of the proposed design development drawings. The approved design development drawings are hereinafter referred to as the “Final Design Development Drawings.”
3.4 Working Drawings. Following completion of the Final Design Development Drawings, the Architect and the Engineers shall complete and deliver to Landlord with a request for its approval, which approval shall not be unreasonably conditioned, withheld or delayed, the proposed architectural and engineering drawings for the Premises, in a form which is sufficiently complete to allow subcontractors to bid on the work and to obtain all applicable permits. Notwithstanding the preceding sentence, Landlord may withhold its consent, in its sole discretion, to any element of the proposed architectural and engineering drawings for the Premises which would materially and adversely affect the systems of the Building, including without limitation, the HVAC, plumbing and fire protection systems, the Building’s equipment, the structural integrity of the Building, and/or the exterior appearance of the Building. Landlord shall notify Tenant of its approval or disapproval (with reasons for any disapproval specified) of the proposed working drawings within five (5) Business Days after receipt thereof. If Landlord disapproves the proposed working drawings, this process shall be repeated until Landlord’s approval is obtained (except the 5-Business Day period shall be reduced to three (3) Business Days), although Tenant need only make such changes to the proposed working drawings which address the reasons Landlord specified for its disapproval of the proposed working drawings. The approved proposed working drawings are hereinafter referred to as the “Final Working Drawings.”
3.5 Permits. The Final Working Drawings shall have been approved by Landlord prior to the commencement of the construction of the Tenant Improvements. Following completion of the Final Working Drawings, Tenant shall submit the Final Working Drawings to the appropriate municipal authorities for all applicable building permits necessary to allow Contractor to commence and fully complete the construction of the Tenant Improvements (the “Permits”). No changes, modifications or alterations in the Final Space Plan or the Final Working Drawings may be made by Tenant without the prior written consent of Landlord, which consent shall not be unreasonably conditioned, withheld or delayed; provided that Landlord may withhold its consent, in its sole discretion, to any change in the Final Space Plan or the Final Working Drawings if such change would materially and adversely affect the systems of the Building, including without limitation, the HVAC, plumbing and fire protection systems,
the Building’s equipment, the structural integrity of the Building, and/or the exterior appearance of the Building.
3.6 Time Deadlines.
(a) Promptly following execution of the Lease, Tenant shall submit to Landlord a proposed construction schedule and customary construction milestones for the Tenant Improvements (“Approved Plan”). Tenant shall use good faith and commercially reasonable efforts to abide by each of the deadlines and milestones contained in such Approved Plan.
(b) Tenant shall use its commercially reasonable, good faith, efforts and all due diligence to cooperate with the Architect, the Engineers, and Landlord to complete all phases of the Drawings and the permitting process and to receive the Permits in accordance with the schedule approved by the parties, and, in that regard, shall meet with Landlord as it reasonably requests to discuss Tenant’s progress in connection with the same. Landlord agrees to cooperate with Tenant at no cost to Landlord, to the extent necessary to facilitate Tenant’s permitting process.
3.7 Approval of Drawings. Without limiting Landlord's rights in any way, Landlord shall be deemed to have reasonably withheld its approval of any portion of the Drawings which:
(a) exceeds the capacity of, materially and adversely affects, is incompatible with, or impairs Landlord’s ability to maintain, operate, alter, modify or improve the Building structure or Building systems and/or Landlord reasonably believes will increase the cost of operating or maintaining the Building structure, Building systems or Project;
(b) does not conform to applicable laws, building codes, insurance regulations or standards for a fire-resistive office building and/or is not approved by any governmental authority having jurisdiction over the Premises;
(c) locates any equipment, telecommunications wiring or cabling or Tenant’s personal property on the roof of the Building (except as specifically agreed to by Landlord), in Common Areas or in Common Area telecommunication or electrical closets;
(d) affects the exterior appearance of the Building or Common Areas;
(e) violates any agreement which affects the Project or binds Landlord;
(f) Landlord reasonably believes will reduce the market value of the Premises or the Project at the end of the Term; or
(g) Landlord reasonably believes will infringe on the architectural integrity of the Building.
SECTION 4.
CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1 Contractor. Tenant shall retain a qualified, reputable general contractor reasonably approved by Landlord (the “Contractor”). Tenant hereby waives all claims against Landlord, and Landlord shall have no responsibility or liability to Tenant, on account of any non-performance or
any misconduct of any contractor or any subcontractor thereof. Tenant shall use its commercially reasonable efforts to cause the Tenant Improvements to be completed as promptly as reasonably possible. The Tenant Improvements shall be constructed in a first-class manner in accordance with the Final Working Drawings and in compliance with all applicable Codes in effect as of the date of construction. Landlord shall notify Tenant of its approval or disapproval (with reasons for any disapproval specified) of the Contractor within two (2) Business Days after request thereof.
4.2 Tenant’s Agents. Tenant shall use reputable subcontractors and engineers for the performance of the Tenant Improvements.
4.3 Landlord Fees and Reimbursements.
4.3.1 Tenant shall pay a construction supervision and management fee (the “Construction Management Fee”) to Landlord in an amount equal to one percent (1%) of the Tenant Improvement Allowance, payable ratably as the Tenant Improvement Allowance is disbursed as provided herein. Tenant shall include such ratable portion of the Construction Management Fee in each request disbursing the Tenant Improvement Allowance.
4.3.2 In addition to the Construction Management Fee, Tenant shall reimburse Landlord for any reasonable third-party costs and expenses incurred by Landlord in connection with the Tenant Improvements, including, but not limited to, the costs of any architects or engineers hired by Landlord to review any space plans, schematic drawings, design development drawings and architectural and engineering drawings. Such reimbursements shall, at Landlord’s election, in its sole and absolute discretion, (a) be paid to Landlord within thirty (30) days of invoice or (b) be credited against the remaining available balance of the Tenant Improvement Allowance
4.4 Construction of the Tenant Improvements. Prior to Tenant’s execution of the construction contract and general conditions between Tenant and its Contractor (the “Contract”), Tenant shall submit the Contract to Landlord for its approval, which approval shall not be unreasonably withheld or delayed. Landlord shall notify Tenant of its approval or disapproval (with reasons for any disapproval specified) of the Contract within five (5) Business Days after request thereof. Prior to the commencement of the construction of the Tenant Improvements, and after Tenant has accepted all bids for the Tenant Improvements, Tenant shall provide Landlord with a detailed breakdown, by trade, of the final costs to be incurred or which have been incurred, in connection with the design and construction of the Tenant Improvements to be performed by or at the direction of Tenant or the Contractor, which costs form a basis for the amount of the Contract (the “Construction Budget”), which for the sake of clarity shall include all hard and soft costs for the Tenant Improvements which are subject to reimbursement from the Tenant Improvement Allowance.
4.4.1 Prior to commencing construction of the Tenant Improvements, Tenant shall deliver to Landlord the following:
(a) The actual commencement date of construction and the estimated date of completion of the work, including fixturization;
(b) Evidence of all insurance required hereunder; and
(c) An executed copy of the Permits.
4.4.2 Contractor Requirements. After receipt of the Permits, Tenant shall cause the Contractor to proceed promptly to commence and complete the Tenant Improvements. The Contractor
and all subcontractors shall be subject to administrative and other supervision by Landlord in their use of the Building. Tenant shall reimburse Landlord within ten (10) days after demand for the cost of repairing any damage to the Building caused by Tenant, the Contractor or any subcontractor during performance of the Tenant Improvements. The Contractor and all subcontractors shall conduct their work and employ labor in such manner as to maintain harmonious labor relations and as not to interfere with or delay any work of Landlord’s contractors or other contractors in the Building.
4.4.3 Landlord’s General Conditions for Tenant’s Agents and Tenant Improvement Work. The construction of the Tenant Improvements by Tenant and Tenant’s subcontractors, laborers, materialmen, and suppliers, and the Contractor, Tenant’s Architect and engineer (collectively, “Tenant’s Agents”) shall comply with the following: (i) the Tenant Improvements shall be constructed in strict accordance with the Final Working Drawings and all approved change orders; and (ii) Tenant shall abide by all rules made by Landlord’s building manager with respect to the use of freight, loading dock and service elevators, storage of materials, trash removal, coordination of work with the contractors of other tenants, and any other matter in connection with this Work Letter, including, without limitation, the construction of the Tenant Improvements.
(a) Changes. Any changes in the Tenant Improvements from the Final Working Drawings (“Changes”) shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably conditioned, delayed or withheld. Any deviation in construction from the design specifications and criteria set forth herein or from Tenant’s plans and specifications as approved by Landlord shall be promptly remedied following notice from Landlord or Landlord’s contractor or any government representative. Only new and/or properly recycled first-class materials shall be used in the construction of the Tenant Improvements, except with the written consent of Landlord, which consent may be withheld in Landlord’s reasonable discretion.
(b) Trash Removal. During the construction of the Tenant Improvements, removal of trash generated by the work of the Tenant Improvements, or otherwise by Tenant, will be done continually at Tenant’s cost and expense. No trash, or other debris, or other waste may be deposited at any time outside the Premises. If so, upon prior written notice, Landlord may remove it at Tenant’s expense, which expense shall equal the cost of removal plus five percent (5%) of such costs as a management fee.
(c) Storage of Tools. Storage of the Contractor’s construction materials, tools and equipment shall be confined within the Premises and in areas designated for such purposes by Landlord, and should such materials, tools and equipment be assigned space or spaces outside the Premises they shall be moved to such other space as Landlord shall direct from time to time to avoid interference or delays with other work. In no event shall any debris be stored outside of the Premises.
4.4.4 Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of the Tenant Improvements for which it is responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof. Each of Tenant’s Agents shall be responsible for the replacement or repair, without additional charge, of all work done or furnished in accordance with its contract that shall become defective within one (1) year after the later to occur of (i) completion of the work performed by such contractor or subcontractors and (ii) the Lease Commencement Date. The correction of such work shall include, without additional charge, all additional expenses and damages incurred in connection with such removal or replacement of all or any part of the Tenant Improvements, and/or repair of the Building and/or Common Areas that may be damaged or disturbed thereby. All such warranties or guarantees as to materials or workmanship of or with respect to the Tenant Improvements
shall be contained in the Contract and/or, as applicable, in the subcontracts and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any non-exclusive assignment or other assurances which may be necessary to affect such right of direct enforcement.
4.4.5 Indemnity. Tenant shall be solely responsible for the actions or omissions of Tenant, as well as the actions or omissions of the Architect, the Contractor and any Tenant’s Agent and for any loss, liability, claim, cost, damage or expense suffered by Landlord or any other entity or person as a result of the acts or omissions of, or any delay caused by, such persons or entities arising in connection with the planning or construction of the Tenant Improvements. Landlord’s approval of the Architect, the Contractor or any Tenant’s Agent, any work performed by any of them, or any documents prepared by any of them shall not be for the benefit of Tenant or any third party, and Landlord shall have no duty to Tenant or to any third parties for the actions or omissions of the Architect, the Contractor or any Tenant’s Agent. Tenant shall pass through to Landlord all warranties in connection with the Tenant Improvements. Tenant shall indemnify, defend and hold harmless Landlord against any and all losses, costs, damages, claims and liabilities, including the cost to defend, arising from the actions or omissions of Tenant, the Architect, the Contractor, Tenant’s Agents or any agents, employees or subcontractors of any of them, or in connection with Tenant’s non-payment of any amount arising out of the Tenant Improvements and/or Tenant’s disapproval of all or any portion of any request for payment. Such indemnity by Tenant, as set forth in the Lease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Landlord’s performance of any ministerial acts reasonably necessary (i) to permit Tenant to complete the Tenant Improvements, and (ii) to enable Tenant to obtain any building permit or certificate of occupancy for the Premises.
4.4.6 Insurance Requirements.
(a) General Coverages. All of Tenant’s Agents shall carry worker’s compensation insurance in accordance with State law, and employers liability insurance with minimum limits of $1,000,000 each accident/$l,000,000-poiicy limit for injury by disease, covering all of their respective employees, and shall also carry commercial general liability insurance, including coverage for bodily injury and property damage, including, without limitation, products and completed operations coverage, and Automobile Liability insurance for owner, hired and non-owned vehicles, all with limits, in form and with companies as are required to be carried by Tenant as set forth in the Lease.
(b) Special Coverages. Tenant or its Contractor shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of the Tenant Improvements, and such other insurance as Landlord may reasonably require, it being understood and agreed that the Tenant Improvements shall be insured by Tenant pursuant to the Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such additional coverage as may be reasonably required by Landlord. Tenant shall require that all of Tenant’s Contractor carry commercial general liability insurance, including coverage for Products and Completed Operations with limits of not less than $5,000,000 per occurrence, $5,000,000 in general aggregate, and $5,000,000 products and completed operations aggregated in form and with companies as are required to be carried by Tenant as set forth in the Lease.
(c) General Terms. Certificates for all insurance carried pursuant to this Section 4,4,6 shall be delivered to Landlord before the commencement of construction of the Tenant Improvements and before the Contractor’s equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy, or its authorized agent, will give
Landlord thirty (30) days’ prior written notice of any cancellation, material change or any reduction in the amounts of such insurance. In the event that the Tenant Improvements are damaged by any cause duringthe course ofthe construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense. Tenant’s Agents shall maintain all of the foregoing insurance coverage in force until the Tenant Improvements are fully completed and accepted by Landlord, except for any Products and Completed Operation Coverage insurance required by Landlord, which is to be maintained for ten (10) years following completion of the work and acceptance by Landlord and Tenant. All policies carried under this Section 4.4.6 shall insure Landlord and Tenant. All policies of property insurance and all Workers’ Compensation, maintained by Tenant or Tenant’s Agents performing operations on the Premises shall preclude subrogation claims by the insurer against Landlord and any additional parties reasonably designated by Landlord. Such insurance shall provide that it is primary insurance as respects the Landlord and that any other insurance maintained by Landlord. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under Section 4.4.5 of this Work Letter.
4.4.7 Governmental Compliance. The Tenant Improvements shall comply in all respects with the following: (i) the Code and other state, federal, city or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) building material manufacturers’ specifications.
4.4.8 Inspection by Landlord. Landlord shall have the right to inspect the Tenant Improvements at all times; provided however, that Landlord’s failure to inspect the Tenant Improvements shall in no event constitute a waiver of any of Landlord’s rights hereunder nor shall Landlord’s inspection of the Tenant Improvements constitute Landlord’s approval of the same. Should Landlord disapprove any portion of the Tenant Improvements, Landlord shall notify Tenant in writing of such disapproval and shall specify the items disapproved. Any defects or deviations in, and/or disapproval by Landlord of, the Tenant Improvements shall be rectified by Tenant at no expense to Landlord; provided however, that in the event Landlord determines that a defect or deviation exists or disapproves of any matter in connection with any portion of the Tenant Improvements and such defect, deviation or matter might materially and adversely affect the mechanical, electrical, plumbing, heating, ventilating and air conditioning or life-safety systems of the Building, the structure or exterior appearance of the Building or any other tenant’s use of such other tenant’s leased premises, Landlord may take such action as Landlord deems necessary, at Tenant’s expense (and if such cost is not promptly reimbursed by Tenant, Landlord may deduct such cost from the Tenant Improvement Allowance) and without incurring any liability on Landlord’s part, to correct any such defect, deviation and/or matter, including, without limitation, causing the cessation of performance of the construction of the Tenant Improvements until such time as the defect, deviation and/or matter is corrected to Landlord’s satisfaction.
4.4.9 Meetings. Commencing upon the execution of this Lease, Tenant shall hold weekly meetings, at a reasonable time, with the Architect and the Contractor regarding the progress of the preparation of the Drawings and the construction of the Tenant Improvements, which meetings shall be held at a location approved by Landlord, and Landlord and/or its agents shall receive prior notice of, and shall have the right to attend, all such meetings, and, upon Landlord’s request, certain of Tenant’s Agents shall attend such meetings. In addition, minutes shall be taken by Tenant and/or Tenant’s Agents at all such meetings, a copy of which minutes shall be promptly delivered to Landlord. Landlord shall be permitted to discuss proposed Landlord Changes or the status of the Landlord’s Work at all such meetings.
4.4.10 Notices. Landlord shall have the right to post in a conspicuous location on the Premises, as well as record with the County of Santa Clara, California, a notice of non-responsibility.
4.4.11 Coordination of Work. All work to be performed inside or outside of the Premises shall be reasonably coordinated with Landlord and shall be subject to reasonable scheduling requirements of Landlord, and Tenant shall coordinate all after-hours and weekend work and use of the swing elevator with Landlord.
4.4.12 As-Built Plans. Tenant shall, upon completion of the Tenant Improvements, submit to Landlord two (2) complete sets of plans (one (1) reproducible) and specifications (including all working drawings) prepared by the Architect and covering all of the Tenant Improvements, including architectural, electrical, and plumbing, as built, plus one (1) copy of the same in “CAD” format.
4.5 Payment of Costs of the Tenant Improvements. Landlord shall bear and pay the cost of the Tenant Improvements up to the amount of the Tenant Improvement Allowance. Tenant shall bear and pay the cost of the Tenant Improvements in excess of the Tenant Improvement Allowance. If the aggregate of the Construction Budget exceeds the Tenant Improvement Allowance (“TI Excess”), Tenant shall be responsible for payment of such excess (the “Tenant Contribution”), so that the TI Excess will be paid pro rata and pari passu with any amount of Tenant Improvement Allowance is required to be disbursed. The Tenant Contribution shall be funded by Tenant pro rata and pari passu with the disbursement of any portion of the Tenant Improvement Allowance, and such payments shall be pursuant to the same procedures and requirements as the funding of the Tenant Improvement Allowance. In the event of any Changes or any other revisions, changes, or substitutions shall be made to the Final Working Drawings or the contracts for the construction of the Tenant Improvements which would increase the Construction Budget, any additional costs which arise in connection with such revisions, changes or substitutions or any other additional costs shall be TI Excess and such amounts shall be paid by Tenant as an addition to the Tenant Contribution and such amount shall be disbursed pro rata and pari passu with any further disbursement of the Tenant Improvement Allowance. Subject to the terms hereof, and except for Tenant Improvement Allowance Items that are other than payments to contractors and materialman for the construction of the Tenant Improvements, Landlord shall disburse to Tenant from the Tenant Improvement Allowance the amount set forth on Tenant’s application for payment, less a ten percent (10%) retention (the aggregate amount of such retentions to be known as the “Final Retention”). Based upon applications for payment prepared, certified, approved and submitted by Tenant, Landlord shall make its payments from the Tenant Improvement Allowance to Tenant or to the Contractor in accordance with the following provisions:
4.5.1 Tenant shall submit applications for payment to Landlord in a form reasonably satisfactory to Landlord, certified as correct by an officer of Tenant and by the Architect, for pro rata payment of that portion of the cost of the Tenant Improvements allocable to labor, materials and equipment incorporated in the Premises which were substantially completed. Each application for payment shall set forth such information and shall be accompanied by such supporting documentation as shall be reasonably requested by Landlord, including the following:
(a) Fully executed conditional lien releases in the form prescribed by law from the Contractor and all subcontractors and suppliers furnishing labor or materials during such period and fully executed unconditional lien releases from all such entities covering any prior payment period.
(b) Contractor’s worksheets showing percentages of completion.
(c) Contractor’s certification as follows:
“There are no known filed mechanics’ or materialmen’s liens outstanding at the date of this application for payment, all due and payable bills with respect to the Tenant Improvements have been paid to date or shall be paid from the proceeds of this application for payment, and there is no known basis for the filing of any mechanics’ or materialmen’s liens against the Premises or the Project, and, to the best of our knowledge, waivers from all subcontractors and materialmen are valid and constitute an effective waiver of lien under applicable law to the extent of payments that have been made or shall be made concurrently herewith.”
(d) Calculation of the number of RSF in the Premises which were substantially completed for which a payment of the Tenant Improvement Allowance has been requested.Any other materials reasonably requested by Landlord evidencing the work completed, permitting and licensing matters, compliance with Laws, and/or previous progress payments.
4.5.2 On or before the 30th day following submission of the application for payment, Landlord shall make payment to Tenant (so long as Tenant is not in default hereunder or under the Lease) of the amount due from Landlord as determined in accordance with this Section 4.5. Landlord has no obligation to make any payments to material suppliers or subcontractors or to determine whether amounts due them from the Contractor in connection with the Tenant Improvements have, in fact, been paid.
4.5.3 Notwithstanding anything to the contrary in this Section 4.5, and except for Tenant’s right to use the Unused Allowance Amount as a credit against future installments of Base Rental pursuant to Section 2.3 above, the Tenant Improvement Allowance shall be available for disbursement pursuant to the terms hereof only for the first eighteen (18) months after the Lease Commencement Date. Accordingly, if any portion of the Tenant Improvement Allowance (other than the Unused Allowance Amount) is not requested by Tenant for disbursement prior to the date that is eighteen (18) months from the Lease Commencement Date (other than by reason of Landlord’s breach of its disbursement obligations hereunder), such unused portion shall be forfeited by Tenant.
4.6 Notice of Completion; Copy of Record Set of Plans. Within ten (10) days after completion of construction of the Tenant Improvements Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the County of Santa Clara in accordance with Section 3093 of the Civil Code of the State of California or any successor statute and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At the conclusion of construction, Tenant shall (i) cause Tenant’s Architect and the Contractor to certify to the best of their knowledge that the “record-set” of reproducible as-built drawings (and the CAD files of the as-built documents for the Tenant Improvements) delivered to Landlord pursuant to Section 4.4.12 are true and correct, which certification shall survive the expiration or termination of the Lease, and (ii) deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems installed by Tenant or Contractor in the Premises.
4.7 Evidence of Completion. Within thirty (30) days following final completion of the entire Tenant Improvements, Tenant shall submit to Landlord:
4.7.1 A statement of Tenant’s final construction costs, together with receipted evidence showing payment thereof, reasonably satisfactory to Landlord, and, to the extent not previously delivered, fully executed and acknowledged unconditional lien releases in the form prescribed by law from the Contractor and all subcontractors and suppliers, and copies of all invoices from the Contractor and all subcontractors and suppliers related to the Tenant Improvements.
4.7.2 All evidence reasonably available from governmental authorities showing compliance with any and all other Laws, orders and regulations of any and all governmental authorities having jurisdiction over the Premises, including, without limitation, a certificate of occupancy, building permit sign-offs, and/or other appropriate authorization for physical occupancy of the Premises.
4.7.3 A certificate executed by the Architect confirming that the Tenant Improvements have been substantially completed in accordance with the Final Working Drawings.
4.7.4 A written certificate from the Contractor as follows:
There are no known mechanics’ or materialmen’s liens outstanding, all due and payable bills with respect to the Tenant Improvements have been paid, and there is no known basis for the filing of any mechanics’ or materialmen’s liens against the Premises or the Project, and, to the best of our knowledge, waivers from all subcontractors and materialmen are valid and constitute an effective waiver of lien under applicable law.
4.7.5 The as-built plans and specifications referred to above.
A check for the Final Retention payable jointly to Tenant and Contractor, or directly to Contractor at Landlord's sole discretion, shall be delivered by Landlord to Tenant within forty-five (45) days following the completion of the requirements of this Section 4.7.5.
4.8 Assignment of Rights Against Architect and Contractor. Upon the expiration or earlier termination of the Lease, Tenant shall assign to Landlord, upon request of Landlord, any and all rights Tenant may have against the Architect and Contractor relating to the Tenant Improvements, without in any way obligating Landlord to pursue or prosecute such rights.
4.9 Compliance with Civil Code Section 8700. If the design and construction of the Tenant Improvements requires that Landlord or Tenant comply with California Civil Code Section 8700, it shall be Tenant’s obligation to comply; and Tenant agrees to comply with said Section in a timely manner and to provide to Landlord, upon request, evidence satisfactory to Landlord of such compliance.
SECTION 5.
MISCELLANEOUS
5.1 Tenant’s Representative. Tenant has designated JOOST DE SCHUTTER as its sole representative with respect to the matters set forth in this Work Letter, who, until further notice from
Tenant to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter until further notice from Tenant.
5.2 Landlord’s Representative. Landlord has designated ALLIE SANCHEZ as its sole representative with respect to the matters set forth in this Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Work Letter.
5.3 Time of the Essence. Time is of the essence in this Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days. In all instances where Tenant is required to approve or deliver an item, if no written notice of approval is given or the item is not delivered within the stated time period, then at Landlord’s sole option at the end of such period the item shall automatically be deemed approved or delivered by Tenant and the next succeeding time period shall commence.
5.4 Tenant’s Lease Default. Notwithstanding any provision to the contrary contained in the Lease, if a Default occurs under the Lease, or a default by Tenant beyond any applicable notice and cure periods under this Work Letter, has occurred at any time on or before the completion of the Tenant Improvements, then in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction of the Premises.
EXHIBIT D
RULES AND REGULATIONS
1. Except as otherwise provided in the Lease, no sign, picture, advertisement or notice visible from the exterior of the Premises shall be installed, affixed, inscribed, painted or otherwise displayed by Tenant on any part of the Premises or the Building unless the same is first approved by Landlord. Any such sign, picture, advertisement or notice approved by Landlord shall be painted or installed for Tenant at Tenant’s cost by Landlord or by a party approved by Landlord.
2. Tenant agrees that its use of electrical current shall never exceed the capacity (as represented by Landlord in the Lease) of existing feeders, risers or wiring installation.
3. The Premises shall not be used for storage of merchandise held for sale to the general public, unless otherwise permitted in writing by Landlord. Tenant shall not do or permit to be done in or about the Premises or Project anything which shall increase the rate of insurance on the Project or unreasonably obstruct or interfere, including no canvassing or soliciting, with the rights of other tenants in the Project. The Premises shall not be used for sleeping or lodging. No cooking or related activities (except for food and beverage warming) shall be done or permitted by Tenant in the Premises except with permission of Landlord. Tenant will be permitted to use for its own employees within the Premises small micro wave ovens and Underwriters’ Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages, provided that such use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations, and provided that such use shall not result in the emission of odors from the Premises into the Common Area. No vending machines of any kind will be installed, permitted or used on any part of the Premises without the prior consent of Landlord, which shall not be unreasonably withheld. No part of said Building or Premises shall be used for gambling or immoral or other unlawful purposes. No intoxicating beverage shall be sold in said Building or Premises without prior written consent of the Landlord.
4. No birds or animals of any kind shall be brought into the Building (other than trained assist dogs required to be used by the visually impaired). No motorcycles or other motorized vehicles shall be brought into the Building.
5. The sidewalks, entrances, passages, corridors, halls, elevators, and stairways in the Building shall not be obstructed by Tenant or used for any purposes other than those for which same were intended as ingress and egress. No windows, floors or skylights that reflect or admit light into the Building shall be covered or obstructed by Tenant. Toilets, wash basins and sinks shall not be used for any purpose other than those for which they were constructed, and no sweeping, rubbish, or other obstructing or improper substances shall be thrown therein. Any damage resulting to them, or to heating apparatus, from misuse by Tenant or its employees, shall be borne by Tenant.
6. Following Tenant’s submission of a space plan, Landlord shall have the right to prescribe the weight, position and manner of installation of heavy articles such as safes, vaults, fireproof file cabinets, machines and other equipment brought into the Building. Landlord may elect to retain an independent structural consultant to review the installation of heavy articles such as safes, fireproof file cabinets, machines and other equipment. Tenant shall reimburse Landlord for all costs associated with such structural review. Landlord will not be responsible for loss of or damage to any such safe or property in any case. Tenant shall not allow the building structure within the Premises (nor shall Tenant cause the elevators of the Building) to be loaded beyond rated capacities. All damage done to any part of the Building, its contents, occupants or visitors by moving or maintaining any such safe or other property
shall be the sole responsibility of Tenant and any expense of such damage or injury shall be borne by Tenant. No hand trucks shall be used in passenger elevators. All hand trucks used by Tenant or its service providers for the delivery or receipt of any freight shall be equipped with rubber tires.
7. Tenant shall not cause or permit any gases, liquids or odors to be produced upon or permeate from the Premises, and no flammable, combustible or explosive fluid, chemical or substance shall be brought into the Building, except as provided in Section 39 of the Lease. Smoking shall not be permitted in any Common Areas of the Building or the Project or in any premises within the Building.
8. Tenant, its employees and its agents must be sure that the doors to the Premises are securely closed and locked when leaving the Premises. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building and/or the Project during the continuance of same by any means it deems appropriate for the safety and protection of life and property.
9. Landlord shall not be responsible for any loss, theft, of or damage to, any property, however occurring and Tenant shall assume all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed, when the Premises are not occupied. Tenant shall employ contractors for janitorial and cleaning in the Premises, at its sole cost and expense.
10. All glass, locks and trimmings in or upon the doors and windows of the Premises shall be kept whole and in good repair. Tenant shall not injure, overload or deface the Building, the woodwork or the walls of the Premises, nor permit upon the Premises any conduct that other tenants of the Project would reasonably find noisome, noxious, noisy or offensive.Tenant and its employees and invitees shall observe and obey all parking and traffic regulations as imposed by Landlord. All vehicles shall be parked only in areas designated therefor by Landlord.
11. Canvassing, peddling, soliciting and distribution of handbills or any other written materials in the Building is prohibited, and Tenant shall cooperate to prevent the same.
12. Tenant agrees to participate in the waste recycling programs implemented by Landlord for the Building, including any programs and procedures for recycling writing paper, computer paper, shipping paper, boxes, newspapers and magazines and aluminum cans. If Landlord elects to provide collection receptacles for recyclable paper and/or recyclable aluminum cans in the Premises, Tenant shall designate an appropriate place within the Premises for placement thereof, and Tenant shall encourage its employees to place their recyclable papers and/or cans into the applicable such receptacles on a daily basis.
13. Any special work or services requested by Tenant’s authorized representative to be provided by Landlord shall be provided by Landlord only upon written request received at the Project management office. Building personnel shall not perform any work or provide any services outside of their regular duties unless special instructions have been issued from Landlord or its managing agent.
14. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the other tenants of the Project. The Rules and Regulations shall not be administered in a manner that discriminates against Tenant.
15. Landlord reserves the right to make such other and reasonable Rules and Regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord shall not be responsible to Tenant or to any other person for the nonobservance of the Rules and Regulations by another tenant or other person. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them.
16. Landlord shall have the right to control and operate the public portions of the Project, the public facilities, and any other facilities furnished for the common use of tenants, in such manner as is customary for comparable buildings in the vicinity of the Building.The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or agents, shall have caused it.
17. Tenant shall not overload the floor of the Premises, nor mark, drive nails or screws, or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof without Landlord’s consent, which shall not be unreasonably withheld.
18. Landlord reserves the right to exclude or expel from the Building and/or Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations.
19. Tenant shall not waste electricity, water or air conditioning and agrees to cooperate reasonably with Landlord to ensure the most effective operation of the Building’s heating and air conditioning system.
20. Tenant shall store all its trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city in which the Building are located without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided for such purposes at such times as Landlord shall designate.
21. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.
22. The washing and/or detailing of automobiles and performing general work on automobiles shall not be allowed on the Project.
23. Food vendors shall be allowed in the Building. Under no circumstance shall the food vendor display their products in a public or Common Area including corridors and elevator lobbies.
24. Tenant must comply with requests by the Landlord to inform Tenant’s employees of items of importance to the Landlord.
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EXHIBIT E
FORM OF TENANT ESTOPPEL CERTIFICATE
The undersigned, as Tenant under that certain Lease (the “Lease”) made and entered into as of August 9, 2021, by and between MVCC Campus Owner, LLC, a Delaware limited liability company, as Landlord, and the undersigned as Tenant, for Premises located at _______________, __________ hereby certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises.
2. The undersigned has commenced occupancy of the Premises described in the Lease, currently occupies the Premises, and the Lease Term commenced on ____________.
3. The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A.
4. Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows:
5. No modification to the documents contained in Exhibit A, or prepayment of any amounts owing under the Lease to Landlord in excess of thirty (30) days, shall be binding on Landlord’s mortgagee, without its written consent.
6. Base Rental became payable on _________________.
7. The Lease Term expires on _____________________subject to the following options to extend: _______________________.
8. To Tenant’s knowledge, all conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder, except as follows: ______________________________________________.
9. No rental has been paid more than thirty (30) days in advance and no security has been deposited with Landlord except as provided in the Lease, except as follows:
____________________________________________________________________________________.
10. As of the date hereof, to the undersigned’s knowledge, there are no existing defenses or offsets that the undersigned has which preclude enforcement of the Lease by Landlord.
11. All monthly installments of Base Rental, all Additional Rental and all monthly installments of estimated Additional Rental have been paid when due through __________________. The current monthly installment of Base Rental is $________________.
12. Landlord has performed all construction obligations required by the Lease and related to the Premises or the Building in accordance with the terms of the Lease and within the time periods set forth in the Lease. Landlord has paid in full any required contributions toward work to be performed by Tenant under the Lease, if any.
13. The undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord’s existing or prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, or prospective purchaser will be relying upon the statements contained herein.
14. If Tenant is a corporation, limited liability company, or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the State of California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so.
Executed at ______________________ on the ________ day of ________________ ______.
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| “TENANT”: |
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| a | | | | |
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| By: | | | | |
| Name: | | | |
| Its: | | | | |
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| By: | | | | |
| Name: | | | |
| Its: | | | | |
[INSERT IF APPLICABLE]
CERTIFICATION OF TENANT’S GUARANTOR
The undersigned hereby certifies as follows: (i) the statements of Tenant set forth in this Tenant Estoppel Certificate are true and correct, (ii) that certain Guaranty dated as of ____________, 20___ made by the undersigned in favor of Landlord (the “Guaranty”) is in full force and effect; (iii) a true, correct and complete copy of the Guaranty is attached hereto as Exhibit B; (iv) the Guaranty has not been amended, modified, supplemented or assigned; (v) the undersigned claims no defense as to its obligations under the Guaranty; and (vi) there has not been filed by or against the undersigned a petition in bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors, any petition seeking reorganization or arrangement under the bankruptcy laws of the United States or any state thereof, or any other action brought pursuant to such bankruptcy laws with respect to the undersigned. The undersigned acknowledges that this Certification of Tenant’s Guarantor may be delivered to Landlord’s existing or prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, or prospective purchaser will be relying upon the statements contained herein.
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| [_______________________], |
| a [______________________] |
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| By: | | | |
| Name: | | |
| Its: | | | |
Exhibit 10.7
Execution Version
CREDIT AGREEMENT AND GUARANTY
dated as of June 14, 2024
by and among
HEARTFLOW, INC.,
as Borrower,
HEARTFLOW HOLDING, INC.,
as Holdings,
THE LENDERS PARTY HERETO,
and
HAYFIN SERVICES LLP,
as the Agent for the Lenders
TABLE OF CONTENTS
| | | | | | | | | | | |
| | | Page |
| | | |
| ARTICLE I DEFINITIONS AND ACCOUNTING TERMS | 1 |
| | | |
| SECTION 1.1 | Defined Terms | 1 |
| | | |
| SECTION 1.2 | Interpretation. | 26 |
| | | |
| SECTION 1.3 | Accounting and Financial Determinations. | 27 |
| | | |
| SECTION 1.4 | Divisions. | 27 |
| | | |
| SECTION 1.5 | Rates. | 28 |
| | | |
| ARTICLE II THE LOANS | 28 |
| | | |
| SECTION 2.1 | Commitments. | 28 |
| | | |
| SECTION 2.2 | Borrowing Procedures. | 28 |
| | | |
| SECTION 2.3 | Funding. | 28 |
| | | |
| ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES | 28 |
| | | |
| SECTION 3.1 | Applicable Currency for Repayments and Prepayments; Pro Rata Application | 28 |
| | | |
| SECTION 3.2 | Repayments and Prepayments. | 29 |
| | | |
| SECTION 3.3 | Application. | 30 |
| | | |
| SECTION 3.4 | Interest Rate. | 30 |
| | | |
| SECTION 3.5 | Default Rate. | 30 |
| | | |
| SECTION 3.6 | Payment Dates. | 30 |
| | | |
| SECTION 3.7 | Fees. | 30 |
| | | |
| SECTION 3.8 | Specified Repayment Fees. | 30 |
| | | |
| SECTION 3.9 | [Reserved]. | 30 |
| | | |
| SECTION 3.10 | PIK Interest. | 31 |
| | | |
| SECTION 3.11 | Interest Computation. | 31 |
| | | |
| SECTION 3.12 | Term SOFR Conforming Changes | 31 |
| | | |
| ARTICLE IV SOFR AND OTHER PROVISIONS | 31 |
| | | |
| SECTION 4.1 | Increased Costs. | 31 |
| | | |
| SECTION 4.2 | Compensation for Losses. | 32 |
| | | |
| SECTION 4.3 | Taxes. | 33 |
| | | |
| SECTION 4.4 | Payments, Computations; Proceeds of Collateral, Etc. | 36 |
| | | |
| SECTION 4.5 | Setoff. | 36 |
| | | |
| | | | | | | | | | | |
| SECTION 4.6 | Inability to Determine Rates. | 36 |
| | | |
| SECTION 4.7 | Sharing of Payments. | 37 |
| | | |
| SECTION 4.8 | Mitigation. | 38 |
| | | |
| SECTION 4.9 | Illegality. | 38 |
| | | |
| SECTION 4.10 | Benchmark Replacement Setting. | 38 |
| | | |
| ARTICLE V CONDITIONS PRECEDENT | 39 |
| | | |
| SECTION 5.1 | Conditions to the Borrowing of the Loans on the Closing Date. | 39 |
| | | |
| ARTICLE VI REPRESENTATIONS AND WARRANTIES | 43 |
| | | |
| SECTION 6.1 | Organization, Etc. | 43 |
| | | |
| SECTION 6.2 | Due Authorization, Non-Contravention, Etc. | 44 |
| | | |
| SECTION 6.3 | Government Approval, Regulation, Etc. | 44 |
| | | |
| SECTION 6.4 | Validity, Etc. | 44 |
| | | |
| SECTION 6.5 | Financial Information | 44 |
| | | |
| SECTION 6.6 | No Material Adverse Change | 44 |
| | | |
| SECTION 6.7 | Litigation, Labor Matters and Environmental Matters. | 44 |
| | | |
| SECTION 6.8 | Subsidiaries. | 45 |
| | | |
| SECTION 6.9 | Ownership of Properties. | 45 |
| | | |
| SECTION 6.10 | Taxes. | 45 |
| | | |
| SECTION 6.11 | Pension Plans, Etc. | 45 |
| | | |
| SECTION 6.12 | Accuracy of Information. | 46 |
| | | |
| SECTION 6.13 | Regulations U and X. | 46 |
| | | |
| SECTION 6.14 | Solvency. | 46 |
| | | |
| SECTION 6.15 | Intellectual Property. | 46 |
| | | |
| SECTION 6.16 | Data Privacy. | 47 |
| | | |
| SECTION 6.17 | Material Agreements. | 48 |
| | | |
| SECTION 6.18 | Permits | 48 |
| | | |
| SECTION 6.19 | Regulatory Matters | 48 |
| | | |
| SECTION 6.20 | Transactions with Affiliates. | 50 |
| | | |
| SECTION 6.21 | Investment Company Act. | 50 |
| | | |
| SECTION 6.22 | OFAC. | 50 |
| | | |
| SECTION 6.23 | Anti-Corruption | 50 |
| | | |
| SECTION 6.24 | Deposit and Disbursement Accounts. | 50 |
| | | |
| | | | | | | | | | | |
| SECTION 6.25 | Registration Rights | 51 |
| | | |
| SECTION 6.26 | Royalty and Other Payments. | 51 |
| | | |
| SECTION 6.27 | Sale and Leaseback. | 51 |
| | | |
| SECTION 6.28 | Senior Secured Obligations | 51 |
| | | |
| SECTION 6.29 | Beneficial Ownership Certification. | 51 |
| | | |
| ARTICLE VII AFFIRMATIVE COVENANTS | 51 |
| | | |
| SECTION 7.1 | Financial Information, Reports, Notices, Etc | 51 |
| | | |
| SECTION 7.2 | Maintenance of Existence; Compliance with Contracts, Laws, Etc | 53 |
| | | |
| SECTION 7.3 | Maintenance of Properties. | 53 |
| | | |
| SECTION 7.4 | Insurance. | 53 |
| | | |
| SECTION 7.5 | Books and Records. | 54 |
| | | |
| SECTION 7.6 | Environmental Law Covenant. | 54 |
| | | |
| SECTION 7.7 | Use of Proceeds | 54 |
| | | |
| SECTION 7.8 | Future Guarantors, Security, Etc. | 54 |
| | | |
| SECTION 7.9 | Obtaining of Permits, Etc. | 56 |
| | | |
| SECTION 7.10 | Product Licenses. | 56 |
| | | |
| SECTION 7.11 | Maintenance of Regulatory Authorizations, Contracts, Intellectual Property, Etc. | 57 |
| | | |
| SECTION 7.12 | Cash Management. | 57 |
| | | |
| ARTICLE VIII NEGATIVE COVENANTS | 58 |
| | | |
| SECTION 8.1 | Business Activities. | 58 |
| | | |
| SECTION 8.2 | Indebtedness. | 58 |
| | | |
| SECTION 8.3 | Liens. | 59 |
| | | |
| SECTION 8.4 | Financial Covenants. | 60 |
| | | |
| SECTION 8.5 | Investments. | 62 |
| | | |
| SECTION 8.6 | Restricted Payments, Etc. | 62 |
| | | |
| SECTION 8.7 | Issuance of Capital Securities. | 63 |
| | | |
| SECTION 8.8 | Consolidation, Merger, Etc. | 63 |
| | | |
| SECTION 8.9 | Permitted Dispositions. | 63 |
| | | |
| SECTION 8.10 | Modification of Certain Agreements. | 63 |
| | | |
| SECTION 8.11 | Transactions with Affiliates. | 63 |
| | | |
| SECTION 8.12 | Restrictive Agreements, Etc. | 64 |
| | | |
| | | | | | | | | | | |
| SECTION 8.13 | Sale and Leaseback. | 64 |
| | | |
| SECTION 8.14 | Product Sales. | 64 |
| | | |
| SECTION 8.15 | Change in Name, Location, Executive Office, or Executive Management; Change in Fiscal Year. | 64 |
| | | |
| SECTION 8.16 | Negative Pledge. | 64 |
| | | |
| SECTION 8.17 | Sanctions. | 65 |
| | | |
| SECTION 8.18 | Passive Holding Company. | 65 |
| | | |
| SECTION 8.19 | USRPHC Status. | 65 |
| | | |
| SECTION 8.20 | Hazardous Materials. | 65 |
| | | |
| SECTION 8.21 | Licenses | 65 |
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| SECTION 8.22 | Subordinated Indebtedness. | 66 |
| | | |
| ARTICLE IX EVENTS OF DEFAULT | 66 |
| | | |
| SECTION 9.1 | Listing of Events of Default. | 66 |
| | | |
| SECTION 9.2 | Action if Bankruptcy | 70 |
| | | |
| SECTION 9.3 | Action if Other Event of Default. | 70 |
| | | |
| ARTICLE X ADMINISTRATIVE AGENT | 70 |
| | | |
| SECTION 10.1 | Appointment. | 70 |
| | | |
| SECTION 10.2 | Rights as a Lender. | 70 |
| | | |
| SECTION 10.3 | Exculpatory Provisions. | 70 |
| | | |
| SECTION 10.4 | Reliance by Agent. | 71 |
| | | |
| SECTION 10.5 | Delegation of Duties. | 71 |
| | | |
| SECTION 10.6 | Resignation of Agent. | 72 |
| | | |
| SECTION 10.7 | Non-Reliance on Agent and Other Lenders. | 72 |
| | | |
| SECTION 10.8 | Agent May File Proofs of Claim. | 72 |
| | | |
| SECTION 10.9 | Collateral and Guaranty Matters. | 73 |
| | | |
| ARTICLE XI MISCELLANEOUS PROVISIONS | 74 |
| | | |
| SECTION 11.1 | Waivers, Amendments, Etc. | 74 |
| | | |
| SECTION 11.2 | Notices; Time. | 74 |
| | | |
| SECTION 11.3 | Payment of Costs and Expenses. | 74 |
| | | |
| SECTION 11.4 | Indemnification. | 75 |
| | | |
| SECTION 11.5 | Survival. | 76 |
| | | |
| SECTION 11.6 | Obligations Several. | 76 |
| | | |
| SECTION 11.7 | Severability. | 76 |
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| | | | | | | | | | | |
| SECTION 11.8 | Headings. | 76 |
| | | |
| SECTION 11.9 | Execution, Effectiveness, Etc. | 76 |
| | | |
| SECTION 11.10 | Governing Law; Entire Agreement. | 77 |
| | | |
| SECTION 11.11 | Register; Successors and Assigns. | 77 |
| | | |
| SECTION 11.12 | Other Transactions. | 78 |
| | | |
| SECTION 11.13 | Forum Selection and Consent to Jurisdiction. | 78 |
| | | |
| SECTION 11.14 | Waiver of Jury Trial. | 79 |
| | | |
| SECTION 11.15 | Interest Rate Limitation. | 79 |
| | | |
| SECTION 11.16 | Acknowledgment and Consent to Bail-In of Affected Financial Institutions. | 79 |
| | | |
| SECTION 11.17 | Judgment Currency. | 80 |
| | | |
| SECTION 11.18 | Specified Repayment Fee. | 80 |
| | | |
| SECTION 11.19 | USA PATRIOT Act. | 80 |
| | | |
| SECTION 11.20 | Erroneous Payments | 80 |
| | | |
| SECTION 11.21 | Reaffirmation. | 81 |
| | | |
| ARTICLE XII GUARANTEE | 81 |
| | | |
| SECTION 12.1 | The Guarantee. | 81 |
| | | |
| SECTION 12.2 | Obligations Unconditional. | 81 |
| | | |
| SECTION 12.3 | Reinstatement. | 82 |
| | | |
| SECTION 12.4 | Subrogation. | 82 |
| | | |
| SECTION 12.5 | Remedies. | 82 |
| | | |
| SECTION 12.6 | Instrument for the Payment of Money. | 83 |
| | | |
| SECTION 12.7 | Continuing Guarantee. | 83 |
| | | |
| SECTION 12.8 | General Limitation on Guarantee Obligations. | 83 |
| | | | | |
| SCHEDULES: | |
| |
| Schedule 1.1 | Key Permits |
| Schedule 1.2 | Specified Holders |
| Schedule 2 | Loans |
| Schedule 2.3 | Funds Flow Schedule |
| Schedule 6.7(a) | Litigation |
| Schedule 6.8 | Existing Subsidiaries |
| Schedule 6.10 | Taxes |
| Schedule 6.11 | Pension Plans |
| Schedule 6.15(a) | Intellectual Property |
| Schedule 6.15(c)(i) | Third Party Infringements |
| Schedule 6.17 | Material Agreements |
| Schedule 6.19(a) | Regulatory Authorizations |
| Schedule 6.19(d), (f) and (g) | Regulatory Actions |
| Schedule 6.20 | Transactions with Affiliates |
| Schedule 6.24 | Deposit and Disbursement Accounts |
| Schedule 6.25 | Registration Rights Agreements |
| Schedule 6.26 | Royalties |
| Schedule 8.2(c) | Existing Indebtedness |
| Schedule 8.3(b) | Existing Liens |
| Schedule 8.5(a) | Investments |
| Schedule 8.12 | Existing Contracts |
| Schedule 11.2 | Notice Information |
| | | | | | | | |
| EXHIBITS: |
| | |
Exhibit A | - | Form of Compliance Certificate |
Exhibit B | - | Form of Loan Request |
Exhibit C | - | Form of Perfection Certificate |
Exhibit D | - | Form of Assignment and Assumption |
Exhibit E-1 | - | Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit E-2 | - | Form of U.S. Tax Compliance Certificate (For Foreign Participants
That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit E-3 | - | Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit E-4 | - | Form of U.S. Tax Compliance Certificate (For Foreign Lenders
That Are Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit F | - | Form of Intercompany Subordination Agreement |
| Exhibit G | - | AWS Agreement |
CREDIT AGREEMENT AND GUARANTY
CREDIT AGREEMENT AND GUARANTY dated as of June 14, 2024 (as amended, supplemented or otherwise modified from time to time, this “Agreement”), is by and among HEARTFLOW, INC., a Delaware corporation (the “Borrower”), HEARTFLOW HOLDING, INC., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings (as defined herein) from time to party hereto, the lenders from time to time party hereto (the “Lenders”) and HAYFIN SERVICES LLP, as administrative agent for the Lenders hereunder (in such capacity, together with its successors and assigns in such capacity, the “Agent”).
WHEREAS, the Borrower, certain Subsidiaries of Holdings from time to time party thereto, the lenders from time to time party thereto and Hayfin Services LLP, as agent, are parties to that certain Credit Agreement and Guaranty, dated as of January 19, 2021 (as amended by that certain Joinder Agreement, dated as March 3, 2021, by that certain Amendment No. 1 to Credit Agreement and Guaranty, dated as of March 17, 2022, by that certain Amendment No. 2 to Credit Agreement and Guaranty, dated as of September 30, 2022, by that certain Amendment No. 3 to Credit Agreement and Guaranty, dated as of December 15, 2022, by that certain Amendment No. 4 and Waiver to Credit Agreement and Guaranty, dated as of March 2, 2023, by that certain Amendment No. 5 to Credit Agreement and Guaranty, dated as of March 16, 2023, and by that certain Amendment No. 6 to Credit Agreement and Guaranty, dated as of March 29, 2023, the “Existing Credit Agreement”);
WHEREAS, the Borrower has requested that the Lenders extend credit to the Borrower in the form of term loans in an aggregate initial principal amount of $138,137,470.97, the proceeds of which shall be used to (i) refinance the outstanding obligations under the Existing Credit Agreement and (ii) pay certain fees, costs, and expenses incurred in connection with such refinancing and entry into this Agreement, the other Loan Documents and the transactions contemplated hereby; and
WHEREAS, the Lenders are willing to extend credit to the Borrower on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):
“ABR” means, for any day, a rate per annum equal to the highest of (i) the Prime Rate in effect on such day, (ii) the Federal Funds Rate in effect on such day plus 0.50% and (iii) Term SOFR for a one-month tenor in effect on such day plus 1.00%. Any change in the ABR due to a change in the Prime Rate, the Federal Funds Rate or Term SOFR shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Rate or Term SOFR, respectively.
“ABR Loan” means a Loan that bears interest based on the ABR.
“ABR Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. “Control” (and its correlatives) by any Person means the power of such Person, directly or indirectly, (i) to vote 10% or more of the Capital Securities (on a fully diluted basis) of another Person which Capital Securities have ordinary voting power for the election of directors, managing members or general partners (as applicable), or (ii) to direct or cause the direction of the management and policies of such other Person (whether by contract or otherwise).
“Agent” has the meaning specified in the preamble.
“Agreement” has the meaning specified in the preamble.
“Applicable Margin” means, for any day, (i) as to any SOFR Loan, 7.00% per annum or (ii) as to any ABR Loan, 6.00% per annum, as the case may be, in each case as such percentage may be increased pursuant to Section 3.5 or 3.10; provided that, if the Borrower makes a single voluntary prepayment or repayment of the Loans in an aggregate principal amount equal to or greater than $40,000,000, the source of which is cash received by Holdings in exchange for common equity in Holdings, such percentage shall be decreased by 0.25% per annum.
“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 D.
“Authorized Officer” means, relative to any Credit Party or any of its Subsidiaries, those of its officers, general partners or managing members (as applicable) whose signatures and incumbency shall have been certified to the Agent pursuant to Section 5.1(a).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 4.10(d).
“AWS” means Amazon Web Services, Inc.
“AWS Agreement” means that certain AWS Customer Agreement, by and between AWS and the Borrower, attached hereto as Exhibit G, as amended or otherwise modified from time to time in accordance with this Agreement.
“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, (i) 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, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (ii) 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).
“Benchmark” means, initially, the Term SOFR Reference Rate; provided, that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 4.10(a).
“Benchmark Replacement” means with respect to any Benchmark Transition Event, the sum of: (i) the alternate benchmark rate that has been selected by the Agent and the Borrower giving due consideration to (x) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (y) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities and (ii) the related Benchmark Replacement Adjustment; provided, that, if such Benchmark Replacement as so determined would be less than 2.00%, such Benchmark Replacement will be deemed to be 2.00% for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero), that has been selected by the Agent giving due consideration to (x) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (y) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities.
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(b) in the case of clause (c) of the definition of “Benchmark Transition Event”, the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by or on behalf of the administrator of such Benchmark (or such component thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative or non-compliant with or non-aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks; provided, that such non-representativeness, non-compliance or non-alignment will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely; provided, that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the F.R.S. Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(c) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means, the period (if any) (i) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 4.10 and (ii) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 4.10.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Borrower” has the meaning specified in the preamble.
“Business Day” means any day which is neither a Saturday nor Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or London, England.
“Capital Expenditures” means, for any applicable Fiscal Period for any Person determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP, the aggregate amount of (i) all expenditures of such Person and its Subsidiaries for fixed or capital assets made during such Fiscal Period which, in accordance with GAAP, would be classified as capital expenditures and (ii) Capitalized Lease Liabilities incurred by such Person and its Subsidiaries during such Fiscal Period.
“Capital Securities” means, with respect to any Person, all shares of, interests or participations in, or other equivalents in respect of (in each case however designated, whether voting or non-voting), such Person’s capital stock or other equity securities, issued and outstanding as of the date hereof or any time hereafter, including treasury stock.
“Capitalized Lease Liabilities” means, with respect to any Person, all monetary obligations of such Person and its Subsidiaries under any leasing or similar arrangement which have been (or, in accordance with GAAP, should be) classified as capitalized leases, and for purposes of each Loan Document the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a premium or a penalty.
“Cash Equivalent Investment” means, at any time:
(a) any direct obligation of (or unconditionally guaranteed by) the United States or a state thereof or of the District of Columbia (or any agency or political subdivision thereof, to the extent such obligations are supported by the full faith and credit of the United States or a state thereof or of the District of Columbia) maturing not more than one (1) year after such time;
(b) commercial paper, or corporate demand notes, maturing not more than 270 days from the date of issue, which is issued by a corporation (other than an Affiliate of a Credit Party or any of its Subsidiaries) organized under the laws of any state of the United States or of the District of Columbia and rated A-1 or higher by S&P or P-1 or higher by Moody’s; or
(c) any certificate of deposit, time deposit or banker’s acceptance, maturing not more than one year after its date of issuance, which is issued by any bank organized under the laws of the United States (or any state thereof or of the District of Columbia) and which has (x) a credit rating of A2 or higher from Moody’s or A or higher from S&P and (y) a combined capital and surplus greater than $500,000,000.
(d) any repurchase agreement entered into with any commercial banking institution meeting the requirements set forth in clause (c) above which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time such repurchase agreement is entered into of not less than one-hundred percent (100%) of the repurchase obligation of such commercial banking institution thereunder;
(e) money market accounts or mutual funds which invest exclusively or substantially in assets satisfying the foregoing requirements; or
(f) other short-term liquid investments approved in writing by the Agent.
“Change in Control” means and shall be deemed to have occurred if:
(a) (i) prior to an IPO or SPAC Transaction, the Specified Holders together fail to own and control, directly or indirectly, beneficially and of record, in the aggregate more than 50% of the total economic interest in the Capital Securities or of the Voting Securities, in each case of Holdings; (ii) after an IPO or SPAC Transaction, any “person” or “group” (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the date hereof), other than the Specified Holders, shall own, directly or indirectly, beneficially or of record, determined on a fully diluted basis, more than 35% of the Capital Securities of Holdings; (iii) a majority of the seats (other than vacant seats) on the board of directors (or equivalent) of Holdings shall at any time be occupied by persons who were not (x) nominated or appointed by the board of directors (or equivalent) of Holdings, (y) nominated or appointed by directors (or equivalent) so nominated or (z) nominated, designated or appointed by any of the Specified Holders; (iv) the sale, lease, transfer, conveyance or other Disposition, in one or more related transactions, of all or substantially all of the assets of Holdings and its Subsidiaries, taken as a whole, occurs; or (v) Holdings shall cease to directly own, beneficially and of record, 100% of the issued and outstanding Capital Securities of the Borrower;
(b) the Borrower shall cease to directly or indirectly own, beneficially and of record, 100% of the issued and outstanding Capital Securities of each Subsidiary Guarantor, except as otherwise permitted pursuant to Section 8.8; or
(c) a Change of Control under and as defined in any Subordinated Convertible Promissory Note issued pursuant to that certain Note Purchase Agreement, dated as of September 30, 2022, by and among Holdings and the investors party thereto.
Notwithstanding the foregoing, the consummation of a SPAC Transaction shall not constitute a Change in Control.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (iii) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that, 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 be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Charged Company” has the meaning specified in Section 7.8(c).
“Closing Date” means June 14, 2024.
“Closing Date Certificate” has the meaning specified in Section 5.1(b).
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“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 property (or all such assets or property, as the context may require); provided that Collateral shall include (i) 100% of the Capital Securities of any Foreign Subsidiaries existing as of the Closing Date, except to the extent as reasonably determined by the Borrower
after consulting with the Agent, such pledge would reasonably be expected to result in material adverse tax consequences to the Borrower, in which case Borrower shall not be required to pledge voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiaries (other than a Foreign Subsidiary that becomes a “Subsidiary Guarantor” after the Closing Date pursuant to Section 7.8) and (ii) unless provided otherwise in Section 7.8(e), 100% of the Capital Securities of each Foreign Subsidiary acquired or organized after the Closing Date; provided, further, that if the Borrower reasonably determines after consulting with the Agent that the continuation of a pledge of 100% of the voting Capital Securities of any Foreign Subsidiary would, as a result of a Change in Law occurring after the original date of such pledge, result in material adverse tax consequences to the Borrower or Holdings, then Collateral shall not include voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiary and the amount of such Capital Securities pledged under the Loan Documents shall be adjusted accordingly.
“Compliance Certificate” means a certificate duly completed and executed by an Authorized Officer of Holdings, substantially in the form of Exhibit A hereto, together with such changes thereto as the Agent or the Majority Lenders may from time to time request for the purpose of monitoring compliance with the financial covenants contained herein.
“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “ABR”, the definition of “Business Day”, the definition of “U.S. Government Securities Business Day”, the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 4.2 and other technical, administrative or operational matters) that the Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“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.
“Constitutional Documents” means the constitutional documents of each UK Subsidiary Guarantor being certificate of incorporation, certificate of change of name, memorandum of association and articles of association (if applicable).
“Contingent Liability” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the Capital Securities of any other Person. The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby.
“Control” has the meaning specified within the definition of “Affiliate”.
“Controlled Account” has the meaning specified in Section 7.12(a).
“Controlled Account Agreement” means, with respect to any Controlled Account, an account control agreement (or equivalent) in favor of, and satisfactory in form and substance to, the Agent (acting on the instructions of the Majority Lenders acting reasonably).
“Copyright Security Agreement” means any Copyright Security Agreement executed and delivered by any Credit Party and/or any of its Subsidiaries, as applicable, substantially in the form of Exhibit E to the Security Agreement, as amended or otherwise modified from time to time.
“Copyrights” means all copyrights and rights in copyrightable subject matter, whether statutory or common law, and all exclusive and nonexclusive licenses from third parties or rights to use copyrights owned by third parties, along with any and all (i) renewals, revisions, extensions, derivative works, enhancements, modifications, updates and new releases thereof, (ii) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iii) rights to sue for past, present and future infringements thereof, and (iv) foreign copyrights and any other rights corresponding thereto throughout the world.
“Credit Parties” means, collectively, the Borrower and the Guarantors.
“Data Activities” has the meaning specified in Section 6.16(a).
“Debenture” has the meaning specified in Section 7.8(c).
“Default” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.
“Default Rate” has the meaning specified in Section 3.5.
“Designated Jurisdiction” means any country or territory to the extent that such country or territory is the subject of any Sanction.
“Disposition” (or similar words such as “Dispose”) means any sale, transfer, lease, contribution or other conveyance (including by way of merger) of, or the granting of options, warrants or other rights to, a Credit Party’s or its Subsidiaries’ assets (including accounts receivable and Capital Securities of Subsidiaries) to any other Person (other than to the Borrower or a wholly owned Subsidiary Guarantor) in a single transaction or series of transactions.
“Disqualified Capital Securities” means, with respect to any Person, any Capital Security of such Person that, by its terms (or by the terms of any security or other Capital Security into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Qualified Capital Securities), including pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof (other than solely for Qualified Capital Securities), in whole or in part, (iii) provides for the scheduled payments of dividends in cash, or (iv) is or becomes convertible into or exchangeable for Indebtedness or any other Capital Securities that would constitute Disqualified Capital Securities, in each case, prior to the date that is one hundred eighty (180) days after the Maturity Date.
“Disqualified Institution” means (a) any Person designated by the Borrower as a “Disqualified Institution” by written notice delivered to the Agent prior to the Closing Date, in form and substance
acceptable to the Agent, and any of such Person’s Affiliates that are readily identifiable as such by their name and (b) any other Person that is a competitor of the Borrower or any of its Subsidiaries (or an affiliate of such competitor) designated by the Borrower as a “Disqualified Institution” by written notice delivered to the Agent from time to time and any of such Person’s Affiliates that are readily identifiable as such by their names; provided that “Disqualified Institutions” shall exclude (x) bona fide debt funds and (y) any Person that the Borrower has designated as no longer being a “Disqualified Institution” by written notice delivered to the Agent from time to time. The list of Disqualified Institutions shall be made available to any Lender upon written request to the Agent. In no event shall a supplement to the list of Disqualified Institutions apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans that was otherwise permitted prior to such supplementation.
“Dollars” and the sign “$” mean lawful money of the United States.
“Domestic Subsidiary” means a Subsidiary incorporated or organized under the laws of the United States, or any state, commonwealth or other political subdivision thereof (including, for the avoidance of doubt, the District of Columbia).
“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.
“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.
“Environmental Laws” means all federal, state, local or international laws, statutes, rules, regulations, codes, directives, treaties, requirements, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, natural resources, Hazardous Material or health and safety matters.
“Environmental Liability” means any liability, loss, claim, suit, action, investigation, proceeding, damage, commitment or obligation, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of or affecting any Credit Party or its Subsidiaries directly or indirectly arising from, in connection with or based upon (i) any Environmental Law or Environmental Permit, (ii) the generation, use, handling, transportation, storage, treatment, recycling, presence, disposal, Release or threatened Release of, or exposure to, any Hazardous Materials or (iii) any contract, agreement, penalty, order, decree, settlement, injunction or other arrangement (including operation of law) pursuant to which liability is assumed, entered into, inherited or imposed with respect to any of the foregoing.
“Environmental Permit” has the meaning specified in Section 6.7(c).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to Sections of ERISA also refer to any successor Sections thereto.
“ERISA Affiliate” means any person that for purposes of Title I and Title IV of ERISA and Section 412 of the Code would be deemed to be a single employer with the Borrower, pursuant to Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.
“ERISA Event” means (i) any reportable event, as defined in Section 4043 of ERISA, with respect to a Pension Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified of such event, (ii) the filing of a notice of intent to terminate any Pension Plan, if such termination could reasonably be expected to require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, the filing under Section 4041(c) of ERISA of a notice of intent to terminate any Pension Plan or the termination of any Pension Plan under Section 4041(c) of ERISA, (iii) the institution of proceedings under Section 4042 of ERISA by the PBGC for the termination of, or the appointment of a trustee to administer, any Pension Plan, (iv) any failure by any Pension Plan to satisfy the minimum funding requirements of Sections 412 and 430 of the Code or Section 302 of ERISA applicable to such Pension Plan, if not waived, (v) the failure to make a required contribution to any Pension Plan that could reasonably be expected to result in the imposition of an encumbrance on a Credit Party, any of its Subsidiaries or any ERISA Affiliate under Section 412 or 430 of the Code, a filing under Section 412 of the Code or Section 302 of ERISA of any request for a minimum funding variance with respect to any Pension Plan or Multiemployer Plan, (vi) an engagement in a non-exempt prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA with respect to which a Credit Party or any of its Subsidiaries could reasonably be expected to incur liability which could reasonably be expected to have a Material Adverse Effect, (vii) the complete or partial withdrawal of a Credit Party, any of its Subsidiaries or any material ERISA Affiliate from a Multiemployer Plan, (viii) a Credit Party, any of its Subsidiaries or an ERISA Affiliate incurring any material liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA) and (ix) a reasonable determination by an actuary for a Pension Plan that such Pension Plan is in “at risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code).
“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 specified in Section 9.1.
“Event of Loss” means, with respect to any asset of a Credit Party or any of its Subsidiaries, any of the following: (i) any loss, destruction or damage of such asset or (ii) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such asset, or confiscation of such asset or requisition of the use of such asset.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Account” has the meaning set forth in the Security Agreement.
“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 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 subdivision 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 pursuant to a law in effect on the date on which (x) such Lender acquires such interest in a Loan or (y) such Lender changes its lending office, except in each case to the extent that,
pursuant to Section 4.3, 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 4.3(g) and (iv) any withholding Taxes imposed under FATCA.
“Existing Credit Agreement” has the meaning specified in the recitals.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, 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.
“Federal Funds 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 shall set 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) 0%.
“FDA” means the U.S. Food and Drug Administration and any successor entity.
“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 promulgated thereunder.
“Fee Letter” means that certain Fee Letter, dated as of the date hereof, by and among the Borrower, the Agent and the Lenders, as amended or otherwise modified from time to time.
“FFRct” means a coronary vascular physiologic simulation software prescription device that provides simulated functional assessment of blood flow in the coronary vascular system using data extracted from medical device imaging to solve algorithms and yield simulated metrics of physiologic information (e.g., blood flow, coronary flow reserve, fractional flow reserve, myocardial perfusion), which is intended to generate results for use and review by a qualified clinician, de novo 510(k) clearance of which was received on November 26, 2014 for version 1.4 of the HeartFlow Analysis (DEN130045), 510(k) clearance for version 2.x of the Heartflow Analysis was received in January 2016 (510(k) No.: K152733), and 510(k) clearance for a modification to the intended use language in August 2016 (510(k) No.: K161772). Additional clearances were received for a strategic architecture scope change in December 2018 (510(k) No.: K182035), and for the addition of Planner capabilities in August 2019 (510(k) No.: K190925). The Borrower submitted its version 3.x for FDA review in November 2020 and received FDA clearance on January 8, 2021 (510(k) No.: K203329).
“Fiscal Period” means, as applicable, a Fiscal Quarter or a Fiscal Year.
“Fiscal Quarter” means a quarter ending on the last day of March, June, September or December.
“Fiscal Year” means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the “2020 Fiscal Year”) refer to the Fiscal Year ending December 31 of such calendar year.
“Foreign Excluded Subsidiary” means at any date of determination, each wholly owned Foreign Subsidiary (together with its Subsidiaries) whose (i) Net Sales during the applicable Measurement Period
were equal to or less than 15.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period and (ii) assets during the applicable Measurement Period were equal to or less than 15.0% of the consolidated assets of Holdings and its Subsidiaries for such period, in each case determined in accordance with GAAP; provided, that, for such Measurement Period, the Foreign Excluded Subsidiaries shall not collectively have (x) Net Sales during such Measurement Period equal to or greater than 20.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period or (y) assets during such Measurement Period equal to or greater than 20.0% of the consolidated assets of Holdings and its Subsidiaries for such period; provided, further, that no Subsidiary that owns any Material Intellectual Property or is party to a Material Agreement may be a Foreign Excluded Subsidiary.
“Foreign Lender” means a Lender that is not a U.S. Person.
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any successor thereto.
“Funded Indebtedness” of any Person means Indebtedness of the type described in clauses (a) and (c) of the definition of Indebtedness, and all Contingent Liabilities of such Person in respect of any such Funded Indebtedness.
“GAAP” has the meaning specified in Section 1.3.
“Governmental Authority” means any national, supranational, federal, state, county, provincial, local, municipal or other government or political subdivision thereof (including any Regulatory Authority), whether domestic or foreign, and any agency, authority, commission, ministry, instrumentality, regulatory body, court, tribunal, arbitrator, central bank or other Person exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to any such government; any entity that contracts with a governmental entity to administer or assist in the administration of a governmental program (including any Medicare or Medicaid administrative contractors); or any arbitrator with authority to bind a party at law.
“Guaranteed Obligations” has the meaning specified in Section 12.1.
“Guarantors” means, collectively, Holdings and each Subsidiary Guarantor.
“Hazardous Material” means any material, substance, chemical, mixture or waste which is capable of damaging or causing harm to any living organism, the environment or natural resources, including all explosive, special, hazardous, polluting, toxic, industrial, dangerous, biohazardous, medical, infectious or radioactive substances, materials or wastes, noise, odor, electricity or heat, and including petroleum or petroleum products, byproducts or distillates, asbestos or asbestos-containing materials, urea formaldehyde, polychlorinated biphenyls, radon gas, ozone-depleting substances, greenhouse gases, and all other substances or wastes of any nature regulated pursuant to any Environmental Law or as to which any Governmental Authority requires investigation, reporting or remedial action.
“Healthcare Laws” means all applicable federal, state or local laws that govern the sales, marketing, promotion, distribution, research, development, testing, current good manufacturing practices (cGMPs) and quality system requirements, handling, packaging, labeling, storage, advertising, import, export, or any other use of the Products including, but not limited to, the FD&C Act; the Public Health Service Act; the federal False Claims Act; the federal Anti-Kickback Statute; the Anti-Inducement Law; the Stark Law; privacy and data security laws including without limitation the Health Insurance Portability and
Accountability Act of 1996, as amended, inclusive of the Health Information Technology for Economic and Clinical Health Act (HITECH) and all implementing regulations (HIPAA); the Medicare Program (Title XVIII of the Social Security Act); the Medicaid Program (Title XIX of the Social Security Act); laws pertaining to the corporate practice of medicine or other healthcare professionals; laws pertaining to deceptive trade practices; any and all Permits required under Healthcare Laws; all applicable rules, regulations and licensing requirements of applicable state agencies; any similar state and local laws that address the subject matter of the foregoing; laws and regulations pertaining to federal and state relief programs related to COVID-19; the Federal Trade Commission Act; and all other analogous laws to the foregoing within any other U.S. or foreign or supranational jurisdiction, and applicable rules and regulations issued thereunder (including, without limitation, 21 C.F.R. Parts 801, 803, 806, 807, 812, and 820).
“Hedging Agreement” means any interest rate, foreign currency, commodity, credit or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.
“Hedging Obligations” means, with respect to any Person, all liabilities of such Person under currency exchange agreements, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates.
“herein”, “hereof”, “hereto”, “hereunder” and similar terms contained in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document.
“Holdings” has the meaning specified in the preamble.
“Immaterial Subsidiary” means at any date of determination, each wholly owned Subsidiary (together with its Subsidiaries) whose (i) Net Sales during the applicable Measurement Period were equal to or less than 5.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period and (ii) assets during the applicable Measurement Period were equal to or less than 5.0% of the consolidated assets of Holdings and its Subsidiaries for such period, in each case determined in accordance with GAAP; provided, that, for such Measurement Period, the Immaterial Subsidiaries shall not collectively have (x) Net Sales during such Measurement Period equal to or greater than 10.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period or (y) assets during such Measurement Period equal to or greater than 10.0% of the consolidated assets of Holdings and its Subsidiaries for such period; provided, further, that no Subsidiary that owns any Material Intellectual Property may be an Immaterial Subsidiary.
“Impermissible Qualification” means any qualification or exception to the opinion or certification of any independent public accountant as to any financial statement of a Credit Party or any of its Subsidiaries (i) which is of a “going concern” or similar nature (other than any such qualification arising from the Loans hereunder maturing on the Maturity Date or by reason of any actual or anticipated financial covenant breach hereunder) or (ii) which relates to the limited scope of examination of matters relevant to such financial statement.
“Indebtedness” of any Person means:
(a) all obligations of such Person for borrowed money or advances and all obligations of such Person evidenced by bonds, debentures, notes or similar instruments;
(b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker’s acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person;
(d) net Hedging Obligations of such Person and all obligations of such Person arising under Synthetic Leases;
(e) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including earn outs, purchase price adjustments and seller notes in connection with acquisitions permitted hereunder (to the extent due and payable and included as a liability on the balance sheet in accordance with GAAP) (other than trade payables entered into in the ordinary course of business);
(f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business which are not overdue for a period of more than 90 days or, if overdue for more than 90 days, as to which a dispute exists and adequate reserves in conformity with GAAP have been established on the books of such Person), and indebtedness secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on property owned or being acquired by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(g) any Disqualified Capital Securities; and
(h) all Contingent Liabilities of such Person in respect of any of the foregoing clauses (a) through (g) inclusive.
The Indebtedness of any Person shall include the Indebtedness of any other Person (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 Person, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
“Indemnified Liabilities” has the meaning specified in Section 11.4(a).
“Indemnified Parties” has the meaning specified in Section 11.4(a).
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Intellectual Property” means all (i) Patents, (ii) Trademarks, (iii) Copyrights and other works of authorship (registered or unregistered), and all applications, registrations and renewals therefor, (iv) computer software, databases, data and documentation, (v) Trade Secrets and confidential business information, including know-how, inventions, manufacturing processes and techniques, research and development information, financial, marketing and business data, databases pricing and cost information, business, finance and marketing plans, customer and prospective customer lists and information, and supplier and prospective supplier lists and information, (vi) other intellectual property or similar proprietary rights, (vii) copies and tangible embodiments of any of the foregoing (in whatever form or medium) and (viii) any and all improvements to any of the foregoing.
“Intercompany Subordination Agreement” means a subordination agreement to be executed and delivered by each Credit Party and any Subsidiaries thereof, pursuant to which all obligations in respect of any Indebtedness for borrowed money (or equivalent) owing between or among any party to such subordination agreement shall be subordinated to the prior Payment in Full of all Obligations, such agreement to be in substantially the form attached hereto as Exhibit F or such other form reasonably acceptable to the Agent.
“Interest Payment Date” means, (i) as to any ABR Loan, (a) the last Business Day of each March, June, September and December and (b) the Maturity Date and (ii) as to any SOFR Loan, (a) the last day of each Interest Period therefor and, in the case of any Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at three-month intervals after the first day of such Interest Period, and (b) the Maturity Date.
“Interest Period” means, (i) initially, as to any Loan, the period beginning on (and including) the date of which the Loans were made and ending on (and including) the last day of the calendar quarter in which the Loans were made and (ii) thereafter, as to any Loan, the period commencing on the date of such Loan and ending on the numerically corresponding day in the calendar month that is three months thereafter (subject to the availability thereof), as specified in the applicable Loan Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, (iii) no Interest Period shall extend beyond the Maturity Date and (iv) no tenor that has been removed from this definition pursuant to Section 4.10(d) shall be available for specification in such Loan Request. For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan.
“Investment” means, relative to any Person, (i) any loan, advance or extension of credit made by such Person to any other Person, including the purchase by such Person of any bonds, notes, debentures or other debt securities of any other Person, (ii) Contingent Liabilities in favor of any other Person and (iii) any Capital Securities held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment.
“IPO” means an underwritten initial public offering of common Capital Securities of Holdings pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act of 1933, as amended.
“Key Permits” means all material Permits in favor of the Credit Parties relating to the Products (including all Regulatory Authorizations), including, for the avoidance of doubt, all current and future permits materially relating to (i) FFRct in the United States and (ii) Plaque and Roadmap, in the case of this clause (ii), from and after the date on which Plaque and Roadmap collectively contribute 30% or more of Net Sales in the aggregate. As of the Closing Date, the Key Permits are as set forth on Schedule 1.1.
“Lender” has the meaning specified in the preamble.
“Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, or other
priority or preferential arrangement of any kind or nature whatsoever, to secure payment of a debt or performance of an obligation.
“Liquidity” means, at any time, unrestricted, unencumbered cash and Cash Equivalent Investments in one or more Controlled Accounts that is free and clear of all Liens, other than Liens granted under the Loan Documents in favor of the Agent, for the benefit of the Secured Parties.
“Liquidity Covenant” has the meaning specified in Section 8.4(a).
“Liquidity Cure Amount” has the meaning specified in Section 8.4(a).
“Liquidity Cure Right” has the meaning specified in Section 8.4(a).
“Loans” means the term loans made on the Closing Date pursuant to Section 2.1(a) in an aggregate principal amount of $138,137,470.97.
“Loan Commitment Amount” means $138,137,470.97.
“Loan Documents” means, collectively, this Agreement (as subsequently amended or otherwise modified), the Notes, the Fee Letter, the Security Agreement, the Debenture, any Mortgages, the Intercompany Subordination Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement, any Controlled Account Agreement and each other agreement pursuant to which any of the Agent or any of the other Secured Parties is granted a Lien to secure the Obligations, and each other agreement, certificate, document or instrument delivered in connection with any Loan Document.
“Loan Request” means a Loan request and certificate duly executed by an Authorized Officer of the Borrower substantially in the form of Exhibit B hereto.
“Majority Lenders” means, at any time, Lenders holding more than 50% of the then aggregate unpaid principal amount of the Loans.
“Material Adverse Effect” means a material adverse effect on (i) the business, condition (financial or otherwise), operations, performance or properties of any Credit Party and each of its Subsidiaries, taken as a whole, (ii) the rights and remedies of the Agent or any Lender under any Loan Document, or (iii) the ability of any Credit Party or any of its Subsidiaries to perform their respective Obligations under any Loan Document.
“Material Agreements” means (i) each contract or agreement to which a Credit Party or any of its Subsidiaries is a party, the loss of which would result in the loss of 30% or more of Net Sales in the aggregate; (ii) the AWS Agreement or any replacement cloud hosting agreement as contemplated in Section 9.1(m) and (iii) all other contracts or agreements to which a Credit Party is a party, individually or in the aggregate, that if breached or terminated could reasonably be expected to result in a Material Adverse Effect.
“Material Intellectual Property” means any Intellectual Property owned by, licensed to or otherwise held by any Credit Party or any of its Subsidiaries (including, for the avoidance of doubt, the Stanford Licenses), whether currently owned or acquired, developed, licensed or obtained after the date hereof (i) reasonably required for the business and/or commercialization of FFRct or otherwise materially relating to FFRct, (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 $5,000,000.
“Maturity Date” means June 14, 2028.
“Measurement Period” means any period of four (4) consecutive Fiscal Quarters of Holdings.
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
“Mortgage” means each mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Agent, for the benefit of the Secured Parties, on real property of a Credit Party, including any amendment, restatement, modification or supplement thereto.
“Mortgage Instruments” means such title reports, title insurance, flood certifications and flood insurance, opinions of counsel, surveys, appraisals and environmental reports and other similar information and related certifications as are reasonably requested by, and in form and substance reasonably acceptable to, the Agent from time to time.
“Multiemployer Plan” means a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA contributed to for any employees of a Credit Party, any of its Subsidiaries or any ERISA Affiliate.
“Net Cash Proceeds” means when used in respect of (i) any Disposition, (ii) the receipt of any proceeds in connection with any Event of Loss suffered, or (iii) the receipt of any proceeds in connection with an IPO, in the case of clauses (i) and (ii), by a Credit Party or any of its Subsidiaries, and, in the case of clause (iii), by Holdings or any direct or indirect holding company of Holdings, the gross proceeds in cash or Cash Equivalent Investments received by such Person (excluding, in connection with any Disposition, any portion of such proceeds deposited in an escrow account pursuant to the documentation related thereto but including such proceeds subsequently received in respect of noncash consideration initially received and amounts initially placed in escrow that subsequently become available) from such Disposition, Event of Loss or IPO, minus, without duplication, (a) all direct costs and expenses incurred or to be incurred (including sales, commissions and legal, accounting and investment banking fees, commissions and expenses), (b) all federal, state, local and foreign Taxes assessed or to be assessed (if any), in connection therewith, (c) in connection with any Disposition or Event of Loss, amounts required to be applied to the repayment of any Permitted Indebtedness (together with any interest thereon, premium or penalty and any other amount payable with respect thereto) secured by a Permitted Lien that has priority over the Lien, if any, of the Agent on the asset subject to such Disposition or Event of Loss, (d) in connection with any Disposition, reserves for purchase price adjustments and retained liabilities reasonably expected to be payable by Holdings or any Subsidiary in connection therewith, to the extent such reserves have been established in accordance with GAAP; provided that upon the final determination of the amount paid in respect of such purchase price adjustments and retained liabilities, if the actual amount of purchase price adjustments and retained liabilities paid is less than such reserves, the difference shall, at such time, constitute Net Cash Proceeds, and (e) with respect to any Event of Loss, all money actually applied within one hundred eighty (180) days to replace the assets in question or to repair or reconstruct damaged property or property affected by loss, destruction, damage, condemnation, confiscation, requisition, seizure or taking.
“Net Income” means, for any applicable Fiscal Period for any Person determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP, the aggregate of all amounts (exclusive of all amounts in respect of any extraordinary gains but including extraordinary losses) which would be included as net income on the consolidated financial statements of such Person and its Subsidiaries for such Fiscal Period.
“Net Sales” means, for any applicable Fiscal Period, the revenue of the Credit Parties and their Subsidiaries from the sale of Products (current or future to the extent the revenue is actually earned and
recognized during such Fiscal Period) during such Fiscal Period, determined on a consolidated basis in accordance with GAAP.
“Note” means a promissory note of the Borrower payable to a Lender (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the outstanding amount of the Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
“Obligations” means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of any Credit Party or any of its Subsidiaries arising under or in connection with a Loan Document and the principal of and premium, if any, and interest (including interest accruing during the pendency of any proceeding of the type described in Section 9.1(h), whether or not allowed in such proceeding) on the Loans.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Organic Document” means, relative to any Credit Party or any of its Subsidiaries, 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 arrangements applicable to such Credit Party’s or any of its Subsidiaries’ Capital Securities and, with respect to any UK Subsidiary Guarantor, the Constitutional Documents of such UK Subsidiary Guarantor.
“Other Administrative Proceeding” means any administrative proceeding relating to a dispute involving a patent office or other relevant intellectual property registry which relates to validity, revocation, ownership or enforceability of the relevant Intellectual Property.
“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 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.
“Participant Register” has the meaning specified in Section 11.11(b).
“Patent” means any patent and patent application, including any divisions, continuations, continuations in-part, provisionals, continued prosecution applications, substitutions, reissues, reexaminations, renewals, extensions, restorations, supplemental protection certificates and other additions in connection therewith, whether in or related to the United States or any foreign country or other jurisdiction.
“Patent Security Agreement” means any Patent Security Agreement executed and delivered by any Credit Party and/or any of its Subsidiaries, as applicable, in substantially the form of Exhibit C to the Security Agreement, as amended or otherwise modified from time to time.
“Patriot Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
“Payment in Full” means the entire principal amount of the Loans, interest thereon and all other Obligations, including all applicable Specified Repayment Fees and fees set forth in the Fee Letter, shall have been indefeasibly paid in full in cash (other than inchoate indemnification, expense reimbursement obligations and other contingent obligations for which no claim has been asserted).
“PBGC” means the Pension Benefit Guaranty Corporation, or any entity succeeding to all or any of its functions under ERISA.
“Pension Plan” means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Plan), to which a Credit Party, any of its Subsidiaries or any ERISA Affiliate sponsors, contributes to, or provides benefits under, or has any obligation to contribute or provide benefits under, and to which a Credit Party or any of its Subsidiaries or ERISA Affiliate could reasonably be expected to have liability, including any liability by reason of having been a substantial employer under Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.
“Perfection Certificate” means a certificate duly completed and executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto, together with such changes thereto as the Agent or the Majority Lenders may from time to time request.
“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Permits” means all permits, licenses, registrations, certificates, orders, approvals, authorizations, consents, waivers, franchises, variances and similar rights issued by or obtained from any Governmental Authority or any other Person, including, without limitation, those relating to Environmental Laws and Healthcare Laws.
“Permitted Disposition” means any of the following: (i) Dispositions of inventory in the ordinary course of business, (ii) Dispositions of obsolete, damaged, worn out or surplus property in the ordinary course of business, (iii) licenses, sublicenses or similar agreements that are permitted pursuant to Section 8.21, (iv) any issuance, offer, sale, transfer or other Disposition of Qualified Capital Securities of Holdings, (v) the sale, lease, sublease or transfer of property or assets (A) from one Credit Party to another Credit Party, (B) from a Subsidiary that is not a Credit Party to another Subsidiary that is not a Credit Party or to any Credit Party or (C) from a Credit Party to a Subsidiary that is not a Credit Party, in an aggregate amount under this clause (C), together with the aggregate amount of Investments made pursuant to Section 8.5(g), not to exceed $2,000,000, (vi) Dispositions of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business (other than in connection with financing transactions) and (vii) other Dispositions that (x) do not include Material Intellectual Property or Capital Securities with respect to Subsidiaries that directly or indirectly own, or hold a license in respect of, Material Intellectual Property and (y) when taken together with all other Dispositions made during the preceding period of 12 consecutive months pursuant to this clause (vii), do not exceed $2,500,000 in the aggregate.
“Permitted Indebtedness” has the meaning specified in Section 8.2.
“Permitted Investments” has the meaning specified in Section 8.5.
“Permitted Lien” has the meaning specified in Section 8.3.
“Person” means any natural person, corporation, limited liability company, partnership, joint venture, association, trust or unincorporated organization, Governmental Authority or any other legal entity, whether acting in an individual, fiduciary or other capacity.
“Personal Data” means all data relating to one or more individual(s) that is personally identifying (i.e., data that identifies an individual or, in combination with any other information or data available to Holdings or its Subsidiaries, is capable of identifying an individual) or capable of identifying a specific device or non-personally identifying, including, without limitation, aggregate or de-identified data and data collected automatically, including data collected through a mobile or other electronic device.
“PIK Interest” has the meaning specified in Section 3.10(a).
“PIK Period” has the meaning specified in Section 3.10(a).
“Plaque” means the HeartFlow product that provides plaque identification, characterization, and visualization, and is presented with the FFRct model, FDA 510(k) approval for which was received on October 14, 2022 (510(k) No.: K213857).
“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the F.R.S. Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Agent) or any similar release by the F.R.S. Board (as determined by the Agent). Any change in the Prime Rate shall take effect at the opening of business on the day such change is publicly announced or quoted as being effective.
“Privacy and Data Security Policies” has the meaning specified in Section 6.16(d).
“Privacy Laws” has the meaning specified in Section 6.16(a).
“Pro Rata Share” means, with respect to any Lender, the percentage (expressed as a decimal and carried out to the ninth decimal place) obtained by dividing (x) the aggregate outstanding principal amount of Loans made hereunder by such Lender, by (y) the aggregate outstanding principal amount of all Loans made hereunder by all Lenders, in each case subject to adjustment as provided in Section 4.7. The Pro Rata Share of each Lender in respect of the Loans is set forth opposite the name of such Lender on Schedule 2 under the caption “Pro Rata Shares” or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
“Product” means any current product developed, manufactured, licensed, marketed, sold, distributed, or otherwise commercialized by any Credit Party (other than Holdings), including any such product in development or which may be developed.
“Product Agreement” means each agreement, license, document, instrument, interest (equity or otherwise) or the like under which one or more Persons grants or receives any right, title or interest with respect to any Product Development and Commercialization Activities in respect of one or more Products specified therein, or receives or is granted the right to exclude any third parties from engaging in any Product Development and Commercialization Activities with respect thereto, including each contract or agreement with suppliers, manufacturers, distributors, clinical research organizations, wholesalers, pharmacies or with any other Person related to any such entity.
“Product Development and Commercialization Activities” means, with respect to any Product, any combination of research, development, manufacture, importation, exportation, use, sale, storage, design, labeling, marketing, promotion, supply, distribution, testing, packaging, purchasing or other commercialization activities, receipt of payment in respect of any of the foregoing, or like activities the purpose of which is to commercially exploit such Product.
“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 or regulation or otherwise for the purpose of influencing any act or decision of such payee in his official capacity, inducing such payee to do or omit to do any act in violation of his lawful duty, securing any improper advantage or inducing such payee to use his influence with a government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality.
“Qualified Capital Securities” means, with respect to any Person, any Capital Security of such Person that is not a Disqualified Capital Security.
“Recipient” means the Agent or any Lender, as applicable.
“Regulatory Authority” means any Governmental Authority that is concerned with or has regulatory oversight with respect to the use, control, safety, efficacy, reliability, manufacturing, labeling, packaging, handling, storage, marketing, advertising, promotion, distribution, sale or other Product Development and Commercialization Activities relating to any Product of any Credit Party or any of its Subsidiaries, including the FDA and all equivalents of such agency in other jurisdictions and Standard Bodies.
“Regulatory Authorizations” means any and all clearances, approvals, and other forms of authorization, and related internal documentation where applicable, forming the basis for distribution of products (including without limitation, 510(k) clearances, internal decision documentation under FDA guidance on changes to 510(k)-cleared products, and where applicable supplements and amendments, governmental price and reimbursement approvals and approvals of applications for regulatory exclusivity), licenses, registrations, or authorizations of any Governmental Authority necessary for the manufacture, development, testing, distribution, use, storage, import, export, transport, promotion, marketing, sale, or other commercialization of a Product in any country or jurisdiction, and including, with respect to the Products, that each Product has been and is lawfully marketed by the Borrower in conformity and compliance with all applicable laws (including Healthcare Laws), regulations, enforcement policies, and similar pronouncements of any Regulatory Authority respecting any Product of the Borrower.
“Related Party” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and such Person’s Affiliate.
“Release” means any releasing, disposing, discharging, injecting, spilling, leaking, leaching, pumping, pouring, dumping, depositing, emitting, escaping, emptying, seeping, dispersal, migrating or placing, including movement through, into or upon the environment or any natural or man-made structure.
“Relevant Governmental Body” means the F.R.S. Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the F.R.S. Board or the Federal Reserve Bank of New York, or any successor thereto.
“Resignation Effective Date” has the meaning specified in Section 10.6(a).
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Restricted Payment” means (i) the declaration or payment of any dividend (other than dividends payable solely in Capital Securities of a Credit Party or any of its Subsidiaries) on, or the making of any payment or distribution on account of, or setting apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any class of Capital Securities of a Credit Party or any of its Subsidiaries or any warrants, options or other right or obligation to purchase or acquire any such Capital Securities, whether now or hereafter outstanding or (ii) the making of any other distribution in respect of such Capital Securities, in each case either directly or indirectly, whether in cash, property or obligations of a Credit Party or any of its Subsidiaries or otherwise.
“Roadmap” means the HeartFlow product that provides coronary vascular physiologic simulation, FDA 510(k) approval for which was received on October 14, 2022 (510(k) No.: K213857).
“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., and its successors.
“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.
“Sanctioned Person” means any Person that is a target of Sanctions, including without limitation, a Person that is (i) listed on OFAC’s Specially Designated Nationals and Blocked Persons List, (ii) listed on OFAC’s Consolidated Non-SDN List, (iii) a legal entity that is deemed by OFAC to be a Sanctions target based on the ownership of such legal entity by Sanctioned Peron(s), or (iv) a Person that is a Sanctions target pursuant to any list-based, territorial or country-based Sanctions program of a Governmental Authority.
“SEC” means the Securities and Exchange Commission.
“Secured Parties” means, collectively, the Agent and each of the Lenders.
“Security Agreement” means the Security Agreement, dated as of the date hereof, by and among the Borrower, the Subsidiary Guarantors and the Agent, as amended or otherwise modified from time to time.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Loan” means a Loan that bears interest at a rate based on Term SOFR, other than pursuant to clause (iii) of the definition of “ABR”.
“Solvent” means, (x) with respect to the Credit Parties and their Subsidiaries on a particular date, that on such date (i) the fair value of the property of the Credit Parties and their Subsidiaries on a consolidated basis is greater than the total amount of liabilities, including Contingent Liabilities, of the
Credit Parties and their Subsidiaries on a consolidated basis, (ii) the present fair saleable value of the assets of the Credit Parties and their Subsidiaries on a consolidated basis is not less than the amount that will be required to pay the probable liability of the Credit Parties and their Subsidiaries on a consolidated basis on its debts as they become absolute and matured, (iii) [reserved], (iv) the Credit Parties and their Subsidiaries on a consolidated basis are not engaged in business or a transaction, and the Credit Parties on a consolidated basis are not about to engage in a business or a transaction, for which the property of the Credit Parties and their Subsidiaries on a consolidated basis would constitute an unreasonably small capital and (v) the Credit Parties and their Subsidiaries have not executed this Agreement or any other Loan Document or made any transfer or incurred any obligations hereunder, with actual intent to hinder, delay or defraud either present or future creditors; and (y) with respect to the Borrower on a particular date, that on such date (i) the fair value of the property of the Borrower is greater than the total amount of liabilities, including Contingent Liabilities, of the Borrower, (ii) the present fair saleable value of the assets of the Borrower is not less than the amount that will be required to pay the probable liability of the Borrower on its debts as they become absolute and matured, (iii) [reserved], (iv) the Borrower is not engaged in business or a transaction, and the Borrower is not about to engage in a business or a transaction, for which the property of the Borrower would constitute an unreasonably small capital and (v) the Borrower have not executed this Agreement or any other Loan Document or made any transfer or incurred any obligations hereunder, with actual intent to hinder, delay or defraud either present or future creditors. The amount of Contingent Liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, can reasonably be expected to become an actual or matured liability.
“SPAC Transaction” means the merger, acquisition, contribution, equity purchase or similar reorganization transaction or series of transactions resulting in the combination of the Borrower (or any corporate successor (including a Subsidiary) thereof) or Holdings and any special purpose acquisition company or similar entity, in each case, where such acquisition company or entity has no material commercial operations and where the common Capital Securities of such surviving entity (or any direct or indirect parent thereof) are publicly listed on any United States national securities exchange.
“Specified Holder” means any of the persons and entities listed on Schedule 1.2.
“Specified Repayment Fee” means for any prepayment or repayment of Loans occurring (i) at any time on or prior to the second anniversary of the Closing Date, none, (ii) at any time after the second anniversary of the Closing Date and on or prior to the third anniversary of the Closing Date, an amount equal to one and one-half percent (1.5%) of the aggregate outstanding principal amount of the Loans being prepaid or repaid and (iii) at any time after the third anniversary of the Closing Date and on or prior to the Maturity Date, an amount equal to three percent (3.0%) of the aggregate outstanding principal amount of the Loans being prepaid or repaid.
“Standard Bodies” means any of the organizations that create, sponsor and maintain safety, quality or other standards, including ISO, ANSI, CEN, SCC and the like.
“Stanford Licenses” means (i) that certain Exclusive Agreement, dated July 22, 2010, by and between the Board of Trustees of the Leland Stanford Junior University, as licensor, and the Borrower, formerly known as Cardiovascular Simulation, Inc., as licensee, (ii) that certain Software Exclusive License Agreement, dated April 20, 2010, by and between the Board of Trustees of the Leland Stanford Junior University, as licensor, and the Borrower, formerly known as Cardiovascular Simulation, Inc., as licensee; as amended by that certain Amendment No. 1, dated August 28, 2014 and that certain Amendment No. 2, dated April 19, 2020, and (iii) that certain Software Exclusive License Agreement, dated June 18, 2009, by and between the Board of Trustees of the Leland Stanford Junior University, as licensor, and the Borrower, formerly known as Cardiovascular Simulation, Inc., as licensee; as amended by that certain Amendment No. 1, dated June 17, 2014 and that certain Amendment No. 2, dated June 17, 2019.
“Subsidiary” means, with respect to any Person, any other Person of which more than 50% of the outstanding Voting Securities (irrespective of whether at the time Capital Securities of any other class or classes of such other Person shall or might have voting power upon the occurrence of any contingency) or the issued Capital Securities of such other Person is at the time directly or indirectly owned or Controlled by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Unless the context otherwise specifically requires, the term “Subsidiary” shall be a reference to a Subsidiary of Holdings, whether direct or indirect.
“Subsidiary Guarantor” means initially as of the Closing Date, each Subsidiary of Holdings identified under the caption “SUBSIDIARY GUARANTORS” on the signature pages hereto, if any, and, thereafter, each Subsidiary of Holdings that becomes a “Subsidiary Guarantor” after the Closing Date pursuant to Section 7.8.
“Synthetic Lease” means, as applied to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (i) that is not a capital lease in accordance with GAAP and (ii) in respect of which the lessee retains or obtains ownership of the property so leased for federal income tax purposes, other than any such lease under which that Person is the lessor.
“Systems” means the computers, servers, devices, networks, software, and systems used in connection with the operation of the business of Holdings or any of its Subsidiaries.
“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.
“Term SOFR” means,
(a) for any calculation with respect to a SOFR Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and
(b) for any calculation with respect to an ABR Loan on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “ABR Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any ABR Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR
Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such ABR SOFR Determination Day;
provided, further, that if Term SOFR determined as provided above (including pursuant to the proviso under clause (a) or clause (b) above) shall ever be less than 2.00%, then Term SOFR shall be deemed to be 2.00%.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Termination Date” means the date on which Payment in Full occurs.
“Trademark” means any trademark, service mark, trade name, logo, symbol, trade dress, domain name, rights in social media accounts, corporate name and other indicator of source or origin, and all applications and registrations therefor, together with all of the goodwill associated with the therewith.
“Trademark Security Agreement” means any Trademark Security Agreement executed and delivered by any Credit Party and/or any of its Subsidiaries, as applicable, substantially in the form of Exhibit D to the Security Agreement, as amended or otherwise modified from time to time.
“Trade Secrets” shall mean trade secrets and other confidential information data and databases, in each case that derive economic value from not being generally known by the public and not being readily ascertainable by other Persons, and all claims and rights related to any of the foregoing.
“Two-Consecutive Fiscal Quarter Net Sales Decline” shall mean a decrease in Net Sales for two consecutive Fiscal Quarters, in each case as compared to the Fiscal Quarter immediately preceding such two consecutive Fiscal Quarters.
“Type”, when used in reference to any Loan, refers to whether the rate of interest on such Loan is determined by reference to Term SOFR or ABR.
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if, with respect to any financing statement or by reason of any provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted to the Agent, on behalf of the Secured Parties, pursuant to the applicable Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than New York, then “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of each Loan Document and any financing statement relating to such perfection or effect of perfection or non-perfection.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form 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.
“UK Subsidiary Guarantor” means each Guarantor incorporated under the laws of England and Wales.
“United States” or “U.S.” means the United States of America, its fifty states and the District of Columbia.
“United States Registered IP Rights” means any United States patent, patent application, trademark registration, trademark application or copyright registration.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“Voting Securities” means, with respect to any Person, Capital Securities of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
“Warrants” means, collectively, each certain Warrant to Purchase Common Stock issued by Holdings pursuant to the Existing Credit Agreement.
“Welfare Plan” means a “welfare plan”, as such term is defined in Section 3(1) of ERISA, which any Credit Party or any of its Subsidiaries sponsors, contributes to, or provides benefits under, or has any obligation to contribute or provide benefits under.
“wholly owned Subsidiary” means any direct or indirect Subsidiary of Holdings, all of the outstanding Capital Securities of which (other than any director’s qualifying shares or investments by foreign nationals mandated by applicable laws) is owned directly or indirectly by Holdings.
“Withholding Agent” means the Credit Parties and the Agent.
“Write-Down and Conversion Powers” means, (i) 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 (ii) 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.
SECTION 1.2 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, Capital Securities, rights under contractual obligations and permits and any right or interest in any such assets or property; and
(i) the word “will” shall have the same meaning as the word “shall”.
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.
SECTION 1.3 Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used in each Loan Document shall be interpreted, and all accounting determinations and computations thereunder (including under Section 8.4 and any definitions used in such calculations) shall be made, in accordance with those generally accepted accounting principles (“GAAP”) applied in the preparation of the financial statements referred to in Section 5.1(d). Unless otherwise expressly provided, all financial covenants and defined financial terms shall be computed on a consolidated basis for Holdings and its Subsidiaries, in each case without duplication. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein, and the determination of Indebtedness hereunder, shall be made without giving effect to Financial Accounting Standards Board (FASB) Standard ASC 842 (Leases) (or any other applicable financial accounting standard having a similar result or effect) and related interpretations, in each case, to the extent any lease (or similar arrangement conveying the right to use) would be required to be treated as a capital lease thereunder where such lease (or similar arrangement) would have been treated as an operating lease under GAAP as in effect immediately prior to the effectiveness of the ASC 842.
SECTION 1.4 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 Capital Securities at such time.
SECTION 1.5 Rates. The Agent does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to ABR, the Term SOFR Reference Rate or Term SOFR, or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, ABR, the Term SOFR Reference Rate, Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Agent and its affiliates or other related entities may engage in transactions that affect the calculation of ABR, the Term SOFR Reference Rate, Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Agent may select information sources or services in its reasonable discretion to ascertain ABR, the Term SOFR Reference Rate, Term SOFR or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
ARTICLE II
THE LOANS
SECTION 2.1 Commitments. On the terms and subject to the conditions of this Agreement, each of the Lenders agrees to make the Loans to the Borrower on the Closing Date in an amount not to exceed the Loan Commitment Amount. No amounts paid or prepaid with respect to any of the Loans may be reborrowed. The Loan Commitment Amount shall automatically and permanently be reduced to zero immediately after the making of the Loans on the Closing Date.
SECTION 2.2 Borrowing Procedures. Subject to the terms and conditions hereof, the Borrower may irrevocably request that the Loans be made by delivering to the Agent a Loan Request on or before 10:00 a.m. (London, England time) on a Business Day at least two (2) Business Days prior to the proposed Closing Date (or such shorter period as the Agent may agree in its sole discretion).
SECTION 2.3 Funding. After receipt of a Loan Request for the Loans pursuant to Section 2.2, each applicable Lender shall, on the Closing Date, and subject to the terms and conditions hereof (including the satisfaction of all conditions precedent set forth in Article V hereof), make the applicable Loans to the Borrower, in the amounts set forth opposite such Lender’s name on Schedule 2; provided that, at the request of the Borrower, the Agent shall cause the proceeds of the Loans to be disbursed, by wire transfer of immediately available funds, in the amount and to the accounts set forth on Schedule 2.3.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1 Applicable Currency for Repayments and Prepayments; Pro Rata Application The Borrower agrees that the Loans, and any fees or interest accrued or accruing thereon, shall be repaid and prepaid solely in Dollars. Except as otherwise provided in this Agreement, each payment (including each repayment and prepayment) by the Borrower will be deemed to be made ratably in accordance with
the Pro Rata Shares of the Lenders, and upon receipt of any such payment the Agent will promptly thereafter distribute like funds relating to any such payment to the Lenders in accordance with their Pro Rata Shares.
SECTION 3.2 Repayments and Prepayments. There will be no scheduled repayments of principal on the Loans prior to the Maturity Date. On the Maturity Date, the Borrower shall repay the entire unpaid principal amount of the Loans in full in cash. Prior thereto, payments, repayments and prepayments of the Loans shall be made as set forth below in this Section 3.2. Nothing in this Section 3.2 shall be deemed to (or be construed to) permit or authorize any transaction by any Credit Party that otherwise is prohibited or not specifically permitted by this Agreement or any other Loan Document. Unless otherwise expressly provided herein, all payments, repayments and prepayments described in this Section 3.2 shall be subject to Section 3.8.
(a) [Reserved].
(b) Loans. The Borrower may, upon five (5) Business Days’ prior written notice to the Agent, voluntarily prepay the outstanding principal amount of the Loans in whole or in part.
(c) Dispositions. Upon any Disposition by a Credit Party or any of its Subsidiaries (other than a Permitted Disposition), made in any period of twelve (12) consecutive months that, when taken together with all other Dispositions made during such 12-month period, results in aggregate Net Cash Proceeds from such Dispositions that exceed $2,000,000 for such 12-month period, the Borrower shall, within three (3) Business Days of such Person’s receipt of such excess proceeds thereof, prepay the outstanding principal amount of the Loans in an amount equal to 100% of such excess Net Cash Proceeds. The provisions of this clause shall not be deemed to be implied consent to any Disposition otherwise prohibited by the terms and conditions of this Agreement.
(d) Events of Loss. Upon the receipt by a Credit Party or any of its Subsidiaries of any Event of Loss, received in any period of 12 consecutive months, that when taken together with all other Events of Loss during such 12-month period, results in aggregate Net Cash Proceeds from such Events of Loss that exceed $2,000,000 for such 12-month period, the Borrower shall, within three (3) Business Days of such Person’s receipt of such excess proceeds thereof, prepay the outstanding principal amount of the Loans in an amount equal to 100% of such excess Net Cash Proceeds.
(e) Other Indebtedness. Upon the issuance, sale or other incurrence of any debt securities or other Indebtedness by a Credit Party or any of its Subsidiaries (other than Permitted Indebtedness), the Borrower shall, within three (3) Business Days of such Person’s receipt of the proceeds thereof, prepay the outstanding principal amount of the Loans in an amount equal to 100% of the net cash proceeds therefrom. The provisions of this clause shall not be deemed to be implied consent to any such issuance, sale or incurrence otherwise prohibited by the terms and conditions of this Agreement.
(f) Acceleration. Immediately upon any acceleration of the applicable Maturity Date of the Loans pursuant to Section 9.2 or Section 9.3, the Borrower shall repay the Loans in full, unless, pursuant to Section 9.3, only a portion of the Loans are so accelerated (in which case the portion so accelerated shall be so repaid).
(g) Change in Control. Immediately upon the occurrence of a Change in Control, the Borrower shall repay the Loans in full.
(h) IPO. Immediately upon the consummation of an IPO or a SPAC, the Borrower shall repay the Loans in an amount equal to the lesser of (i) the Net Cash Proceeds of such IPO or SPAC in excess of $150,000,000 and (ii) $35,000,000.
SECTION 3.3 Application. Proceeds of each prepayment or repayment of the Loans shall be applied as set forth in clause (b) of Section 4.4.
SECTION 3.4 Interest Rate. Subject to Section 3.5, during any applicable Interest Period, (a) each ABR Loan shall accrue interest at a rate per annum equal to the sum of (i) the Applicable Margin, plus (ii) ABR and (b) each SOFR Loan shall accrue interest during such Interest Period at a rate per annum equal to the sum of (i) the Applicable Margin, plus (ii) Term SOFR for such Interest Period. The interest rate shall be recalculated and, if necessary, adjusted for each Interest Period, in each case pursuant to the terms hereof.
SECTION 3.5 Default Rate. Upon the occurrence and during the continuance of an Event of Default, and continuing until such Event of Default is no longer continuing, upon written notice by the Agent (acting pursuant to the instruction of the Majority Lenders (in their sole discretion)), the Applicable Margin shall be increased by 3.00% per annum (such increase, the “Default Rate”). The Default Rate, along with all other interest due and payable on such date, shall be payable in cash on the last Business Day of each calendar month.
SECTION 3.6 Payment Dates. Interest accrued on the Loans shall be payable in cash, without duplication:
(a) on the applicable Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on the Loans, on the principal amount so paid or prepaid;
(c) subject to Section 3.10, the last day of each Interest Period for the Loans; and
(d) on that portion of the Loans that is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration.
Interest accrued on the Loans or any other monetary Obligations after the date such amount is due and payable (whether on the applicable Maturity Date, upon acceleration or otherwise) shall be payable upon demand.
SECTION 3.7 Fees. The Credit Parties agree, jointly and severally, to pay to the Agent and the Lenders the fees set forth in the Fee Letter.
SECTION 3.8 Specified Repayment Fees. Unless otherwise expressly provided herein, all payments, repayments and prepayments described in Section 3.2 and made at any time after the second anniversary of the Closing Date (whether resulting from voluntary or involuntary prepayments or repayments, acceleration (including as a result of the occurrence of any event described in Section 9.1(h) or otherwise)), including, for the avoidance of doubt, on the Maturity Date, shall be subject to the payment of Specified Repayment Fees as described below in this Section 3.8. Until Payment in Full occurs, all such Specified Repayment Fees shall continue to be due and payable, including after the occurrence of any Default, acceleration, maturity or otherwise. If all or any portion of the outstanding Loans are repaid or prepaid for any reason after the second anniversary of the Closing Date, including, for the avoidance of doubt, on the Maturity Date, the Borrower shall pay the Specified Repayment Fee to the Agent at the time of such prepayment or repayment, together with any other fees payable hereunder. Specified Repayment Fees shall be nonrefundable once paid.
SECTION 3.9 [Reserved].
SECTION 3.10 PIK Interest.With respect to the Loans, during the period from the Closing Date until the Interest Payment Date occurring closest to (but not after) the date that is eighteen (18) months after the Closing Date (the “PIK Period”), so long as no Default has occurred and is continuing on such date, by delivery of written notice to the Agent not less than five (5) Business Days prior to any Interest Payment Date, the Borrower may elect to pay all of the interest accrued on the Loans for the Interest Period ending on such Interest Payment Date “in kind” (“PIK Interest”); provided that during the PIK Period, the Applicable Margin shall be increased by one percent (1.00%) per annum with respect to any such interest paid as PIK Interest.
(b) In each case, such election shall only relate to interest that is (x) due and payable on such Interest Payment Date and (y) accrued during the Interest Period ending on such Interest Payment Date. In the event the Borrower elects to pay PIK Interest pursuant to this Section 3.10, such PIK Interest shall be capitalized and added to the outstanding principal amount of the Loans on the applicable Interest Payment Date. For purposes of this Agreement and the other Loan Documents, the amounts so capitalized and added pursuant to the foregoing sentence will constitute a portion of the outstanding principal amount of the Loans as of such Interest Payment Date and will bear interest (which shall be due and payable) in accordance with Sections 3.4, 3.5, 3.6 and, to the extent applicable, 3.8. Notwithstanding anything to the contrary contained in this Agreement or in any other Loan Document, in the event that any Default has occurred and is continuing on any Interest Payment Date, all interest due and payable on such date must be paid in cash, irrespective of any election at any time by the Borrower to pay such interest in the form of PIK Interest.
SECTION 3.11 Interest Computation.
(a) Subject to Section 2.2, each Loan shall initially be a SOFR Loan.
(b) All interest hereunder shall be computed on the basis of a year of 360 days (or in the case of interest computed by reference to the ABR at times when the ABR is based on the Prime Rate, such interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year)), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on any Loan shall be computed on a daily basis based upon the outstanding principal amount of such Loan as of the applicable date of determination. The applicable ABR or Term SOFR shall be determined by the Agent, and such determination shall be conclusive absent manifest error.
SECTION 3.12 Term SOFR Conforming Changes.
In connection with the use or administration of Term SOFR, the Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.
ARTICLE IV
SOFR AND OTHER PROVISIONS
SECTION 4.1 Increased Costs.Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender;
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii) impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any participation therein (except as otherwise accounted for in the definition of “Term SOFR”, as applicable);
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender or such other Recipient of participating in, or to reduce the amount of any sum received or receivable by such Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Loan Commitments of such Lender or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company, as the case may be, could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and/or liquidity), then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Agent), the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section 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 for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law 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).
SECTION 4.2 Compensation for Losses.In the event of (a) the payment of any principal of any SOFR Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any SOFR Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (c) the failure to borrow, convert, continue or prepay any SOFR Loan on the date specified in any notice delivered pursuant hereto, or (d) the
assignment of any SOFR Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 3.11, then, in any such event, the Borrower shall compensate each Lender for any loss, cost and expense attributable to such event, including any loss, cost or expense arising from the liquidation or redeployment of funds. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.
SECTION 4.3 Taxes.Defined Terms. For purposes of this Section, the term “applicable law” includes FATCA.
(b) Payments Free of Taxes. Any and all payments by or on account of any Obligation of a Credit Party under any Loan Document 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 any Withholding Agent, then such 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 Credit Party 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) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(c) Payment of Other Taxes by the Credit Parties. Each Credit Party agrees that, without duplication, it shall, or shall cause the appropriate Credit Party to, timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Agent timely reimburse it for the payment of, any Other Taxes.
(d) Indemnification by Credit Parties. Each Credit Party agrees that, without duplication, it shall, or shall cause the appropriate Credit Party to, indemnify 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) 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 a Credit Party 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 error.
(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 11.11(b) 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 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 such Lender from any other source against any amount due to the Agent under this paragraph (e).
(f) Evidence of Payments. As soon as practicable after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section, such Credit Party 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 satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably).
(g) 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. In addition, any Lender, if reasonably requested by the Borrower or the Agent, shall deliver such other documentation prescribed by applicable law or 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 paragraphs (g)(ii)(A), (ii)(B) and (ii)(D) of this Section) 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,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Agent on or about 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 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 about 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:
(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 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 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) in the case of a Foreign Lender claiming that its extension of credit will generate U.S. effectively connected income, executed copies of IRS Form W-8ECI;
(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 E-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; or
(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-2 or Exhibit E-3, IRS Form W-9, 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 E-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 about 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 applicable law to permit the Borrower or the Agent to determine the withholding or deduction required to be made; and
(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 Lender’s obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Agent in writing of its legal inability to do so.
(h) Treatment of Certain Refunds. If any party 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 (including by the payment of additional amounts pursuant to this Section), 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 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 paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) 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 paragraph 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.
(i) Survival. Each party’s obligations under this Section shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all obligations under any Loan Document.
SECTION 4.4 Payments, Computations; Proceeds of Collateral, Etc. The parties hereto agree as follows:
(a) Unless otherwise expressly provided in a Loan Document, all payments by the Borrower pursuant to each Loan Document shall be made without setoff, deduction or counterclaim not later than 11:00 a.m. (New York City time) on the date due in same day or immediately available funds to such account as the Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Agent on the next succeeding Business Day. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Payments due on other than a Business Day shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees in connection with that payment.
(b) All amounts received as a result of the exercise of remedies under the Loan Documents (including from the proceeds of collateral securing the Obligations) or under applicable law shall be applied upon receipt to the Obligations as follows: (i) first, to the payment in full in cash of all interest (including interest accruing after the commencement of a proceeding in bankruptcy, insolvency or similar law, whether or not permitted as a claim under such law) and fees owing under the Loan Documents, and all costs and expenses owing to the Agent and the Lenders (or any of them) pursuant to the terms of the Loan Documents, until paid in full in cash, (ii) second, after payment in full in cash of the amounts specified in clause (b)(i), to the payment of the principal amount of the Loans then outstanding, (iii) third, after payment in full in cash of the amounts specified in clauses (b)(i) and (b)(ii), to the payment of all other Obligations owing to the Agent and the Lenders (or any of them), and (iv) fourth, after payment in full in cash of the amounts specified in clauses (b)(i) through (b)(iii), and following the Termination Date, to the Borrower or any other Person lawfully entitled to receive such surplus.
SECTION 4.5 Setoff. Each Lender and the Agent shall, upon the occurrence and during the continuance of any Default described in clauses (i) through (iv), inclusive, of Section 9.1(h) or, upon the occurrence and during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) each Credit Party and each of its Subsidiaries hereby grants to each Lender and the Agent a continuing security interest in, any and all balances, credits, deposits, accounts (other than Excluded Accounts) or moneys of each Credit Party and each of its Subsidiaries then or thereafter maintained with such Lender or the Agent, as applicable. Each Lender and the Agent agrees promptly to notify the Borrower after any such appropriation and application made by such Lender or the Agent, as applicable; provided that, the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender and the Agent under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender or the Agent, as applicable, may have.
SECTION 4.6 Inability to Determine Rates.
Subject to Section 4.10, if, on or prior to the first day of any Interest Period for any SOFR Loan:
(a) the Agent determines (which determination shall be conclusive and binding absent manifest error) that “Term SOFR” cannot be determined pursuant to the definition thereof, or
(b) the Majority Lenders determine that for any reason in connection with any request for a SOFR Loan or a conversion thereto or a continuation thereof that Term SOFR for any requested Interest Period with respect to a proposed SOFR Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, and the Majority Lenders have provided notice of such determination to the Agent,
the Agent will promptly so notify the Borrower and each Lender.
Upon notice thereof by the Agent to the Borrower, any obligation of the Lenders to make SOFR Loans shall be suspended (to the extent of the affected SOFR Loans or affected Interest Periods) until the Agent (with respect to clause (b), at the instruction of the Majority Lenders) revokes such notice. Upon receipt of such notice, (i) the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of SOFR Loans (to the extent of the affected SOFR Loans or affected Interest Periods) or, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to an ABR Loan in the amount specified therein and (ii) any outstanding affected SOFR Loans will be deemed to have been converted into ABR Loans at the end of the applicable Interest Period. Upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 4.2. Subject to Section 4.10, if the Agent determines (which determination shall be conclusive and binding absent manifest error) that “Term SOFR” cannot be determined pursuant to the definition thereof on any given day, the interest rate on ABR Loans shall be determined by the Agent without reference to clause (iii) of the definition of “ABR” until the Agent revokes such determination.
SECTION 4.7 Sharing of Payments. If any Lender will, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on the Loans or other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations greater than its Pro Rata Share thereof as provided herein, then the Lender receiving such greater proportion will (a) notify the Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as will be equitable, so that the benefit of all such payments will be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them; provided that, (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations will be rescinded and the purchase price restored to the extent of such recovery, without interest; and (ii) the provisions of this Section will not be construed to apply to (i) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (ii) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in its Loans to any assignee or participant, other than to the Borrower or any of their respective Subsidiaries (as to which the provisions of this subsection will apply).
SECTION 4.8 Mitigation. If any Lender requests compensation under Section 4.1, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 4.3, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 4.1 or 4.3, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would 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.
SECTION 4.9 Illegality. If any Lender determines that any law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Loans whose interest is determined by reference to SOFR, the Term SOFR Reference Rate or Term SOFR, or to determine or charge interest rates based upon SOFR, the Term SOFR Reference Rate or Term SOFR, then, upon notice thereof by such Lender to the Borrower (through the Agent), (a) any obligation of the Lenders to make SOFR Loans, and any right of the Borrower to continue SOFR Loans shall be suspended, and (b) the interest rate on which ABR Loans shall, if necessary to avoid such illegality, be determined by the Agent without reference to clause (iii) of the definition of “ABR”, in each case until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (i) the Borrower shall, if necessary to avoid such illegality, upon demand from any Lender (with a copy to the Agent), prepay or, if applicable, convert all SOFR Loans to ABR Loans (the interest rate on which ABR Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Agent without reference to clause (iii) of the definition of “ABR”), on the last day of the Interest Period therefor, if all affected Lenders may lawfully continue to maintain such SOFR Loans to such day, or immediately, if any Lender may not lawfully continue to maintain such SOFR Loans to such day, and (ii) if necessary to avoid such illegality, the Agent shall during the period of such suspension compute the ABR without reference to clause (iii) of the definition of “ABR,” in each case until the Agent is advised in writing by each affected Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon SOFR, the Term SOFR Reference Rate or Term SOFR. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 4.2.
SECTION 4.10 Benchmark Replacement Setting.Benchmark Replacement.
(i) Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, the Agent and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the Agent has posted such proposed amendment to all affected Lenders and the Borrower so long as the Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Majority Lenders. No replacement of a Benchmark with a Benchmark Replacement pursuant to this Section 4.10(a)(i) will occur prior to the applicable Benchmark Transition Start Date.
(ii) No Hedging Agreement shall be deemed to be a “Loan Document” for purposes of this Section 4.10.
(b) Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in
any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(c) Notices; Standards for Decisions and Determinations. The Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Agent will promptly notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 4.10(d) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 4.10, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 4.10.
(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Agent in its reasonable discretion or (B) the administrator of such Benchmark or the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks, then the Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable, non-representative, non-compliant or non-aligned tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks for a Benchmark (including a Benchmark Replacement), then the Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(e) Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any pending request for a SOFR Loan of, conversion to or continuation of SOFR Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for or conversion to ABR Loans. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of ABR.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to the Borrowing of the Loans on the Closing Date. The obligation of the Lenders to make the Loans on the Closing Date shall be subject to the execution and delivery of this Agreement by the parties hereto, the delivery of a Loan Request for the Loan Loans pursuant to Section
2.2, and the prior or concurrent satisfaction of each of the conditions precedent set forth below in this Section.
(a) Secretary’s Certificate, Etc. The Agent shall have received from each Credit Party (x) a copy of a good standing certificate (to the extent such concept it applicable in any relevant jurisdiction), dated a date reasonably close to the Closing Date, for each such Person and (y) a certificate, dated as of the Closing Date, duly executed and delivered by such Person’s Secretary, Assistant Secretary, or other Authorized Officer, director, managing member or general partner, as applicable, as to:
(i) resolutions of each such Person’s board of directors (or other managing body, in the case of other than a corporation) then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by such Person and the transactions contemplated hereby and thereby;
(ii) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each Loan Document to be executed by such Person;
(iii) the full force and validity of each Organic Document of such Person and copies thereof; and
(iv) certifying that each copy document relating to it specified in this Section 5.1(a) is correct, complete and in full force and effect and has not been amended or superseded as at the date no earlier than the Closing Date;
in each case, upon which certificates the Agent may conclusively rely until it shall have received a further certificate of the Secretary, Assistant Secretary, director, managing member or general partner, as applicable, of any such Person cancelling or amending the prior certificate of such Person.
(b) Closing Date Certificate. The Agent shall have received a certificate, dated as of the Closing Date and duly executed and delivered by an Authorized Officer of the Borrower (the “Closing Date Certificate”), which certificate shall be in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) and shall, among other things, represent and warrant that the statements made therein are true and correct as of such date, and, at the time such certificate is delivered, such statements shall in fact be true and correct. The statements in such certificate shall be limited to (i) (x) the representations and warranties set forth herein and in each Loan Document shall, in each case, be true and correct in all material respects as of the Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); provided that any representations and warranties that are by their terms qualified by materiality, Material Adverse Effect or similar qualification shall be true and correct in all respects, and (y) no Default or Event of Default under and as defined in this Agreement shall have occurred and then be continuing and (ii) all of the conditions set forth in Section 5.1 have been satisfied.
(c) Delivery of Notes. The Agent shall have received Notes for each Lender that has requested as such, evidencing the Loans, which Notes shall be duly executed and delivered by an Authorized Officer of the Borrower.
(d) Financial Information, Etc. The Agent shall have received:
(i) audited consolidated financial statements of the Borrower and its Subsidiaries for the Fiscal Year ended December 31, 2023; and
(ii) unaudited consolidated balance sheets of the Borrower and its Subsidiaries for the Fiscal Quarter ended March 31, 2024, together with the related consolidated statement of operations, shareholder’s equity and cash flows for such Fiscal Quarter.
(e) Compliance Certificate. The Agent shall have received a Compliance Certificate, dated as of the Closing Date, duly executed (and with all schedules thereto duly completed) and delivered by the chief financial or accounting Authorized Officer of the Borrower.
(f) Solvency, Etc. The Agent shall have received a solvency certificate duly executed and delivered by the chief financial or accounting Authorized Officer of the Borrower, dated as of the Closing Date, in form and substance satisfactory to the Agent.
(g) Fee Letter. The Agent shall have received the Fee Letter, dated as of the Closing Date, duly executed and delivered by the Borrower, the Agent and the Lenders.
(h) Security Agreement, etc. The Agent shall have received executed counterparts of the Security Agreement, dated as of the Closing Date, duly executed and delivered by the Credit Parties, together with:
(i) certificates (in the case of Capital Securities that are securities (as defined in the UCC)) evidencing all of the issued and outstanding Capital Securities owned by each Credit Party, which certificates in each case shall be accompanied by undated instruments of transfer duly executed in blank, or, if any Capital Securities (in the case of Capital Securities that are uncertificated securities (as defined in the UCC)), confirmation and evidence satisfactory to the Agent that the security interest therein has been transferred to and perfected by the Agent in accordance with Articles 8 and 9 of the UCC and all laws otherwise applicable to the perfection of the pledge of such Capital Securities; provided that Borrower shall be required to pledge 100% of the Capital Securities of any Foreign Subsidiaries existing as of the Closing Date, except to the extent as reasonably determined by the Borrower after consulting with the Agent, such pledge would reasonably be expected to result in material adverse tax consequences to the Borrower, in which case Borrower shall not be required to pledge voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiaries;
(ii) financing statements suitable in form for naming each Credit Party as a debtor and the Agent for the benefit of the Secured Parties as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions as may be necessary or, in the opinion of the Agent, desirable to perfect the security interests of the Secured Parties pursuant to the Security Agreement; and
(iii) any Patent Security Agreement, Trademark Security Agreement or Copyright Security Agreement required to be provided under the Security Agreement, each dated as of the Closing Date, duly executed and delivered by an Authorized Officer of the applicable Credit Party;
(i) Intercompany Subordination Agreement. The Agent shall have received executed counterparts of the Intercompany Subordination Agreement, duly executed and delivered by each Credit Party and each of their respective Subsidiaries.
(j) Material Agreements. Copies of all Material Agreements and license agreements shall have been made available to the Agent upon its request. The Agent shall have received a certificate
from an Authorized Officer of the Borrower certifying that each such contract or agreement is in full force and effect as of the Closing Date and, to the extent applicable, that there have been no changes to each such contract or agreement since the delivery of same in connection with the Existing Credit Agreement. The Agent shall be satisfied in its sole discretion with the terms and conditions of all Material Agreements and license agreements entered into by the Credit Parties and their Subsidiaries.
(k) 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 the Credit Parties, in each case, in form and substance reasonably acceptable to the Agent.
(l) Fees, Expenses, Etc. The Agent shall have received for its own account and for the account of the Lenders and all fees, costs and expenses due and payable pursuant to Section 11.3, the Fee Letter or any other Loan Documents, including all closing costs and fees and all unpaid reasonable expenses of the Agent and the Lenders incurred in connection with the transactions contemplated hereby (including the Agent’s legal fees and expenses).
(m) Anti-Terrorism Laws and Beneficial Ownership. The Agent shall have received, as applicable, (i) 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 (ii) if the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, at least five Business Days prior to the Closing Date, a Beneficial Ownership Certification.
(n) No Material Adverse Effect. As of the Closing Date, (i) the representations and warranties set forth herein and in each Loan Document are true and correct in all material respects; provided that any representations and warranties that are by their terms qualified by materiality, Material Adverse Effect or similar qualification shall be true and correct in all respects, (ii) no Default or Event of Default shall have then occurred and be continuing, and (iii) no Material Adverse Effect shall have occurred since December 31, 2023.
(o) Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of any Credit Party shall be satisfactory in form and substance to the Agent, and the Agent and its counsel shall have received all information, approvals, resolutions, opinions, documents or instruments as the Agent may reasonably request.
(p) Debt Securities and Credit Facilities; Senior Secured Loans. The Agent shall have received a certificate from an Authorized Officer of the Borrower certifying that (i) no Credit Party nor any of its Subsidiaries has issued, or authorized the issuance of, any debt securities or entered into, or authorized the entrance into, any other credit facilities and (ii) the Obligations constitute the sole secured obligations and sole Indebtedness of the Credit Parties (other than Permitted Indebtedness).
(q) Perfection Certificate. The Agent shall have received a Perfection Certificate, dated as of the Closing Date, duly executed (and with all schedules thereto duly completed) and delivered by the Authorized Officer of the Borrower.
(r) Organizational Chart. The Borrower shall have provided an accurate and complete organization chart reflecting all of the direct and indirect subsidiaries of the Borrower (including the applicable ownership percentages of each entity) as of the Closing Date, and the Agent and the Majority Lenders, in their sole discretion, shall have been satisfied with the direct and indirect equity ownership of the Credit Parties.
(s) Insurance. The Agent shall have received: (i) certificates of insurance evidencing that the insurance required to be maintained pursuant to Section 7.4 is in full force and effect, in each case, in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably); and (ii) certified copies of the insurance policies (or binders in respect thereof), from one or more insurance companies satisfactory to the Agent, required to be maintained pursuant to Section 7.4.
(t) Repayment of Existing Debt. On or prior to the Closing Date or substantially concurrently with the funding of the Loans, (i) all Indebtedness of each Credit Party and each Subsidiary thereof under the Existing Credit Agreement and all other documents, agreements and instruments related thereto shall have been repaid in full, together with all fees (except for those fees related to the Existing Credit Agreement set forth in the Fee Letter) and other amounts owing thereon, all commitments under the agreements evidencing such Indebtedness shall have been terminated and all letters of credit, if any, issued pursuant to such agreements shall have been terminated, backstopped or cash collateralized, in each case in accordance with the terms of that certain payoff letter, dated on or about the date hereof, by and among the parties to the Existing Credit Agreement and (ii) all security interests in respect of, and Liens securing, the obligations of each such Credit Party and each such Subsidiary, as applicable, under the Existing Credit Agreement and all other documents, agreements and instruments related thereto shall have been terminated and released (except for those documents, agreements and instruments that will continue to secure the Obligations hereunder), and the Agent shall have received all customary payoff letters with respect to such Indebtedness and such releases and other documents related thereto as may have been requested by the Agent, which releases shall be in customary form, in each case in accordance with the terms of that certain payoff letter, dated on or about the date hereof, by and among the parties to the Existing Credit Agreement. Without limiting the foregoing, the Agent shall have received (or been granted authorization to file) (x) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC or equivalent statute or regulation of each jurisdiction where a financing statement or application for registration (Form UCC-1 or the appropriate equivalent) was filed with respect to any Credit Party or any Subsidiary thereof, as applicable, in connection with the security interests created under the Existing Credit Agreement and all other documents, agreements and instruments related thereto, (y) terminations or reassignments of any security interest in any United States Patents, United States Trademarks, United States Copyrights, or similar United States interests of such Credit Party or such Subsidiary, as applicable, on which filings have been made, and (z) if applicable, terminations of all mortgages, leasehold mortgages, hypothecs and deeds of trust created with respect to property of such Credit Party or such Subsidiary, as applicable, in each case, to secure the obligations under the Existing Credit Agreement and all other documents, agreements and instruments related thereto, all of which shall be in a form reasonably satisfactory to the Agent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this Agreement, each Credit Party hereby jointly and severally represents and warrants to the Agent and the Lenders as follows:
SECTION 6.1 Organization, Etc.Each Credit Party (i) is validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation or organization (to the extent such concept it applicable in any relevant jurisdiction), (ii) is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction where the nature of its business requires such qualification, (iii) has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under each Loan Document to which it is a party, to own and hold under lease its property and to conduct its business substantially as currently conducted by it and (iv) in the case of each UK Subsidiary Guarantor, if any, no limit on its powers will be exceeded as a result of the borrowing, grant of security or giving of guarantees contemplated by the Loan Documents to which it is a party; except
in the cases of clauses (ii) and (iii), where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
SECTION 6.2 Due Authorization, Non-Contravention, Etc. The execution, delivery and performance by each Credit Party and each of its Subsidiaries of each Loan Document executed or to be executed by it are in each case within such Person’s powers, have been duly authorized by all necessary action, and do not:
(a) contravene (i) any Organic Documents of such Credit Party or such Subsidiary, (ii) any court decree or order binding on or affecting such Credit Party or such Subsidiary, or (iii) any law or governmental regulation binding on or affecting such Credit Party or such Subsidiary; except in the cases of clauses (ii) and (iii), where could not reasonably be expected to result in a Material Adverse Effect; or
(b) result in (i) or require the creation or imposition of, any Lien on a Credit Party’s or any of its Subsidiaries’ properties (except Permitted Liens) or (ii) a default under any contractual restriction binding on or affecting a Credit Party or any of its Subsidiaries, except in the case of this clause (ii) where such default could not reasonably be expected to result in a Material Adverse Effect.
SECTION 6.3 Government Approval, Regulation, Etc. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other Person (other than those that have been, or on the Closing Date will be, duly obtained or made and which are, or on the Closing Date will be, in full force and effect) is required for the due execution, delivery or performance by a Credit Party or any of its Subsidiaries of any Loan Document to which it is a party, except where could not reasonably be expected to result in a Material Adverse Effect. Each Credit Party, each of its Subsidiaries and their respective properties and businesses are in compliance in all material respects with all laws, rules, regulations, orders and court decrees applicable to such Persons, properties or businesses, as the case may be.
SECTION 6.4 Validity, Etc. Each Loan Document to which a Credit Party or any of its Subsidiaries is a party constitutes the legal, valid and binding obligations of such Person enforceable against such Person in accordance with its respective terms (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by principles of equity).
SECTION 6.5 Financial Information. The consolidated financial statements of Holdings or the Borrower, as applicable, and such party’s Subsidiaries furnished to the Agent pursuant to Section 5.1(d) and Sections 7.1(a), (b), and (c) have been prepared in accordance with GAAP consistently applied, and present fairly the consolidated financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended.
SECTION 6.6 No Material Adverse Change. Since December 31, 2023, there has been no event, occurrence or other circumstance that has resulted in a Material Adverse Effect.
SECTION 6.7 Litigation, Labor Matters and Environmental Matters.Except as set forth on Schedule 6.7(a), there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or threatened against or affecting any Credit Party or any of its Subsidiaries.
(b) There are no material labor controversies pending against or threatened, in writing, against or affecting any Credit Party or any of its Subsidiaries.
(c) No Credit Party nor any of its Subsidiaries (i) has failed to comply with any material Environmental Law or to obtain, maintain or comply with any material Permit under or in connection with any Environmental Law (“Environmental Permit”), (ii) is or has been subject to any Environmental Liability, (iii) has received notice of any Environmental Liability or (iv) knows of any basis for any Environmental Liability, that, in the case of clause (ii), (iii) or (iv), could reasonably be expected to result in a Material Adverse Effect.
SECTION 6.8 Subsidiaries. Schedule 6.8 sets forth the name and jurisdiction of incorporation or formation of each direct and indirect Subsidiary of Holdings. Except as set forth on Schedule 6.8, neither Holdings nor any of its Subsidiaries owns or holds, whether beneficially or of record, any Capital Securities of any other Person. All of the outstanding Capital Securities of Holdings’ Subsidiaries as set forth on Schedule 6.8 have been validly issued, are fully paid and nonassessable and are owned directly or indirectly by Holdings free and clear of all Liens except for Permitted Liens.
SECTION 6.9 Ownership of Properties. Each Credit Party and each of its Subsidiaries owns (i) in the case of owned real property, good and marketable fee title to, and (ii) in the case of owned personal property, good and valid title to, or, in the case of leased real or personal property, valid and enforceable leasehold interests (as the case may be) in, all of its material properties and material assets, tangible and intangible, of any nature whatsoever, free and clear in each case of all Liens or claims, except for Permitted Liens.
SECTION 6.10 Taxes. Each Credit Party and each of its Subsidiaries has filed all income and other material Tax returns and reports required by law to have been filed by it and each Credit Party has paid all material Taxes owed (whether or not shown on any such Tax returns), except any such Taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books and that are set forth on Schedule 6.10.
SECTION 6.11 Pension Plans, Etc. As of the date hereof, (i) the Borrower is not an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA nor a “plan,” as defined in and subject to Section 4975 of the Code, (ii) none of the assets of any Credit Party or any of their respective Subsidiaries constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, (iii) no Credit Party nor any of its Subsidiaries constitutes a “governmental plan” within the meaning of Section 3(32) of ERISA, and (iv) to the knowledge of any Credit Party, transactions by or with a Credit Party are not subject to any statute, rule or regulation regulating investments of, or fiduciary obligations with respect to, “governmental plans” within the meaning of Section 3(32) of ERISA. Each Welfare Plan and each “employee pension benefit plan, as defined in Section 3(1) of ERISA that is sponsored or maintained by any Credit Party, has been established and operated in compliance with applicable law, and there is no liability outstanding with respect to any such Welfare Plan or employee pension benefit plan, except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Except as set forth on Schedule 6.11, no formal steps have been taken to terminate any Pension Plan maintained or contributed to any Credit Party or any of its Subsidiaries. No ERISA Event has occurred with respect to any Pension Plan or Multiemployer Plan which could reasonably be expected to result in the incurrence by any Credit Party, any of its Subsidiaries or any ERISA Affiliate of any liability, fine or penalty which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. No Credit Party, nor any of its Subsidiaries has any Contingent Liability with respect to any post-retirement benefit under a Welfare Plan, which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. As of the date hereof, there are no Multiemployer Plans to which any Credit Party or any of its Subsidiaries has incurred any Liability.
SECTION 6.12 Accuracy of Information None of the factual information (excluding information of a general economic or industry nature and, for the avoidance of doubt, any budgets, financial statements, forecasts, projections or other forward-looking statements (provided, that, such statements were prepared in good faith based upon assumptions reasonably believed by the preparer)) heretofore or contemporaneously furnished in writing to the Agent or any Lender by or on behalf of any Credit Party or any of its Subsidiaries in connection with this Agreement or any other Loan Document or any transaction contemplated hereby or thereby, when taken as a whole, contains any untrue statement of a material fact, or omits to state any material fact necessary to make any information, in the light of the circumstances under which they were made, not materially misleading.
SECTION 6.13 Regulations U and X. No Credit Party and none of its Subsidiaries is engaged in the business of extending credit for the purpose of buying or carrying margin stock, and no proceeds of any of the Loans will be used to purchase or carry margin stock or otherwise for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or Regulation X. Terms for which meanings are provided in F.R.S. Board Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.
SECTION 6.14 Solvency. The Borrower is Solvent, and the Credit Parties and their Subsidiaries taken as a whole, on a consolidated basis, are Solvent.
SECTION 6.15 Intellectual Property.Schedule 6.15(a) sets forth a complete and accurate list of all (A) applied for, issued or registered Patents, (B) registered Trademarks and any pending registrations for Trademarks, and (C) registered Copyrights and any other registered Intellectual Property, in each case owned by a Credit Party or any of its Subsidiaries, as applicable; provided that no Intellectual Property that is not Material Intellectual Property shall be required to be listed on Schedule 6.15(a). For each item of Material Intellectual Property listed on Schedule 6.15(a), the applicable Credit Party or Subsidiary has, where relevant, indicated the following: the countries in each case in which such item is patented, registered or applied for, the application numbers, the registration or patent numbers, the filing and registration dates, and the owner of such item of Material Intellectual Property.
(b) Each Credit Party and each of its Subsidiaries owns, free and clear of any and all Liens other than Permitted Liens, or has a valid license to all Intellectual Property material to or otherwise necessary for the operation of the business of such Credit Party and Subsidiary. All Material Intellectual Property set forth or required to be set forth on Schedule 6.15(a) is in full force and effect, and has not expired, lapsed or been forfeited, cancelled or abandoned. Each Credit Party and each of its Subsidiaries is the exclusive owner of all right, title and interest in and to, all such Material Intellectual Property that is owned or purported to be owned by such Person.
(c) Each Credit Party and each of its Subsidiaries has taken commercially reasonable measures consistent with commercially reasonable practices in the industry in which it operates to maintain and protect its Material Intellectual Property, and there are no unpaid maintenance or renewal fees payable by such Person that are currently overdue or due prior to the Closing Date for any of such registered Material Intellectual Property.
(d) There is no proceeding challenging the validity or enforceability of any Material Intellectual Property set forth on Schedule 6.15(a), no Credit Party nor any of its Subsidiaries is involved in any such proceeding with any Person and none of such Material Intellectual Property is the subject of any Other Administrative Proceeding.
(e) Each item of Material Intellectual Property listed in Schedule 6.15(a) is, to the knowledge of the Credit Parties, valid, enforceable and, where registered, subsisting, and nothing has been
knowingly done or omitted to have been done by the Credit Parties, that could reasonably be expected to affect the validity or enforceability of such Material Intellectual Property.
(f) Except for as set forth on Schedule 6.15(c)(i), to the knowledge of the Credit Parties, no third party is infringing, misappropriating or otherwise violating any Material Intellectual Property of any Credit Party or Subsidiary.
(g) To the knowledge of the Credit Parties, no Credit Party or Subsidiary is infringing, misappropriating or otherwise violating the Intellectual Property rights of any other Person in any material manner.
SECTION 6.16 Data Privacy.
(a) Each Credit Party and each of its Subsidiaries complies with all applicable federal, state, local and foreign laws, rules and regulations pertaining to data privacy (“Privacy Laws”), except to the extent that any compliance failure would not reasonably be expected to have a Material Adverse Effect. There is no pending, nor has there even been any, complaint, audit, proceeding, investigation, or claim against any Credit Party or any of its Subsidiaries initiated by any Governmental Authority alleging that any collection, storage, use, access, disclosure, processing, security, and transfer of Personal Data (referred to collectively in this Agreement as “Data Activities”) of the Credit Party and each of its Subsidiaries is in violation of any applicable Privacy Laws, except to the extent that any such complaint, audit, proceeding, investigation or claim would not reasonably be expected to result in a Material Adverse Effect.
(b) Each Credit Party and each of its Subsidiaries takes commercially reasonable steps to protect Personal Data in its possession or control against damage or loss, and against unauthorized access, acquisition, use, modification, disclosure or other misuse, except to the extent that failure to take such steps would not reasonably result in a Material Adverse Effect. To the knowledge of the Credit Parties, in the past three years, there has been no unauthorized access, use, or disclosure by a third-party of Personal Data in the possession or control of any Credit Party or any of its Subsidiaries with regard to any Personal Data of such Credit Party or such Subsidiary, except to the extent any such unauthorized access or use, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
(c) Neither any Credit Party nor any of its Subsidiaries targets its products and services to children (persons under the age of 13), and neither any Credit Party nor any of its Subsidiaries knowingly collect Personal Data from children.
(d) Holdings and each of its Subsidiaries has implemented applicable written policies relating to Data Activities, including, a publicly posted website privacy policy, mobile app privacy policy and annual privacy statements required by federal, state, local or foreign law, rule, or regulation, as applicable, and a comprehensive information security program that includes appropriate written information security policies (“Privacy and Data Security Policies”). At all times, Holdings and each of its Subsidiaries has been and is in compliance with all such Privacy and Data Security Policies, and neither Holdings nor any of its Subsidiaries engages in any undisclosed collection of Personal Data on its website or any third-party websites, except to the extent any such noncompliance or undisclosed collection would not reasonably be expected to have a Material Adverse Effect or otherwise result in a material violation of any applicable law.
(e) Holdings and each of its Subsidiaries have provided notifications to, and have obtained consent from, Persons regarding its Data Activities where such notice or consent is required by Privacy Laws. Holdings and each of its Subsidiaries have collected all Personal Data in accordance with its Privacy Policies and Privacy Laws, and Holdings’ and each of its Subsidiaries’ collection of such
Personal Data or any other data from third parties is in accordance with any requirements from such third parties, including written website terms and conditions.
(f) Holdings and each of its Subsidiaries have taken commercially reasonable steps and implemented commercially reasonable measures and procedures to ensure that Holdings’ and each of its Subsidiaries’ Systems are free from malware and other harmful code, including, but not limited to, the use of commercially available up to date antivirus software.
(g) Holdings and each of its Subsidiaries is, and at all times has been in compliance with all U.S. federal and state laws and regulations pertaining to sales, marketing, and electronic communications, including, without limitation, the CAN-SPAM Act, the Telephone Consumer Protection Act, and the Telemarketing Sales Rule, except to the extent any such noncompliance would not reasonably be expected to result in a material violation of any applicable law.
SECTION 6.17 Material Agreements. As of the Closing Date, set forth on Schedule 6.17 is a complete and accurate list of each Material Agreement of the Credit Parties and their Subsidiaries, with a reasonable description of the parties, subject matter thereof and amendments, waivers and modifications thereto. As of the Closing Date, each such Material Agreement (i) is in full force and effect and is binding upon and enforceable against each Credit Party or Subsidiary party thereto and to the knowledge of such Credit Party or Subsidiary, all other parties thereto in accordance with its terms, and (ii) has not suffered any material default thereunder. As of the Closing Date, no Credit Party nor any of its Subsidiaries has taken any action that could reasonably be expected to permit any other Person party to any Material Agreement to have, and no such Person otherwise has, any material defenses, counterclaims or rights of setoff thereunder.
SECTION 6.18 Permits The Credit Parties and their Subsidiaries have all material Permits, including Environmental Permits, necessary or required for the ownership, operation and conduct of its business and the distribution of the Products. All such Permits are validly held and there are no material defaults thereunder.
SECTION 6.19 Regulatory Matters. With respect to each Product:
(a) Set forth on Schedule 6.19(a) is a complete and accurate list of all material Regulatory Authorizations relating to the Credit Parties and their Subsidiaries, the conduct of their business, and the Products (on a per Product basis). All such material Regulatory Authorizations are (i) legally and beneficially owned exclusively by the Credit Parties and their Subsidiaries, as applicable, free and clear of all Liens other than Permitted Liens, and (ii) as applicable, validly registered and on file with the applicable Governmental Authority, in compliance with all filing and maintenance requirements (including any fee requirements) thereof, and are in good standing, valid and enforceable with the applicable Governmental Authority. All required notices, registrations and listings, supplemental applications or notifications, reports (including field alerts, medical device reports (MDRs) and other reports of adverse experiences or product malfunctions, and reports of corrections or removal) and other required filings with respect to the Products for the last five (5) years have been timely filed with the FDA and all other applicable Governmental Authorities.
(b) (i) All regulatory filings required by any Regulatory Authority or in respect of any Regulatory Authorization with respect to any Product or any Product Development and Commercialization Activities which represented, in the aggregate, 15% or more of Net Sales in any applicable year, in the last five (5) years have been made, and all such filings above such threshold are complete and correct and have complied in all material respects with all applicable laws and regulations, (ii) all clinical and pre-clinical trials, if any, of investigational Products have been and are being conducted by the Credit Parties and their
Subsidiaries in accordance with all applicable laws and regulations along with appropriate monitoring of clinical investigator trial sites for their compliance, and (iii) the Credit Parties and their Subsidiaries have disclosed to the Agent all such regulatory filings and all material communications between representatives of the Credit Parties (and their Subsidiaries) and any Regulatory Authority.
(c) The Credit Parties, their Subsidiaries and the agents thereof are in compliance in all material respects with all applicable statutes, rules and regulations (including all Healthcare Laws and Regulatory Authorizations) of all applicable Governmental Authorities, including the FDA and all other Regulatory Authorities, with respect to each Product and all Product Development and Commercialization Activities related thereto. The Credit Parties and their Subsidiaries have and maintain in full force and effect all the necessary and requisite Regulatory Authorizations. The Credit Parties and their Subsidiaries are in compliance in all material respects with all applicable registration and listing requirements set forth in the FD&C Act or equivalent regulation of each other Governmental Authority having jurisdiction over such Person. The Credit Parties and their Subsidiaries adhere in all material respects to all applicable regulations of all Regulatory Authorities with respect to the Products and all Product Development and Commercialization Activities related thereto.
(d) Except as set forth on Schedule 6.19(d), no Credit Party nor any of its Subsidiaries has received from any Regulatory Authority any notice of alleged non-compliance or adverse findings with respect to any Product or any Product Development and Commercialization Activities related thereto which represented, in the aggregate, 15% or more of Net Sales in any applicable year, including any FDA Form 483 inspectional observations, notices of violations, Warning Letters, untitled letters, criminal proceeding notices under Section 305 of the FD&C Act, or any other similar communication from any Regulatory Authority within the last five (5) years. Except as set forth on Schedule 6.19(d), there have been no recalls, market withdrawals, field notifications or corrections, detentions, seizures, notifications or allegations of misbranding or adulteration or safety alerts conducted, requested, or threatened by any Regulatory Authority, or (for example in the case of a recall) initiated by Credit Party or any of its Subsidiaries, relating to any Products which represented, in the aggregate, 15% or more of Net Sales in any applicable year within the last five (5) years. No Credit Party nor any of its Subsidiaries has received any written notification that remains unresolved from the FDA or any other Regulatory Authority indicating any breach or violation of any applicable Regulatory Authorization, including that any of the Products is misbranded or adulterated as defined in the FD&C Act, in each case of the foregoing, which represented, in the aggregate, 15% or more of Net Sales in any applicable year within the last five (5) years.
(e) No Credit Party, nor any of its Subsidiaries, nor any officer, employee or agent thereof, has made an untrue statement of a material fact or fraudulent statements to the FDA or any other Regulatory Authority, failed to disclose a material fact required to be disclosed to the FDA or any other Regulatory Authority, or committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made (or was not made), could reasonably be expected to provide a basis for the FDA or any other Regulatory Authority to invoke its policy respecting Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy.
(f) Except as set forth on Schedule 6.19(f), no Credit Party nor any of its Subsidiaries has received any written notice that the FDA or any other applicable Regulatory Authority has commenced or initiated, or threatened to commence or initiate, any action to withdraw any Regulatory Authorization, requested the recall (whether by correction or removal) of any Products or commenced or initiated or threatened to commence or initiate, any action to enjoin any Product Development and Commercialization Activities of such Credit Party or such Subsidiary, in each case, which represented, in the aggregate, 15% or more of Net Sales in any applicable year,.
(g) Except as set forth on Schedule 6.19(g), the clinical, preclinical, safety and other studies and tests conducted by or on behalf of or sponsored by the Credit Parties and their Subsidiaries, or in respect of which any Products or Product candidates under development have participated, were (and if still pending, are) being conducted in accordance with all applicable Regulatory Authorizations and Healthcare Laws in all material respects.
(h) The transactions contemplated by the Loan Documents (or contemplated by the conditions to effectiveness of any Loan Document) will not impair any Credit Party’s or any of its Subsidiaries’ ownership of or rights under (or the license or the right to use, as the case may be) any Regulatory Authorizations relating to the Products in any material manner, and no consent or other authorization of any Governmental Authority is required in connection with the transactions contemplated hereby, including the Liens granted in connection herewith and the exercise of rights and remedies with respect thereto.
SECTION 6.20 Transactions with Affiliates. Except as set forth on Schedule 6.20, no Credit Party and none of its 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) with any Affiliate during the three (3)-year period prior to the Closing Date, which would not be permitted pursuant to Section 8.11.
SECTION 6.21 Investment Company Act. No Credit Party and none of its Subsidiaries is an “investment company” or is “controlled” by an “investment company,” as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
SECTION 6.22 OFAC. No Credit Party, any of its Subsidiaries, any Related Party, any of their respective directors, officers, or employees nor any agents or other persons acting on behalf of any of the foregoing (a) is currently the target of any Sanctions, (b) is located, organized or residing in any Designated Jurisdiction, (c) 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 (d) is or has ever been in violation of or subject to an investigation relating to Sanctions. No Loans, and none of the proceeds from the Loans, have 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, any Lender and its and their respective Affiliates) of Sanctions.
SECTION 6.23 Anti-Corruption. No Credit Party, any of its Subsidiaries, any Related Party, or any of their respective directors, officers, or employees or any agents or other persons acting on behalf of any of the foregoing, directly or indirectly, has (a) violated or is in violation of any applicable anti-corruption law, (b) made, offered to make, promised to make or authorized the payment or giving of, directly or indirectly, any Prohibited Payment or (c) been subject to any investigation by any Governmental Authority with regard to any actual or alleged Prohibited Payment.
SECTION 6.24 Deposit and Disbursement Accounts. Schedule 6.24 contains a list of all banks and other financial institutions at which any Credit Party or any of its Subsidiaries maintains deposit accounts, lockboxes, disbursement accounts, investment accounts or other similar accounts, and such Schedule correctly identifies the name and address of each bank or financial institution, the name in which the account is held, the type of account, and the complete account number therefor. Subject to the proviso in Section 7.12(a), each such account (other than each Excluded Account) is a Controlled Account.
SECTION 6.25 Registration Rights. Except as set forth on Schedule 6.25, no Credit Party and none of its Subsidiaries has granted or agreed to grant any registration rights, including piggyback rights, to any Person.
SECTION 6.26 Royalty and Other Payments. Except as set forth on Schedule 6.26, no Credit Party and none of its Subsidiaries is obligated to pay any royalty, milestone payment, deferred payment or any other contingent payment in respect of any Product.
SECTION 6.27 Sale and Leaseback. No Credit Party and none of its Subsidiaries has entered, directly or indirectly, into any agreement or arrangement providing for the sale or transfer by it of any property (now owned or hereafter acquired) to a Person and the subsequent lease or rental or such property or other similar property from such Person, except for any transactions permitted by Section 8.13.
SECTION 6.28 Senior Secured Obligations. The Obligations constitute the sole senior secured obligations and sole Indebtedness (except as set forth in Schedule 8.2(c)) of the Credit Parties and their Subsidiaries.
SECTION 6.29 Beneficial Ownership Certification. The information included in the Beneficial Ownership Certification is true and correct in all respects.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Credit Parties hereby jointly and severally covenant and agree for the benefit of the Agent and the Lenders that, until the Termination Date has occurred, the Credit Parties will perform or cause to be performed by each of their respective Subsidiaries, as applicable, the obligations set forth below.
SECTION 7.1 Financial Information, Reports, Notices, Etc. Holdings will furnish the Agent copies of the following financial statements, reports, notices and information:
(a) as soon as available and in any event within thirty (30) days after the end of each calendar month, an unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such month and consolidated statements of income and cash flow of Holdings and its Subsidiaries for such applicable period, including (in each case), in comparative form the figures for the corresponding month in, and year to date portion of, the immediately preceding Fiscal Year and as provided in the budget delivered pursuant to clause (e) below for the current Fiscal Year, certified as complete and correct by the chief financial or accounting Authorized Officer of Holdings (subject to normal year-end audit adjustments) together with evidence satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) that the Credit Parties were in compliance with Section 8.4(a) for such calendar month;
(b) as soon as available and in any event within forty-five (45) days after the end of each Fiscal Quarter (including the last Fiscal Quarter of each Fiscal Year), an unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such Fiscal Quarter, and consolidated statements of income and cash flow of Holdings and its Subsidiaries for such period, including (in each case), in comparative form the figures for the corresponding Fiscal Quarter in, and year to date portion of, the immediately preceding Fiscal Year, certified as complete and correct by the chief financial or accounting Authorized Officer of Holdings and its Subsidiaries (subject to normal year-end audit adjustments);
(c) (i) as soon as available and in any event within one hundred twenty (120) days
after the end of each Fiscal Year, an unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such Fiscal Year, and the related unaudited consolidated statements of income and cash
flow of Holdings and its Subsidiaries for such Fiscal Year, setting forth in comparative form the figures for the immediately preceding Fiscal Year, certified as complete and correct by the chief financial or accounting Authorized Officer of Holdings and its Subsidiaries; and (ii) as soon as available and in any event within one hundred twenty (120) days after the end of each Fiscal Year, a copy of the consolidated balance sheet of Holdings and its Subsidiaries, and the related consolidated statements of income and cash flow of Holdings and its Subsidiaries for such Fiscal Year, setting forth in comparative form the figures for the immediately preceding Fiscal Year, audited (without any Impermissible Qualification) by independent public accountants acceptable to the Agent, which shall include a calculation of the financial covenants set forth in Section 8.4 and stating that, in performing the examination necessary to deliver the audited financial statements of Holdings, no knowledge was obtained of any Event of Default;
(d) concurrently with the delivery of the financial information required to be delivered pursuant to clauses (b) and (c) above for each Fiscal Quarter and each Fiscal Year, a Compliance Certificate, executed by the chief financial or accounting Authorized Officer of Holdings, (i) showing compliance with the financial covenants set forth in Section 8.4 and stating that no Default has occurred and is continuing (or, if a Default has occurred, specifying the details of such Default and the action that Holdings or any of its Subsidiaries has taken or proposes to take with respect thereto), (ii) stating that no Subsidiary has been formed or acquired since the delivery of the last Compliance Certificate (or, if a Subsidiary has been formed or acquired since the delivery of the last Compliance Certificate, a statement that such Subsidiary has complied with Section 7.8) and (iii) including a list of all Immaterial Subsidiaries and setting forth in reasonable detail the Net Sales and Assets, in each case, attributable to each such Immaterial Subsidiary for the applicable Measurement Period;
(e) as soon as available and in any event within thirty (30) days after the end of each Fiscal Year, an annual budget, a business plan and financial forecasts of Holdings and its Subsidiaries for the then current Fiscal Year of Holdings, in form and substance as approved by the board of directors (or equivalent) of Holdings, which shall include a projection of income and a projected cash flow statement for each Fiscal Quarter in such Fiscal Year and a projected balance sheet as of the end of each Fiscal Quarter in such Fiscal Year, in each case prepared in reasonable detail, with appropriate presentation and discussion (in reasonable detail) of the principal assumptions upon which such budgets and projections are based, which shall be accompanied by the statement of an Authorized Officer of Holdings to the effect that such budget and projections are based on reasonable and good faith estimates and assumptions made by the management of Holdings for the respective periods covered thereby;
(f) as soon as possible and in any event within three (3) Business Days after Holdings obtains knowledge of the occurrence of a Default, a statement of an Authorized Officer of Holdings setting forth details of such Default, event or occurrence and the action which Holdings has taken and proposes to take with respect thereto;
(g) as soon as possible and in any event within three (3) Business Days after Holdings obtains knowledge of (i) the occurrence of any material adverse development with respect to any litigation, action, proceeding or labor controversy described in Schedule 6.7(a) and in the following clause (ii) or (ii) the commencement of any litigation, action, proceeding or labor controversy of the type and materiality described in Section 6.7 or alleging potential or actual violations of any Healthcare Laws, notice thereof and, to the extent the Agent or any Lender requests, copies of all documentation relating thereto;
(h) as soon as possible and in any event within three (3) Business Days after Holdings obtains knowledge of any return, recovery, dispute or claim related to any Product or inventory that involves more than $1,500,000, written notice thereof from an Authorized Officer of Holdings which notice shall include any statement setting forth details of such return, recovery, dispute or claim;
(i) as soon as possible and in any event within three (3) Business Days after becoming aware of the occurrence of any ERISA Event which could reasonably be expected to result in the incurrence by a Credit Party or any of its Subsidiaries of any material liability, fine or penalty, notice thereof and copies of all documentation relating thereto, written notice thereof from an Authorized Officer of Holdings, which notice shall include a statement setting forth details of such events;
(j) promptly after the sending or filing thereof, copies of all reports, notices, prospectuses and registration statements which any Credit Party or any of its Subsidiaries files with the SEC or any national securities exchange;
(k) promptly upon receipt thereof, copies of all “management letters” (or equivalent) submitted to Holdings or any of its Subsidiaries by the independent public accountants referred to in Section 7.1(c) in connection with each audit made by such accountants; and
(l) such other financial and other information as the Agent or any Lender may from time to time reasonably request (including information and reports in such detail as the Agent or any Lender may request with respect to the terms of and information provided pursuant to the Compliance Certificate).
SECTION 7.2 Maintenance of Existence; Compliance with Contracts, Laws, Etc. Each Credit Party will, and will cause each of its Subsidiaries to, (i) preserve and maintain its legal existence (except as otherwise permitted by Section 8.8) and (ii) comply in all material respects with all applicable laws, rules, regulations and orders, including all Healthcare Laws and the payment (before the same become delinquent) of all material Taxes imposed upon such Credit Party or such Subsidiary or upon its property, except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on the books of such Credit Party or such Subsidiary.
SECTION 7.3 Maintenance of Properties. Each Credit Party will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its respective material properties in good repair, working order and condition (ordinary wear and tear excepted), and make necessary material repairs, renewals and replacements so that the business carried on by such Credit Party or such Subsidiary may be properly conducted at all times in all material respects, unless the Disposition of such property is otherwise permitted by Section 8.8 or Section 8.9.
SECTION 7.4 Insurance. Each Credit Party will, and will cause each of its Subsidiaries to, maintain:
(a) insurance on its property with financially sound and reputable insurance companies against loss and damage in at least the amounts (and with only those deductibles) customarily maintained, and against such risks as are typically insured against in the same general area, by Persons of comparable size engaged in the same or similar business as such Credit Party or such Subsidiary; and
(b) all worker’s compensation, employer’s liability insurance or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business.
Without limiting the foregoing, on or within forty-five (45) days of the Closing Date (or such longer period as the Agent may agree in its reasonable discretion) all insurance policies required pursuant to this Section shall (i) name the Agent, for the benefit of the Secured Parties, as mortgagee (in the case of property insurance) or loss payee or additional insured (in the case of liability insurance), as applicable, and provide that no cancellation or modification of the policies will be made without the prior written notice to the Agent and (ii) be in addition to any requirements to maintain specific types of insurance contained in the other Loan Documents. If any Credit Party or any of its Subsidiaries fails to provide or pay for any such
insurance, the Agent may but is not obligated to, obtains the same at such Credit Party’s or such Subsidiary’s expense.
SECTION 7.5 Books and Records. Each Credit Party will, and will cause each of its Subsidiaries to, keep books and records that accurately reflect all of its business affairs and transactions and permit the Agent, any Lenders or any of their respective representatives, at reasonable times and intervals upon reasonable notice to Holdings, to visit such Credit Party’s or such Subsidiary’s offices, to discuss such Credit Party’s or such Subsidiary’s financial matters with its officers and employees, and its independent public accountants (and the Credit Parties hereby authorize such independent public accountant to discuss such Credit Party’s or such Subsidiary’s financial matters with the Agent, any Lenders or any of their respective representatives whether or not any representative of such Credit Party or such Subsidiary, as applicable, is present) and to examine (and photocopy extracts from) any of its books and records. The Credit Parties will, and will cause each of their Subsidiaries to, pay all fees and expenses of the Agent or such Lender, including any fees of such independent public accountant incurred in connection with the Agent’s or any Lender’s exercise of its rights pursuant to this Section; provided, however, that in the absence of a Default and an Event of Default, the Credit Parties shall not be responsible for the costs associated with more than one such visit or inspection during any Fiscal Year.
SECTION 7.6 Environmental Law Covenant. Each Credit Party will, and will cause each of its Subsidiaries to, (i) use and operate all of its and their businesses, facilities and properties in material compliance with all Environmental Laws, and keep and maintain all Environmental Permits and remain in compliance therewith and (ii) promptly notify the Agent of, and provide the Agent with copies of all material claims, complaints, notices or inquiries relating to, any actual or alleged non-compliance with any Environmental Laws or Environmental Permits or any actual or alleged Environmental Liabilities.
SECTION 7.7 Use of Proceeds. Proceeds of the Loans shall be used only to (i) refinance the outstanding obligations under the Existing Credit Agreement and (ii) pay certain fees, costs, and expenses incurred in connection with such refinancing and entry into this Agreement, the other Loan Documents and the transactions contemplated hereby.
SECTION 7.8 Future Guarantors, Security, Etc. Each Credit Party agrees that:
(a) it will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, existing as of the Closing Date to, execute any documents, Mortgages and Mortgage Instruments (subject to the limitation set forth in Section 7.8(c)), UCC-1 financing statements, UCC-3 termination statements, agreements and instruments, and take all further action that may be required under applicable law, or that the Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority (subject to Permitted Liens) of the Liens created or intended to be created by the Loan Documents; including, without limitation, actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction to create any security interests in assets of the Credit Parties located or titled outside of the United States or to perfect or make enforceable any security interests in any Collateral;
(b) it will cause each of its Subsidiaries, except for any Immaterial Subsidiary and any Foreign Excluded Subsidiary, that is acquired or organized by it after the Closing Date to, on or within thirty (30) days of such acquisition or organization (or such longer period as the Agent may agree in its sole discretion), to (i) execute a supplement (in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably)) to each applicable Loan Document (including the Security Agreement, the Intercompany Subordination Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement and other security documents, and the Subsidiary Guaranty) in favor of the Agent and the other Secured Parties, (ii) execute or deliver such other
UCC-1 financing statements, UCC-3 termination statements, documents, Mortgages and Mortgage Instruments, agreements and instruments as the Agent may reasonably request, and (iii) take all further action that may be required under applicable law, or that the Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority (subject to Permitted Liens) of the Liens created or intended to be created by the Loan Documents; provided that no Mortgage or Mortgage Instruments will be required with respect to any real property having a fair market value of less than $2,500,000;
(c) it will cause each of its Subsidiaries organized under the under the laws of England and Wales, except for any Immaterial Subsidiary and any Foreign Excluded Subsidiary, that is acquired or organized by it after the Closing Date to, on or within thirty (30) days of such acquisition or organization (or such longer period as the Agent may agree in its sole discretion), to deliver to the Agent: (A) a certificate, duly executed and delivered by such Person’s Secretary or Assistant Secretary, director, managing member or general partner, as applicable, as to: (i) resolutions of each such Person’s board of directors (or other managing body, in the case of other than a corporation) then in full force and effect authorizing (x) the execution, delivery and performance of each Loan Document to be executed by such Person and the transactions contemplated hereby and thereby and (y) a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Loan Documents to which it is a party; (ii) a copy of (x) a resolution of the board of directors of such Subsidiary approving the terms of the resolution referred to in sub-clause (i) above; (y) a resolution of all of the shareholders of each such subsidiary approving the terms of the resolution referred to in sub-clause (i) above; and (z) a resolution of the board of directors of each shareholder referred to in the preceding sub-clause (y) that is a corporate body, approving the execution by such corporate shareholder of the resolution referred to in the preceding sub-clause (y); (iii) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each Loan Document to be executed by such Person; (iv) the full force and validity of each Organic Document of such Person and copies thereof; and certifying that each copy document relating to it specified in this clause is correct, complete and in full force and effect and has not been amended or superseded as at the date no earlier than the date of such certificate, in each case in this sub-clause (A), upon which certificates the Agent may conclusively rely until it shall have received a further certificate of the Secretary, Assistant Secretary, director, managing member or general partner, as applicable, of any such Person cancelling or amending the prior certificate of such Person; (B) a certificate, duly executed and delivered by a director of such Subsidiary, which certificate shall be in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) and shall certify that borrowing or guaranteeing, as applicable, and securing the Loan Commitment Amount would not cause any borrowing, guarantee, security or any similar limit binding on such Subsidiary to be exceeded; (C) at least two originals of an English law debenture (the “Debenture”) executed by such Subsidiary created or expressed to be created in favor of the Agent, together with, a copy of all notices required to be sent under the Debenture executed by such Subsidiary and all share certificates, transfers and stock transfer forms or equivalent duly executed by the relevant Subsidiary in blank in relation to the assets subject to or expressed to be subject to the debenture security and other documents of title to be provided under the Debenture; and (D) with respect to each company incorporated in the United Kingdom whose shares are the subject of the Debenture security (a “Charged Company”), either: (i) a certificate of an Authorized Officer of Holdings certifying that: (A) each of Holdings and its Subsidiaries has complied within the relevant timeframe with any notice it has received pursuant to Part 21A of the Companies Act 2006 from such Charged Company, (B) no “warning notice” or “restrictions notice” (in each case as defined in Schedule 1B of the Companies Act 2006) has been issued in respect of those shares and (C) together with a copy of the “PSC register” (within the meaning of section 790C(10) of the Companies Act 2006) of such Charged Company, which, in the case of a Charged Company that is a Subsidiary Guarantor, is certified by an Authorized Officer of Holdings to be correct, complete and not amended or superseded as at a date no earlier than the Closing Date; or a certificate of an Authorized
Officer of Holdings certifying that such Charged Company is not required to comply with Part 21A of the Companies Act 2006;
(d) it will promptly notify the Agent of any real property subsequently acquired by it or any of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, and will provide the Agent with a description of such real property, the acquisition date thereof and the purchase price therefor, and if reasonably requested by the Agent, on or within sixty (60) days of such acquisition (or such longer period as the Agent may agree in its sole discretion) execute and deliver Mortgages and Mortgage Instruments in order to grant perfected and first priority Liens on such real property; provided that no Mortgage or Mortgage Instruments will be required with respect to any real property having a fair market value of less than $2,500,000;
(e) it will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, to, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected Liens with respect to such of its assets and properties as the Agent shall designate, it being agreed that it is the intent of the parties that the Obligations shall at all times be secured by, among other things, substantially all the assets of Credit Parties and such Subsidiaries (including personal property acquired subsequent to the Closing Date), in each case, located in the United States and in any non-U.S. jurisdiction; provided that a pledge of 100% of the Capital Securities of any Foreign Subsidiary acquired or organized after the Closing Date shall be required, except to the extent as reasonably determined by the Borrower after consulting with the Agent, such pledge would reasonably be expected to result in material adverse tax consequences to the Borrower or Holdings, in which case Borrower shall not be required to pledge voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiary;
(f) it will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries, and Foreign Excluded Subsidiaries to, at its cost and expense, promptly upon acquisition, filing or issuance of any Patent, Trademark, Copyright, material Product Agreement or other Material Intellectual Property anywhere in the world, notify the Agent of such acquisition, filing or issuance of any Patent, Trademark, Copyright, material Product Agreement or other Material Intellectual Property and execute a supplement (in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably)) to each applicable Loan Document (including the Security Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement and other security documents); and
(g) all Liens described above in this Section 7.8 will be created under the Loan Documents in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably), and each Credit Party will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, to, deliver or cause to be delivered to the Agent all such instruments and documents (including legal opinions and lien searches) as the Agent shall reasonably request to evidence compliance with this Section 7.8.
SECTION 7.9 Obtaining of Permits, Etc. With respect to Products, each Credit Party will, and will cause each of its Subsidiaries to, obtain, maintain and preserve, and take all necessary action to timely renew all Permits (including Key Permits) and accreditations which are necessary in the proper conduct of its business.
SECTION 7.10 Product Licenses. Each Credit Party will, and will cause each of its Subsidiaries to, (i) maintain each Permit, including each Regulatory Authorization, from, or file any notice or registration in, each jurisdiction in which such Credit Party or such Subsidiary is required to obtain any Permit or Regulatory Authorization or to file any notice or registration, in order to sell or distribute the
Products which represented, in the aggregate, 15% or more of Net Sales in any applicable year and (ii) upon request of the Agent, promptly provide evidence of same to the Agent.
SECTION 7.11 Maintenance of Regulatory Authorizations, Contracts, Intellectual Property, Etc. With respect to the Products, each Credit Party will, and will cause each of its Subsidiaries to, (i) maintain in full force and effect all Regulatory Authorizations, contract rights, or other rights necessary for the material operations of its business, (ii) notify the Agent, promptly after learning thereof, of any Product recalls, safety alerts, corrections, withdrawals, marketing suspensions, removals or the like conducted, to be undertaken or issued by such Credit Party, such Subsidiary or its respective suppliers whether or not at the request, demand or order of any Governmental Authority or otherwise with respect to any Product which represented, in the aggregate, 15% or more of Net Sales in any applicable year, or any basis for undertaking or issuing any such action or item, (iii) maintain in full force and effect, and pay all costs and expenses relating to, all Material Intellectual Property owned by such Credit Party or such Subsidiary, (iv) notify the Agent, promptly after learning thereof, of any infringement or other violation by any Person of its Material Intellectual Property and respond to such infringement or other violation in a manner determined within the reasonable judgement and at the sole expense of such Credit Party and (v) notify the Agent, promptly after learning thereof, of (x) any claim by any Person that the conduct of such Credit Party’s or such Subsidiary’s business (including the development, manufacture, use, sale or other commercialization of any Product) infringes any material Intellectual Property of such Person and, if requested by the Agent, use commercially reasonable efforts to resolve such claim, or (y) any event, circumstance, act or omission that could reasonably be expected to cause any representation or warranty contained in Section 6.19 to be incorrect in any material respect if such representation or warranty was to be made at the time such Credit Party or such Subsidiary learned of such event, circumstance, act or omission.
SECTION 7.12 Cash Management. Each Credit Party will, and will cause each of its Subsidiaries (other than Immaterial Subsidiaries) to:
(a) maintain all deposit accounts, disbursement accounts, investment accounts (and other similar accounts) and lockboxes (other than Excluded Accounts) with a bank or financial institution that has executed and delivered to the Agent a Controlled Account Agreement in form and substance reasonably acceptable to the Agent; each such deposit account, disbursement account, investment account (or similar account) and lockbox (each, a “Controlled Account”) shall be a cash collateral account, with all cash, checks and other similar items of payment in such account securing payment of the Obligations, and the Credit Parties shall have granted a Lien to the Agent, for the benefit of the Secured Parties, over such Controlled Accounts; provided that the Credit Parties shall cause each account existing as of the Closing Date to become a Controlled Account on or within sixty (60) days of the Closing Date (or such longer period as the Agent may agree in its reasonable discretion); and
(b) deposit promptly, and in any event no later than fourteen (14) Business Days after the date of receipt thereof, all checks, drafts, other similar items of payment or cash, in each case, in an amount in excess of $500,000, in each case, relating to or constituting payments made in respect of any and all accounts and other rights and interests into Controlled Accounts.
At any time after the occurrence and during the continuance of an Event of Default, at the request of the Agent, the Credit Parties and their Subsidiaries will cause all payments constituting proceeds of accounts to be directed into lockbox accounts under Controlled Account Agreements in form and substance satisfactory to the Agent.
ARTICLE VIII
NEGATIVE COVENANTS
The Credit Parties hereby jointly and severally covenant and agree for the benefit of the Agent and the Lenders that until the Termination Date has occurred unless the Majority Lenders shall otherwise consent in writing, the Credit Parties will perform or cause to be performed by each of their respective Subsidiaries, as applicable, the obligations set forth below.
SECTION 8.1 Business Activities. No Credit Party will, nor will it permit any of its Subsidiaries to, engage in any business activity except those business activities engaged in on the date of this Agreement and activities reasonably incidental or complimentary thereto and reasonable extensions thereof.
SECTION 8.2 Indebtedness. No Credit Party will, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, other than the following (“Permitted Indebtedness”):
(a) Indebtedness in respect of the Obligations;
(b) unsecured Indebtedness of any Credit Party pursuant to Hedging Agreements solely for purposes of hedging the rate of interest payable on the outstanding principal amount of the Loans;
(c) Indebtedness existing as of the Closing Date which is identified in Schedule 8.2(c);
(d) Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of business and consistent with past practice but excluding (in each case) Indebtedness incurred through the borrowing of money or Contingent Liabilities in respect thereof;
(e) purchase money Indebtedness and Capitalized Lease Liabilities incurred by any Credit Party in an aggregate amount at any time outstanding, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 8.2(j), not to exceed $4,500,000;
(f) Indebtedness (i) arising from customary agreements for indemnification related to sales of goods, licensing of Intellectual Property or adjustment of purchase price or similar obligations in any case incurred in connection with the acquisition or Disposition permitted hereunder of any business, assets or Subsidiary of Holdings, (ii) representing deferred compensation to employees of a Credit Party or any of its Subsidiaries incurred in the ordinary course of business consistent with past practice, and (iii) representing customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;
(g) Indebtedness with respect to cash management obligations and other Indebtedness in respect of automatic clearing house arrangements, netting services, overdraft protection and similar arrangements, in each case incurred in the ordinary course of business;
(h) unsecured Indebtedness in the nature of account or trade payables originated in the ordinary course of business;
(i) (i) intercompany Indebtedness of any Credit Party or a Subsidiary thereof owing
to another Credit Party or a Subsidiary thereof, in each case, subject to the Intercompany Subordination Agreement; provided that any intercompany Indebtedness made to a Subsidiary that is not a Credit Party shall be for the sole purpose of payroll expenses and other operational costs incurred by such Subsidiary in
the ordinary course of business and consistent with past practice; and (ii) unsecured guarantees of outstanding Permitted Indebtedness made in the ordinary course of business by the Borrower or any Subsidiary of obligations of any Credit Party permitted hereunder in an aggregate amount not to exceed $1,500,000 at any time outstanding; provided that to the extent that any such Permitted Indebtedness is subordinated to the Obligations, such guarantees are similarly subordinated;
(j) (i) Indebtedness of the Borrower or any Subsidiary Guarantor incurred to finance the acquisition, construction or improvement of any fixed or capital assets; provided that (x) such Indebtedness is incurred prior to or within two hundred seventy (270) days after such acquisition or the completion of such construction or improvement and (y) the aggregate principal amount of Indebtedness permitted by this Section 8.2(j), when combined with the aggregate principal amount of all purchase money Indebtedness and Capitalized Lease Liabilities incurred pursuant to Section 8.2(e), does not exceed $4,500,000 at any time outstanding and (ii) extensions, renewals, refinancings and replacements thereof; provided that no such extension, renewal, refinancing or replacement shall result in an increase in the outstanding principal amount of such Indebtedness;
(k) Indebtedness at any time incurred in connection with financing insurance premiums in respect of insurance policies insuring assets or businesses of any Credit Party written or arranged in the ordinary course of business consistent with past practice;
(l) Indebtedness of any Subsidiary that is not a Credit Party in an aggregate outstanding principal amount not to exceed $2,000,000;
(m) Indebtedness constituting letters of credit in an aggregate face amount at any time outstanding not to exceed $6,000,000; provided, in each case, that any such letter of credit is used solely to secure obligations in respect of a lease or sublease of a Credit Party or any of its Subsidiaries; and other Indebtedness in an aggregate outstanding principal amount not to exceed $1,500,000; and
(n) unsecured Indebtedness of Holdings in respect of any subordinated convertible promissory note, in an aggregate principal amount not to exceed $75,000,000 (plus the amount of interest paid-in-kind thereon pursuant to the terms of such notes on the date of incurrence thereof); provided that (x) such Indebtedness shall not mature before the date that is ninety-one (91) days after the Maturity Date, (y) such Indebtedness shall not permit cash payments with respect to the principal or interest thereon and (z) such Indebtedness shall at all times be subject to a subordination agreement in form and substance satisfactory to the Agent;
provided that, no Indebtedness otherwise permitted by clauses (e) or (j) of this Section 8.2 shall be assumed, created or otherwise incurred if at the time of such assumption, creation or incurrence, a Default has occurred and is then continuing or could reasonably be expected to result therefrom.
SECTION 8.3 Liens. No Credit Party will, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Lien upon any of its property (including Capital Securities of any Person), revenues or assets, whether now owned or hereafter acquired, except for the following (“Permitted Liens”):
(a) Liens securing payment of the Obligations;
(b) Liens existing on the Closing Date which are disclosed in Schedule 8.3(b);
(c) Liens in favor of carriers, warehousemen, mechanics, materialmen and landlords granted in the ordinary course of business for amounts not overdue or being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;
(d) Liens incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, bids, leases or other similar obligations (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety and appeal bonds or performance bonds;
(e) judgment Liens in existence for less than sixty (60) days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies and which do not otherwise result in an Event of Default under Section 9.1(f);
(f) easements, rights-of-way, zoning restrictions, minor defects or irregularities in title and other similar encumbrances not interfering in any material respect with the value or use of the property to which such Lien is attached;
(g) Liens for Taxes not yet due and payable or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;
(h) purchase money security interests in real property, improvements thereto, equipment or other assets hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary Guarantor; provided that (i) such security interests secure Indebtedness permitted by Section 8.2(e) or Section 8.2(j), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within two hundred seventy (270) days after such acquisition (or construction) (or in the case of the first or any successive extensions, renewals or refinancings of the underlying Indebtedness, such security interests are incurred and the security is created within thirty (30) days after the incurrence of such new Indebtedness), (iii) the Indebtedness secured thereby does not exceed the cost of such real property, improvements or equipment at the time of such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary;
(i) any interest or title of a lessor under any lease entered into by the Borrower or any of its Subsidiaries as lessees in the ordinary course of business and covering only the assets so leased;
(j) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(k) Liens arising solely by virtue of any statutory or common law provision relating to bankers’ liens, rights of set-off or similar rights;
(l) the cash collateralization of any letter of credit obligations incurred pursuant to Section 8.2(m) in an amount not to exceed 105% of the face amount thereof; and
(m) other Liens securing Indebtedness and other obligations in an aggregate outstanding principal amount not to exceed $1,500,000.
SECTION 8.4 Financial Covenants.Minimum Liquidity. The Credit Parties shall maintain at all times Liquidity in an amount equal to or greater than $25,000,000 (the “Liquidity Covenant”); provided that in the event that the Credit Parties fail to comply with the Liquidity Covenant as of any date from and
after the date of written notice to, or knowledge of, the Borrower of such noncompliance until the expiration of the thirtieth (30th) Business Day subsequent to such date of such written notice or knowledge, Holdings shall have the right to issue common equity (or other Qualified Capital Securities that are preferred equity or other equity) for cash or otherwise receive cash contributions to its capital and, in either case, directly contribute any such cash to the common equity (or other Qualified Capital Securities that are preferred equity or other equity) capital of the Borrower (the “Liquidity Cure Right”), and upon the receipt by the Borrower of such cash in an amount not less than the greater of (x) $5,000,000 and (y) the amount necessary to cure the failure to comply with the Liquidity Covenant (the “Liquidity Cure Amount”), the calculation of Liquidity as used in the Liquidity Covenant shall be recalculated giving effect to the following pro forma adjustments: (a) Liquidity shall be increased, solely for the purpose of measuring the Liquidity Covenant for each day prior to receipt of the Liquidity Cure Amount for which a Liquidity Cure Right has been exercised in accordance with this Section 8.4(a) and not for any determination made following receipt of such Liquidity Cure Amount or for any other purpose under this Agreement, by an amount equal to the Liquidity Cure Amount (it being understood and agreed that previously received proceeds of any exercise of the Liquidity Cure Right shall be counted in calculating Liquidity following receipt thereof to the extent and for so long as such proceeds constitute Liquidity) and (b) if, after giving effect to the foregoing recalculation, the Borrower shall then be in compliance with the Liquidity Covenant, the Borrower shall be deemed to have satisfied the requirements of such covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default that had occurred shall be deemed cured for all purposes of this Agreement.
(b) Minimum Net Sales. As of the last day of each Fiscal Quarter set forth below, Net Sales for the twelve (12) consecutive month period ending on the last day of such Fiscal Quarter shall not be less than the corresponding amount set forth opposite such Fiscal Quarter:
| | | | | | | | | | | |
| Fiscal Quarter Ending | Net Sales | |
| |
| | | |
| June 30, 2024 | $78,872,953 | | |
| September 30, 2024 | $88,399,787 | | |
| December 31, 2024 | $98,680,724 | | |
| March 31, 2025 | $109,528,429 | | |
| June 30, 2025 | $110,000,000 | | |
| September 30, 2025 | $110,000,000 | | |
| December 31, 2025 | $110,000,000 | | |
| March 31, 2026 | $110,000,000 | | |
| June 30, 2026 | $110,000,000 | | |
| September 30, 2026 | $110,000,000 | | |
| December 31, 2026 | $110,000,000 | | |
| March 31, 2027 | $110,000,000 | | |
| June 30, 2027 | $110,000,000 | | |
| September 30, 2027 | $110,000,000 | | |
| December 31, 2027 | $110,000,000 | | |
| March 31, 2028 | $110,000,000 | | |
; provided that compliance with this covenant shall not be required for any Fiscal Quarter with respect to which (i) the Credit Parties maintain Liquidity in an amount greater than or equal to $60,000,000 as of the end of such Fiscal Quarter and (ii) there has not occurred a Two-Consecutive Fiscal Quarter Net Sales Decline as of the end of such Fiscal Quarter.
SECTION 8.5 Investments. No Credit Party will, nor will it permit any of its Subsidiaries to, purchase, make, incur, assume or permit to exist any Investment in any other Person, except (“Permitted Investments”):
(a) Investments existing on the Closing Date and identified in Schedule 8.5(a);
(b) cash and Cash Equivalent Investments;
(c) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;
(d) Investments consisting of any deferred portion of the sales price received by a Credit Party or any of its Subsidiaries in connection with any Disposition permitted under Section 8.9;
(e) (i) Investments in and loans to any Credit Party and (ii) Investments in and loans
to any Subsidiary that is not a Credit Party (x) to the extent made by any other Subsidiary that is not a Credit Party or (y) constituting payroll expenses and other operational costs incurred by such Subsidiary in the ordinary course of business consistent with past practice;
(f) Investments constituting (i) accounts receivable arising, (ii) trade debt granted, or (iii) deposits made in connection with the purchase price of goods or services, in each case in the ordinary course of business;
(g) Investments and loans by a Credit Party in a Subsidiary that is not a Credit Party that do not include the Disposition of Material Intellectual Property or Capital Securities with respect to Subsidiaries that directly or indirectly own, or hold a license in respect of, Material Intellectual Property, in an aggregate amount, together with the aggregate amount of Permitted Dispositions made pursuant to clause (v)(C) of the definition thereof, not to exceed $2,000,000; and
(h) other Investments that do not include Material Intellectual Property or Capital Securities with respect to Subsidiaries that directly or indirectly own, or hold a license in respect of, Material Intellectual Property in an aggregate amount not to exceed $5,000,000.
SECTION 8.6 Restricted Payments, Etc. No Credit Party will, nor will it permit any of its Subsidiaries to, declare or make a Restricted Payment, or make any deposit for any Restricted Payment, other than:
(a) Restricted Payments made by Subsidiaries of the Borrower to the Borrower; and
(b) so long as (i) no Default or Event of Default has occurred and is continuing, (or could be reasonably expected to occur as a result thereof) and (ii) Holdings (or any direct or indirect parent of Holdings) is the parent of a consolidated group for U.S. federal income tax purposes that includes the Borrower, Restricted Payments made in cash by the Borrower to Holdings (or such direct or indirect parent of Holdings), the proceeds of which shall be used solely to pay Taxes of Holdings or such direct or indirect parent of Holdings (other than any Taxes attributable to any action or activity that constitutes or results in a breach by Holdings of Section 8.20); and
(c) so long as no Event of Default has occurred and is continuing (or could be reasonably expected to occur as a result thereof), share repurchases in an aggregate amount not to exceed
$1,000,000 per Fiscal Year plus any amounts pursuant to this clause (c) that were unused in any preceding Fiscal Year.
SECTION 8.7 Issuance of Capital Securities. No Credit Party will, nor will it permit any of its Subsidiaries to, issue any Capital Securities (whether for value or otherwise) to any Person other than:
(a) in the case of Subsidiaries of the Credit Parties, Qualified Capital Securities issued to a Credit Party so long as such issuance could not reasonably be expected to result in a Default or an Event of Default; and
(b) the issuance of Qualified Capital Securities of Holdings so long as such issuance could not reasonably be expected to result in an Event of Default.
SECTION 8.8 Consolidation, Merger, Etc. No Credit Party will, nor will it permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge or amalgamate into or with, any other Person, or purchase or otherwise acquire any other Person or all or substantially all of the assets of any other Person (or any division thereof), except that (i) any Subsidiary (other than the Borrower) of a Credit Party may liquidate or dissolve voluntarily into, and may merge or amalgamate with and into, a Credit Party; provided, that such Credit Party is the surviving entity; and provided, further, that immediately following any such merger or amalgamation, the Credit Parties directly or indirectly hold the same or greater percentage of the issued and outstanding Capital Securities of such Subsidiary as the Credit Parties held immediately prior to such merger or amalgamation; (ii) any Credit Party (other than Holdings) may liquidate or dissolve voluntarily into, and may merge or amalgamate with and into, a Credit Party; provided, that if the Borrower is a party thereto, the Borrower is the surviving entity; and (iii) any Subsidiary that is not a Credit Party may liquidate or dissolve voluntarily into, and may merge or amalgamate with and into, another Subsidiary that is not a Credit Party.
SECTION 8.9 Permitted Dispositions. No Credit Party will, nor will it permit any of its Subsidiaries to, Dispose of any of its assets (including accounts receivable and Capital Securities) to any Person in one transaction or series of transactions except for Permitted Dispositions.
SECTION 8.10 Modification of Certain Agreements. No Credit Party will, nor will it permit any of its Subsidiaries to, amend, supplement, waive or otherwise modify, consent to any amendment, supplement, waiver or other modification of, or enter into any forbearance from exercising any rights with respect to the terms or provisions contained in (i) any Organic Documents of a Credit Party or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect or in a manner that could be materially adverse to the interests of the Agent or any of the Lenders without the consent of the Agent; provided that a transaction expressly permitted pursuant to Section 8.8 that does not materially adversely effect the interests of the Agent or any of the Lenders shall not require any consent under this Section 8.10 or (ii)(A) any Material Agreement or any documents relating thereto (in each case, other than any amendments, supplements, waivers, or other modifications to the AWS Agreement (or any replacement cloud hosting agreement that is a Material Agreement) or any documents relating thereto, in each case, that are made from time to time by AWS (or any counterparty to such replacement cloud hosting agreement or any documents relating thereto)), or (B) any material Product Agreement or any documents relating thereto, in any such case in this clause (ii), in a manner that could be materially adverse to the interests of the Agent or any of the Lenders without the consent of the Agent.
SECTION 8.11 Transactions with Affiliates. No Credit Party will, nor will it permit any of its Subsidiaries to, enter into or cause or permit to exist any arrangement, transaction or contract (including for the purchase, lease or exchange of property or the rendering of services) with any of its other Affiliates, unless such arrangement, transaction or contract (i) is on fair and reasonable terms no less favorable to such
Credit Party or such Subsidiary than it could obtain in an arm’s-length transaction with a Person that is not an Affiliate (it being understood that this Section shall not apply to any transaction that is expressly permitted under this Agreement between or among the Credit Parties and not involving any other Affiliate) or (ii) is set forth on Schedule 6.20.
SECTION 8.12 Restrictive Agreements, Etc. No Credit Party will, nor will it permit any of its Subsidiaries to, enter into any agreement (i) prohibiting the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or limiting in any way granting to the Secured Parties (or any of them) a Lien on any of its assets, (ii) restricting the ability of a Credit Party or any of its Subsidiaries to amend or otherwise modify any Loan Document, (iii) containing any provision which could reasonably be expected to be violated or breached by a party hereunder by the performance by such party of any of its obligations hereunder or under any other Loan Document, (iv) encumbering or restricting the ability of a Credit Party or any of its Subsidiaries to (a) make any payments, directly or indirectly, to the Borrower, including by way of dividends, advances, repayments of Indebtedness owed to the Borrower, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, (b) make loans or advances to the Borrower or (c) transfer any of its assets or properties to the Borrower. The foregoing prohibitions shall not apply to restrictions (x) contained in any Loan Document or (y) in the case of clause (i), (I) by reason of applicable law, (II) in any agreement governing any Indebtedness permitted by clause (e) of Section 8.2 as to the assets financed with the proceeds of such Indebtedness, (III) in contracts (A) existing as of the Closing Date and set forth on Schedule 8.12 or any renewal or extension thereof; provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith and (B) of a Person existing at the time such Person becomes a Subsidiary of a Credit Party in a transaction permitted hereunder, provided that any such contract was not created in anticipation of or in connection with the transaction or series of transactions pursuant to which such Person became a Subsidiary of a Credit Party, or (IV) any Permitted Lien or any document or instrument governing any Permitted Lien; provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien.
SECTION 8.13 Sale and Leaseback. Except in a transaction permitted by Section 8.9, or transactions with an aggregate fair market value not in excess of $750,000, no Credit Party will, nor will it permit any of its Subsidiaries to, directly or indirectly enter into any agreement or arrangement providing for the sale or transfer by it of any property (now owned or hereafter acquired) to a Person and the subsequent lease or rental of such property or other similar property from such Person.
SECTION 8.14 Product Sales. No Credit Party will, nor will it permit any of its Subsidiaries to, sell or distribute Products which represented, in the aggregate, 15% or more of Net Sales in any applicable year, or permit any sale or distribution of such Products above such threshold where a Credit Party or any of its Subsidiaries is required to obtain any Permit, or to file any notice or registration in any jurisdiction prior to any such sale or distribution of such Products above such threshold, in each case, until such Credit Party or such Subsidiary has obtained such required Permit or filed such notice or registration.
SECTION 8.15 Change in Name, Location, Executive Office, or Executive Management; Change in Fiscal Year. No Credit Party will, nor will it permit any of its Subsidiaries to, (i) change its legal name without ten (10) days’ prior written notice to the Agent, (ii) change its jurisdiction of organization or legal structure, (iii) relocate its chief executive office or principal place of business, relocate any other office in which it maintains books or records relating to its business (including the establishment of any new office or facility), except, in each case, within the State of California or into the State of Texas and with ten (10) days’ prior written notice to the Agent, or (iv) change its Fiscal Year or any of its Fiscal Quarters.
SECTION 8.16 Negative Pledge. No Credit Party will, nor will it permit any of its Subsidiaries to, create, permit or suffer to exist any Lien (whether such interest is based on common law, statute, other
law or contract and whether junior or equal or superior in priority to the security interests and Liens created by the Loan Documents) upon any of its property (including Capital Securities of any Person), revenues or assets, whether now owned or hereafter acquired, except Permitted Liens. No Credit Party will, nor will it permit any of its Subsidiaries to, incur senior secured obligations other than the Obligations incurred hereunder. For the avoidance of doubt, this Section 8.16 shall not restrict the Credit Parties’ (i) incurrence of Indebtedness (A) secured by Permitted Liens that are permitted pursuant to Section 8.3(h) or (B) constituting letters of credit incurred in reliance upon Section 8.2(m) or (ii) cash collateral securing any such letter of credit in reliance upon Section 8.3(l).
SECTION 8.17 Sanctions. No Credit Party will, and no Credit Party will permit any of its Affiliates to, use any proceeds of the Loans for the purpose of: (i) providing financing to or otherwise making funds directly or indirectly available to any Sanctioned Person, or (ii) providing financing to or otherwise funding any transaction which would be prohibited by Sanctions or would otherwise cause the Agent or any of the Lenders to be in breach of any Sanction.
(b) No Credit Party will, and no Credit Party will permit any of its Affiliates to, fund any repayment of the credit with proceeds derived from any transaction that would be prohibited by Sanctions or would otherwise cause the Agent or any of the Lenders to be in breach of any Sanction.
SECTION 8.18 Passive Holding Company. Holdings will not conduct, transact or otherwise engage in any active trade or business or operations, incur any Indebtedness or other liability, or own any assets other than Capital Securities of the Borrower; provided that the foregoing will not prohibit Holdings from the following: (i) the maintenance of its legal existence and obligations that are incidental thereto (including the ability to incur reasonable fees, costs, expenses and other liabilities directly relating to such maintenance), (ii) obligations that are limited to obligations under the Loan Documents to which it is a party, (iii) the making of contributions to (or other equity investments in) the Borrower, which contributions shall be subordinated to the Obligations, (iv) participating in tax, accounting and other administrative and fiduciary matters as a direct owner of the Borrower, in accordance with the terms of the Loan Documents to which Holdings is a party, (v) providing customary compensation, indemnification and insurance coverage to officers and directors (or equivalent), (vi) the consummation of an IPO or SPAC Transaction, and (vii) making Restricted Payments or issuing any Capital Securities to the extent expressly permitted hereunder.
SECTION 8.19 USRPHC Status. No Credit Party will, nor will it permit any of its Subsidiaries to, become a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code.
SECTION 8.20 Hazardous Materials. No Credit Party will, nor will it permit any of its Subsidiaries to, cause or suffer to exist a Release of any Hazardous Material at, on, under, to or from any real estate that would violate any Environmental Law, form the basis for any Environmental Liabilities or otherwise adversely affect the value or marketability of any real estate (whether or not owned by any Credit Party or any Subsidiary of any Credit Party), other than such violations, Environmental Liabilities and effects that would not, in the aggregate, reasonably be expected to result in a material liability.
SECTION 8.21 Licenses. No Credit Party will, nor will it permit any of its Subsidiaries to, grant any license to any Material Intellectual Property other than a license that:
(a) is in the ordinary course of business;
(b) is (i) on a non-exclusive basis or (ii) on an exclusive basis so long as each such exclusive license is limited to a particular geographic area (other than the U.S, U.K. or Japan);
(c) will not prevent, restrict or otherwise impair such Credit Party’s or such Subsidiary’s or the Agent’s ability to use or otherwise monetize such Material Intellectual Property; and
(d) will not prevent, restrict or otherwise impair the Agent’s ability to assume such Credit Party’s or such Subsidiary’s rights under such license.
SECTION 8.22 Subordinated Indebtedness.
Except as expressly permitted by the subordination agreement with respect to any subordinated Indebtedness, no Credit Party shall make any payment or distribution in respect of such subordinated Indebtedness, other than in the form of Capital Securities (other than Disqualified Capital Securities) of Holdings. No Credit Party shall, without the prior written consent of the Administrative Agent, amend or otherwise modify the terms of any subordinated Indebtedness, except as expressly permitted by the subordination agreement with respect to such subordinated Indebtedness. No Credit Party shall permit the transfer of any subordinated Indebtedness, unless the transferee party is, or becomes, a party to the subordination agreement with respect to such subordinated Indebtedness.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1 Listing of Events of Default. Each of the following events or occurrences described in this Article shall constitute an “Event of Default”.
(a) Non-Payment of Obligations. (i) The Borrower shall default in the payment or prepayment when due of any principal on the Loans, or (ii) any Credit Party, including the Borrower, shall default in the payment or prepayment of interest or any fee described in Article III or any other monetary Obligation, and in the case of clause (ii) such default shall continue unremedied for a period of three (3) Business Days after such amount was due.
(b) Breach of Representation or Warranty. Any representation or warranty made or deemed to be made by a Credit Party or its Subsidiaries in any Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect in any material respect when made or deemed to have been made or, in the case of any representation or warranty that, by its terms, is qualified by materiality, Material Adverse Effect or similar qualification, such representation or warranty is or shall be incorrect in any respect when made or deemed made.
(c) Non-Performance of Certain Covenants and Obligations. A Credit Party or any of its Subsidiaries shall default in the due performance or observance of any of its obligations under Sections 7.1(a), 7.1(b), 7.1(c), 7.1(d), 7.7, 7.8 or 7.12 or Article VIII ((i) other than Section 8.10(ii) and (ii) with respect to Section 8.4(a), subject to the Liquidity Cure Right set forth therein).
(d) Non-Performance of Other Covenants and Obligations. A Credit Party or any of its Subsidiaries shall default in the due performance and observance of any other covenant, obligation or agreement contained in any Loan Document (other than any default of the type contemplated by any other subsection of this Section 9.1) executed by it, and such default shall continue unremedied for a period of thirty (30) days after the earlier to occur of (i) written notice thereof given to Holdings by the Agent or the Majority Lenders or (ii) the date on which a Credit Party or any of its Subsidiaries has knowledge of such default.
(e) Default on Other Indebtedness. A default shall occur in the payment of any amount when due (subject to any applicable grace period), whether by acceleration or otherwise, of any principal or stated amount of, or interest or fees on, any Indebtedness (other than Indebtedness permitted under Section 8.2(a)) of any Credit Party or any of its Subsidiaries having a principal or stated amount, individually or in the aggregate, in excess of $4,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause or declare such Indebtedness to become due and payable or to require such Indebtedness to be prepaid, redeemed, purchased or defeased, or require an offer to purchase or defease such Indebtedness to be made, prior to its expressed maturity.
(f) Judgments. Any judgment or order for the payment of money individually or in the aggregate in excess of $4,000,000 (exclusive of any amounts fully covered by insurance (less any applicable deductible) and as to which the insurer has acknowledged its responsibility to cover such judgment or order) shall be rendered against any Credit Party or any of its Subsidiaries and such judgment shall not have been vacated or discharged or stayed or bonded pending appeal within sixty (60) days after the entry thereof or enforcement proceedings shall have been commenced by any creditor upon such judgment or order.
(g) Change in Control. Any Change in Control shall occur.
(h) Bankruptcy, Insolvency, Etc. Any Credit Party or any of its Subsidiaries shall:
(i) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness generally to pay, debts as they become due;
(ii) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, sequestrator or other custodian for any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors;
(iii) in the absence of such application, consent or acquiescence in or permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within sixty (60) days; provided that, the Credit Parties and their Subsidiaries hereby expressly authorize the Agent to appear in any court conducting any relevant proceeding during such sixth (60) day period to preserve, protect and defend its rights under the Loan Documents;
(iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law or any dissolution, winding up or liquidation proceeding, in respect thereof, and, if any such case or proceeding is not commenced by a Credit Party or any of its Subsidiaries, such case or proceeding shall be consented to or acquiesced in by a Credit Party or any of its Subsidiaries or shall result in the entry of an order for relief or shall remain for sixty (60) days undismissed; provided that, the Credit Parties and their Subsidiaries hereby expressly authorize the Agent to appear in any court conducting any such case or proceeding during such sixty (60) day period to preserve, protect and defend its rights under the Loan Documents; or
(v) take any action authorizing, or in furtherance of, any of the foregoing in clause (ii), (iii) or (iv) above.
(i) Impairment of Security, Etc. Any Loan Document or any Lien granted thereunder shall (except in accordance with its terms), in any material respect, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of a Credit Party or any of its Subsidiaries party thereto; any Credit Party or any of its Subsidiaries shall, directly or indirectly, contest in writing such effectiveness, validity, binding nature or enforceability; or, except as permitted under any Loan Document, any Lien securing any Obligation shall, in any material respect, cease to be a perfected first priority Lien, except to the extent that any such loss of perfection results from the failure of the Agent to maintain possession of certificates actually delivered to or representing securities pledged under this Agreement or any other Loan Documents.
(j) Regulatory Matters. If any of the following events or circumstances occur: (i) the FDA or the Department of Justice (DOJ) on its behalf, or any other Governmental Authority (A) makes a final determination that any Product which represented, in the aggregate, 15% or more of Net Sales in any applicable year lacks a required Regulatory Authorization or otherwise takes a regulatory or enforcement action that until and unless successfully resolved through Credit Party responsive action and remediation, dispute resolution, appeal, or other action prohibits or enjoins the distribution of such a Product above such threshold by Credit Party under the then-held Regulatory Authorization, or (B) initiates enforcement action against, including but not limited to issuing a warning letter with respect to, or proposing a consent decree of permanent injunction with respect to, any Products of any Credit Party or any of its Subsidiaries which represented, in the aggregate, 15% or more of Net Sales in any applicable year, in any case that causes such Credit Party or such Subsidiary to discontinue operating in any applicable jurisdiction or (ii) any Credit Party or any of its Subsidiaries enters into a settlement agreement with the FDA and DOJ or any other Governmental Authority that results in aggregate liability as to any single or related series of transactions, incidents or conditions, in excess of $4,000,000.
(k) Pension Plans. Any of the following events shall occur with respect to any Pension Plan which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:
(i) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien on any Credit Party or any ERISA Affiliate under Section 303(k) of ERISA or under Section 430(k) of the Code; or
(ii) any ERISA Event shall occur that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries.
(l) Key Permit Events. Any of the following events shall occur:
(i) any Key Permit relating to FFRct issued by the United States, any state thereof or any instrumentality of the foregoing is terminated, suspended or amended by the Governmental Authority issuing such Key Permit or a court of competent jurisdiction in a manner that (x) results in the cessation of a material portion of the revenue generating business of a Credit Party or any of its Subsidiaries or (y) requires the commercialization of any of the material Products by a Credit Party or any of its Subsidiaries to be stopped or halted for a material amount of time; or
(ii) any other Key Permit is terminated, suspended or amended by the Governmental Authority issuing such Key Permit or a court of competent jurisdiction in a manner that (x) results in the cessation of a material portion of the revenue generating business of a Credit Party or any of its Subsidiaries or (y) requires the commercialization of any of the material Products by a Credit Party or any of its Subsidiaries to be stopped or halted for a material amount of time; provided that, if, after excluding
the Net Sales as of the last period for which a Compliance Certificate has been delivered (or was required to be delivered) to the Agent pursuant to Section 7.1(d) for which such Key Permit is necessary, the Credit Parties remain in compliance with the financial covenant set forth in Section 8.4(b) (without giving effect to the proviso contained in such Section), as evidenced by calculations in reasonable detail certified by an Authorized Officer of the Borrower to the Agent within two (2) Business Days after such termination, suspension or amendment, no Event of Default shall occur;
provided that, in each case of the foregoing clauses (i) and (ii), to the extent such termination, suspension or amendment with respect to such Key Permit is of an administrative and technical nature that can be remedied without the consent of any third party or Governmental Authority and is so remedied within five (5) Business Days after the occurrence thereof, no Event of Default shall occur.
(m) Material Agreements. Any default or event of default shall occur under any Material Agreement, or any Material Agreement shall cease, for any reason, to be in full force and effect other than upon expiration thereof in accordance with its terms unless the Credit Party party thereto determines in the exercise of its good faith business judgment that termination thereof by Credit Party is beneficial to such Credit Party, or any party to any Material Agreement (other than a Credit Party) shall challenge or repudiate its obligations under such Material Agreement or the enforceability of such Material Agreement, in each case, to the extent that any such occurrence has or could reasonably be expected to have a Material Adverse Effect; provided that, for the avoidance of doubt and notwithstanding anything to the contrary in this Agreement or any other Loan Document, in no event shall an Event of Default occur as a result of any termination of the AWS Agreement (x) by the Credit Parties to the extent that, prior to or concurrently with such termination, the Credit Parties have entered into an agreement with another provider for cloud hosting services that (taken as a whole) are not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) provided to the Credit Parties in the AWS Agreement (or, if such cloud hosting services are materially worse, then not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) customarily provided in the market at such time for similarly situated Persons in the same industry as the Credit Parties) or (y) by AWS to the extent that, within thirty (30) days after such termination, the Credit Parties have entered into an agreement with another provider for cloud hosting services that (taken as a whole) are not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) provided to the Credit Parties in the AWS Agreement (or, if such cloud hosting services are materially worse, then not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) customarily provided in the market at such time for similarly situated Persons in the same industry as the Credit Parties).
(n) Patents. Any Patents, the loss of which would constitute a Material Adverse Effect, are found invalid as determined by a court of competent jurisdiction by final and non-appealable judgment.
SECTION 9.2 Action if Bankruptcy. If any Event of Default described in Section 9.1(h) with respect to any Credit Party or any of its Subsidiaries shall occur, and the outstanding principal amount of the Loans and all other Obligations shall automatically be and become immediately due and payable, without notice, demand or presentment to or on any Person.
SECTION 9.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 9.1(h)) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Agent or the Majority Lenders may, by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable whereupon the full unpaid amount of the Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment to or on any Person.
ARTICLE X
ADMINISTRATIVE AGENT
SECTION 10.1 Appointment. Each of the Lenders hereby irrevocably appoints Hayfin Services LLP to act on its behalf as the Agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article X are solely for the benefit of the Agent and the Lenders, and neither any Credit Party nor any of its respective Subsidiaries will have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used as a matter of market custom and is intended to create or reflect only an administrative relationship between contracting parties.
SECTION 10.2 Rights as a Lender. The Person serving as the Agent hereunder will have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent, and the term “Lender” or “Lenders” will, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower or any of its Affiliates as if such Person were not the Agent hereunder and without any duty to account therefor to the Lenders.
SECTION 10.3 Exculpatory Provisions.The Agent will not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder are administrative in nature. Without limiting the generality of the foregoing, the Agent:
(i) will not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(ii) will not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Majority Lenders (or such other number or percentage of the Lenders as will be expressly provided for herein or in the other Loan Documents); provided that the Agent will not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or
applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any debtor relief law; and
(iii) will not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and will not be liable for the failure to disclose, any information relating to any Credit Party or any of its Subsidiaries or Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.
(b) The Agent will not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as will be necessary, or as the Agent believes in good faith will be necessary, under the circumstances as provided in Sections 9.2, 9.3, and 11.1) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Agent will be deemed not to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Agent in writing by the Borrower or a Lender.
(c) The Agent will not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article V or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.
SECTION 10.4 Reliance by Agent. The Agent will be entitled to rely upon, and will not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and will not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of the Loans that by its terms must be fulfilled to the satisfaction of a Lender, the Agent may presume that such condition is satisfactory to such Lender unless the Agent has received notice to the contrary from such Lender prior to the making of such Loans. The Agent may consult with legal counsel (who may be counsel for the Borrower or any of its Affiliates), independent accountants and other experts selected by it, and will not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
SECTION 10.5 Delegation of Duties. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory provisions of this Article X will apply to any such sub-agent and to the Affiliates of the Agent and any such sub-agent and will apply to their respective activities in connection with the syndication of the facility as well as activities as the Agent. The Agent will not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
SECTION 10.6 Resignation of Agent.The Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Majority Lenders will have the right, with the consent of the Borrower (unless an Event of Default is in existence), to appoint a successor. If no such successor will have been so appointed by the Majority Lenders and will have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation (or such earlier day as will be agreed by the Majority Lenders) (the “Resignation Effective Date”), then the retiring Agent may (but will not be obligated to), on behalf of the Lenders, appoint a successor Agent meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation will become effective in accordance with such notice on the Resignation Effective Date.
(b) With effect from the Resignation Effective Date (i) the retiring Agent will be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by the Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent will continue to hold such Collateral until such time as a successor Agent is appointed) and (ii) except for any indemnity payments owed to the retiring Agent, all payments, communications and determinations provided to be made by, to or through the Agent will instead be made by or to each Lender directly, until such time, if any, as the Majority Lenders appoint a successor Agent as provided for above. Upon the acceptance of a successor’s appointment as the Agent hereunder, such successor will succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Agent (other than any rights to indemnity payments owed to the retiring Agent), and the retiring Agent will be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Agent will be the same as those payable to its predecessor unless otherwise agreed among the Borrower and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article X, Section 11.3 and Section 11.4 will continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as the Agent.
SECTION 10.7 Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their respective Affiliates and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their respective Affiliates and based on such documents and information as it will from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
SECTION 10.8 Agent May File Proofs of Claim. In case of the pendency of any insolvency proceeding or any other judicial proceeding relative to the Borrower, the Agent (irrespective of whether the principal of the Loans will then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent has made any demand on the Borrower) will be entitled and empowered (but not obligated), by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid hereunder or under any other Loan Document to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Agent and their respective agents and counsel and all other amounts due the Lenders and the Agent under Sections 3.7, 3.8, 11.3 and 11.4) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Agent and, in the event that the Agent consents to the making of such payments directly to the Lenders, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent under Sections 3.7, 3.8, 11.3 and 11.4.
SECTION 10.9 Collateral and Guaranty Matters.Without limiting the provisions of Section 10.8, the Lenders irrevocably authorize the Agent, at its option and in its discretion:
(i) to release any Lien on any property granted to or held by the Agent under any Loan Document (A) on the Termination Date (or such other date on which all Obligations then outstanding have been paid in full), (B) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted under the Loan Documents or (C) subject to Section 11.1, if approved, authorized or ratified in writing by the Majority Lenders; and
(ii) to release any Guarantor from its obligations under its Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted under the Loan Documents.
Upon request by the Agent at any time, the Majority Lenders will confirm in writing the Agent’s authority to release or subordinate its interest in particular types or items of Collateral, or to release any Guarantor from its obligations under its Guaranty pursuant to this Section 10.9.
(b) The Agent will not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Agent’s Lien thereon, or any certificate prepared by the Borrower in connection therewith, nor will the Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.
(c) The Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or any Security Agreement which may be necessary to perfect and maintain perfected the Liens on the Collateral granted pursuant to any such Security Agreement or protect and preserve the Agent’s ability to enforce the Liens or realize upon the Collateral.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 Waivers, Amendments, Etc. Except as otherwise provided herein or in any other Loan Document, (i) no amendment to any provision of this Agreement or any of the other Loan Documents will in any event be effective unless the same is in writing and signed by Holdings, the Borrower (and/or any Guarantor or other party thereto, as applicable), the Agent and the Majority Lenders (or the Agent with the written consent of the Majority Lenders) and (ii) no waiver of any provision of this Agreement or any other Loan Document, or consent to any departure by a Credit Party, any of its Subsidiaries or other party therefrom, will in any event be effective unless the same is in writing and signed by the Agent and the Majority Lenders (or the Agent with the consent of the Majority Lenders). Any such amendment, waiver or consent will be effective only in the specific instance and for the specific purpose for which given; provided that, notwithstanding the foregoing provisions of this Section 11.1, any term or provision of Article X (other than the provisions of Section 10.6 pertaining to the Borrower’s consent) may be amended without the agreement or consent of, or prior notice to, a Credit Party or any of its Subsidiaries; provided that such amendment does not add any additional obligations or burdens on such Credit Party or such Subsidiary.
No failure or delay on the part of the Agent or the Lenders in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on Holdings, the Borrower or any other Subsidiary in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Agent or the Lenders under any Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2 Notices; Time. All notices and other communications provided under any Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted, if to Holdings, the Borrower or the Agent, to the applicable Person at its address or facsimile number set forth on Schedule 11.2 hereto, or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile or email, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. Unless otherwise indicated, all references to the time of a day in a Loan Document shall refer to New York City time.
SECTION 11.3 Payment of Costs and Expenses. The Credit Parties agree to, jointly and severally, pay promptly on demand all reasonable and documented or invoiced out-of-pocket expenses of the Agent and the Lenders (or any of them) (including the reasonable fees and documented or invoiced out-of-pocket expenses of DLA Piper LLP (US), U.S. counsel to the Agent and the Lenders and of one local counsel in each relevant jurisdiction, if any, who may reasonably be retained by or on behalf of the Agent and the Lenders (or any of them)) in connection with:
(a) the negotiation, preparation, execution and delivery of (i) each Loan Document, including schedules and exhibits, whether or not the transactions contemplated hereby are consummated; provided that, with respect to legal fees of DLA Piper LLP (US) (U.S. counsel to the Agent and the Lenders) for services rendered as of the Closing Date, the Credit Parties shall have no obligation to pay more than $250,000 (plus the amount of any out-of-pocket disbursements of such counsel), and (ii) any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time be entered into after the Closing Date;
(b) the filing or recording of any Loan Document (including any financing statements) and all amendments, supplements, amendment and restatements and other modifications to any thereof, searches made after the date hereof in jurisdictions where financing statements (or other documents evidencing Liens in favor of the Agent and the other Secured Parties) have been recorded and any and all other documents or instruments of further assurance required to be filed or recorded by the terms of any Loan Document; and
(c) the preparation and review of the form of any document or instrument relevant to any Loan Document, including any amendments or other modifications thereto.
The Credit Parties further agree to, jointly and severally, pay, and to save the Agent and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of each Loan Document, the Loans or the issuance of the Notes, excluding any Other Taxes, which are governed by Section 4.3(c). The Credit Parties also agree to reimburse the Agent and the Lenders upon demand for all reasonable and documented or invoiced out-of-pocket expenses (including all reasonable and documented or invoiced out-of-pocket attorneys’ fees and legal expenses of counsel to Agent and the Lenders (or any of them)) incurred by the Agent and the Lenders (or any of them) in connection with (i) the negotiation of any restructuring or “work-out” with Holdings or the Borrower, whether or not consummated, of any Obligations and (ii) the enforcement of any Obligations.
SECTION 11.4 Indemnification.Reimbursement by the Borrower. In consideration of the execution and delivery of this Agreement by the Agent and the Lenders, the Credit Parties hereby, jointly and severally, indemnify, agree to defend, exonerate and hold the Agent, the Lenders and each of their respective officers, directors, employees and agents (collectively, the “Indemnified Parties”) free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities, obligations and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable and documented or invoiced out-of-pocket attorneys’ and professionals’ fees and disbursements, of one primary counsel for all Indemnified Parties (and, in the case of an actual or perceived conflict of interest where the Indemnified Party affected by such conflict notifies the Borrower of the existence of such conflict and thereafter retains its own counsel, another counsel for each such affected Indemnified Party), and one local counsel in each relevant jurisdiction, whether incurred in connection with actions between the parties hereto or the parties hereto and third parties (collectively, the “Indemnified Liabilities”), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (i) the entering into and performance of any Loan Document by any of the Indemnified Parties or (ii) any Environmental Liability, any actual or alleged breach of or non-compliance with Environmental Laws or Environmental Permits, any Hazardous Materials, or any other decision, act, omission or matter relating to the environment, natural resources, health, safety or welfare; provided that such indemnity shall not, as to any Indemnified Party, be available to the extent that such Indemnified Liabilities (A) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnified Party, (B) result from a claim brought by any Credit Party against an Indemnified Party for breach in bad faith of such Indemnified Party’s obligations hereunder or under any other Loan Document, if such Credit Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (C) result from a claim not involving an act or omission of any Credit Party and that is brought by an Indemnified Party against another Indemnified Party (other than against the Agent in its capacity as such).
(b) If and to the extent that the foregoing indemnification may be unenforceable for any reason, the Credit Parties agree to, jointly and severally, make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. To the fullest extent permitted by applicable law, no party hereunder shall assert, and each hereby waives,
any claim against any other party hereunder, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, or the use of the proceeds thereof. No Indemnified Party shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby. All amounts due under this Section shall be payable promptly after demand therefor. This Section 11.4 shall not apply to Taxes, other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.
(c) Reimbursement by the Lenders. To the extent that Holdings or the Borrower for any reason fails to pay any amount required under Section 11.3 or subsection (a) of this Section to be paid by it to the Agent (or any sub-agent thereof) or any Affiliate thereof, each Lender severally agrees to pay to the Agent (or any such sub-agent) or such Affiliate, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s Pro Rata Share at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub-agent), or such Affiliate acting for the Agent (or any such sub-agent) in connection with such capacity. The obligations of the Lenders under this subsection (b) are subject to the provisions of Section 11.6.
SECTION 11.5 Survival. The obligations of the Borrower under Section 4.1, Section 4.2, Section 4.3, Section 11.3, Section 11.4 and this Section 11.5, shall in each case survive any assignment by the Lender and the occurrence of the Termination Date. The representations and warranties made by the Borrower in each Loan Document shall survive the execution and delivery of such Loan Document.
SECTION 11.6 Obligations Several. The obligations of the Lenders under the Loan Documents are several. The failure of any Lender or the Agent to carry out its obligations thereunder will not relieve any other Lender or the Agent of any obligations thereunder, nor will any Lender or the Agent be responsible for the obligations of, or any action taken or omitted by, any other Person hereunder or thereunder. Nothing contained in any Loan Documents will be deemed to cause any Lender or the Agent to be considered a partner or a joint venture with any other Lender or Lenders or the Agent.
SECTION 11.7 Severability. Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 11.8 Headings. The various headings of each Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of such Loan Document or any provisions thereof.
SECTION 11.9 Execution, Effectiveness, Etc.
(a) Execution in Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement.
(b) Effectiveness. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and the Lenders shall have been received by the Agent.
(c) Electronic Signatures. Delivery of an executed counterpart of a signature page to this Agreement by email (e.g. “pdf” or “tiff”) or telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. 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 contemplated hereby or by any other Loan Document, 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.
SECTION 11.10 Governing Law; Entire Agreement. EACH LOAN DOCUMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THE LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 11.11 Register; Successors and Assigns.(a)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 register for the recordation of the names and addresses of the Lenders, 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 error, and 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 under this Agreement. The Register shall be available for inspection by any Credit Party and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(b) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that, the Credit Parties may not assign or transfer their rights or obligations hereunder without the prior written consent of the Agent. The Lenders may freely assign, participate or otherwise transfer any or all of their rights and/or obligations hereunder and/or under the other Loan Documents (in each case, other than to a Disqualified Institution); provided that, except in the case of an assignment to a Lender, an Affiliate of a Lender or related funds, (i) so long as no Event of Default pursuant to Section 9.1(a) or Section 9.1(h) has occurred and is continuing, there shall be no assignment, sale or participation to any Person without the written consent of the Borrower (except in each case with respect to a Disqualified Institution, such consent not to be unreasonably withheld or delayed and such consent to be deemed to have been given if the Borrower has not responded within ten (10) Business Days of a request for such consent), and (ii) any such assignment, sale or participation shall be in an integral multiple of $1,000,000 (or, if less, the entire remaining amount of such Lender’s then outstanding Loans). In the event of any assignment, the Lender making such assignment shall provide
prompt notice thereof to the Agent so such assignment can be reflected on the 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 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 the Agent) shall have no responsibility for maintaining a Participant Register. Each participant shall be entitled to the benefits of Sections 4.1, 4.2 and 4.3 (subject to the requirements and limitations therein, including the requirements under Section 4.3(g) (it being understood that the documentation required under Section 4.3(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment; provided that such participant shall not be entitled to receive any greater payment under Section 4.1 or 4.3, with respect to any participation, than its participating lender would have been entitled to receive, except to the extent that such entitlement to receive a greater payment results from a Change in Law that occurs after the participant acquired the applicable participation.
SECTION 11.12 Other Transactions. Nothing contained herein shall preclude the Agent or any of the Lenders, from engaging in any transaction, in addition to those contemplated by the Loan Documents, with a Credit Party, any of its Subsidiaries or any of their Affiliates in which such Credit Party or such Affiliate is not restricted hereby from engaging with any other Person.
SECTION 11.13 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS (OR ANY OF THEM), OR ANY CREDIT PARTY (OR ANY OF ITS SUBSIDIARIES) IN CONNECTION HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT, ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT’S OR SUCH LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.2. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.
SECTION 11.14 Waiver of Jury Trial. THE AGENT, EACH OF THE LENDERS, AND THE CREDIT PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, EACH LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE CREDIT PARTIES IN CONNECTION THEREWITH. EACH PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THE LOAN DOCUMENTS.
SECTION 11.15 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If the Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
SECTION 11.16 Acknowledgment and Consent to Bail-In of Affected 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 Financial 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.
SECTION 11.17 Judgment Currency.
(a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in one currency (the “first currency”) into another currency (the “other 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 the first currency with such other currency at the applicable 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 Credit Parties in respect of any sum due to the Agent hereunder or 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, the Credit Parties agree, jointly and severally, 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 the Credit Parties.
SECTION 11.18 Specified Repayment Fee. The parties hereto acknowledge and agree that, to the extent the Specified Repayment Fee is applicable to any repayment or prepayment of principal of any Loan at any time, such Specified Repayment Fee is not intended to be a penalty assessed as a result of any such repayment or prepayment of the Loans, but rather is the product of a good faith, arm’s length commercial negotiation between the Borrower and the Lenders relating to the mutually satisfactory compensation payable to the Lenders by the Borrower in respect of the Loans made hereunder. In furtherance of the foregoing, to the fullest extent permitted by applicable law, the Credit Parties hereby jointly and severally waive any rights or claims any of them may have under any such applicable law (whether or not in effect on the Closing Date) that would prohibit or restrict the payment of the Specified Repayment Fee under any of the circumstances provided herein or in any other Loan Document, including payment after acceleration of the Loans.
SECTION 11.19 USA PATRIOT Act. The Agent and the Lenders hereby notify the Credit Parties that pursuant to the requirements of the Patriot Act, they are required to obtain, verify and record information that identifies each Credit Party, which information includes the name and address of each Credit Party and other information that shall allow such Person to identify such Credit Party in accordance with the Patriot Act. Promptly following any written request therefor, Holdings or the Borrower shall deliver to the Agent such information and documentation in respect of any Credit Party reasonably requested by the Agent or any Lender for purposes of compliance by the Agent or such Lender with applicable “know your customer” requirements under the Patriot Act, the Beneficial Ownership Regulation or other applicable anti-money laundering laws.
SECTION 11.20 Erroneous Payments. If a payment is made by the Agent (or its Affiliates) in error (whether known to the recipient or not) or if a Lender or another recipient of funds is not otherwise entitled to receive such funds at such time of such payment or from such Person in accordance with the Loan Documents, then such Lender or recipient shall forthwith on demand repay to the Agent the portion of such payment that was made in error (or otherwise not intended (as determined by the Agent) to be received) in the amount made available by the Agent (or its Affiliate) to such Lender or recipient, with interest thereon, for each day from and including the date such amount was made available by the Agent (or its Affiliate) to it to but excluding the date of payment to the Agent, at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank
compensation; provided that, without limiting any other rights or remedies (whether at law or in equity), the Agent may not make any such demand under this Section 11.20 with respect to such payment unless such demand is made within sixty (60) days of the date of receipt of such payment by the applicable Lender. Each Lender and other party hereto waives the discharge for value defense in respect of any such payment.
SECTION 11.21 Reaffirmation. Each Credit Party as borrower, debtor, grantor, pledgor, guarantor, assignor or in any other similar capacity in which such Credit Party has granted liens or security interests in its property or otherwise acts as accommodation party, under any instruments, documents and agreements entered into in connection with the Existing Credit Agreement that will remain outstanding to secure the Obligations hereunder, hereby (a) ratifies and reaffirms all of its performance and observance obligations and liabilities, whether contingent or otherwise, under each of such instruments, documents and agreements and (ii) ratifies and reaffirms such grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secured all of the Obligations hereunder.
ARTICLE XII
GUARANTEE
SECTION 12.1 The Guarantee. Each of Holdings, the Subsidiary Guarantors and any other Person that becomes a Subsidiary Guarantor after the Closing Date hereby guarantees to the Agent and the Lenders, and their respective successors, endorsees, transferees and assigns, the full and prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise) and performance of the indebtedness, liabilities and other obligations of the Borrower to the Agent and the Lenders under or in connection with this Agreement, the Notes and the other Loan Documents, including all unpaid principal of the Loans, all interest accrued thereon, all fees due under this Agreement and all other amounts payable by the Borrower to the Agent and the Lenders hereunder or in connection herewith. The terms “indebtedness,” “liabilities” and “obligations” are used herein in their most comprehensive sense and include any and all advances, debts, obligations and liabilities, now existing or hereafter arising, whether voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether recovery upon such indebtedness, liabilities and obligations may be or hereafter become unenforceable or shall be an allowed or disallowed claim in any insolvency proceeding and including interest that accrues after the commencement by or against any Credit Party or any of its Subsidiaries of any insolvency proceeding naming such Credit Party or such Subsidiary as the debtor in such insolvency proceeding. The foregoing indebtedness, liabilities and other obligations of the Borrower, and all other indebtedness, liabilities and obligations to be paid or performed by Holdings and/or the Subsidiary Guarantors in connection with this Section shall hereinafter be collectively referred to as the “Guaranteed Obligations.”
SECTION 12.2 Obligations Unconditional. The obligations of Holdings and the Subsidiary Guarantors under Section 12.1 are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower 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 law, 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 12.1 that the obligations of Holdings and the Subsidiary Guarantors hereunder shall be absolute and unconditional under any and all circumstances other than the Payment in Full of the Guaranteed Obligations. 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 Holdings or 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 Holdings or 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 Loan Document 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.
Each of Holdings and the Subsidiary Guarantors hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or the Lenders exhaust any right, power or remedy or proceed against the Borrower 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.
SECTION 12.3 Reinstatement. The obligations of Holdings and the Subsidiary Guarantors under this Article XII 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, and each of Holdings and the Subsidiary Guarantors agrees that it will indemnify the Agent and the Lenders on demand for all reasonable costs and expenses (including reasonable fees of one primary counsel and one local counsel in each relevant jurisdiction) incurred by such Persons in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.
SECTION 12.4 Subrogation. Until the Guaranteed Obligations shall be satisfied in full (other than inchoate indemnification, expense reimbursement obligations and other contingent obligations for which no claim has been asserted), neither Holdings nor any Subsidiary Guarantor shall directly or indirectly exercise, (i) any rights that it may acquire by way of subrogation under this Article XII, by any payment hereunder or otherwise, (ii) any rights of contribution, indemnification, reimbursement or similar suretyship claims arising out of this Article XII or (iii) any other right which it might otherwise have or acquire (in any way whatsoever) which could entitle it at any time to share or participate in any right, remedy or security of the Agent or any Lender as against the Borrower or other Credit Parties (or any of their Subsidiaries), whether in connection with this Article XII, any of the other Loan Documents or otherwise. If any amount shall be paid to Holdings or the Subsidiary Guarantors on account of the foregoing rights at any time when all the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Agent and the Lenders and shall forthwith be paid to the Agent to be credited and applied to the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents.
SECTION 12.5 Remedies. Each of Holdings and the Subsidiary Guarantors agrees that, as between Holdings or any Subsidiary Guarantor, 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 Article IX (and shall be deemed to have become automatically due and payable in the circumstances provided in Article IX) for purposes of Section 12.1 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 Holdings and the Subsidiary Guarantors for purposes of Section 12.1.
SECTION 12.6 Instrument for the Payment of Money. Each of Holdings and the Subsidiary Guarantors hereby acknowledges that the guarantee in this Article XII 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 Holdings or any 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.
SECTION 12.7 Continuing Guarantee. The guarantee in this Article XII is a continuing guaranty and agreement of subordination relating to any Guaranteed Obligations, including Guaranteed Obligations which may exist continuously or which may arise from time to time under successive transactions, and each of Holdings and the Subsidiary Guarantors expressly acknowledges that the guarantee in this Article XII shall remain in full force and effect notwithstanding that there may be periods in which no Guaranteed Obligations exist. The guarantee in this Article XII shall continue in effect and be binding upon Holdings and the Subsidiary Guarantors until payment and performance in full of the Guaranteed Obligations (other than inchoate indemnification, expense reimbursement obligations and other contingent obligations for which no claim has been asserted).
SECTION 12.8 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 Holdings or any Subsidiary Guarantor under Section 12.1 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 12.1, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by Holdings, the Subsidiary Guarantors, the Agent, the Lenders 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.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.
| | | | | | | | | | | |
| BORROWER: |
| | | |
| HEARTFLOW, INC. |
| | | |
| | | |
| By /s/ Vikram Verghese | |
| Name: Vikram Verghese | |
| Title: Chief Financial Officer |
| | | |
| HOLDINGS: |
| | | |
| HEARTFLOW HOLDING, INC. |
| | | |
| | | |
| By /s/ Vikram Verghese | |
| Name: Vikram Verghese |
| Title: Chief Financial Officer |
[Signature Page to Credit Agreement and Guaranty (Heartflow)]
| | | | | | | | | | | |
| AGENT: |
| | | |
| HAYFIN SERVICES LLP |
| | | |
| | | |
| By: | /s/ Erica Hughes | |
| | Name: Erica Hughes | |
| | Title: Authorised Signatory | |
[Signature Page to Credit Agreement and Guaranty (Heartflow)]
| | | | | | | | | | | |
| LENDER: |
| | | |
| HAYFIN TOURMALINE LUXCO S.A.R.L. |
| | | |
| | | |
| | | |
| By: | /s/ Choui Min Kon Kam King | |
| | Name: Choui Min Kon Kam King | |
| | Title: Manager | |
| | | |
| | | |
| | | |
| | | |
| By: | /s/ John Molloy | |
| | Name: John Molloy | |
| | Title: Manager | |
[Signature Page to Credit Agreement and Guaranty (Heartflow)]
EXHIBIT A
to Credit Agreement
FORM OF COMPLIANCE CERTIFICATE
COMPUTATION DATE: [___________]
This Compliance Certificate (this “Compliance Certificate”) is delivered pursuant to [Section 5.1(e) of, and in connection with the consummation of the transactions contemplated in,] [Section 7.1(d) of] that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto (the “Lenders”) and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Agent”). Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement. This Compliance Certificate is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be constructed, administered and applied in accordance with the terms and provisions thereof, including Article XI thereof.
The undersigned, the chief financial or accounting Authorized Officer of Holdings having the name and title set forth below under [his][her] signature, hereby certifies, on behalf of Holdings for the benefit of the Secured Parties and pursuant to Section [5.1(e)][7.1(d)] of the Credit Agreement that such chief financial or accounting Authorized Officer of Holdings is familiar with the Credit Agreement and that, in accordance with each of the following sections of the Credit Agreement, each of the following is true on the date hereof, both before and after giving effect to any Loan to be made on or before the date hereof:
(a) [In accordance with Section 7.1(b) of the Credit Agreement, attached hereto as Annex A are the correct and complete copies of the unaudited consolidated balance sheet of Holdings and its Subsidiaries for the Fiscal Quarter ended [_________] required to be delivered pursuant to Section 7.1(b) of the Credit Agreement and consolidated statements of income and cash flow of Holdings and its Subsidiaries for such period, including (in each case), in comparative form, the figures for the corresponding Fiscal Quarter in, and year to date portion of, the immediately preceding Fiscal Year (subject to normal year-end audit adjustments).]
(b) [In accordance with Section [5.1(e)][7.1(c)] of the Credit Agreement, attached hereto as Annex A are the correct and complete copies of the audited consolidated balance sheet of Holdings and its Subsidiaries for the Fiscal Year ended [_________] required to be delivered pursuant to and by the terms of Section 7.1(c) of the Credit Agreement and the related consolidated statements of income and cash flow of Holdings and its Subsidiaries for such period, setting forth in comparative form the figures for the immediately preceding Fiscal Year.]
(c) All other information presented in connection with this Compliance Certificate (including the attachments hereto) is correct and complete in all material respects.
(d) Attached hereto as Annex B are the calculations used to determine compliance with each financial covenant contained in Section 8.4 of the Credit Agreement as of the Computation Date set forth above.
(e) As of the Computation Date set forth above, no Default or Event of Default is continuing as of the date hereof, and during the [Fiscal Quarter] ended on such Computation Date, no Default or Event of Default occurred[, except as provided for on Annex C attached hereto, which includes a description of the nature and period of existence of such Default or Event of Default and what action Holdings or any of its Subsidiaries has taken, is taking and proposes to take with respect thereto].
(f) Set forth on Annex D hereto is a list of all Immaterial Subsidiaries and Foreign Excluded Subsidiaries, together with the Net Sales and Assets, in each case, attributable to each such Immaterial Subsidiary and Foreign Excluded Subsidiary as of the Computation Date set forth above. [Except as set forth on Annex E hereto, subsequent to the date of the last Compliance Certificate submitted by the undersigned pursuant to [Section 5.1(e)][7.1(d)] of the Credit Agreement, no Subsidiary has been formed or acquired or, if a Subsidiary has been formed or acquired since the delivery of the last Compliance Certificate, such Subsidiary has, to the extent required, complied with Section 7.8 of the Credit Agreement.]
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the undersigned has caused this Compliance Certificate to be executed and delivered, and the certification and warranties contained herein to be made, by its chief financial Authorized Officer as of the date above written.
| | | | | | | | |
| HEARTFLOW HOLDING, INC. |
| | |
| By | |
| | Name: |
| | Title: |
[Signature Page to Compliance Certificate]
Annex A to Compliance Certificate
FINANCIAL STATEMENTS
[See attached.]
Annex B to Compliance Certificate
CALCULATIONS OF FINANCIAL COVENANT COMPLIANCE
Annex C to Compliance Certificate
[DEFAULTS OR EVENTS OF DEFAULT]
[If needed.]
Annex D to Compliance Certificate
SUBSIDIARIES
Annex E to Compliance Certificate
[NEWLY FORMED OR ACQUIRED SUBSIDIARIES]
[If needed.]
EXHIBIT B
to Credit Agreement
FORM OF LOAN REQUEST
Date: [__________]
To: Hayfin Services LLP, as administrative agent
One Eagle Place
London, SW1Y 6AF
Attn: Andrew Merrill
Legal Team/Loan Operations
Re: Borrowing under the Credit Agreement
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto (the “Lenders”) and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Agent”). Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
The undersigned, an Authorized Officer of the Borrower, hereby gives you irrevocable notice, pursuant to Section 2.2 of the Credit Agreement, of the borrowing of Loans specified herein:
1. The Borrowing Date is [__].
2. The amount of the proposed Loans is $[__].
3. The payment instructions with respect to the funds to be made available to the Borrower are as follows:
Bank name:
Bank Address:
Routing Number:
Account Number:
The Borrower hereby certifies that the following statements are true and correct:
a) the representations and warranties set forth herein and in each Loan Document are, in each case, true and correct in all material respects as of the date hereof (unless stated to relate
solely to an earlier date, in which case such representations and warranties are true and correct in all material respects as of such earlier date); and
b) at the time of and immediately after giving effect to the Loan, no Default or Event of Default has occurred or is continuing.
[Signature Page Follows]
IN WITNESS WHEREOF, the Borrower has caused this Loan Request to be duly executed and delivered as of the day and year first above written.
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| BORROWER: | |
| | | |
| HEARTFLOW, INC. | |
| | | |
| By: | | |
| Name: | |
| Title: | |
[Signature Page to Loan Request]
EXHIBIT C
to Credit Agreement
FORM OF PERFECTION CERTIFICATE
[See attached.]
EXHIBIT D
to Credit Agreement
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [______________] (the “Assignor”) and [______________] (the “Assignee”). Capitalized terms used herein and not otherwise defined herein are used herein as defined in that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto (the “Lenders”) and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Agent”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the Credit Agreement and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by the Assignor to the Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.
1. Assignor[s]: ________________________________________
____________________________________________
2. Assignee[s]: ________________________________________
____________________________________________
[Assignee is an Affiliate of [identify Lender]]
3. Borrower: HeartFlow, Inc.
4. Administrative Agent: Hayfin Services LLP
5. Credit Agreement: Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time), by and among HeartFlow, Inc., HeartFlow Holding, Inc., certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto and Hayfin Services LLP, as administrative agent for the Lenders.
6. Assigned Interest[s]:
| | | | | | | | | | | | | | |
Assignor[s]1 | Assignee[s]2 | Aggregate Amount of Commitment/Loans for all Lenders | Amount of Commitment/Loans Assigned8 | Percentage Assigned of Commitment/ Loans3 |
| | $ | $ | % |
| | $ | $ | % |
| | $ | $ | % |
[Signature Page Follows]
1 List each Assignor, as appropriate.
2 List each Assignee, as appropriate.
3 Set forth, to at least 9 decimals, a percentage of the Commitment/Loans of all Lenders thereunder.
Effective Date: _____________ ___, 20___ [TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
| | | | | | | | | | | | | | | | | |
| ASSIGNOR | |
| | | | | |
| [NAME OF ASSIGNOR] | |
| | | | | |
| By: |
| Name: | |
| Title: | | . |
| | | | | |
| | | | | |
| | | | | |
| ASSIGNEE | |
| | | | | |
| [NAME OF ASSIGNEE] | |
| | | | | |
| By: |
| Name: | |
| Title: | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Consented to and Accepted: | | | | |
| | | | | | | |
| HAYFIN SERVICES LLP, as the Agent | | | | |
| | | | | | | |
| By: | | | |
| Name: | | | | |
| Title: | Authorised Signatory | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| [Consented to and Accepted: | | | | |
| | | | | | | |
| HEARTFLOW, INC., as the Borrower | | | | |
| | | | | | | |
| By: | | | |
| Name: | | | | |
| Title: | | ] | 4 |
4 [NTD: To be included where the Borrower’s consent is required pursuant to the Credit Agreement.]
ANNEX 1
STANDARD TERMS AND CONDITIONS
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or other Person of any of their respective obligations under any Loan Document.
1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iii) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and is experienced in acquiring assets of such type, (iv) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Sections 7.1(a), (b) and (c) thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, (v) it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, and (vi) attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2. Payments. From and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date. Notwithstanding the foregoing,
the Agent shall make all payments of interest, fees or other amounts paid or payable in kind from and after the Effective Date to the Assignee.
3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile or in electronic (PDF) format shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption 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 of the New York General Obligations Law shall apply.
EXHIBIT E-1
to Credit Agreement
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships for U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto (the “Lenders”) and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Agent”).
Pursuant to the provisions of Section 4.3(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “ten percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
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| [NAME OF LENDER] | |
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| | By:_____________________________________ | |
| | | Name: | |
| | | Title: | |
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| Date: _________ __, 20__ | |
EXHIBIT E-2
to Credit Agreement
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships for U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto (the “Lenders”) and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Agent”).
Pursuant to the provisions of Section 4.3(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “ten percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
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| [NAME OF PARTICIPANT] | |
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| | By:_____________________________________ | |
| | | Name: | |
| | | Title: | |
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| Date: _________ __, 20__ | |
EXHIBIT E-3
to Credit Agreement
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships for U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto (the “Lenders”) and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Agent”).
Pursuant to the provisions of Section 4.3(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a “bank” extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “ten percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[Signature Page Follows]
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| [NAME OF PARTICIPANT] | |
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| | By:_____________________________________ | |
| | | Name: | |
| | | Title: | |
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| Date: _________ __, 20__ | |
EXHIBIT E-4
to Credit Agreement
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships for U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto (the “Lenders”) and Hayfin Services LLP, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, the “Agent”).
Pursuant to the provisions of Section 4.3(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a “bank” extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “ten percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided in this certificate changes, the undersigned shall promptly so inform the Borrower and the Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[Signature Page Follows]
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| [NAME OF LENDER] | |
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| | By:_____________________________________ | |
| | | Name: | |
| | | Title: | |
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| Date: _________ __, 20 | |
EXHIBIT F
to Credit Agreement
FORM OF INTERCOMPANY SUBORDINATION AGREEMENT
This INTERCOMPANY SUBORDINATION AGREEMENT, dated as of June 14, 2024 (this “Subordination Agreement”), is entered into by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings that are parties hereto and certain other Subsidiaries of Holdings that may from time to time in the future become parties hereto by executing and delivering a joinder agreement in substantially the form of Exhibit A hereto (any such Subsidiary being herein, individually, a “Subsidiary Party” and collectively the “Subsidiary Parties”), and Hayfin Services LLP, in its capacity as administrative agent for the Lenders under the Credit Agreement (as defined below) (in such capacity, together with its successors and assigns, the “Agent”).
Reference is made to that certain Credit Agreement and Guaranty, dated as of the date hereof (as amended or otherwise modified from time to time, the “Credit Agreement”), by and among the Borrower, Holdings, certain Subsidiaries of Holdings that may be required to provide Guarantees from time to time thereunder, the lenders from time to time party thereto and the Agent. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
One or more of Holdings, the Borrower and the Subsidiary Parties (individually, a “HeartFlow Party” and collectively, the “HeartFlow Parties”), in their capacities as lenders (each such entity, together with its successors, assigns and transferees in such capacity, individually, a “Junior Creditor”, and, collectively, “Junior Creditors”) has made, or may from time to time may make, loans or extend other financings (other than trade payables in the ordinary course of business) to one or more of the HeartFlow Parties that is a Credit Party (each such Credit Party, in its capacity as a borrower from any Junior Creditor (together with its successors, assigns and transferees) being herein, individually, a “Debtor Obligor”, and, collectively, “Debtor Obligors”) pursuant to Section 8.2(i) of the Credit Agreement. All such Indebtedness for borrowed money resulting from the making of any such loan or financing, together with all principal, interest, fees, premiums, costs, expenses, liabilities, obligations and other amounts of any type or nature at any time owing or arising in respect thereof, including but not limited to any such items or amounts as may accrue or be incurred before or after default or workout or the commencement of any liquidation, dissolution, bankruptcy, receivership or reorganization case by or against any Credit Party, is herein collectively referred to as the “Junior Obligations”. For the avoidance of doubt, trade payables due from one HeartFlow Party to another HeartFlow Party in the ordinary course of business shall not be deemed to be Junior Obligations and shall not be subject to the terms of this Subordination Agreement.
Each of the Junior Creditors and each of the Debtor Obligors, for the benefit of the Secured Parties and each of their permitted successors, transferees and assigns, hereby irrevocably and unconditionally agree as follows:
1. All payment obligations and other monetary obligations of any Debtor Obligor arising from time to time under or in connection with any Junior Obligations to any Junior Creditor are,
and shall at all times be, subordinated in right of payment and performance to the prior Payment in Full (as defined below) of all Obligations owing under or in connection with the Credit Agreement and the other Loan Documents, whether in respect of principal, interest, fees or other monetary obligations or liabilities of any type or nature, including costs and expenses of enforcement, if any, and including all applicable Early Prepayment Fees and Exit Fees (collectively, the “Senior Obligations”), notwithstanding the maturity date or amortization date of any Junior Obligations or any acceleration of the maturity date related thereto, any default by or insolvency of any Junior Creditor or any other Person, or otherwise.
2. The parties hereto agree that this Subordination Agreement is for the benefit of, and shall be enforceable by, the Agent on behalf of the Secured Parties.
3. At all times from and after the occurrence of an Event of Default until Payment in Full of all Senior Obligations and the termination of all Senior Liens (as defined below) (i) no Debtor Obligor shall make, and no Junior Creditor shall accept, receive or collect from or on behalf of any Debtor Obligor, any direct or indirect payment or distribution of any kind or character whatsoever (whether in cash, securities, other property, by set-off, forgiveness of any Indebtedness of any Secured Party, or otherwise) on account of any of the Junior Obligations, and (ii) under no circumstance shall any payment of any of the Junior Obligations be accelerated, or any other remedy, enforcement action or other action be taken by any Junior Creditor against any Debtor Obligor or any property of any Debtor Obligor or of any other Person, in each case with respect to any of the Junior Obligations (including to assert, enforce or collect any of the Junior Obligations), in each case, without the prior written consent of the Agent.
4. No Junior Creditor shall, directly or indirectly, independently or with any other Person, take any action that would be in violation of, or inconsistent with, or result in a breach of this Subordination Agreement or challenge or contest (i) the validity, perfection, priority or enforceability of this Subordination Agreement, any Senior Obligations or any Liens securing the Senior Obligations (“Senior Liens”), (ii) any of the rights of any Secured Party set forth in the Credit Agreement or any other Loan Document (including with respect to the Senior Liens), or (iii) the validity or enforceability of the Credit Agreement or any other Loan Document or any portion thereof.
5. In the event that, prior to Payment in Full of the Senior Obligations, any Junior Creditor shall receive any payment or distribution of any kind or character whatsoever (whether in cash, securities, other property, by set-off, forgiveness of any Indebtedness of any Secured Party, or otherwise) on or in respect of all or any portion of the Junior Obligations which is not permitted to be paid hereunder, then such payment or distribution shall be held in trust by such Junior Creditor for the benefit of, and promptly (and in any event within one (1) Business Day) paid over by such Junior Creditor to the Agent for application of such payment or distribution to repay the Senior Obligations in accordance with the terms thereof, until Payment in Full of the Senior Obligations as confirmed in writing by the Agent to the Borrower.
6. For purposes of this Subordination Agreement, “Payment in Full” means, with respect to the Senior Obligations, that all such obligations and other amounts payable constituting Senior Obligations have been indefeasibly paid in full in cash (other than inchoate indemnification and expense reimbursement obligations for which no claim has been asserted).
7. Neither any Junior Creditor nor any Debtor Obligor may assign or transfer any of its rights or obligations hereunder, except to another Obligor that becomes bound by the terms of this Subordination Agreement.
8. This Subordination Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with all of the terms and provisions of the Credit Agreement, as amended hereby, including Article XI thereof. The provisions of this Subordination Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.
9. This Subordination 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 Subordination Agreement by signing any such counterpart.
10. This Subordination 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 of the New York General Obligations Law shall apply.
11. Holdings and any Subsidiary of the Borrower or Holdings may, without the consent of any other party to Subordination Agreement, become a HeartFlow Party under this Subordination Agreement by executing and delivering to the Agent a joinder agreement in substantially the form of Exhibit A hereto.
12. Except as modified in accordance with Section 11 to add Holdings or any Subsidiary of the Borrower or Holdings as an additional HeartFlow Party to this Subordination Agreement, this Subordination Agreement may not be amended, waived or otherwise modified without the prior written consent of each of the parties hereto.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Subordination Agreement to be duly executed and delivered as of the date first above written.
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| HEARTFLOW, INC. | |
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| By: | | |
| Name: | |
| Title: | |
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| HEARTFLOW INTERNATIONAL SARL | |
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| By: | | |
| Name: | |
| Title: | |
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| HEARTFLOW U.K. LTD. | |
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| By: | | |
| Name: | |
| Title: | |
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| HEARTFLOW JAPAN G.K. | |
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| By: | | |
| Name: | |
| Title: | |
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| HEARTFLOW TECHNOLOGY LIMITED | |
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| By: | | |
| Name: | |
| Title: | |
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| HEARTFLOW TECHNOLOGY U.K. LIMITED |
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| By: | | |
| Name: | |
| Title: | |
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| HAYFIN SERVICES LLP, as the Agent | |
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| By: | | |
| Name: | |
| Title: | Authorised Signatory | |
Exhibit A
FORM OF INTERCOMPANY SUBORDINATION AGREEMENT JOINDER
This INTERCOMPANY SUBORDINATION AGREEMENT JOINDER, dated as of [DATE] by [NAME OF ADDITIONAL SUBSIDIARY], a [state of organization] [corporation][limited liability company] (the “Additional HeartFlow Party”), under that certain Intercompany Subordination Agreement, dated as of June 14, 2024 (as amended or otherwise modified from time to time, the “Subordination Agreement”), by and among HeartFlow, Inc., a Delaware corporation (the “Borrower”), HeartFlow Holding, Inc., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings from time to time party thereto, and Hayfin Services LLP, in its capacity as administrative agent for the Lenders under the Credit Agreement (as defined in the Subordination Agreement) (in such capacity, together with its successors and assigns, the “Agent”). Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Subordination Agreement.
Pursuant to Section 11 of the Subordination Agreement, the Additional HeartFlow Party hereby agrees to become a “HeartFlow Party” for all purposes of the Subordination Agreement.
IN WITNESS WHEREOF, the Additional HeartFlow Party has caused this Subordination Agreement Joinder to be duly executed and delivered as of the day and year first above written.
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| [ADDITIONAL HEARTFLOW PARTY] | |
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| By | |
| Name: | |
| Title: | |
Exhibit 10.8
Execution Version
AMENDMENT NO. 1 TO CREDIT AGREEMENT AND GUARANTY, dated as of January 24, 2025 (this “Amendment”), by and among HEARTFLOW, INC., a Delaware corporation (the “Borrower”), HEARTFLOW HOLDING, INC., a Delaware corporation (“Holdings”), the lenders party hereto (the “Lenders”) and HAYFIN SERVICES LLP, as administrative agent for the Lenders hereunder (in such capacity, together with its successors and assigns in such capacity, the “Agent”).
WHEREAS, the Borrower, Holdings, certain Subsidiaries of Holdings from time to time party thereto, the Lenders from time to time party thereto and the Agent are party to that certain Credit Agreement and Guaranty, dated as of June 14, 2024 (the “Existing Credit Agreement”, as amended by this Amendment and as may be further amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”);
WHEREAS, Holdings intends to issue certain unsecured convertible promissory notes (the “Subordinated Convertible Notes”) pursuant to (i) that certain Note Purchase Agreement, dated as of January 24, 2025, by and among Holdings and the investors party thereto (the “Non-Employee Note Purchase Agreement”) and (ii) those certain Employee Note Purchase Agreements, each dated as of January 24, 2025, by and among Holdings and the applicable investor party thereto (each, an “Employee Note Purchase Agreement” and collectively, the “Employee Note Purchase Agreements”; the Employee Note Purchase Agreements, together with the Non-Employee Note Purchase Agreement, each, a “Note Purchase Agreement” and collectively, the “Note Purchase Agreements”), which such Subordinated Convertible Notes constitute Indebtedness under the Credit Agreement;
WHEREAS, the Lenders desire to convert, (i) upon receipt by Holdings of net proceeds in an aggregate amount of at least $21,500,000 resulting from the sale of the Subordinated Convertible Notes at the Initial Closing (as defined in the applicable Note Purchase Agreement) (excluding in connection with the Principal Conversion (as defined below) or any other conversion of Indebtedness), $21,000,000 of the principal amount of the Obligations under the Existing Credit Agreement into Subordinated Convertible Notes to be issued to Hayfin Heartflow UK Limited, an Affiliate of the Lenders (the “Hayfin Note Investor”), pursuant to the terms of the Non-Employee Note Purchase Agreement (the “First Principal Conversion”) and (ii) upon receipt by Holdings of net proceeds in an aggregate amount of at least $2,000,000 resulting from the sale of the Subordinated Convertible Notes at a Subsequent Closing (as defined in the applicable Note Purchase Agreement) to occur on or prior to January 31, 2025 (excluding in connection with the Principal Conversion or any other conversion of Indebtedness), $2,000,000 of the principal amount of the Obligations under the Existing Credit Agreement into Subordinated Convertible Notes to be issued to the Hayfin Note Investor, pursuant to the terms of the Non-Employee Note Purchase Agreement (the “Second Principal Conversion” and, together with the First Principal Conversion, the “Principal Conversion”);
WHEREAS, in connection with the issuance of the Subordinated Convertible Notes, the Borrower has requested, and subject to the terms and conditions set forth herein, the Lenders have agreed, to amend certain provisions of the Existing Credit Agreement as set forth herein in accordance with Section 11.1 thereof.
NOW THEREFORE, in consideration of the foregoing premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Terms used but not defined herein have the respective meanings given to such terms in the Credit Agreement.
ARTICLE II
Principal Conversion
SECTION 2.1. As of the First Amendment Effective Date (as defined below), the First Principal Conversion shall be effective and Holdings shall issue to the Hayfin Note Investor a Subordinated Convertible Note pursuant to the Non-Employee Note Purchase Agreement in a principal amount equal to the principal amount of the Loans being converted pursuant to the First Principal Conversion.
SECTION 2.2. On and after the occurrence of the First Principal Conversion, the aggregate amount of Loans outstanding under the Credit Agreement shall be $117,137,470.97.
SECTION 2.3. On the Subsequent Closing Date (as defined below), the Second Principal Conversion shall be consummated and, in connection therewith, Holdings shall issue to the Hayfin Note Investor a Subordinated Convertible Note pursuant to the Non-Employee Note Purchase Agreement in a principal amount equal to the principal amount of the Loans being converted pursuant to the Second Principal Conversion.
SECTION 2.4. On and after the occurrence of the Second Principal Conversion, the aggregate amount of Loans outstanding under the Credit Agreement shall be $115,137,470.97.
ARTICLE III
Amendments to the Existing Credit Agreement
SECTION 3.1. As of the First Amendment Effective Date, the Existing Credit Agreement is hereby amended (i) to delete the red or green stricken text (indicated textually in the same manner as the following examples: stricken text and stricken text) and (ii) to add the blue or green double-underlined text (indicated textually in the same manner as the following examples: double-underlined text and double-underlined text), in each case, as set forth in the marked copy of the Credit Agreement attached hereto as Appendix A.
ARTICLE IV
Representations and Warranties
SECTION 4.1. Each Credit Party hereby represents and warrants to the Agent and the Lenders that, as of the First Amendment Effective Date and the Subsequent Closing Date, after giving effect to this Amendment, (a) no Default or Event of Default has occurred and is continuing and (b) the representations and warranties of the Credit Parties contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of such day (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); provided that any representations and warranties that are by their terms qualified by materiality, Material Adverse Effect or similar qualification shall be true and correct in all respects.
SECTION 4.2. Each Credit Party hereby represents and warrants to the Agent and the Lenders that:
(a) it has taken all necessary action to authorize the execution, delivery and performance of this Amendment;
(b) this Amendment has been duly executed and delivered by such Credit Party and constitutes such Credit Party’s legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity);
(c) no consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or third party is required in connection with the execution, delivery or performance by such Credit Party of this Amendment;
(d) the Security Agreement, each Copyright Security Agreement, each Patent Security Agreement, each Trademark Security Agreement and any other security documents (collectively, the “Security Documents”) continue to create a valid security interest in, and Lien upon, the Collateral (as defined in the respective Security Document), in favor of the Collateral Agent, for the benefit of the Lenders, which security interests and Liens are perfected in accordance with the terms of the Security Documents and prior to all Liens other than Permitted Liens; and
(e) except as specifically provided in this Amendment, the Obligations are not reduced or modified by this Amendment and are not subject to any offsets, defenses or counterclaims.
SECTION 4.3. As of the First Amendment Effective Date, all of the conditions set forth in Section 5.1 have been satisfied. As of the Subsequent Closing Date, all of the conditions set forth in Section 5.2 will have been satisfied.
ARTICLE V
Conditions
SECTION 5.1. This Amendment shall become effective upon the satisfaction of the following conditions (the date upon which each such condition has been satisfied in full or waived by the Agent in its sole discretion, the “First Amendment Effective Date”):
(a) This Amendment. The execution and delivery of this Amendment by each Credit Party, each Lender and the Agent.
(b) Secretary’s Certificate, Etc. The Agent shall have received from each Credit Party (x) a copy of a good standing certificate (to the extent such concept it applicable in any relevant jurisdiction), dated a date reasonably close to the First Amendment Effective Date, for each such Person and (y) a certificate, dated as of the First Amendment Effective Date, duly executed and delivered by such Person’s Secretary, Assistant Secretary, or other Authorized Officer, director, managing member or general partner, as applicable, as to:
(i) resolutions of each such Person’s board of directors (or other managing body, in the case of other than a corporation) then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by such Person in connection with this Amendment and the transactions contemplated hereby and thereby;
(ii) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each such Loan Document to be executed by such Person;
(iii) the full force and validity of each Organic Document of such Person and copies thereof; and
(iv) certifying that each copy document relating to it specified in this Section 5.1(b) is correct, complete and in full force and effect and, except as attached thereto or noted therein, has not been amended or superseded as at the date no earlier than the First Amendment Effective Date;
in each case, upon which certificate the Agent may conclusively rely until it shall have received a further certificate of the Secretary, Assistant Secretary, director, managing member or general partner, as applicable, of any such Person cancelling or amending the prior certificate of such Person.
(c) First Amendment Effective Date Certificate. The Agent shall have received a certificate, dated as of the First Amendment Effective Date (after giving effect to this Amendment and the amendments contemplated herein) and duly executed and delivered by an Authorized Officer of the Borrower, which certificate shall be in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) and shall, among other things, represent and warrant that the statements made therein are true
and correct as of such date (or such earlier date specified therein), and, at the time such certificate is delivered, such statements shall in fact be so true and correct. The statements in such certificate shall be limited to (i) (x) the representations and warranties set forth herein and in each Loan Document are, in each case, true and correct in all material respects as of the First Amendment Effective Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); provided that any representations and warranties that are by their terms qualified by materiality, Material Adverse Effect or similar qualification shall be true and correct in all respects, and (y) no Default or Event of Default under and as defined in the Credit Agreement has occurred and is continuing as of the First Amendment Effective Date, (ii) all of the conditions set forth in this Section 5.1 have been satisfied as of the First Amendment Effective Date and (iii) as of the First Amendment Effective Date, no Material Adverse Effect shall have occurred since December 31, 2023.
(d) Solvency, Etc. The Agent shall have received a solvency certificate duly executed and delivered by the chief financial or accounting Authorized Officer of the Borrower, dated as of the First Amendment Effective Date, in form and substance satisfactory to the Agent.
(e) Fees, Expenses, Etc. The Agent shall have received for its own account and for the account of the Lenders and all fees, costs and expenses due and payable pursuant to Section 11.3 of the Credit Agreement, the Fee Letter or any other Loan Documents, including all closing costs and fees and all unpaid reasonable expenses of the Agent and the Lenders incurred in connection with the transactions contemplated hereby (including the Agent’s legal fees and expenses).
(f) Convertible Notes. (i) The conditions under the Note Purchase Agreements shall have been satisfied substantially concurrently with the conditions set forth in this Section 5.1 and (ii) the Agent shall have received (A) evidence of receipt by Holdings of net proceeds in an aggregate amount of at least $21,500,000 resulting from the sale of the Subordinated Convertible Notes at the Initial Closing (excluding in connection with the Principal Conversion or any other conversion of Indebtedness) issued by Holdings pursuant to the Note Purchase Agreements, (B) evidence of receipt by Holdings of net proceeds in an aggregate amount of at least $21,000,000 resulting from the First Principal Conversion and (C) fully executed copies of (x) each Note Purchase Agreement and each of the Subordinated Convertible Notes issued pursuant thereto at the Initial Closing (including, for the avoidance of doubt, the Subordinated Convertible Notes issued in connection with the First Principal Conversion), (y) each subordination agreement in respect of the Subordinated Convertible Notes issued at the Initial Closing and (z) a side letter between Holdings and the Hayfin Note Investor, and all other documents related to the sale and issuance of the Subordinated Convertible Notes issued at the Initial Closing, in each case, in form and substance satisfactory to the Agent in its sole discretion.
SECTION 5.2. The Second Principal Conversion shall be consummated upon the satisfaction of the following conditions (the date upon which each such condition has been satisfied in full or waived by the Agent in its sole discretion, the “Subsequent Closing Date”):
(a) Subsequent Closing Conditions. The conditions under the Note Purchase Agreements with respect to a Subsequent Closing shall have been satisfied substantially concurrently with the conditions set forth in this Section 5.2.
(b) Convertible Notes. The Agent shall have received (i) evidence of receipt by Holdings of net proceeds in an aggregate amount of at least $2,000,000 resulting from the sale of the Subordinated Convertible Notes at a Subsequent Closing on or prior to January 31, 2025 (excluding in connection with the Principal Conversion or any other conversion of Indebtedness) issued by Holdings pursuant to the Note Purchase Agreements and (B) fully executed copies of, or counterpart signature pages to, (x) each Note Purchase Agreement pursuant to which Subordinated Convertible Notes are issued at such Subsequent Closing (including, for the avoidance of doubt, the Subordinated Convertible Notes issued in connection with the Second Principal Conversion), (y) each subordination agreement in respect of the Subordinated Convertible Notes issued at such Subsequent Closing and (z) all other documents related to the sale and issuance of the Subordinated Convertible Notes issued at such Subsequent Closing, in each case, in form and substance satisfactory to the Agent in its sole discretion.
(c) Subsequent Closing Date Certificate. The Agent shall have received a certificate, dated as of the Subsequent Closing Date (after giving effect to this Amendment and the amendments contemplated herein) and duly executed and delivered by an Authorized Officer of the Borrower, which certificate shall be in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) and shall, among other things, represent and warrant that the statements made therein are true and correct as of such date (or such earlier date specified therein), and, at the time such certificate is delivered, such statements shall in fact be so true and correct. The statements in such certificate shall be limited to (i) (x) the representations and warranties set forth herein and in each Loan Document are, in each case, true and correct in all material respects as of the Subsequent Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); provided that any representations and warranties that are by their terms qualified by materiality, Material Adverse Effect or similar qualification shall be true and correct in all respects, and (y) no Default or Event of Default under and as defined in the Credit Agreement has occurred and is continuing as of the Subsequent Closing Date, (ii) all of the conditions set forth in this Section 5.2 have been satisfied as of the Subsequent Closing Date and (iii) as of the Subsequent Closing Date, no Material Adverse Effect shall have occurred since December 31, 2023.
ARTICLE VI
Miscellaneous
SECTION 6.1. Governing Law. THIS AMENDMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AMENDMENT CONTEMPLATED HEREBY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS AMENDMENT AND THE LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT HERETO AND THERETO.
SECTION 6.2. Severability Clause. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 6.3. Ratification and Reaffirmation. Except as expressly amended hereby, each of the Credit Agreement and the Fee Letter is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. Each Credit Party hereby consents to this Amendment, agrees that this Amendment shall form a part of the Credit Agreement and the Fee Letter for all purposes and acknowledges that each of the other Loan Documents remains in full force and effect and is hereby ratified and reaffirmed. Each Credit Party as borrower, debtor, grantor, pledgor, guarantor, assignor, or in other any other similar capacity in which such Credit Party grants liens or security interests in its property or otherwise acts as accommodation party or guarantor, as the case may be, hereby (a) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents to which it is a party (after giving effect hereto) and (b) to the extent such Credit Party granted liens on or security interests in any of its property pursuant to any such Loan Document as security for or otherwise guaranteed Obligations under or with respect to the Loan Documents, ratifies and reaffirms such guarantee and grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secure all of the Obligations as amended hereby. The execution of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders, constitute a waiver of any provision of any of the Loan Documents or serve to effect a novation of the Obligations or any other obligation or covenant of the Credit Parties under the Loan Documents. Except as specifically set forth herein, the Agent and the Lenders reserve all of their respective rights and remedies under the Credit Agreement and the other Loan Documents.
SECTION 6.4. Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof.
SECTION 6.5. Execution in Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement.
SECTION 6.6. Effectiveness. This Amendment shall become effective when counterparts hereof executed on behalf of the Credit Parties and the Lenders shall have been received by the Agent.
SECTION 6.7. Electronic Signatures. Delivery of an executed counterpart of a signature page to this Agreement by email (e.g. “pdf” or “tiff”) or telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. 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 to any other certificate, agreement or document related hereto or the transactions contemplated hereby, 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.
SECTION 6.8. Release. Each Credit Party hereby unconditionally and irrevocably acquits and fully and forever releases and discharges the Agent, the Lenders and all their respective affiliates, partners, subsidiaries, officers, employees, agents, attorneys, principals, directors and shareholders and its respective heirs, legal representatives, successors and permitted assigns (collectively, the “Releasees”) from any and all claims, demands, causes of action, obligations, remedies, suits, damages and liabilities of any nature whatsoever, whether now known, suspected or claimed, whether arising under common law, in equity or under statute, which such party hereto ever had or now has against any of the Releasees and which has arisen at any time prior to the date hereof directly out of this Amendment, the Credit Agreement or the other Loan Documents or the enforcement or attempted or threatened enforcement by any of the Releasees of any of their respective rights, remedies or recourse related thereto (collectively, the “Released Claims”) (but in each case referred to in this Section 6.8, excluding any claims, demands, causes of actions, obligations, remedies, suits, damages or liabilities to the extent same occurred by reason of the gross negligence, bad faith or willful misconduct of the Releasee to be indemnified (as determined by a court of competent jurisdiction in a final and non-appealable decision)). Each Credit Party covenants and agrees never to commence, voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against any of the Releasees any action or other proceeding based upon any of the Released Claims.
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written.
| | | | | | | | | | | |
| BORROWER: | |
| | | |
| HEARTFLOW, INC. | |
| | | |
| By /s/ Vikram Verghese | |
| Name: Vikram Verghese | |
| Title: Chief Financial Officer | |
| | | |
| | | |
| HOLDINGS: | |
| | | |
| HEARTFLOW HOLDING, INC. | |
| | | |
| By /s/ Vikram Verghese | |
| Name: Vikram Verghese | |
| Title: Chief Financial Officer | |
[Signature Page to Amendment No. 1 to Credit Agreement and Guaranty]
| | | | | | | | | | | |
| AGENT: | |
| | | |
| HAYFIN SERVICES LLP | |
| | | |
| | | |
| | | |
| By | /s/ Jennifer Shen | |
| | Authorised Signatory | |
[Signature Page to Amendment No. 1 to Credit Agreement and Guaranty
| | | | | | | | | | | |
| LENDER: | |
| | | |
| HAYFIN TOURMALINE LUXCO S.A.R.L. | |
| | | |
| By /s/ John Molloy | |
| | Authorised Signatory John Molloy | |
| | | |
| | | |
| By /s/ Choui Min Kon Kam King (Diana) | |
| | Authorised Signatory Choui Min Kon Kam King (Diana) |
[Signature Page to Amendment No. 1 to Credit Agreement and Guaranty
Appendix A
(see attached)
Execution VersionCONFORMED THROUGH AMENDMENT NO. 1 DATED JANUARY 24, 2025
CREDIT AGREEMENT AND GUARANTY
dated as of June 14, 2024
by and among
HEARTFLOW, INC.,
as Borrower,
HEARTFLOW HOLDING, INC.,
as Holdings,
THE LENDERS PARTY HERETO,
and
HAYFIN SERVICES LLP,
as the Agent for the Lenders
TABLE OF CONTENTS
| | | | | | | | | | | | | | |
| | | Page |
| | | | |
| ARTICLE I DEFINITIONS AND ACCOUNTING TERMS | 1 | |
| | | | |
| SECTION 1.1 | Defined Terms | 1 | |
| | | | |
| SECTION 1.2 | Interpretation. | 2627 | |
| | | | |
| SECTION 1.3 | Accounting and Financial Determinations. | 27 | |
| | | | |
| SECTION 1.4 | Divisions. | 2728 | |
| | | | |
| SECTION 1.5 | Rates. | 28 | |
| | | | |
| ARTICLE II THE LOANS | 28 | |
| | | | |
| SECTION 2.1 | Commitments. | 28 | |
| | | | |
| SECTION 2.2 | Borrowing Procedures. | 28 | |
| | | | |
| SECTION 2.3 | Funding. | 2829 | |
| | | | |
| ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES | 2829 | |
| | | | |
| SECTION 3.1 | Applicable Currency for Repayments and Prepayments; Pro Rata Application | 2829 | |
| | | | |
| SECTION 3.2 | Repayments and Prepayments. | 29 | |
| | | | |
| SECTION 3.3 | Application. | 30 | |
| | | | |
| SECTION 3.4 | Interest Rate. | 30 | |
| | | | |
| SECTION 3.5 | Default Rate. | 30 | |
| | | | |
| SECTION 3.6 | Payment Dates. | 30 | |
| | | | |
| SECTION 3.7 | Fees. | 3031 | |
| | | | |
| SECTION 3.8 | Specified Repayment Fees. | 3031 | |
| | | | |
| SECTION 3.9 | [Reserved]. | 3031 | |
| | | | |
| SECTION 3.10 | PIK Interest. | 31 | |
| | | | |
| SECTION 3.11 | Interest Computation. | 31 | |
| | | | |
| SECTION 3.12 | Term SOFR Conforming Changes. | 3132 | |
| | | | |
| ARTICLE IV SOFR AND OTHER PROVISIONS | 3132 | |
| | | | |
| SECTION 4.1 | Increased Costs. | 3132 | |
| | | | |
| SECTION 4.2 | Compensation for Losses. | 3233 | |
| | | | |
| SECTION 4.3 | Taxes. | 33 | |
| | | | |
| SECTION 4.4 | Payments, Computations; Proceeds of Collateral, Etc. | 36 | |
| | | | |
| SECTION 4.5 | Setoff. | 3637 | |
| | | | |
| | | | | | | | | | | |
| SECTION 4.6 | Inability to Determine Rates. | 3637 |
| | | |
| SECTION 4.7 | Sharing of Payments. | 3738 |
| | | |
| SECTION 4.8 | Mitigation. | 38 |
| | | |
| SECTION 4.9 | Illegality. | 38 |
| | | |
| SECTION 4.10 | Benchmark Replacement Setting. | 3839 |
| | | |
| ARTICLE V CONDITIONS PRECEDENT | 3940 |
| | | |
| SECTION 5.1 | Conditions to the Borrowing of the Loans on the Closing Date. | 3940 |
| | | |
| ARTICLE VI REPRESENTATIONS AND WARRANTIES | 4344 |
| | | |
| SECTION 6.1 | Organization, Etc. | 4344 |
| | | |
| SECTION 6.2 | Due Authorization, Non-Contravention, Etc. | 44 |
| | | |
| SECTION 6.3 | Government Approval, Regulation, Etc. | 44 |
| | | |
| SECTION 6.4 | Validity, Etc. | 44 |
| | | |
| SECTION 6.5 | Financial Information. | 44 |
| | | |
| SECTION 6.6 | No Material Adverse Change. | 4445 |
| | | |
| SECTION 6.7 | Litigation, Labor Matters and Environmental Matters. | 4445 |
| | | |
| SECTION 6.8 | Subsidiaries. | 45 |
| | | |
| SECTION 6.9 | Ownership of Properties. | 45 |
| | | |
| SECTION 6.10 | Taxes. | 45 |
| | | |
| SECTION 6.11 | Pension Plans, Etc. | 45 |
| | | |
| SECTION 6.12 | Accuracy of Information | 46 |
| | | |
| SECTION 6.13 | Regulations U and X. | 46 |
| | | |
| SECTION 6.14 | Solvency. | 46 |
| | | |
| SECTION 6.15 | Intellectual Property. | 46 |
| | | |
| SECTION 6.16 | Data Privacy. | 47 |
| | | |
| SECTION 6.17 | Material Agreements. | 48 |
| | | |
| SECTION 6.18 | Permits | 48 |
| | | |
| SECTION 6.19 | Regulatory Matters. | 48 |
| | | |
| SECTION 6.20 | Transactions with Affiliates. | 50 |
| | | |
| SECTION 6.21 | Investment Company Act. | 50 |
| | | |
| SECTION 6.22 | OFAC. | 50 |
| | | |
| SECTION 6.23 | Anti-Corruption. | 5051 |
| | | |
| SECTION 6.24 | Deposit and Disbursement Accounts. | 5051 |
| | | |
| | | | | | | | | | | |
| SECTION 6.25 | Registration Rights. | 51 |
| | | |
| SECTION 6.26 | Royalty and Other Payments. | 51 |
| | | |
| SECTION 6.27 | Sale and Leaseback. | 51 |
| | | |
| SECTION 6.28 | Senior Secured Obligations. | 51 |
| | | |
| SECTION 6.29 | Beneficial Ownership Certification. | 51 |
| | | |
| ARTICLE VII AFFIRMATIVE COVENANTS | 51 |
| | | |
| SECTION 7.1 | Financial Information, Reports, Notices, Etc. | 51 |
| | | |
| SECTION 7.2 | Maintenance of Existence; Compliance with Contracts, Laws, Etc. | 53 |
| | | |
| SECTION 7.3 | Maintenance of Properties. | 53 |
| | | |
| SECTION 7.4 | Insurance. | 53 |
| | | |
| SECTION 7.5 | Books and Records. | 54 |
| | | |
| SECTION 7.6 | Environmental Law Covenant. | 54 |
| | | |
| SECTION 7.7 | Use of Proceeds. | 54 |
| | | |
| SECTION 7.8 | Future Guarantors, Security, Etc. | 54 |
| | | |
| SECTION 7.9 | Obtaining of Permits, Etc. | 5657 |
| | | |
| SECTION 7.10 | Product Licenses. | 5657 |
| | | |
| SECTION 7.11 | Maintenance of Regulatory Authorizations, Contracts, Intellectual Property, Etc. | 57 |
| | | |
| SECTION 7.12 | Cash Management. | 57 |
| | | |
| ARTICLE VIII NEGATIVE COVENANTS | 58 |
| | | |
| SECTION 8.1 | Business Activities. | 58 |
| | | |
| SECTION 8.2 | Indebtedness. | 58 |
| | | |
| SECTION 8.3 | Liens. | 5960 |
| | | |
| SECTION 8.4 | Financial Covenants. | 6061 |
| | | |
| SECTION 8.5 | Investments. | 62 |
| | | |
| SECTION 8.6 | Restricted Payments, Etc. | 6263 |
| | | |
| SECTION 8.7 | Issuance of Capital Securities. | 63 |
| | | |
| SECTION 8.8 | Consolidation, Merger, Etc. | 63 |
| | | |
| SECTION 8.9 | Permitted Dispositions. | 63 |
| | | |
| SECTION 8.10 | Modification of Certain Agreements. | 63 |
| | | |
| SECTION 8.11 | Transactions with Affiliates. | 6364 |
| | | |
| SECTION 8.12 | Restrictive Agreements, Etc. | 64 |
| | | |
| | | | | | | | | | | |
| SECTION 8.13 | Sale and Leaseback. | 64 |
| | | |
| SECTION 8.14 | Product Sales. | 6465 |
| | | |
| SECTION 8.15 | Change in Name, Location, Executive Office, or Executive Management; Change in Fiscal Year. | 6465 |
| | | |
| SECTION 8.16 | Negative Pledge. | 6465 |
| | | |
| SECTION 8.17 | Sanctions. | 65 |
| | | |
| SECTION 8.18 | Passive Holding Company. | 6566 |
| | | |
| SECTION 8.19 | USRPHC Status. | 6566 |
| | | |
| SECTION 8.20 | Hazardous Materials. | 6566 |
| | | |
| SECTION 8.21 | Licenses. | 6566 |
| | | |
| SECTION 8.22 | Subordinated Indebtedness. | 66 |
| | | |
| ARTICLE IX EVENTS OF DEFAULT | 6667 |
| | | |
| SECTION 9.1 | Listing of Events of Default. | 6667 |
| | | |
| SECTION 9.2 | Action if Bankruptcy. | 70 |
| | | |
| SECTION 9.3 | Action if Other Event of Default. | 70 |
| | | |
| ARTICLE X ADMINISTRATIVE AGENT | 70 |
| | | |
| SECTION 10.1 | Appointment. | 70 |
| | | |
| SECTION 10.2 | Rights as a Lender. | 70 |
| | | |
| SECTION 10.3 | Exculpatory Provisions. | 7071 |
| | | |
| SECTION 10.4 | Reliance by Agent. | 7172 |
| | | |
| SECTION 10.5 | Delegation of Duties. | 7172 |
| | | |
| SECTION 10.6 | Resignation of Agent. | 72 |
| | | |
| SECTION 10.7 | Non-Reliance on Agent and Other Lenders. | 7273 |
| | | |
| SECTION 10.8 | Agent May File Proofs of Claim. | 7273 |
| | | |
| SECTION 10.9 | Collateral and Guaranty Matters. | 73 |
| | | |
| ARTICLE XI MISCELLANEOUS PROVISIONS | 74 |
| | | |
| SECTION 11.1 | Waivers, Amendments, Etc. | 74 |
| | | |
| SECTION 11.2 | Notices; Time. | 74 |
| | | |
| SECTION 11.3 | Payment of Costs and Expenses. | 74 |
| | | |
| SECTION 11.4 | Indemnification. | 75 |
| | | |
| SECTION 11.5 | Survival. | 76 |
| | | |
| SECTION 11.6 | Obligations Several. | 76 |
| | | |
| SECTION 11.7 | Severability. | 76 |
| | | |
| | | | | | | | | | | |
| SECTION 11.8 | Headings. | 7677 |
| | | |
| SECTION 11.9 | Execution, Effectiveness, Etc. | 7677 |
| | | |
| SECTION 11.10 | Governing Law; Entire Agreement. | 77 |
| | | |
| SECTION 11.11 | Register; Successors and Assigns. | 77 |
| | | |
| SECTION 11.12 | Other Transactions. | 78 |
| | | |
| SECTION 11.13 | Forum Selection and Consent to Jurisdiction. | 78 |
| | | |
| SECTION 11.14 | Waiver of Jury Trial. | 79 |
| | | |
| SECTION 11.15 | Interest Rate Limitation. | 79 |
| | | |
| SECTION 11.16 | Acknowledgment and Consent to Bail-In of Affected Financial Institutions. | 79 |
| | | |
| SECTION 11.17 | Judgment Currency. | 80 |
| | | |
| SECTION 11.18 | Specified Repayment Fee. | 80 |
| | | |
| SECTION 11.19 | USA PATRIOT Act. | 80 |
| | | |
| SECTION 11.20 | Erroneous Payments. | 8081 |
| | | |
| SECTION 11.21 | Reaffirmation. | 81 |
| | | |
| ARTICLE XII GUARANTEE | 81 |
| | | |
| SECTION 12.1 | The Guarantee. | 81 |
| | | |
| SECTION 12.2 | Obligations Unconditional. | 81 |
| | | |
| SECTION 12.3 | Reinstatement. | 82 |
| | | |
| SECTION 12.4 | Subrogation. | 82 |
| | | |
| SECTION 12.5 | Remedies. | 8283 |
| | | |
| SECTION 12.6 | Instrument for the Payment of Money. | 83 |
| | | |
| SECTION 12.7 | Continuing Guarantee. | 83 |
| | | |
| SECTION 12.8 | General Limitation on Guarantee Obligations. | 83 |
SCHEDULES:
| | | | | |
| Schedule 1.1 | Key Permits |
| Schedule 1.2 | Specified Holders |
| Schedule 2 | Loans |
| Schedule 2.3 | Funds Flow Schedule |
| Schedule 6.7(a) | Litigation |
| Schedule 6.8 | Existing Subsidiaries |
| Schedule 6.10 | Taxes |
| Schedule 6.11 | Pension Plans |
| Schedule 6.15(a) | Intellectual Property |
| Schedule 6.15(c)(i) | Third Party Infringements |
| Schedule 6.17 | Material Agreements |
| Schedule 6.19(a) | Regulatory Authorizations |
| Schedule 6.19(d), (f) and (g) | Regulatory Actions |
| Schedule 6.20 | Transactions with Affiliates |
| Schedule 6.24 | Deposit and Disbursement Accounts |
| Schedule 6.25 | Registration Rights Agreements |
| Schedule 6.26 | Royalties |
| Schedule 8.2(c) | Existing Indebtedness |
| Schedule 8.3(b) | Existing Liens |
| Schedule 8.5(a) | Investments |
| Schedule 8.12 | Existing Contracts |
| Schedule 11.2 | Notice Information |
EXHIBITS:
| | | | | | | | |
| Exhibit A | - | Form of Compliance Certificate |
| Exhibit B | - | Form of Loan Request |
| Exhibit C | - | Form of Perfection Certificate |
| Exhibit D | - | Form of Assignment and Assumption |
| Exhibit E-1 | - | Form of U.S. Tax Compliance Certificate (For Foreign Lenders
That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit E-2 | - | Form of U.S. Tax Compliance Certificate (For Foreign Participants
That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit E-3 | - | Form of U.S. Tax Compliance Certificate (For Foreign Participants
That Are Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit E-4 | - | Form of U.S. Tax Compliance Certificate (For Foreign Lenders
That Are Partnerships For U.S. Federal Income Tax Purposes) |
| Exhibit F | - | Form of Intercompany Subordination Agreement |
| Exhibit G | - | AWS Agreement |
CREDIT AGREEMENT AND GUARANTY
CREDIT AGREEMENT AND GUARANTY dated as of June 14, 2024 (as amended, supplemented or otherwise modified from time to time, this “Agreement”), is by and among HEARTFLOW, INC., a Delaware corporation (the “Borrower”), HEARTFLOW HOLDING, INC., a Delaware corporation (“Holdings”), certain Subsidiaries of Holdings (as defined herein) from time to party hereto, the lenders from time to time party hereto (the “Lenders”) and HAYFIN SERVICES LLP, as administrative agent for the Lenders hereunder (in such capacity, together with its successors and assigns in such capacity, the “Agent”).
WHEREAS, the Borrower, certain Subsidiaries of Holdings from time to time party thereto, the lenders from time to time party thereto and Hayfin Services LLP, as agent, are parties to that certain Credit Agreement and Guaranty, dated as of January 19, 2021 (as amended by that certain Joinder Agreement, dated as March 3, 2021, by that certain Amendment No. 1 to Credit Agreement and Guaranty, dated as of March 17, 2022, by that certain Amendment No. 2 to Credit Agreement and Guaranty, dated as of September 30, 2022, by that certain Amendment No. 3 to Credit Agreement and Guaranty, dated as of December 15, 2022, by that certain Amendment No. 4 and Waiver to Credit Agreement and Guaranty, dated as of March 2, 2023, by that certain Amendment No. 5 to Credit Agreement and Guaranty, dated as of March 16, 2023, and by that certain Amendment No. 6 to Credit Agreement and Guaranty, dated as of March 29, 2023, the “Existing Credit Agreement”);
WHEREAS, the Borrower has requested that the Lenders extend credit to the Borrower in the form of term loans in an aggregate initial principal amount of $138,137,470.97, the proceeds of which shall be used to (i) refinance the outstanding obligations under the Existing Credit Agreement and (ii) pay certain fees, costs, and expenses incurred in connection with such refinancing and entry into this Agreement, the other Loan Documents and the transactions contemplated hereby; and
WHEREAS, the Lenders are willing to extend credit to the Borrower on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):
“ABR” means, for any day, a rate per annum equal to the highest of (i) the Prime Rate in effect on such day, (ii) the Federal Funds Rate in effect on such day plus 0.50% and (iii) Term SOFR for a one-month tenor in effect on such day plus 1.00%. Any change in the ABR due to a change in the Prime Rate, the Federal Funds Rate or Term SOFR shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Rate or Term SOFR, respectively.
“ABR Loan” means a Loan that bears interest based on the ABR.
“ABR Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. “Control” (and its correlatives) by any Person means the power of such Person, directly or indirectly, (i) to vote 10% or more of the Capital Securities (on a fully diluted basis) of another Person which Capital Securities have ordinary voting power for the election of directors, managing members or general partners (as applicable), or (ii) to direct or cause the direction of the management and policies of such other Person (whether by contract or otherwise).
“Agent” has the meaning specified in the preamble.
“Agreement” has the meaning specified in the preamble.
“Applicable Margin” means, for any day, (i) as to any SOFR Loan, 7.00% per annum or (ii) as to any ABR Loan, 6.00% per annum, as the case may be, in each case as such percentage may be increased pursuant to Section 3.5 or 3.10; provided that, if the Borrower makes a single voluntary prepayment or repayment of the Loans in an aggregate principal amount equal to or greater than $40,000,000, the source of which is cash received by Holdings in exchange for common equity in Holdings, such percentage shall be decreased by 0.25% per annum.
“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 D.
“Authorized Officer” means, relative to any Credit Party or any of its Subsidiaries, those of its officers, general partners or managing members (as applicable) whose signatures and incumbency shall have been certified to the Agent pursuant to Section 5.1(a).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 4.10(d).
“AWS” means Amazon Web Services, Inc.
“AWS Agreement” means that certain AWS Customer Agreement, by and between AWS and the Borrower, attached hereto as Exhibit G, as amended or otherwise modified from time to time in accordance with this Agreement.
“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, (i) 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, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (ii) 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).
“Benchmark” means, initially, the Term SOFR Reference Rate; provided, that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 4.10(a).
“Benchmark Replacement” means with respect to any Benchmark Transition Event, the sum of: (i) the alternate benchmark rate that has been selected by the Agent and the Borrower giving due consideration to (x) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (y) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities and (ii) the related Benchmark Replacement Adjustment; provided, that, if such Benchmark Replacement as so determined would be less than 2.00%, such Benchmark Replacement will be deemed to be 2.00% for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero), that has been selected by the Agent giving due consideration to (x) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (y) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities.
“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(b) in the case of clause (c) of the definition of “Benchmark Transition Event”, the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by or on behalf of the administrator of such Benchmark (or such component thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative or non-compliant with or non-aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks; provided, that such non-representativeness, non-compliance or non-alignment will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely; provided, that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the F.R.S. Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(c) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) or the regulatory supervisor for the administrator of such Benchmark (or such component thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means, the period (if any) (i) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 4.10 and (ii) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 4.10.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Borrower” has the meaning specified in the preamble.
“Business Day” means any day which is neither a Saturday nor Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or London, England.
“Capital Expenditures” means, for any applicable Fiscal Period for any Person determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP, the aggregate amount of (i) all expenditures of such Person and its Subsidiaries for fixed or capital assets made during such Fiscal Period which, in accordance with GAAP, would be classified as capital expenditures and (ii) Capitalized Lease Liabilities incurred by such Person and its Subsidiaries during such Fiscal Period.
“Capital Securities” means, with respect to any Person, all shares of, interests or participations in, or other equivalents in respect of (in each case however designated, whether voting or non-voting), such Person’s capital stock or other equity securities, issued and outstanding as of the date hereof or any time hereafter, including treasury stock.
“Capitalized Lease Liabilities” means, with respect to any Person, all monetary obligations of such Person and its Subsidiaries under any leasing or similar arrangement which have been (or, in accordance with GAAP, should be) classified as capitalized leases, and for purposes of each Loan Document the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a premium or a penalty.
“Cash Equivalent Investment” means, at any time:
(a) any direct obligation of (or unconditionally guaranteed by) the United States or a state thereof or of the District of Columbia (or any agency or political subdivision thereof, to the extent such obligations are supported by the full faith and credit of the United States or a state thereof or of the District of Columbia) maturing not more than one (1) year after such time;
(b) commercial paper, or corporate demand notes, maturing not more than 270 days from the date of issue, which is issued by a corporation (other than an Affiliate of a Credit Party or any of its Subsidiaries) organized under the laws of any state of the United States or of the District of Columbia and rated A-1 or higher by S&P or P-1 or higher by Moody’s; or
(c) any certificate of deposit, time deposit or banker’s acceptance, maturing not more than one year after its date of issuance, which is issued by any bank organized under the laws of the United States (or any state thereof or of the District of Columbia) and which has (x) a credit rating of A2 or higher from Moody’s or A or higher from S&P and (y) a combined capital and surplus greater than $500,000,000.
(d) any repurchase agreement entered into with any commercial banking institution meeting the requirements set forth in clause (c) above which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a
market value at the time such repurchase agreement is entered into of not less than one-hundred percent (100%) of the repurchase obligation of such commercial banking institution thereunder;
(e) money market accounts or mutual funds which invest exclusively or substantially in assets satisfying the foregoing requirements; or
(f) other short-term liquid investments approved in writing by the Agent.
“Change in Control” means and shall be deemed to have occurred if:
(a) (i) prior to an IPO or SPAC Transaction, the Specified Holders together fail to own and control, directly or indirectly, beneficially and of record, in the aggregate more than 50% of the total economic interest in the Capital Securities or of the Voting Securities, in each case of Holdings; (ii) after an IPO or SPAC Transaction, any “person” or “group” (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the date hereof), other than the Specified Holders, shall own, directly or indirectly, beneficially or of record, determined on a fully diluted basis, more than 35% of the Capital Securities of Holdings; (iii) a majority of the seats (other than vacant seats) on the board of directors (or equivalent) of Holdings shall at any time be occupied by persons who were not (x) nominated or appointed by the board of directors (or equivalent) of Holdings, (y) nominated or appointed by directors (or equivalent) so nominated or (z) nominated, designated or appointed by any of the Specified Holders; (iv) the sale, lease, transfer, conveyance or other Disposition, in one or more related transactions, of all or substantially all of the assets of Holdings and its Subsidiaries, taken as a whole, occurs; or (v) Holdings shall cease to directly own, beneficially and of record, 100% of the issued and outstanding Capital Securities of the Borrower;
(b) the Borrower shall cease to directly or indirectly own, beneficially and of record, 100% of the issued and outstanding Capital Securities of each Subsidiary Guarantor, except as otherwise permitted pursuant to Section 8.8; or
(c) a Change of Control under and as defined in any Subordinated Convertible Promissory Notesubordinated convertible promissory note issued pursuant to (i) that certain Note Purchase Agreement, dated as of September 30, 2022, by and among Holdings and the investors party thereto or (ii) that certain Note Purchase Agreement, dated as of January 24, 2025, by and among Holdings and the investors party thereto.
Notwithstanding the foregoing, the consummation of a SPAC Transaction shall not constitute a Change in Control.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (iii) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that, 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 be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Charged Company” has the meaning specified in Section 7.8(c).
“Closing Date” means June 14, 2024.
“Closing Date Certificate” has the meaning specified in Section 5.1(b).
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“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 property (or all such assets or property, as the context may require); provided that Collateral shall include (i) 100% of the Capital Securities of any Foreign Subsidiaries existing as of the Closing Date, except to the extent as reasonably determined by the Borrower after consulting with the Agent, such pledge would reasonably be expected to result in material adverse tax consequences to the Borrower, in which case Borrower shall not be required to pledge voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiaries (other than a Foreign Subsidiary that becomes a “Subsidiary Guarantor” after the Closing Date pursuant to Section 7.8) and (ii) unless provided otherwise in Section 7.8(e), 100% of the Capital Securities of each Foreign Subsidiary acquired or organized after the Closing Date; provided, further, that if the Borrower reasonably determines after consulting with the Agent that the continuation of a pledge of 100% of the voting Capital Securities of any Foreign Subsidiary would, as a result of a Change in Law occurring after the original date of such pledge, result in material adverse tax consequences to the Borrower or Holdings, then Collateral shall not include voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiary and the amount of such Capital Securities pledged under the Loan Documents shall be adjusted accordingly.
“Compliance Certificate” means a certificate duly completed and executed by an Authorized Officer of Holdings, substantially in the form of Exhibit A hereto, together with such changes thereto as the Agent or the Majority Lenders may from time to time request for the purpose of monitoring compliance with the financial covenants contained herein.
“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “ABR”, the definition of “Business Day”, the definition of “U.S. Government Securities Business Day”, the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 4.2 and other technical, administrative or operational matters) that the Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“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.
“Constitutional Documents” means the constitutional documents of each UK Subsidiary Guarantor being certificate of incorporation, certificate of change of name, memorandum of association and articles of association (if applicable).
“Contingent Liability” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the Capital Securities of any other Person. The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby.
“Control” has the meaning specified within the definition of “Affiliate”.
“Controlled Account” has the meaning specified in Section 7.12(a).
“Controlled Account Agreement” means, with respect to any Controlled Account, an account control agreement (or equivalent) in favor of, and satisfactory in form and substance to, the Agent (acting on the instructions of the Majority Lenders acting reasonably).
“Copyright Security Agreement” means any Copyright Security Agreement executed and delivered by any Credit Party and/or any of its Subsidiaries, as applicable, substantially in the form of Exhibit E to the Security Agreement, as amended or otherwise modified from time to time.
“Copyrights” means all copyrights and rights in copyrightable subject matter, whether statutory or common law, and all exclusive and nonexclusive licenses from third parties or rights to use copyrights owned by third parties, along with any and all (i) renewals, revisions, extensions, derivative works, enhancements, modifications, updates and new releases thereof, (ii) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iii) rights to sue for past, present and future infringements thereof, and (iv) foreign copyrights and any other rights corresponding thereto throughout the world.
“Credit Parties” means, collectively, the Borrower and the Guarantors.
“Data Activities” has the meaning specified in Section 6.16(a).
“Debenture” has the meaning specified in Section 7.8(c).
“Default” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.
“Default Rate” has the meaning specified in Section 3.5.
“Designated Jurisdiction” means any country or territory to the extent that such country or territory is the subject of any Sanction.
“Disposition” (or similar words such as “Dispose”) means any sale, transfer, lease, contribution or other conveyance (including by way of merger) of, or the granting of options, warrants or other rights to, a Credit Party’s or its Subsidiaries’ assets (including accounts receivable and Capital Securities of
Subsidiaries) to any other Person (other than to the Borrower or a wholly owned Subsidiary Guarantor) in a single transaction or series of transactions.
“Disqualified Capital Securities” means, with respect to any Person, any Capital Security of such Person that, by its terms (or by the terms of any security or other Capital Security into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Qualified Capital Securities), including pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof (other than solely for Qualified Capital Securities), in whole or in part, (iii) provides for the scheduled payments of dividends in cash, or (iv) is or becomes convertible into or exchangeable for Indebtedness or any other Capital Securities that would constitute Disqualified Capital Securities, in each case, prior to the date that is one hundred eighty (180) days after the Maturity Date.
“Disqualified Institution” means (a) any Person designated by the Borrower as a “Disqualified Institution” by written notice delivered to the Agent prior to the Closing Date, in form and substance acceptable to the Agent, and any of such Person’s Affiliates that are readily identifiable as such by their name and (b) any other Person that is a competitor of the Borrower or any of its Subsidiaries (or an affiliate of such competitor) designated by the Borrower as a “Disqualified Institution” by written notice delivered to the Agent from time to time and any of such Person’s Affiliates that are readily identifiable as such by their names; provided that “Disqualified Institutions” shall exclude (x) bona fide debt funds and (y) any Person that the Borrower has designated as no longer being a “Disqualified Institution” by written notice delivered to the Agent from time to time. The list of Disqualified Institutions shall be made available to any Lender upon written request to the Agent. In no event shall a supplement to the list of Disqualified Institutions apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans that was otherwise permitted prior to such supplementation.
“Dollars” and the sign “$” mean lawful money of the United States.
“Domestic Subsidiary” means a Subsidiary incorporated or organized under the laws of the United States, or any state, commonwealth or other political subdivision thereof (including, for the avoidance of doubt, the District of Columbia).
“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.
“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.
“Environmental Laws” means all federal, state, local or international laws, statutes, rules, regulations, codes, directives, treaties, requirements, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, natural resources, Hazardous Material or health and safety matters.
“Environmental Liability” means any liability, loss, claim, suit, action, investigation, proceeding, damage, commitment or obligation, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of or affecting any Credit Party or its Subsidiaries directly or indirectly arising from, in connection with or based upon (i) any Environmental Law or Environmental Permit, (ii) the generation, use, handling, transportation, storage, treatment, recycling, presence, disposal, Release or threatened Release of, or exposure to, any Hazardous Materials or (iii) any contract, agreement, penalty, order, decree, settlement, injunction or other arrangement (including operation of law) pursuant to which liability is assumed, entered into, inherited or imposed with respect to any of the foregoing.
“Environmental Permit” has the meaning specified in Section 6.7(c).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to Sections of ERISA also refer to any successor Sections thereto.
“ERISA Affiliate” means any person that for purposes of Title I and Title IV of ERISA and Section 412 of the Code would be deemed to be a single employer with the Borrower, pursuant to Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.
“ERISA Event” means (i) any reportable event, as defined in Section 4043 of ERISA, with respect to a Pension Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified of such event, (ii) the filing of a notice of intent to terminate any Pension Plan, if such termination could reasonably be expected to require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, the filing under Section 4041(c) of ERISA of a notice of intent to terminate any Pension Plan or the termination of any Pension Plan under Section 4041(c) of ERISA, (iii) the institution of proceedings under Section 4042 of ERISA by the PBGC for the termination of, or the appointment of a trustee to administer, any Pension Plan, (iv) any failure by any Pension Plan to satisfy the minimum funding requirements of Sections 412 and 430 of the Code or Section 302 of ERISA applicable to such Pension Plan, if not waived, (v) the failure to make a required contribution to any Pension Plan that could reasonably be expected to result in the imposition of an encumbrance on a Credit Party, any of its Subsidiaries or any ERISA Affiliate under Section 412 or 430 of the Code, a filing under Section 412 of the Code or Section 302 of ERISA of any request for a minimum funding variance with respect to any Pension Plan or Multiemployer Plan, (vi) an engagement in a non-exempt prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA with respect to which a Credit Party or any of its Subsidiaries could reasonably be expected to incur liability which could reasonably be expected to have a Material Adverse Effect, (vii) the complete or partial withdrawal of a Credit Party, any of its Subsidiaries or any material ERISA Affiliate from a Multiemployer Plan, (viii) a Credit Party, any of its Subsidiaries or an ERISA Affiliate incurring any material liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA) and (ix) a reasonable determination by an actuary for a Pension Plan that such Pension Plan is in “at risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code).
“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 specified in Section 9.1.
“Event of Loss” means, with respect to any asset of a Credit Party or any of its Subsidiaries, any of the following: (i) any loss, destruction or damage of such asset or (ii) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such asset, or confiscation of such asset or requisition of the use of such asset.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Account” has the meaning set forth in the Security Agreement.
“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 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 subdivision 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 pursuant to a law in effect on the date on which (x) such Lender acquires such interest in a Loan or (y) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 4.3, 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 4.3(g) and (iv) any withholding Taxes imposed under FATCA.
“Existing Credit Agreement” has the meaning specified in the recitals.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, 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.
“Federal Funds 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 shall set 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) 0%.
“FDA” means the U.S. Food and Drug Administration and any successor entity.
“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 promulgated thereunder.
“Fee Letter” means that certain Fee Letter, dated as of the date hereof, by and among the Borrower, the Agent and the Lenders, as amended or otherwise modified from time to time.
“FFRct” means a coronary vascular physiologic simulation software prescription device that provides simulated functional assessment of blood flow in the coronary vascular system using data extracted from medical device imaging to solve algorithms and yield simulated metrics of physiologic
information (e.g., blood flow, coronary flow reserve, fractional flow reserve, myocardial perfusion), which is intended to generate results for use and review by a qualified clinician, de novo 510(k) clearance of which was received on November 26, 2014 for version 1.4 of the HeartFlow Analysis (DEN130045), 510(k) clearance for version 2.x of the Heartflow Analysis was received in January 2016 (510(k) No.: K152733), and 510(k) clearance for a modification to the intended use language in August 2016 (510(k) No.: K161772). Additional clearances were received for a strategic architecture scope change in December 2018 (510(k) No.: K182035), and for the addition of Planner capabilities in August 2019 (510(k) No.: K190925). The Borrower submitted its version 3.x for FDA review in November 2020 and received FDA clearance on January 8, 2021 (510(k) No.: K203329).
“First Amendment” means that certain Amendment No. 1 to Credit Agreement and Guaranty, dated as of the First Amendment Effective Date, by and among the Borrower, Holdings, the Lenders party thereto, and the Agent.
“First Amendment Effective Date” means January 24, 2025.
“Fiscal Period” means, as applicable, a Fiscal Quarter or a Fiscal Year.
“Fiscal Quarter” means a quarter ending on the last day of March, June, September or December.
“Fiscal Year” means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the “2020 Fiscal Year”) refer to the Fiscal Year ending December 31 of such calendar year.
“Foreign Excluded Subsidiary” means at any date of determination, each wholly owned Foreign Subsidiary (together with its Subsidiaries) whose (i) Net Sales during the applicable Measurement Period were equal to or less than 15.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period and (ii) assets during the applicable Measurement Period were equal to or less than 15.0% of the consolidated assets of Holdings and its Subsidiaries for such period, in each case determined in accordance with GAAP; provided, that, for such Measurement Period, the Foreign Excluded Subsidiaries shall not collectively have (x) Net Sales during such Measurement Period equal to or greater than 20.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period or (y) assets during such Measurement Period equal to or greater than 20.0% of the consolidated assets of Holdings and its Subsidiaries for such period; provided, further, that no Subsidiary that owns any Material Intellectual Property or is party to a Material Agreement may be a Foreign Excluded Subsidiary.
“Foreign Lender” means a Lender that is not a U.S. Person.
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
“F.R.S. Board” means the Board of Governors of the Federal Reserve System or any successor thereto.
“Funded Indebtedness” of any Person means Indebtedness of the type described in clauses (a) and (c) of the definition of Indebtedness, and all Contingent Liabilities of such Person in respect of any such Funded Indebtedness.
“GAAP” has the meaning specified in Section 1.3.
“Governmental Authority” means any national, supranational, federal, state, county, provincial, local, municipal or other government or political subdivision thereof (including any Regulatory Authority), whether domestic or foreign, and any agency, authority, commission, ministry,
instrumentality, regulatory body, court, tribunal, arbitrator, central bank or other Person exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to any such government; any entity that contracts with a governmental entity to administer or assist in the administration of a governmental program (including any Medicare or Medicaid administrative contractors); or any arbitrator with authority to bind a party at law.
“Guaranteed Obligations” has the meaning specified in Section 12.1.
“Guarantors” means, collectively, Holdings and each Subsidiary Guarantor.
“Hazardous Material” means any material, substance, chemical, mixture or waste which is capable of damaging or causing harm to any living organism, the environment or natural resources, including all explosive, special, hazardous, polluting, toxic, industrial, dangerous, biohazardous, medical, infectious or radioactive substances, materials or wastes, noise, odor, electricity or heat, and including petroleum or petroleum products, byproducts or distillates, asbestos or asbestos-containing materials, urea formaldehyde, polychlorinated biphenyls, radon gas, ozone-depleting substances, greenhouse gases, and all other substances or wastes of any nature regulated pursuant to any Environmental Law or as to which any Governmental Authority requires investigation, reporting or remedial action.
“Healthcare Laws” means all applicable federal, state or local laws that govern the sales, marketing, promotion, distribution, research, development, testing, current good manufacturing practices (cGMPs) and quality system requirements, handling, packaging, labeling, storage, advertising, import, export, or any other use of the Products including, but not limited to, the FD&C Act; the Public Health Service Act; the federal False Claims Act; the federal Anti-Kickback Statute; the Anti-Inducement Law; the Stark Law; privacy and data security laws including without limitation the Health Insurance Portability and Accountability Act of 1996, as amended, inclusive of the Health Information Technology for Economic and Clinical Health Act (HITECH) and all implementing regulations (HIPAA); the Medicare Program (Title XVIII of the Social Security Act); the Medicaid Program (Title XIX of the Social Security Act); laws pertaining to the corporate practice of medicine or other healthcare professionals; laws pertaining to deceptive trade practices; any and all Permits required under Healthcare Laws; all applicable rules, regulations and licensing requirements of applicable state agencies; any similar state and local laws that address the subject matter of the foregoing; laws and regulations pertaining to federal and state relief programs related to COVID-19; the Federal Trade Commission Act; and all other analogous laws to the foregoing within any other U.S. or foreign or supranational jurisdiction, and applicable rules and regulations issued thereunder (including, without limitation, 21 C.F.R. Parts 801, 803, 806, 807, 812, and 820).
“Hedging Agreement” means any interest rate, foreign currency, commodity, credit or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.
“Hedging Obligations” means, with respect to any Person, all liabilities of such Person under currency exchange agreements, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates.
“herein”, “hereof”, “hereto”, “hereunder” and similar terms contained in any Loan Document refer to such Loan Document as a whole and not to any particular Section, paragraph or provision of such Loan Document.
“Holdings” has the meaning specified in the preamble.
“Immaterial Subsidiary” means at any date of determination, each wholly owned Subsidiary (together with its Subsidiaries) whose (i) Net Sales during the applicable Measurement Period were equal to or less than 5.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period and (ii) assets during the applicable Measurement Period were equal to or less than 5.0% of the consolidated assets of Holdings and its Subsidiaries for such period, in each case determined in accordance with GAAP; provided, that, for such Measurement Period, the Immaterial Subsidiaries shall not collectively have (x) Net Sales during such Measurement Period equal to or greater than 10.0% of the consolidated Net Sales of Holdings and its Subsidiaries for such period or (y) assets during such Measurement Period equal to or greater than 10.0% of the consolidated assets of Holdings and its Subsidiaries for such period; provided, further, that no Subsidiary that owns any Material Intellectual Property may be an Immaterial Subsidiary.
“Impermissible Qualification” means any qualification or exception to the opinion or certification of any independent public accountant as to any financial statement of a Credit Party or any of its Subsidiaries (i) which is of a “going concern” or similar nature (other than any such qualification arising from the Loans hereunder maturing on the Maturity Date or by reason of any actual or anticipated financial covenant breach hereunder) or (ii) which relates to the limited scope of examination of matters relevant to such financial statement.
“Indebtedness” of any Person means:
(a) all obligations of such Person for borrowed money or advances and all obligations of such Person evidenced by bonds, debentures, notes or similar instruments;
(b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker’s acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person;
(d) net Hedging Obligations of such Person and all obligations of such Person arising under Synthetic Leases;
(e) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including earn outs, purchase price adjustments and seller notes in connection with acquisitions permitted hereunder (to the extent due and payable and included as a liability on the balance sheet in accordance with GAAP) (other than trade payables entered into in the ordinary course of business);
(f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business which are not overdue for a period of more than 90 days or, if overdue for more than 90 days, as to which a dispute exists and adequate reserves in conformity with GAAP have been established on the books of such Person), and indebtedness secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on property owned or being acquired by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(g) any Disqualified Capital Securities; and
(h) all Contingent Liabilities of such Person in respect of any of the foregoing clauses (a) through (g) inclusive.
The Indebtedness of any Person shall include the Indebtedness of any other Person (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 Person, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
“Indemnified Liabilities” has the meaning specified in Section 11.4(a).
“Indemnified Parties” has the meaning specified in Section 11.4(a).
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Intellectual Property” means all (i) Patents, (ii) Trademarks, (iii) Copyrights and other works of authorship (registered or unregistered), and all applications, registrations and renewals therefor, (iv) computer software, databases, data and documentation, (v) Trade Secrets and confidential business information, including know-how, inventions, manufacturing processes and techniques, research and development information, financial, marketing and business data, databases pricing and cost information, business, finance and marketing plans, customer and prospective customer lists and information, and supplier and prospective supplier lists and information, (vi) other intellectual property or similar proprietary rights, (vii) copies and tangible embodiments of any of the foregoing (in whatever form or medium) and (viii) any and all improvements to any of the foregoing.
“Intercompany Subordination Agreement” means a subordination agreement to be executed and delivered by each Credit Party and any Subsidiaries thereof, pursuant to which all obligations in respect of any Indebtedness for borrowed money (or equivalent) owing between or among any party to such subordination agreement shall be subordinated to the prior Payment in Full of all Obligations, such agreement to be in substantially the form attached hereto as Exhibit F or such other form reasonably acceptable to the Agent.
“Interest Payment Date” means, (i) as to any ABR Loan, (a) the last Business Day of each March, June, September and December and (b) the Maturity Date and (ii) as to any SOFR Loan, (a) the last day of each Interest Period therefor and, in the case of any Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at three-month intervals after the first day of such Interest Period, and (b) the Maturity Date.
“Interest Period” means, (i) initially, as to any Loan, the period beginning on (and including) the date of which the Loans were made and ending on (and including) the last day of the calendar quarter in which the Loans were made and (ii) thereafter, as to any Loan, the period commencing on the date of such Loan and ending on the numerically corresponding day in the calendar month that is three months thereafter (subject to the availability thereof), as specified in the applicable Loan Request; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, (iii) no Interest Period shall extend beyond the Maturity Date and (iv) no tenor that has been removed from this definition pursuant to Section 4.10(d) shall be available for specification in such Loan Request. For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan.
“Investment” means, relative to any Person, (i) any loan, advance or extension of credit made by such Person to any other Person, including the purchase by such Person of any bonds, notes, debentures or other debt securities of any other Person, (ii) Contingent Liabilities in favor of any other Person and (iii) any Capital Securities held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment.
“IPO” means an underwritten initial public offering of common Capital Securities of Holdings pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act of 1933, as amended.
“Key Permits” means all material Permits in favor of the Credit Parties relating to the Products (including all Regulatory Authorizations), including, for the avoidance of doubt, all current and future permits materially relating to (i) FFRct in the United States and (ii) Plaque and Roadmap, in the case of this clause (ii), from and after the date on which Plaque and Roadmap collectively contribute 30% or more of Net Sales in the aggregate. As of the Closing Date, the Key Permits are as set forth on Schedule 1.1.
“Lender” has the meaning specified in the preamble.
“Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property, or other priority or preferential arrangement of any kind or nature whatsoever, to secure payment of a debt or performance of an obligation.
“Liquidity” means, at any time, unrestricted, unencumbered cash and Cash Equivalent Investments in one or more Controlled Accounts that is free and clear of all Liens, other than Liens granted under the Loan Documents in favor of the Agent, for the benefit of the Secured Parties.
“Liquidity Covenant” has the meaning specified in Section 8.4(a).
“Liquidity Cure Amount” has the meaning specified in Section 8.4(a).
“Liquidity Cure Right” has the meaning specified in Section 8.4(a).
“Loans” means the term loans made on the Closing Date pursuant to Section 2.1(a) in an aggregate principal amount of $138,137,470.97., which such principal amount was reduced to $117,137,470.97 on the First Amendment Effective Date in connection with the First Principal Conversion (as defined in the First Amendment) and will be further reduced to $115,137,470.97 on the Subsequent Closing Date (solely to the extent the Second Principal Conversion (as defined in the First
Amendment) occurs in accordance with the terms of the First Amendment) in connection with the Second Principal Conversion.
“Loan Commitment Amount” means (i) as of the Closing Date, $138,137,470.97., (ii) as of the First Amendment Effective Date, $117,137,470.97 and (iii) as of the Subsequent Closing Date, $115,137,470.97 (solely to the extent the Second Principal Conversion (as defined in the First Amendment) occurs in accordance with the terms of the First Amendment).
“Loan Documents” means, collectively, this Agreement (as subsequently amended or otherwise modified), the Notes, the Fee Letter, the Security Agreement, the Debenture, any Mortgages, the Intercompany Subordination Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement, any Controlled Account Agreement and each other agreement pursuant to which any of the Agent or any of the other Secured Parties is granted a Lien to secure the Obligations, and each other agreement, certificate, document or instrument delivered in connection with any Loan Document.
“Loan Request” means a Loan request and certificate duly executed by an Authorized Officer of the Borrower substantially in the form of Exhibit B hereto.
“Majority Lenders” means, at any time, Lenders holding more than 50% of the then aggregate unpaid principal amount of the Loans.
“Material Adverse Effect” means a material adverse effect on (i) the business, condition (financial or otherwise), operations, performance or properties of any Credit Party and each of its Subsidiaries, taken as a whole, (ii) the rights and remedies of the Agent or any Lender under any Loan Document, or (iii) the ability of any Credit Party or any of its Subsidiaries to perform their respective Obligations under any Loan Document.
“Material Agreements” means (i) each contract or agreement to which a Credit Party or any of its Subsidiaries is a party, the loss of which would result in the loss of 30% or more of Net Sales in the aggregate; (ii) the AWS Agreement or any replacement cloud hosting agreement as contemplated in Section 9.1(m) and (iii) all other contracts or agreements to which a Credit Party is a party, individually or in the aggregate, that if breached or terminated could reasonably be expected to result in a Material Adverse Effect.
“Material Intellectual Property” means any Intellectual Property owned by, licensed to or otherwise held by any Credit Party or any of its Subsidiaries (including, for the avoidance of doubt, the Stanford Licenses), whether currently owned or acquired, developed, licensed or obtained after the date hereof (i) reasonably required for the business and/or commercialization of FFRct or otherwise materially relating to FFRct, (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 $5,000,000.
“Maturity Date” means June 14, 2028.
“Measurement Period” means any period of four (4) consecutive Fiscal Quarters of Holdings.
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
“Mortgage” means each mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Agent, for the benefit of the Secured Parties, on real property of a Credit Party, including any amendment, restatement, modification or supplement thereto.
“Mortgage Instruments” means such title reports, title insurance, flood certifications and flood insurance, opinions of counsel, surveys, appraisals and environmental reports and other similar information and related certifications as are reasonably requested by, and in form and substance reasonably acceptable to, the Agent from time to time.
“Multiemployer Plan” means a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA contributed to for any employees of a Credit Party, any of its Subsidiaries or any ERISA Affiliate.
“Net Cash Proceeds” means when used in respect of (i) any Disposition, (ii) the receipt of any proceeds in connection with any Event of Loss suffered, or (iii) the receipt of any proceeds in connection with an IPO, in the case of clauses (i) and (ii), by a Credit Party or any of its Subsidiaries, and, in the case of clause (iii), by Holdings or any direct or indirect holding company of Holdings, the gross proceeds in cash or Cash Equivalent Investments received by such Person (excluding, in connection with any Disposition, any portion of such proceeds deposited in an escrow account pursuant to the documentation related thereto but including such proceeds subsequently received in respect of noncash consideration initially received and amounts initially placed in escrow that subsequently become available) from such Disposition, Event of Loss or IPO, minus, without duplication, (a) all direct costs and expenses incurred or to be incurred (including sales, commissions and legal, accounting and investment banking fees, commissions and expenses), (b) all federal, state, local and foreign Taxes assessed or to be assessed (if any), in connection therewith, (c) in connection with any Disposition or Event of Loss, amounts required to be applied to the repayment of any Permitted Indebtedness (together with any interest thereon, premium or penalty and any other amount payable with respect thereto) secured by a Permitted Lien that has priority over the Lien, if any, of the Agent on the asset subject to such Disposition or Event of Loss, (d) in connection with any Disposition, reserves for purchase price adjustments and retained liabilities reasonably expected to be payable by Holdings or any Subsidiary in connection therewith, to the extent such reserves have been established in accordance with GAAP; provided that upon the final determination of the amount paid in respect of such purchase price adjustments and retained liabilities, if the actual amount of purchase price adjustments and retained liabilities paid is less than such reserves, the difference shall, at such time, constitute Net Cash Proceeds, and (e) with respect to any Event of Loss, all money actually applied within one hundred eighty (180) days to replace the assets in question or to repair or reconstruct damaged property or property affected by loss, destruction, damage, condemnation, confiscation, requisition, seizure or taking.
“Net Income” means, for any applicable Fiscal Period for any Person determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP, the aggregate of all amounts (exclusive of all amounts in respect of any extraordinary gains but including extraordinary losses) which would be included as net income on the consolidated financial statements of such Person and its Subsidiaries for such Fiscal Period.
“Net Sales” means, for any applicable Fiscal Period, the revenue of the Credit Parties and their Subsidiaries from the sale of Products (current or future to the extent the revenue is actually earned and recognized during such Fiscal Period) during such Fiscal Period, determined on a consolidated basis in accordance with GAAP.
“Note” means a promissory note of the Borrower payable to a Lender (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the outstanding amount of the Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.
“Obligations” means all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of any Credit Party or any of its Subsidiaries arising under or in connection with a Loan Document and the principal of and premium, if any, and interest (including interest accruing during the pendency of any proceeding of the type described in Section 9.1(h), whether or not allowed in such proceeding) on the Loans.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Organic Document” means, relative to any Credit Party or any of its Subsidiaries, 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 arrangements applicable to such Credit Party’s or any of its Subsidiaries’ Capital Securities and, with respect to any UK Subsidiary Guarantor, the Constitutional Documents of such UK Subsidiary Guarantor.
“Other Administrative Proceeding” means any administrative proceeding relating to a dispute involving a patent office or other relevant intellectual property registry which relates to validity, revocation, ownership or enforceability of the relevant Intellectual Property.
“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 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.
“Participant Register” has the meaning specified in Section 11.11(b).
“Patent” means any patent and patent application, including any divisions, continuations, continuations in-part, provisionals, continued prosecution applications, substitutions, reissues, reexaminations, renewals, extensions, restorations, supplemental protection certificates and other additions in connection therewith, whether in or related to the United States or any foreign country or other jurisdiction.
“Patent Security Agreement” means any Patent Security Agreement executed and delivered by any Credit Party and/or any of its Subsidiaries, as applicable, in substantially the form of Exhibit C to the Security Agreement, as amended or otherwise modified from time to time.
“Patriot Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
“Payment in Full” means the entire principal amount of the Loans, interest thereon and all other Obligations, including all applicable Specified Repayment Fees and fees set forth in the Fee Letter, shall
have been indefeasibly paid in full in cash (other than inchoate indemnification, expense reimbursement obligations and other contingent obligations for which no claim has been asserted).
“PBGC” means the Pension Benefit Guaranty Corporation, or any entity succeeding to all or any of its functions under ERISA.
“Pension Plan” means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Plan), to which a Credit Party, any of its Subsidiaries or any ERISA Affiliate sponsors, contributes to, or provides benefits under, or has any obligation to contribute or provide benefits under, and to which a Credit Party or any of its Subsidiaries or ERISA Affiliate could reasonably be expected to have liability, including any liability by reason of having been a substantial employer under Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.
“Perfection Certificate” means a certificate duly completed and executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto, together with such changes thereto as the Agent or the Majority Lenders may from time to time request.
“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Permits” means all permits, licenses, registrations, certificates, orders, approvals, authorizations, consents, waivers, franchises, variances and similar rights issued by or obtained from any Governmental Authority or any other Person, including, without limitation, those relating to Environmental Laws and Healthcare Laws.
“Permitted Disposition” means any of the following: (i) Dispositions of inventory in the ordinary course of business, (ii) Dispositions of obsolete, damaged, worn out or surplus property in the ordinary course of business, (iii) licenses, sublicenses or similar agreements that are permitted pursuant to Section 8.21, (iv) any issuance, offer, sale, transfer or other Disposition of Qualified Capital Securities of Holdings, (v) the sale, lease, sublease or transfer of property or assets (A) from one Credit Party to another Credit Party, (B) from a Subsidiary that is not a Credit Party to another Subsidiary that is not a Credit Party or to any Credit Party or (C) from a Credit Party to a Subsidiary that is not a Credit Party, in an aggregate amount under this clause (C), together with the aggregate amount of Investments made pursuant to Section 8.5(g), not to exceed $2,000,000, (vi) Dispositions of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business (other than in connection with financing transactions) and (vii) other Dispositions that (x) do not include Material Intellectual Property or Capital Securities with respect to Subsidiaries that directly or indirectly own, or hold a license in respect of, Material Intellectual Property and (y) when taken together with all other Dispositions made during the preceding period of 12 consecutive months pursuant to this clause (vii), do not exceed $2,500,000 in the aggregate.
“Permitted Indebtedness” has the meaning specified in Section 8.2.
“Permitted Investments” has the meaning specified in Section 8.5.
“Permitted Lien” has the meaning specified in Section 8.3.
“Person” means any natural person, corporation, limited liability company, partnership, joint venture, association, trust or unincorporated organization, Governmental Authority or any other legal entity, whether acting in an individual, fiduciary or other capacity.
“Personal Data” means all data relating to one or more individual(s) that is personally identifying (i.e., data that identifies an individual or, in combination with any other information or data available to Holdings or its Subsidiaries, is capable of identifying an individual) or capable of identifying a specific device or non-personally identifying, including, without limitation, aggregate or de-identified data and data collected automatically, including data collected through a mobile or other electronic device.
“PIK Interest” has the meaning specified in Section 3.10(a).
“PIK Period” has the meaning specified in Section 3.10(a).
“Plaque” means the HeartFlow product that provides plaque identification, characterization, and visualization, and is presented with the FFRct model, FDA 510(k) approval for which was received on October 14, 2022 (510(k) No.: K213857).
“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the F.R.S. Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Agent) or any similar release by the F.R.S. Board (as determined by the Agent). Any change in the Prime Rate shall take effect at the opening of business on the day such change is publicly announced or quoted as being effective.
“Privacy and Data Security Policies” has the meaning specified in Section 6.16(d).
“Privacy Laws” has the meaning specified in Section 6.16(a).
“Pro Rata Share” means, with respect to any Lender, the percentage (expressed as a decimal and carried out to the ninth decimal place) obtained by dividing (x) the aggregate outstanding principal amount of Loans made hereunder by such Lender, by (y) the aggregate outstanding principal amount of all Loans made hereunder by all Lenders, in each case subject to adjustment as provided in Section 4.7. The Pro Rata Share of each Lender in respect of the Loans is set forth opposite the name of such Lender on Schedule 2 under the caption “Pro Rata Shares” or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
“Product” means any current product developed, manufactured, licensed, marketed, sold, distributed, or otherwise commercialized by any Credit Party (other than Holdings), including any such product in development or which may be developed.
“Product Agreement” means each agreement, license, document, instrument, interest (equity or otherwise) or the like under which one or more Persons grants or receives any right, title or interest with respect to any Product Development and Commercialization Activities in respect of one or more Products specified therein, or receives or is granted the right to exclude any third parties from engaging in any Product Development and Commercialization Activities with respect thereto, including each contract or agreement with suppliers, manufacturers, distributors, clinical research organizations, wholesalers, pharmacies or with any other Person related to any such entity.
“Product Development and Commercialization Activities” means, with respect to any Product, any combination of research, development, manufacture, importation, exportation, use, sale, storage, design, labeling, marketing, promotion, supply, distribution, testing, packaging, purchasing or other commercialization activities, receipt of payment in respect of any of the foregoing, or like activities the purpose of which is to commercially exploit such Product.
“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 or regulation or otherwise for the purpose of influencing any act or decision of such payee in his official capacity, inducing such payee to do or omit to do any act in violation of his lawful duty, securing any improper advantage or inducing such payee to use his influence with a government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality.
“Qualified Capital Securities” means, with respect to any Person, any Capital Security of such Person that is not a Disqualified Capital Security.
“Recipient” means the Agent or any Lender, as applicable.
“Regulatory Authority” means any Governmental Authority that is concerned with or has regulatory oversight with respect to the use, control, safety, efficacy, reliability, manufacturing, labeling, packaging, handling, storage, marketing, advertising, promotion, distribution, sale or other Product Development and Commercialization Activities relating to any Product of any Credit Party or any of its Subsidiaries, including the FDA and all equivalents of such agency in other jurisdictions and Standard Bodies.
“Regulatory Authorizations” means any and all clearances, approvals, and other forms of authorization, and related internal documentation where applicable, forming the basis for distribution of products (including without limitation, 510(k) clearances, internal decision documentation under FDA guidance on changes to 510(k)-cleared products, and where applicable supplements and amendments, governmental price and reimbursement approvals and approvals of applications for regulatory exclusivity), licenses, registrations, or authorizations of any Governmental Authority necessary for the manufacture, development, testing, distribution, use, storage, import, export, transport, promotion, marketing, sale, or other commercialization of a Product in any country or jurisdiction, and including, with respect to the Products, that each Product has been and is lawfully marketed by the Borrower in conformity and compliance with all applicable laws (including Healthcare Laws), regulations, enforcement policies, and similar pronouncements of any Regulatory Authority respecting any Product of the Borrower.
“Related Party” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and such Person’s Affiliate.
“Release” means any releasing, disposing, discharging, injecting, spilling, leaking, leaching, pumping, pouring, dumping, depositing, emitting, escaping, emptying, seeping, dispersal, migrating or placing, including movement through, into or upon the environment or any natural or man-made structure.
“Relevant Governmental Body” means the F.R.S. Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the F.R.S. Board or the Federal Reserve Bank of New York, or any successor thereto.
“Resignation Effective Date” has the meaning specified in Section 10.6(a).
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Restricted Payment” means (i) the declaration or payment of any dividend (other than dividends payable solely in Capital Securities of a Credit Party or any of its Subsidiaries) on, or the making of any payment or distribution on account of, or setting apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any class of Capital Securities of a Credit Party or any of its Subsidiaries or any warrants, options or other right or obligation to purchase or acquire any such Capital Securities, whether now or hereafter outstanding or (ii) the making of any other distribution in respect of such Capital Securities, in each case either directly or indirectly, whether in cash, property or obligations of a Credit Party or any of its Subsidiaries or otherwise.
“Roadmap” means the HeartFlow product that provides coronary vascular physiologic simulation, FDA 510(k) approval for which was received on October 14, 2022 (510(k) No.: K213857).
“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., and its successors.
“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.
“Sanctioned Person” means any Person that is a target of Sanctions, including without limitation, a Person that is (i) listed on OFAC’s Specially Designated Nationals and Blocked Persons List, (ii) listed on OFAC’s Consolidated Non-SDN List, (iii) a legal entity that is deemed by OFAC to be a Sanctions target based on the ownership of such legal entity by Sanctioned Peron(s), or (iv) a Person that is a Sanctions target pursuant to any list-based, territorial or country-based Sanctions program of a Governmental Authority.
“SEC” means the Securities and Exchange Commission.
“Secured Parties” means, collectively, the Agent and each of the Lenders.
“Security Agreement” means the Security Agreement, dated as of the date hereof, by and among the Borrower, the Subsidiary Guarantors and the Agent, as amended or otherwise modified from time to time.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Loan” means a Loan that bears interest at a rate based on Term SOFR, other than pursuant to clause (iii) of the definition of “ABR”.
“Solvent” means, (x) with respect to the Credit Parties and their Subsidiaries on a particular date, that on such date (i) the fair value of the property of the Credit Parties and their Subsidiaries on a consolidated basis is greater than the total amount of liabilities, including Contingent Liabilities, of the Credit Parties and their Subsidiaries on a consolidated basis, (ii) the present fair saleable value of the assets of the Credit Parties and their Subsidiaries on a consolidated basis is not less than the amount that will be required to pay the probable liability of the Credit Parties and their Subsidiaries on a consolidated basis on its debts as they become absolute and matured, (iii) [reserved], (iv) the Credit Parties and their Subsidiaries on a consolidated basis are not engaged in business or a transaction, and the Credit Parties on a consolidated basis are not about to engage in a business or a transaction, for which the property of the Credit Parties and their Subsidiaries on a consolidated basis would constitute an unreasonably small capital and (v) the Credit Parties and their Subsidiaries have not executed this Agreement or any other Loan Document or made any transfer or incurred any obligations hereunder, with actual intent to hinder, delay or defraud either present or future creditors; and (y) with respect to the Borrower on a particular date, that on such date (i) the fair value of the property of the Borrower is greater than the total amount of liabilities, including Contingent Liabilities, of the Borrower, (ii) the present fair saleable value of the assets of the Borrower is not less than the amount that will be required to pay the probable liability of the Borrower on its debts as they become absolute and matured, (iii) [reserved], (iv) the Borrower is not engaged in business or a transaction, and the Borrower is not about to engage in a business or a transaction, for which the property of the Borrower would constitute an unreasonably small capital and (v) the Borrower have not executed this Agreement or any other Loan Document or made any transfer or incurred any obligations hereunder, with actual intent to hinder, delay or defraud either present or future creditors. The amount of Contingent Liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, can reasonably be expected to become an actual or matured liability.
“SPAC Transaction” means the merger, acquisition, contribution, equity purchase or similar reorganization transaction or series of transactions resulting in the combination of the Borrower (or any corporate successor (including a Subsidiary) thereof) or Holdings and any special purpose acquisition company or similar entity, in each case, where such acquisition company or entity has no material commercial operations and where the common Capital Securities of such surviving entity (or any direct or indirect parent thereof) are publicly listed on any United States national securities exchange.
“Specified Holder” means any of the persons and entities listed on Schedule 1.2.
“Specified Repayment Fee” means for any prepayment or repayment of Loans occurring (i) at any time on or prior to the second anniversary of the Closing Date, none, (ii) at any time after the second anniversary of the Closing Date and on or prior to the third anniversary of the Closing Date, an amount equal to one and one-half percent (1.5%) of the aggregate outstanding principal amount of the Loans being prepaid or repaid and (iii) at any time after the third anniversary of the Closing Date and on or prior to the Maturity Date, an amount equal to three percent (3.0%) of the aggregate outstanding principal amount of the Loans being prepaid or repaid.
“Standard Bodies” means any of the organizations that create, sponsor and maintain safety, quality or other standards, including ISO, ANSI, CEN, SCC and the like.
“Stanford Licenses” means (i) that certain Exclusive Agreement, dated July 22, 2010, by and between the Board of Trustees of the Leland Stanford Junior University, as licensor, and the Borrower, formerly known as Cardiovascular Simulation, Inc., as licensee, (ii) that certain Software Exclusive License Agreement, dated April 20, 2010, by and between the Board of Trustees of the Leland Stanford Junior University, as licensor, and the Borrower, formerly known as Cardiovascular Simulation, Inc., as licensee; as amended by that certain Amendment No. 1, dated August 28, 2014 and that certain
Amendment No. 2, dated April 19, 2020, and (iii) that certain Software Exclusive License Agreement, dated June 18, 2009, by and between the Board of Trustees of the Leland Stanford Junior University, as licensor, and the Borrower, formerly known as Cardiovascular Simulation, Inc., as licensee; as amended by that certain Amendment No. 1, dated June 17, 2014 and that certain Amendment No. 2, dated June 17, 2019.
“Subsequent Closing Date” has the meaning specified in the First Amendment.
“Subsidiary” means, with respect to any Person, any other Person of which more than 50% of the outstanding Voting Securities (irrespective of whether at the time Capital Securities of any other class or classes of such other Person shall or might have voting power upon the occurrence of any contingency) or the issued Capital Securities of such other Person is at the time directly or indirectly owned or Controlled by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. Unless the context otherwise specifically requires, the term “Subsidiary” shall be a reference to a Subsidiary of Holdings, whether direct or indirect.
“Subsidiary Guarantor” means initially as of the Closing Date, each Subsidiary of Holdings identified under the caption “SUBSIDIARY GUARANTORS” on the signature pages hereto, if any, and, thereafter, each Subsidiary of Holdings that becomes a “Subsidiary Guarantor” after the Closing Date pursuant to Section 7.8.
“Synthetic Lease” means, as applied to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (i) that is not a capital lease in accordance with GAAP and (ii) in respect of which the lessee retains or obtains ownership of the property so leased for federal income tax purposes, other than any such lease under which that Person is the lessor.
“Systems” means the computers, servers, devices, networks, software, and systems used in connection with the operation of the business of Holdings or any of its Subsidiaries.
“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.
“Term SOFR” means,
(a) for any calculation with respect to a SOFR Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and
(b) for any calculation with respect to an ABR Loan on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “ABR Term SOFR Determination
Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 5:00 p.m. (New York City time) on any ABR Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such ABR SOFR Determination Day;
provided, further, that if Term SOFR determined as provided above (including pursuant to the proviso under clause (a) or clause (b) above) shall ever be less than 2.00%, then Term SOFR shall be deemed to be 2.00%.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Termination Date” means the date on which Payment in Full occurs.
“Trademark” means any trademark, service mark, trade name, logo, symbol, trade dress, domain name, rights in social media accounts, corporate name and other indicator of source or origin, and all applications and registrations therefor, together with all of the goodwill associated with the therewith.
“Trademark Security Agreement” means any Trademark Security Agreement executed and delivered by any Credit Party and/or any of its Subsidiaries, as applicable, substantially in the form of Exhibit D to the Security Agreement, as amended or otherwise modified from time to time.
“Trade Secrets” shall mean trade secrets and other confidential information data and databases, in each case that derive economic value from not being generally known by the public and not being readily ascertainable by other Persons, and all claims and rights related to any of the foregoing.
“Two-Consecutive Fiscal Quarter Net Sales Decline” shall mean a decrease in Net Sales for two consecutive Fiscal Quarters, in each case as compared to the Fiscal Quarter immediately preceding such two consecutive Fiscal Quarters.
“Type”, when used in reference to any Loan, refers to whether the rate of interest on such Loan is determined by reference to Term SOFR or ABR.
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if, with respect to any financing statement or by reason of any provisions of law, the perfection or the effect of perfection or non-perfection of the security interests granted to the Agent, on behalf of the Secured Parties, pursuant to the applicable Loan Document is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than New York, then “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of each Loan Document and any financing statement relating to such perfection or effect of perfection or non-perfection.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form 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.
“UK Subsidiary Guarantor” means each Guarantor incorporated under the laws of England and Wales.
“United States” or “U.S.” means the United States of America, its fifty states and the District of Columbia.
“United States Registered IP Rights” means any United States patent, patent application, trademark registration, trademark application or copyright registration.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“Voting Securities” means, with respect to any Person, Capital Securities of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
“Warrants” means, collectively, each certain Warrant to Purchase Common Stock issued by Holdings pursuant to the Existing Credit Agreement.
“Welfare Plan” means a “welfare plan”, as such term is defined in Section 3(1) of ERISA, which any Credit Party or any of its Subsidiaries sponsors, contributes to, or provides benefits under, or has any obligation to contribute or provide benefits under.
“wholly owned Subsidiary” means any direct or indirect Subsidiary of Holdings, all of the outstanding Capital Securities of which (other than any director’s qualifying shares or investments by foreign nationals mandated by applicable laws) is owned directly or indirectly by Holdings.
“Withholding Agent” means the Credit Parties and the Agent.
“Write-Down and Conversion Powers” means, (i) 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 (ii) 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.
SECTION 1.2 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, Capital Securities, rights under contractual obligations and permits and any right or interest in any such assets or property; and
(i) the word “will” shall have the same meaning as the word “shall”.
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.
SECTION 1.3 Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used in each Loan Document shall be interpreted, and all accounting determinations and computations thereunder (including under Section 8.4 and any definitions used in such calculations) shall be made, in accordance with those generally accepted accounting principles (“GAAP”) applied in the preparation of the financial statements referred to in Section 5.1(d). Unless otherwise expressly provided, all financial covenants and defined financial terms shall be computed on a consolidated basis for Holdings and its Subsidiaries, in each case without duplication. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein, and the determination of Indebtedness hereunder, shall be made without giving effect to Financial Accounting Standards Board (FASB) Standard ASC 842 (Leases) (or any other applicable financial accounting standard having a similar result or effect) and related interpretations, in each case, to the extent any lease (or similar arrangement conveying the right
to use) would be required to be treated as a capital lease thereunder where such lease (or similar arrangement) would have been treated as an operating lease under GAAP as in effect immediately prior to the effectiveness of the ASC 842.
SECTION 1.4 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 Capital Securities at such time.
SECTION 1.5 Rates. The Agent does not warrant or accept responsibility for, and shall not have any liability with respect to (a) the continuation of, administration of, submission of, calculation of or any other matter related to ABR, the Term SOFR Reference Rate or Term SOFR, or any component definition thereof or rates referred to in the definition thereof, or any alternative, successor or replacement rate thereto (including any Benchmark Replacement), including whether the composition or characteristics of any such alternative, successor or replacement rate (including any Benchmark Replacement) will be similar to, or produce the same value or economic equivalence of, or have the same volume or liquidity as, ABR, the Term SOFR Reference Rate, Term SOFR or any other Benchmark prior to its discontinuance or unavailability, or (b) the effect, implementation or composition of any Conforming Changes. The Agent and its affiliates or other related entities may engage in transactions that affect the calculation of ABR, the Term SOFR Reference Rate, Term SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement) or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Agent may select information sources or services in its reasonable discretion to ascertain ABR, the Term SOFR Reference Rate, Term SOFR or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
ARTICLE II
THE LOANS
SECTION 2.1 Commitments. On the terms and subject to the conditions of this Agreement, each of the Lenders agrees to make the Loans to the Borrower on the Closing Date in an amount not to exceed the Loan Commitment Amount. No amounts paid or prepaid with respect to any of the Loans may be reborrowed. The Loan Commitment Amount shall automatically and permanently be reduced to zero immediately after the making of the Loans on the Closing Date.
SECTION 2.2 Borrowing Procedures. Subject to the terms and conditions hereof, the Borrower may irrevocably request that the Loans be made by delivering to the Agent a Loan Request on or before 10:00 a.m. (London, England time) on a Business Day at least two (2) Business Days prior to the proposed Closing Date (or such shorter period as the Agent may agree in its sole discretion).
SECTION 2.3 Funding. After receipt of a Loan Request for the Loans pursuant to Section 2.2, each applicable Lender shall, on the Closing Date, and subject to the terms and conditions hereof (including the satisfaction of all conditions precedent set forth in Article V hereof), make the applicable Loans to the Borrower, in the amounts set forth opposite such Lender’s name on Schedule 2; provided
that, at the request of the Borrower, the Agent shall cause the proceeds of the Loans to be disbursed, by wire transfer of immediately available funds, in the amount and to the accounts set forth on Schedule 2.3.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1 Applicable Currency for Repayments and Prepayments; Pro Rata Application The Borrower agrees that the Loans, and any fees or interest accrued or accruing thereon, shall be repaid and prepaid solely in Dollars. Except as otherwise provided in this Agreement, each payment (including each repayment and prepayment) by the Borrower will be deemed to be made ratably in accordance with the Pro Rata Shares of the Lenders, and upon receipt of any such payment the Agent will promptly thereafter distribute like funds relating to any such payment to the Lenders in accordance with their Pro Rata Shares.
SECTION 3.2 Repayments and Prepayments. There will be no scheduled repayments of principal on the Loans prior to the Maturity Date. On the Maturity Date, the Borrower shall repay the entire unpaid principal amount of the Loans in full in cash. Prior thereto, payments, repayments and prepayments of the Loans shall be made as set forth below in this Section 3.2. Nothing in this Section 3.2 shall be deemed to (or be construed to) permit or authorize any transaction by any Credit Party that otherwise is prohibited or not specifically permitted by this Agreement or any other Loan Document. Unless otherwise expressly provided herein, all payments, repayments and prepayments described in this Section 3.2 shall be subject to Section 3.8.
(a) [Reserved].
(b) Loans. The Borrower may, upon five (5) Business Days’ prior written notice to the Agent, voluntarily prepay the outstanding principal amount of the Loans in whole or in part.
(c) Dispositions. Upon any Disposition by a Credit Party or any of its Subsidiaries (other than a Permitted Disposition), made in any period of twelve (12) consecutive months that, when taken together with all other Dispositions made during such 12-month period, results in aggregate Net Cash Proceeds from such Dispositions that exceed $2,000,000 for such 12-month period, the Borrower shall, within three (3) Business Days of such Person’s receipt of such excess proceeds thereof, prepay the outstanding principal amount of the Loans in an amount equal to 100% of such excess Net Cash Proceeds. The provisions of this clause shall not be deemed to be implied consent to any Disposition otherwise prohibited by the terms and conditions of this Agreement.
(d) Events of Loss. Upon the receipt by a Credit Party or any of its Subsidiaries of any Event of Loss, received in any period of 12 consecutive months, that when taken together with all other Events of Loss during such 12-month period, results in aggregate Net Cash Proceeds from such Events of Loss that exceed $2,000,000 for such 12-month period, the Borrower shall, within three (3) Business Days of such Person’s receipt of such excess proceeds thereof, prepay the outstanding principal amount of the Loans in an amount equal to 100% of such excess Net Cash Proceeds.
(e) Other Indebtedness. Upon the issuance, sale or other incurrence of any debt securities or other Indebtedness by a Credit Party or any of its Subsidiaries (other than Permitted Indebtedness), the Borrower shall, within three (3) Business Days of such Person’s receipt of the proceeds thereof, prepay the outstanding principal amount of the Loans in an amount equal to 100% of the net cash proceeds therefrom. The provisions of this clause shall not be deemed to be implied consent
to any such issuance, sale or incurrence otherwise prohibited by the terms and conditions of this Agreement.
(f) Acceleration. Immediately upon any acceleration of the applicable Maturity Date of the Loans pursuant to Section 9.2 or Section 9.3, the Borrower shall repay the Loans in full, unless, pursuant to Section 9.3, only a portion of the Loans are so accelerated (in which case the portion so accelerated shall be so repaid).
(g) Change in Control. Immediately upon the occurrence of a Change in Control, the Borrower shall repay the Loans in full.
(h) IPO. Immediately upon the consummation of an IPO or a SPAC, the Borrower shall repay the Loans in an amount equal to the lesser of (i) the Net Cash Proceeds of such IPO or SPAC in excess of $150,000,000 and (ii) $35,000,000. 50,000,000; provided that, in the event any “green shoe option” (or overallotment option) is exercised by the financial institutions underwriting such IPO, then, the Borrower shall repay the Loans in an additional principal amount of $5,000,000.
SECTION 3.3 Application. Proceeds of each prepayment or repayment of the Loans shall be applied as set forth in clause (b) of Section 4.4.
SECTION 3.4 Interest Rate. Subject to Section 3.5, during any applicable Interest Period, (a) each ABR Loan shall accrue interest at a rate per annum equal to the sum of (i) the Applicable Margin, plus (ii) ABR and (b) each SOFR Loan shall accrue interest during such Interest Period at a rate per annum equal to the sum of (i) the Applicable Margin, plus (ii) Term SOFR for such Interest Period. The interest rate shall be recalculated and, if necessary, adjusted for each Interest Period, in each case pursuant to the terms hereof.
SECTION 3.5 Default Rate. Upon the occurrence and during the continuance of an Event of Default, and continuing until such Event of Default is no longer continuing, upon written notice by the Agent (acting pursuant to the instruction of the Majority Lenders (in their sole discretion)), the Applicable Margin shall be increased by 3.00% per annum (such increase, the “Default Rate”). The Default Rate, along with all other interest due and payable on such date, shall be payable in cash on the last Business Day of each calendar month.
SECTION 3.6 Payment Dates. Interest accrued on the Loans shall be payable in cash, without duplication:
(a) on the applicable Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on the Loans, on the principal amount so paid or prepaid;
(c) subject to Section 3.10, the last day of each Interest Period for the Loans; and
(d) on that portion of the Loans that is accelerated pursuant to Section 9.2 or Section 9.3, immediately upon such acceleration.
Interest accrued on the Loans or any other monetary Obligations after the date such amount is due and payable (whether on the applicable Maturity Date, upon acceleration or otherwise) shall be payable upon demand.
SECTION 3.7 Fees. The Credit Parties agree, jointly and severally, to pay to the Agent and the Lenders the fees set forth in the Fee Letter.
SECTION 3.8 Specified Repayment Fees. Unless otherwise expressly provided herein, all payments, repayments and prepayments described in Section 3.2 and made at any time after the second anniversary of the Closing Date (whether resulting from voluntary or involuntary prepayments or repayments, acceleration (including as a result of the occurrence of any event described in Section 9.1(h) or otherwise)), including, for the avoidance of doubt, on the Maturity Date, shall be subject to the payment of Specified Repayment Fees as described below in this Section 3.8. Until Payment in Full occurs, all such Specified Repayment Fees shall continue to be due and payable, including after the occurrence of any Default, acceleration, maturity or otherwise. If all or any portion of the outstanding Loans are repaid or prepaid for any reason after the second anniversary of the Closing Date, including, for the avoidance of doubt, on the Maturity Date, the Borrower shall pay the Specified Repayment Fee to the Agent at the time of such prepayment or repayment, together with any other fees payable hereunder. Specified Repayment Fees shall be nonrefundable once paid.
SECTION 3.9 [Reserved].
SECTION 3.10 PIK Interest.With respect to the Loans, during the period from the Closing Date until the Interest Payment Date occurring closest to (but not after) the date that is eighteen (18) months after the Closing Date (the “PIK Period”), so long as no Default has occurred and is continuing on such date, by delivery of written notice to the Agent not less than five (5) Business Days prior to any Interest Payment Date, the Borrower may elect to pay all of the interest accrued on the Loans for the Interest Period ending on such Interest Payment Date “in kind” (“PIK Interest”); provided that during the PIK Period, the Applicable Margin shall be increased by one percent (1.00%) per annum with respect to any such interest paid as PIK Interest.
(b) In each case, such election shall only relate to interest that is (x) due and payable on such Interest Payment Date and (y) accrued during the Interest Period ending on such Interest Payment Date. In the event the Borrower elects to pay PIK Interest pursuant to this Section 3.10, such PIK Interest shall be capitalized and added to the outstanding principal amount of the Loans on the applicable Interest Payment Date. For purposes of this Agreement and the other Loan Documents, the amounts so capitalized and added pursuant to the foregoing sentence will constitute a portion of the outstanding principal amount of the Loans as of such Interest Payment Date and will bear interest (which shall be due and payable) in accordance with Sections 3.4, 3.5, 3.6 and, to the extent applicable, 3.8. Notwithstanding anything to the contrary contained in this Agreement or in any other Loan Document, in the event that any Default has occurred and is continuing on any Interest Payment Date, all interest due and payable on such date must be paid in cash, irrespective of any election at any time by the Borrower to pay such interest in the form of PIK Interest.
SECTION 3.11 Interest Computation.
(a) Subject to Section 2.2, each Loan shall initially be a SOFR Loan.
(b) All interest hereunder shall be computed on the basis of a year of 360 days (or in the case of interest computed by reference to the ABR at times when the ABR is based on the Prime Rate, such interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year)), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on any Loan shall be computed on a daily basis based upon the outstanding principal amount of such Loan as of the applicable date of determination. The applicable
ABR or Term SOFR shall be determined by the Agent, and such determination shall be conclusive absent manifest error.
SECTION 3.12 Term SOFR Conforming Changes.
In connection with the use or administration of Term SOFR, the Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. The Agent will promptly notify the Borrower and the Lenders of the effectiveness of any Conforming Changes in connection with the use or administration of Term SOFR.
ARTICLE IV
SOFR AND OTHER PROVISIONS
SECTION 4.1 Increased Costs.Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender;
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii) impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any participation therein (except as otherwise accounted for in the definition of “Term SOFR”, as applicable);
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender or such other Recipient of participating in, or to reduce the amount of any sum received or receivable by such Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or other Recipient, the Borrower will pay to such Lender or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any lending office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Loan Commitments of such Lender or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company, as the case may be, could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and/or liquidity), then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Agent), the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section 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 for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law 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).
SECTION 4.2 Compensation for Losses.In the event of (a) the payment of any principal of any SOFR Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any SOFR Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (c) the failure to borrow, convert, continue or prepay any SOFR Loan on the date specified in any notice delivered pursuant hereto, or (d) the assignment of any SOFR Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 3.11, then, in any such event, the Borrower shall compensate each Lender for any loss, cost and expense attributable to such event, including any loss, cost or expense arising from the liquidation or redeployment of funds. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.
SECTION 4.3 Taxes.Defined Terms. For purposes of this Section, the term “applicable law” includes FATCA.
(b) Payments Free of Taxes. Any and all payments by or on account of any Obligation of a Credit Party under any Loan Document 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 any Withholding Agent, then such 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 Credit Party 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) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
(c) Payment of Other Taxes by the Credit Parties. Each Credit Party agrees that, without duplication, it shall, or shall cause the appropriate Credit Party to, timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Agent timely reimburse it for the payment of, any Other Taxes.
(d) Indemnification by Credit Parties. Each Credit Party agrees that, without duplication, it shall, or shall cause the appropriate Credit Party to, indemnify 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) 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 a Credit Party 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 error.
(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 11.11(b) 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 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 such Lender from any other source against any amount due to the Agent under this paragraph (e).
(f) Evidence of Payments. As soon as practicable after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section, such Credit Party 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 satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably).
(g) 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. In addition, any Lender, if reasonably requested by the Borrower or the Agent, shall deliver such other documentation prescribed by applicable law or 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 paragraphs (g)(ii)(A), (ii)(B) and (ii)(D) of this Section) 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,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Agent on or about 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 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 about 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:
(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 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 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) in the case of a Foreign Lender claiming that its extension of credit will generate U.S. effectively connected income, executed copies of IRS Form W-8ECI;
(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 E-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; or
(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-2 or Exhibit E-3, IRS Form W-9, 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 E-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 about 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 applicable law to permit the Borrower or the Agent to determine the withholding or deduction required to be made; and
(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 Lender’s obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Agent in writing of its legal inability to do so.
(h) Treatment of Certain Refunds. If any party 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 (including by the payment of additional amounts pursuant to this Section), 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 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 paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) 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 paragraph 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.
(i) Survival. Each party’s obligations under this Section shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all obligations under any Loan Document.
SECTION 4.4 Payments, Computations; Proceeds of Collateral, Etc. The parties hereto agree as follows:
(a) Unless otherwise expressly provided in a Loan Document, all payments by the Borrower pursuant to each Loan Document shall be made without setoff, deduction or counterclaim not later than 11:00 a.m. (New York City time) on the date due in same day or immediately available funds to such account as the Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Agent on the next succeeding Business Day. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Payments due on other than a Business Day shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees in connection with that payment.
(b) All amounts received as a result of the exercise of remedies under the Loan Documents (including from the proceeds of collateral securing the Obligations) or under applicable law shall be applied upon receipt to the Obligations as follows: (i) first, to the payment in full in cash of all interest (including interest accruing after the commencement of a proceeding in bankruptcy, insolvency or similar law, whether or not permitted as a claim under such law) and fees owing under the Loan Documents, and all costs and expenses owing to the Agent and the Lenders (or any of them) pursuant to the terms of the Loan Documents, until paid in full in cash, (ii) second, after payment in full in cash of the amounts specified in clause (b)(i), to the payment of the principal amount of the Loans then outstanding, (iii) third, after payment in full in cash of the amounts specified in clauses (b)(i) and (b)(ii), to the payment of all other Obligations owing to the Agent and the Lenders (or any of them), and (iv) fourth, after payment in full in cash of the amounts specified in clauses (b)(i) through (b)(iii), and following the Termination Date, to the Borrower or any other Person lawfully entitled to receive such surplus.
SECTION 4.5 Setoff. Each Lender and the Agent shall, upon the occurrence and during the continuance of any Default described in clauses (i) through (iv), inclusive, of Section 9.1(h) or, upon the occurrence and during the continuance of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) each Credit Party and each of its Subsidiaries hereby grants to each Lender and the Agent a continuing security interest in, any and all balances, credits, deposits, accounts (other than Excluded Accounts) or moneys of each Credit Party and each of its Subsidiaries then or thereafter maintained with such Lender or the Agent, as applicable. Each Lender and the Agent agrees promptly to notify the Borrower after any such appropriation and application made by such Lender or the Agent, as applicable; provided that, the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender and the Agent under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender or the Agent, as applicable, may have.
SECTION 4.6 Inability to Determine Rates.
Subject to Section 4.10, if, on or prior to the first day of any Interest Period for any SOFR Loan:
(a) the Agent determines (which determination shall be conclusive and binding absent manifest error) that “Term SOFR” cannot be determined pursuant to the definition thereof, or
(b) the Majority Lenders determine that for any reason in connection with any request for a SOFR Loan or a conversion thereto or a continuation thereof that Term SOFR for any requested Interest Period with respect to a proposed SOFR Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, and the Majority Lenders have provided notice of such determination to the Agent,
the Agent will promptly so notify the Borrower and each Lender.
Upon notice thereof by the Agent to the Borrower, any obligation of the Lenders to make SOFR Loans shall be suspended (to the extent of the affected SOFR Loans or affected Interest Periods) until the Agent (with respect to clause (b), at the instruction of the Majority Lenders) revokes such notice. Upon receipt of such notice, (i) the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of SOFR Loans (to the extent of the affected SOFR Loans or affected Interest Periods) or, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to an ABR Loan in the amount specified therein and (ii) any outstanding affected SOFR Loans will be deemed to have been converted into ABR Loans at the end of the
applicable Interest Period. Upon any such conversion, the Borrower shall also pay accrued interest on the amount so converted, together with any additional amounts required pursuant to Section 4.2. Subject to Section 4.10, if the Agent determines (which determination shall be conclusive and binding absent manifest error) that “Term SOFR” cannot be determined pursuant to the definition thereof on any given day, the interest rate on ABR Loans shall be determined by the Agent without reference to clause (iii) of the definition of “ABR” until the Agent revokes such determination.
SECTION 4.7 Sharing of Payments. If any Lender will, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on the Loans or other obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations greater than its Pro Rata Share thereof as provided herein, then the Lender receiving such greater proportion will (a) notify the Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as will be equitable, so that the benefit of all such payments will be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them; provided that, (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations will be rescinded and the purchase price restored to the extent of such recovery, without interest; and (ii) the provisions of this Section will not be construed to apply to (i) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (ii) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in its Loans to any assignee or participant, other than to the Borrower or any of their respective Subsidiaries (as to which the provisions of this subsection will apply).
SECTION 4.8 Mitigation. If any Lender requests compensation under Section 4.1, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 4.3, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 4.1 or 4.3, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would 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.
SECTION 4.9 Illegality. If any Lender determines that any law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Loans whose interest is determined by reference to SOFR, the Term SOFR Reference Rate or Term SOFR, or to determine or charge interest rates based upon SOFR, the Term SOFR Reference Rate or Term SOFR, then, upon notice thereof by such Lender to the Borrower (through the Agent), (a) any obligation of the Lenders to make SOFR Loans, and any right of the Borrower to continue SOFR Loans shall be suspended, and (b) the interest rate on which ABR Loans shall, if necessary to avoid such illegality, be determined by the Agent without reference to clause (iii) of the definition of “ABR”, in each case until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (i) the Borrower shall, if necessary to avoid such illegality, upon demand from any Lender (with a copy to the Agent), prepay or, if applicable, convert all SOFR Loans to ABR Loans (the interest rate on which ABR Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Agent without reference to clause (iii) of the definition of “ABR”), on the last day of the Interest Period therefor, if all affected Lenders may lawfully continue to maintain such SOFR Loans to such day, or immediately, if any Lender may not lawfully continue to maintain such SOFR Loans to such day, and (ii) if necessary to
avoid such illegality, the Agent shall during the period of such suspension compute the ABR without reference to clause (iii) of the definition of “ABR,” in each case until the Agent is advised in writing by each affected Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon SOFR, the Term SOFR Reference Rate or Term SOFR. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 4.2.
SECTION 4.10 Benchmark Replacement Setting.Benchmark Replacement.
(i) Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, the Agent and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the Agent has posted such proposed amendment to all affected Lenders and the Borrower so long as the Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Majority Lenders. No replacement of a Benchmark with a Benchmark Replacement pursuant to this Section 4.10(a)(i) will occur prior to the applicable Benchmark Transition Start Date.
(ii) No Hedging Agreement shall be deemed to be a “Loan Document” for purposes of this Section 4.10.
(b) Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(c) Notices; Standards for Decisions and Determinations. The Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Conforming Changes in connection with the use, administration, adoption or implementation of a Benchmark Replacement. The Agent will promptly notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to Section 4.10(d) and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 4.10, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 4.10.
(d) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including the Term SOFR Reference Rate) and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Agent in its reasonable discretion or (B) the administrator of such Benchmark or the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for
Financial Benchmarks, then the Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable, non-representative, non-compliant or non-aligned tenor and (ii) if a tenor that was removed pursuant to clause (i) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is not or will not be representative or in compliance with or aligned with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks for a Benchmark (including a Benchmark Replacement), then the Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
(e) Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period, the Borrower may revoke any pending request for a SOFR Loan of, conversion to or continuation of SOFR Loans to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for or conversion to ABR Loans. During a Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of ABR based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of ABR.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to the Borrowing of the Loans on the Closing Date. The obligation of the Lenders to make the Loans on the Closing Date shall be subject to the execution and delivery of this Agreement by the parties hereto, the delivery of a Loan Request for the Loan Loans pursuant to Section 2.2, and the prior or concurrent satisfaction of each of the conditions precedent set forth below in this Section.
(a) Secretary’s Certificate, Etc. The Agent shall have received from each Credit Party (x) a copy of a good standing certificate (to the extent such concept it applicable in any relevant jurisdiction), dated a date reasonably close to the Closing Date, for each such Person and (y) a certificate, dated as of the Closing Date, duly executed and delivered by such Person’s Secretary, Assistant Secretary, or other Authorized Officer, director, managing member or general partner, as applicable, as to:
(i) resolutions of each such Person’s board of directors (or other managing body, in the case of other than a corporation) then in full force and effect authorizing the execution, delivery and performance of each Loan Document to be executed by such Person and the transactions contemplated hereby and thereby;
(ii) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each Loan Document to be executed by such Person;
(iii) the full force and validity of each Organic Document of such Person and copies thereof; and
(iv) certifying that each copy document relating to it specified in this Section 5.1(a) is correct, complete and in full force and effect and has not been amended or superseded as at the date no earlier than the Closing Date;
in each case, upon which certificates the Agent may conclusively rely until it shall have received a further certificate of the Secretary, Assistant Secretary, director, managing member or general partner, as applicable, of any such Person cancelling or amending the prior certificate of such Person.
(b) Closing Date Certificate. The Agent shall have received a certificate, dated as of the Closing Date and duly executed and delivered by an Authorized Officer of the Borrower (the “Closing Date Certificate”), which certificate shall be in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) and shall, among other things, represent and warrant that the statements made therein are true and correct as of such date, and, at the time such certificate is delivered, such statements shall in fact be true and correct. The statements in such certificate shall be limited to (i) (x) the representations and warranties set forth herein and in each Loan Document shall, in each case, be true and correct in all material respects as of the Closing Date (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); provided that any representations and warranties that are by their terms qualified by materiality, Material Adverse Effect or similar qualification shall be true and correct in all respects, and (y) no Default or Event of Default under and as defined in this Agreement shall have occurred and then be continuing and (ii) all of the conditions set forth in Section 5.1 have been satisfied.
(c) Delivery of Notes. The Agent shall have received Notes for each Lender that has requested as such, evidencing the Loans, which Notes shall be duly executed and delivered by an Authorized Officer of the Borrower.
(d) Financial Information, Etc. The Agent shall have received:
(i) audited consolidated financial statements of the Borrower and its Subsidiaries for the Fiscal Year ended December 31, 2023; and
(ii) unaudited consolidated balance sheets of the Borrower and its Subsidiaries for the Fiscal Quarter ended March 31, 2024, together with the related consolidated statement of operations, shareholder’s equity and cash flows for such Fiscal Quarter.
(e) Compliance Certificate. The Agent shall have received a Compliance Certificate, dated as of the Closing Date, duly executed (and with all schedules thereto duly completed) and delivered by the chief financial or accounting Authorized Officer of the Borrower.
(f) Solvency, Etc. The Agent shall have received a solvency certificate duly executed and delivered by the chief financial or accounting Authorized Officer of the Borrower, dated as of the Closing Date, in form and substance satisfactory to the Agent.
(g) Fee Letter. The Agent shall have received the Fee Letter, dated as of the Closing Date, duly executed and delivered by the Borrower, the Agent and the Lenders.
(h) Security Agreement, etc. The Agent shall have received executed counterparts of the Security Agreement, dated as of the Closing Date, duly executed and delivered by the Credit Parties, together with:
(i) certificates (in the case of Capital Securities that are securities (as defined in the UCC)) evidencing all of the issued and outstanding Capital Securities owned by each Credit Party, which certificates in each case shall be accompanied by undated instruments of transfer duly executed in blank, or, if any Capital Securities (in the case of Capital Securities that are uncertificated securities (as defined in the UCC)), confirmation and evidence satisfactory to the Agent that the security interest therein has been transferred to and perfected by the Agent in accordance with Articles 8 and 9 of the UCC and all laws otherwise applicable to the perfection of the pledge of such Capital Securities; provided that Borrower shall be required to pledge 100% of the Capital Securities of any Foreign Subsidiaries existing as of the Closing Date, except to the extent as reasonably determined by the Borrower after consulting with the Agent, such pledge would reasonably be expected to result in material adverse tax consequences to the Borrower, in which case Borrower shall not be required to pledge voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiaries;
(ii) financing statements suitable in form for naming each Credit Party as a debtor and the Agent for the benefit of the Secured Parties as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions as may be necessary or, in the opinion of the Agent, desirable to perfect the security interests of the Secured Parties pursuant to the Security Agreement; and
(iii) any Patent Security Agreement, Trademark Security Agreement or Copyright Security Agreement required to be provided under the Security Agreement, each dated as of the Closing Date, duly executed and delivered by an Authorized Officer of the applicable Credit Party;
(i) Intercompany Subordination Agreement. The Agent shall have received executed counterparts of the Intercompany Subordination Agreement, duly executed and delivered by each Credit Party and each of their respective Subsidiaries.
(j) Material Agreements. Copies of all Material Agreements and license agreements shall have been made available to the Agent upon its request. The Agent shall have received a certificate from an Authorized Officer of the Borrower certifying that each such contract or agreement is in full force and effect as of the Closing Date and, to the extent applicable, that there have been no changes to each such contract or agreement since the delivery of same in connection with the Existing Credit Agreement. The Agent shall be satisfied in its sole discretion with the terms and conditions of all Material Agreements and license agreements entered into by the Credit Parties and their Subsidiaries.
(k) 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 the Credit Parties, in each case, in form and substance reasonably acceptable to the Agent.
(l) Fees, Expenses, Etc. The Agent shall have received for its own account and for the account of the Lenders and all fees, costs and expenses due and payable pursuant to Section 11.3, the Fee Letter or any other Loan Documents, including all closing costs and fees and all unpaid reasonable expenses of the Agent and the Lenders incurred in connection with the transactions contemplated hereby (including the Agent’s legal fees and expenses).
(m) Anti-Terrorism Laws and Beneficial Ownership. The Agent shall have received, as applicable, (i) 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 (ii) if the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, at least five Business Days prior to the Closing Date, a Beneficial Ownership Certification.
(n) No Material Adverse Effect. As of the Closing Date, (i) the representations and warranties set forth herein and in each Loan Document are true and correct in all material respects; provided that any representations and warranties that are by their terms qualified by materiality, Material Adverse Effect or similar qualification shall be true and correct in all respects, (ii) no Default or Event of Default shall have then occurred and be continuing, and (iii) no Material Adverse Effect shall have occurred since December 31, 2023.
(o) Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of any Credit Party shall be satisfactory in form and substance to the Agent, and the Agent and its counsel shall have received all information, approvals, resolutions, opinions, documents or instruments as the Agent may reasonably request.
(p) Debt Securities and Credit Facilities; Senior Secured Loans. The Agent shall have received a certificate from an Authorized Officer of the Borrower certifying that (i) no Credit Party nor any of its Subsidiaries has issued, or authorized the issuance of, any debt securities or entered into, or authorized the entrance into, any other credit facilities and (ii) the Obligations constitute the sole secured obligations and sole Indebtedness of the Credit Parties (other than Permitted Indebtedness).
(q) Perfection Certificate. The Agent shall have received a Perfection Certificate, dated as of the Closing Date, duly executed (and with all schedules thereto duly completed) and delivered by the Authorized Officer of the Borrower.
(r) Organizational Chart. The Borrower shall have provided an accurate and complete organization chart reflecting all of the direct and indirect subsidiaries of the Borrower (including the applicable ownership percentages of each entity) as of the Closing Date, and the Agent and the Majority Lenders, in their sole discretion, shall have been satisfied with the direct and indirect equity ownership of the Credit Parties.
(s) Insurance. The Agent shall have received: (i) certificates of insurance evidencing that the insurance required to be maintained pursuant to Section 7.4 is in full force and effect, in each case, in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably); and (ii) certified copies of the insurance policies (or binders in respect thereof), from one or more insurance companies satisfactory to the Agent, required to be maintained pursuant to Section 7.4.
(t) Repayment of Existing Debt. On or prior to the Closing Date or substantially concurrently with the funding of the Loans, (i) all Indebtedness of each Credit Party and each Subsidiary thereof under the Existing Credit Agreement and all other documents, agreements and instruments related thereto shall have been repaid in full, together with all fees (except for those fees related to the Existing Credit Agreement set forth in the Fee Letter) and other amounts owing thereon, all commitments under the agreements evidencing such Indebtedness shall have been terminated and all letters of credit, if any, issued pursuant to such agreements shall have been terminated, backstopped or cash collateralized, in each case in accordance with the terms of that certain payoff letter, dated on or about the date hereof, by and among the parties to the Existing Credit Agreement and (ii) all security interests in respect of, and Liens securing, the obligations of each such Credit Party and each such Subsidiary, as applicable, under the Existing Credit Agreement and all other documents, agreements and instruments related thereto shall have been terminated and released (except for those documents, agreements and instruments that will continue to secure the Obligations hereunder), and the Agent shall have received all customary payoff
letters with respect to such Indebtedness and such releases and other documents related thereto as may have been requested by the Agent, which releases shall be in customary form, in each case in accordance with the terms of that certain payoff letter, dated on or about the date hereof, by and among the parties to the Existing Credit Agreement. Without limiting the foregoing, the Agent shall have received (or been granted authorization to file) (x) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC or equivalent statute or regulation of each jurisdiction where a financing statement or application for registration (Form UCC-1 or the appropriate equivalent) was filed with respect to any Credit Party or any Subsidiary thereof, as applicable, in connection with the security interests created under the Existing Credit Agreement and all other documents, agreements and instruments related thereto, (y) terminations or reassignments of any security interest in any United States Patents, United States Trademarks, United States Copyrights, or similar United States interests of such Credit Party or such Subsidiary, as applicable, on which filings have been made, and (z) if applicable, terminations of all mortgages, leasehold mortgages, hypothecs and deeds of trust created with respect to property of such Credit Party or such Subsidiary, as applicable, in each case, to secure the obligations under the Existing Credit Agreement and all other documents, agreements and instruments related thereto, all of which shall be in a form reasonably satisfactory to the Agent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this Agreement, each Credit Party hereby jointly and severally represents and warrants to the Agent and the Lenders as follows:
SECTION 6.1 Organization, Etc.Each Credit Party (i) is validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation or organization (to the extent such concept it applicable in any relevant jurisdiction), (ii) is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction where the nature of its business requires such qualification, (iii) has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under each Loan Document to which it is a party, to own and hold under lease its property and to conduct its business substantially as currently conducted by it and (iv) in the case of each UK Subsidiary Guarantor, if any, no limit on its powers will be exceeded as a result of the borrowing, grant of security or giving of guarantees contemplated by the Loan Documents to which it is a party; except in the cases of clauses (ii) and (iii), where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
SECTION 6.2 Due Authorization, Non-Contravention, Etc. The execution, delivery and performance by each Credit Party and each of its Subsidiaries of each Loan Document executed or to be executed by it are in each case within such Person’s powers, have been duly authorized by all necessary action, and do not:
(a) contravene (i) any Organic Documents of such Credit Party or such Subsidiary, (ii) any court decree or order binding on or affecting such Credit Party or such Subsidiary, or (iii) any law or governmental regulation binding on or affecting such Credit Party or such Subsidiary; except in the cases of clauses (ii) and (iii), where could not reasonably be expected to result in a Material Adverse Effect; or
(b) result in (i) or require the creation or imposition of, any Lien on a Credit Party’s or any of its Subsidiaries’ properties (except Permitted Liens) or (ii) a default under any contractual restriction binding on or affecting a Credit Party or any of its Subsidiaries, except in the case of this clause (ii) where such default could not reasonably be expected to result in a Material Adverse Effect.
SECTION 6.3 Government Approval, Regulation, Etc. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or other Person (other than those that have been, or on the Closing Date will be, duly obtained or made and which are, or on the Closing Date will be, in full force and effect) is required for the due execution, delivery or performance by a Credit Party or any of its Subsidiaries of any Loan Document to which it is a party, except where could not reasonably be expected to result in a Material Adverse Effect. Each Credit Party, each of its Subsidiaries and their respective properties and businesses are in compliance in all material respects with all laws, rules, regulations, orders and court decrees applicable to such Persons, properties or businesses, as the case may be.
SECTION 6.4 Validity, Etc. Each Loan Document to which a Credit Party or any of its Subsidiaries is a party constitutes the legal, valid and binding obligations of such Person enforceable against such Person in accordance with its respective terms (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by principles of equity).
SECTION 6.5 Financial Information. The consolidated financial statements of Holdings or the Borrower, as applicable, and such party’s Subsidiaries furnished to the Agent pursuant to Section 5.1(d) and Sections 7.1(a), (b), and (c) have been prepared in accordance with GAAP consistently applied, and present fairly the consolidated financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended.
SECTION 6.6 No Material Adverse Change. Since December 31, 2023, there has been no event, occurrence or other circumstance that has resulted in a Material Adverse Effect.
SECTION 6.7 Litigation, Labor Matters and Environmental Matters.Except as set forth on Schedule 6.7(a), there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or threatened against or affecting any Credit Party or any of its Subsidiaries.
(b) There are no material labor controversies pending against or threatened, in writing, against or affecting any Credit Party or any of its Subsidiaries.
(c) No Credit Party nor any of its Subsidiaries (i) has failed to comply with any material Environmental Law or to obtain, maintain or comply with any material Permit under or in connection with any Environmental Law (“Environmental Permit”), (ii) is or has been subject to any Environmental Liability, (iii) has received notice of any Environmental Liability or (iv) knows of any basis for any Environmental Liability, that, in the case of clause (ii), (iii) or (iv), could reasonably be expected to result in a Material Adverse Effect.
SECTION 6.8 Subsidiaries. Schedule 6.8 sets forth the name and jurisdiction of incorporation or formation of each direct and indirect Subsidiary of Holdings. Except as set forth on Schedule 6.8, neither Holdings nor any of its Subsidiaries owns or holds, whether beneficially or of record, any Capital Securities of any other Person. All of the outstanding Capital Securities of Holdings’ Subsidiaries as set forth on Schedule 6.8 have been validly issued, are fully paid and nonassessable and are owned directly or indirectly by Holdings free and clear of all Liens except for Permitted Liens.
SECTION 6.9 Ownership of Properties. Each Credit Party and each of its Subsidiaries owns (i) in the case of owned real property, good and marketable fee title to, and (ii) in the case of owned personal property, good and valid title to, or, in the case of leased real or personal property, valid and enforceable leasehold interests (as the case may be) in, all of its material properties and material assets,
tangible and intangible, of any nature whatsoever, free and clear in each case of all Liens or claims, except for Permitted Liens.
SECTION 6.10 Taxes. Each Credit Party and each of its Subsidiaries has filed all income and other material Tax returns and reports required by law to have been filed by it and each Credit Party has paid all material Taxes owed (whether or not shown on any such Tax returns), except any such Taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books and that are set forth on Schedule 6.10.
SECTION 6.11 Pension Plans, Etc. As of the date hereof, (i) the Borrower is not an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA nor a “plan,” as defined in and subject to Section 4975 of the Code, (ii) none of the assets of any Credit Party or any of their respective Subsidiaries constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, (iii) no Credit Party nor any of its Subsidiaries constitutes a “governmental plan” within the meaning of Section 3(32) of ERISA, and (iv) to the knowledge of any Credit Party, transactions by or with a Credit Party are not subject to any statute, rule or regulation regulating investments of, or fiduciary obligations with respect to, “governmental plans” within the meaning of Section 3(32) of ERISA. Each Welfare Plan and each “employee pension benefit plan, as defined in Section 3(1) of ERISA that is sponsored or maintained by any Credit Party, has been established and operated in compliance with applicable law, and there is no liability outstanding with respect to any such Welfare Plan or employee pension benefit plan, except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Except as set forth on Schedule 6.11, no formal steps have been taken to terminate any Pension Plan maintained or contributed to any Credit Party or any of its Subsidiaries. No ERISA Event has occurred with respect to any Pension Plan or Multiemployer Plan which could reasonably be expected to result in the incurrence by any Credit Party, any of its Subsidiaries or any ERISA Affiliate of any liability, fine or penalty which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. No Credit Party, nor any of its Subsidiaries has any Contingent Liability with respect to any post-retirement benefit under a Welfare Plan, which could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. As of the date hereof, there are no Multiemployer Plans to which any Credit Party or any of its Subsidiaries has incurred any Liability.
SECTION 6.12 Accuracy of Information None of the factual information (excluding information of a general economic or industry nature and, for the avoidance of doubt, any budgets, financial statements, forecasts, projections or other forward-looking statements (provided, that, such statements were prepared in good faith based upon assumptions reasonably believed by the preparer)) heretofore or contemporaneously furnished in writing to the Agent or any Lender by or on behalf of any Credit Party or any of its Subsidiaries in connection with this Agreement or any other Loan Document or any transaction contemplated hereby or thereby, when taken as a whole, contains any untrue statement of a material fact, or omits to state any material fact necessary to make any information, in the light of the circumstances under which they were made, not materially misleading.
SECTION 6.13 Regulations U and X. No Credit Party and none of its Subsidiaries is engaged in the business of extending credit for the purpose of buying or carrying margin stock, and no proceeds of any of the Loans will be used to purchase or carry margin stock or otherwise for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or Regulation X. Terms for which meanings are provided in F.R.S. Board Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.
SECTION 6.14 Solvency. The Borrower is Solvent, and the Credit Parties and their Subsidiaries taken as a whole, on a consolidated basis, are Solvent.
SECTION 6.15 Intellectual Property.Schedule 6.15(a) sets forth a complete and accurate list of all (A) applied for, issued or registered Patents, (B) registered Trademarks and any pending registrations for Trademarks, and (C) registered Copyrights and any other registered Intellectual Property, in each case owned by a Credit Party or any of its Subsidiaries, as applicable; provided that no Intellectual Property that is not Material Intellectual Property shall be required to be listed on Schedule 6.15(a). For each item of Material Intellectual Property listed on Schedule 6.15(a), the applicable Credit Party or Subsidiary has, where relevant, indicated the following: the countries in each case in which such item is patented, registered or applied for, the application numbers, the registration or patent numbers, the filing and registration dates, and the owner of such item of Material Intellectual Property.
(b) Each Credit Party and each of its Subsidiaries owns, free and clear of any and all Liens other than Permitted Liens, or has a valid license to all Intellectual Property material to or otherwise necessary for the operation of the business of such Credit Party and Subsidiary. All Material Intellectual Property set forth or required to be set forth on Schedule 6.15(a) is in full force and effect, and has not expired, lapsed or been forfeited, cancelled or abandoned. Each Credit Party and each of its Subsidiaries is the exclusive owner of all right, title and interest in and to, all such Material Intellectual Property that is owned or purported to be owned by such Person.
(c) Each Credit Party and each of its Subsidiaries has taken commercially reasonable measures consistent with commercially reasonable practices in the industry in which it operates to maintain and protect its Material Intellectual Property, and there are no unpaid maintenance or renewal fees payable by such Person that are currently overdue or due prior to the Closing Date for any of such registered Material Intellectual Property.
(d) There is no proceeding challenging the validity or enforceability of any Material Intellectual Property set forth on Schedule 6.15(a), no Credit Party nor any of its Subsidiaries is involved in any such proceeding with any Person and none of such Material Intellectual Property is the subject of any Other Administrative Proceeding.
(e) Each item of Material Intellectual Property listed in Schedule 6.15(a) is, to the knowledge of the Credit Parties, valid, enforceable and, where registered, subsisting, and nothing has been knowingly done or omitted to have been done by the Credit Parties, that could reasonably be expected to affect the validity or enforceability of such Material Intellectual Property.
(f) Except for as set forth on Schedule 6.15(c)(i), to the knowledge of the Credit Parties, no third party is infringing, misappropriating or otherwise violating any Material Intellectual Property of any Credit Party or Subsidiary.
(g) To the knowledge of the Credit Parties, no Credit Party or Subsidiary is infringing, misappropriating or otherwise violating the Intellectual Property rights of any other Person in any material manner.
SECTION 6.16 Data Privacy.
(a) Each Credit Party and each of its Subsidiaries complies with all applicable federal, state, local and foreign laws, rules and regulations pertaining to data privacy (“Privacy Laws”), except to the extent that any compliance failure would not reasonably be expected to have a Material Adverse Effect. There is no pending, nor has there even been any, complaint, audit, proceeding,
investigation, or claim against any Credit Party or any of its Subsidiaries initiated by any Governmental Authority alleging that any collection, storage, use, access, disclosure, processing, security, and transfer of Personal Data (referred to collectively in this Agreement as “Data Activities”) of the Credit Party and each of its Subsidiaries is in violation of any applicable Privacy Laws, except to the extent that any such complaint, audit, proceeding, investigation or claim would not reasonably be expected to result in a Material Adverse Effect.
(b) Each Credit Party and each of its Subsidiaries takes commercially reasonable steps to protect Personal Data in its possession or control against damage or loss, and against unauthorized access, acquisition, use, modification, disclosure or other misuse, except to the extent that failure to take such steps would not reasonably result in a Material Adverse Effect. To the knowledge of the Credit Parties, in the past three years, there has been no unauthorized access, use, or disclosure by a third-party of Personal Data in the possession or control of any Credit Party or any of its Subsidiaries with regard to any Personal Data of such Credit Party or such Subsidiary, except to the extent any such unauthorized access or use, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
(c) Neither any Credit Party nor any of its Subsidiaries targets its products and services to children (persons under the age of 13), and neither any Credit Party nor any of its Subsidiaries knowingly collect Personal Data from children.
(d) Holdings and each of its Subsidiaries has implemented applicable written policies relating to Data Activities, including, a publicly posted website privacy policy, mobile app privacy policy and annual privacy statements required by federal, state, local or foreign law, rule, or regulation, as applicable, and a comprehensive information security program that includes appropriate written information security policies (“Privacy and Data Security Policies”). At all times, Holdings and each of its Subsidiaries has been and is in compliance with all such Privacy and Data Security Policies, and neither Holdings nor any of its Subsidiaries engages in any undisclosed collection of Personal Data on its website or any third-party websites, except to the extent any such noncompliance or undisclosed collection would not reasonably be expected to have a Material Adverse Effect or otherwise result in a material violation of any applicable law.
(e) Holdings and each of its Subsidiaries have provided notifications to, and have obtained consent from, Persons regarding its Data Activities where such notice or consent is required by Privacy Laws. Holdings and each of its Subsidiaries have collected all Personal Data in accordance with its Privacy Policies and Privacy Laws, and Holdings’ and each of its Subsidiaries’ collection of such Personal Data or any other data from third parties is in accordance with any requirements from such third parties, including written website terms and conditions.
(f) Holdings and each of its Subsidiaries have taken commercially reasonable steps and implemented commercially reasonable measures and procedures to ensure that Holdings’ and each of its Subsidiaries’ Systems are free from malware and other harmful code, including, but not limited to, the use of commercially available up to date antivirus software.
(g) Holdings and each of its Subsidiaries is, and at all times has been in compliance with all U.S. federal and state laws and regulations pertaining to sales, marketing, and electronic communications, including, without limitation, the CAN-SPAM Act, the Telephone Consumer Protection Act, and the Telemarketing Sales Rule, except to the extent any such noncompliance would not reasonably be expected to result in a material violation of any applicable law.
SECTION 6.17 Material Agreements. As of the Closing Date, set forth on Schedule 6.17 is a complete and accurate list of each Material Agreement of the Credit Parties and their Subsidiaries, with a reasonable description of the parties, subject matter thereof and amendments, waivers and modifications thereto. As of the Closing Date, each such Material Agreement (i) is in full force and effect and is binding upon and enforceable against each Credit Party or Subsidiary party thereto and to the knowledge of such Credit Party or Subsidiary, all other parties thereto in accordance with its terms, and (ii) has not suffered any material default thereunder. As of the Closing Date, no Credit Party nor any of its Subsidiaries has taken any action that could reasonably be expected to permit any other Person party to any Material Agreement to have, and no such Person otherwise has, any material defenses, counterclaims or rights of setoff thereunder.
SECTION 6.18 Permits The Credit Parties and their Subsidiaries have all material Permits, including Environmental Permits, necessary or required for the ownership, operation and conduct of its business and the distribution of the Products. All such Permits are validly held and there are no material defaults thereunder.
SECTION 6.19 Regulatory Matters. With respect to each Product:
(a) Set forth on Schedule 6.19(a) is a complete and accurate list of all material Regulatory Authorizations relating to the Credit Parties and their Subsidiaries, the conduct of their business, and the Products (on a per Product basis). All such material Regulatory Authorizations are (i) legally and beneficially owned exclusively by the Credit Parties and their Subsidiaries, as applicable, free and clear of all Liens other than Permitted Liens, and (ii) as applicable, validly registered and on file with the applicable Governmental Authority, in compliance with all filing and maintenance requirements (including any fee requirements) thereof, and are in good standing, valid and enforceable with the applicable Governmental Authority. All required notices, registrations and listings, supplemental applications or notifications, reports (including field alerts, medical device reports (MDRs) and other reports of adverse experiences or product malfunctions, and reports of corrections or removal) and other required filings with respect to the Products for the last five (5) years have been timely filed with the FDA and all other applicable Governmental Authorities.
(b) (i) All regulatory filings required by any Regulatory Authority or in respect of any Regulatory Authorization with respect to any Product or any Product Development and Commercialization Activities which represented, in the aggregate, 15% or more of Net Sales in any applicable year, in the last five (5) years have been made, and all such filings above such threshold are complete and correct and have complied in all material respects with all applicable laws and regulations, (ii) all clinical and pre-clinical trials, if any, of investigational Products have been and are being conducted by the Credit Parties and their Subsidiaries in accordance with all applicable laws and regulations along with appropriate monitoring of clinical investigator trial sites for their compliance, and (iii) the Credit Parties and their Subsidiaries have disclosed to the Agent all such regulatory filings and all material communications between representatives of the Credit Parties (and their Subsidiaries) and any Regulatory Authority.
(c) The Credit Parties, their Subsidiaries and the agents thereof are in compliance in all material respects with all applicable statutes, rules and regulations (including all Healthcare Laws and Regulatory Authorizations) of all applicable Governmental Authorities, including the FDA and all other Regulatory Authorities, with respect to each Product and all Product Development and Commercialization Activities related thereto. The Credit Parties and their Subsidiaries have and maintain in full force and effect all the necessary and requisite Regulatory Authorizations. The Credit Parties and their Subsidiaries are in compliance in all material respects with all applicable registration and listing requirements set forth in the FD&C Act or equivalent regulation of each other Governmental
Authority having jurisdiction over such Person. The Credit Parties and their Subsidiaries adhere in all material respects to all applicable regulations of all Regulatory Authorities with respect to the Products and all Product Development and Commercialization Activities related thereto.
(d) Except as set forth on Schedule 6.19(d), no Credit Party nor any of its Subsidiaries has received from any Regulatory Authority any notice of alleged non-compliance or adverse findings with respect to any Product or any Product Development and Commercialization Activities related thereto which represented, in the aggregate, 15% or more of Net Sales in any applicable year, including any FDA Form 483 inspectional observations, notices of violations, Warning Letters, untitled letters, criminal proceeding notices under Section 305 of the FD&C Act, or any other similar communication from any Regulatory Authority within the last five (5) years. Except as set forth on Schedule 6.19(d), there have been no recalls, market withdrawals, field notifications or corrections, detentions, seizures, notifications or allegations of misbranding or adulteration or safety alerts conducted, requested, or threatened by any Regulatory Authority, or (for example in the case of a recall) initiated by Credit Party or any of its Subsidiaries, relating to any Products which represented, in the aggregate, 15% or more of Net Sales in any applicable year within the last five (5) years. No Credit Party nor any of its Subsidiaries has received any written notification that remains unresolved from the FDA or any other Regulatory Authority indicating any breach or violation of any applicable Regulatory Authorization, including that any of the Products is misbranded or adulterated as defined in the FD&C Act, in each case of the foregoing, which represented, in the aggregate, 15% or more of Net Sales in any applicable year within the last five (5) years.
(e) No Credit Party, nor any of its Subsidiaries, nor any officer, employee or agent thereof, has made an untrue statement of a material fact or fraudulent statements to the FDA or any other Regulatory Authority, failed to disclose a material fact required to be disclosed to the FDA or any other Regulatory Authority, or committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made (or was not made), could reasonably be expected to provide a basis for the FDA or any other Regulatory Authority to invoke its policy respecting Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy.
(f) Except as set forth on Schedule 6.19(f), no Credit Party nor any of its Subsidiaries has received any written notice that the FDA or any other applicable Regulatory Authority has commenced or initiated, or threatened to commence or initiate, any action to withdraw any Regulatory Authorization, requested the recall (whether by correction or removal) of any Products or commenced or initiated or threatened to commence or initiate, any action to enjoin any Product Development and Commercialization Activities of such Credit Party or such Subsidiary, in each case, which represented, in the aggregate, 15% or more of Net Sales in any applicable year,.
(g) Except as set forth on Schedule 6.19(g), the clinical, preclinical, safety and other studies and tests conducted by or on behalf of or sponsored by the Credit Parties and their Subsidiaries, or in respect of which any Products or Product candidates under development have participated, were (and if still pending, are) being conducted in accordance with all applicable Regulatory Authorizations and Healthcare Laws in all material respects.
(h) The transactions contemplated by the Loan Documents (or contemplated by the conditions to effectiveness of any Loan Document) will not impair any Credit Party’s or any of its Subsidiaries’ ownership of or rights under (or the license or the right to use, as the case may be) any Regulatory Authorizations relating to the Products in any material manner, and no consent or other authorization of any Governmental Authority is required in connection with the transactions
contemplated hereby, including the Liens granted in connection herewith and the exercise of rights and remedies with respect thereto.
SECTION 6.20 Transactions with Affiliates. Except as set forth on Schedule 6.20, no Credit Party and none of its 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) with any Affiliate during the three (3)-year period prior to the Closing Date, which would not be permitted pursuant to Section 8.11.
SECTION 6.21 Investment Company Act. No Credit Party and none of its Subsidiaries is an “investment company” or is “controlled” by an “investment company,” as such terms are defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
SECTION 6.22 OFAC. No Credit Party, any of its Subsidiaries, any Related Party, any of their respective directors, officers, or employees nor any agents or other persons acting on behalf of any of the foregoing (a) is currently the target of any Sanctions, (b) is located, organized or residing in any Designated Jurisdiction, (c) 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 (d) is or has ever been in violation of or subject to an investigation relating to Sanctions. No Loans, and none of the proceeds from the Loans, have 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, any Lender and its and their respective Affiliates) of Sanctions.
SECTION 6.23 Anti-Corruption. No Credit Party, any of its Subsidiaries, any Related Party, or any of their respective directors, officers, or employees or any agents or other persons acting on behalf of any of the foregoing, directly or indirectly, has (a) violated or is in violation of any applicable anti-corruption law, (b) made, offered to make, promised to make or authorized the payment or giving of, directly or indirectly, any Prohibited Payment or (c) been subject to any investigation by any Governmental Authority with regard to any actual or alleged Prohibited Payment.
SECTION 6.24 Deposit and Disbursement Accounts. Schedule 6.24 contains a list of all banks and other financial institutions at which any Credit Party or any of its Subsidiaries maintains deposit accounts, lockboxes, disbursement accounts, investment accounts or other similar accounts, and such Schedule correctly identifies the name and address of each bank or financial institution, the name in which the account is held, the type of account, and the complete account number therefor. Subject to the proviso in Section 7.12(a), each such account (other than each Excluded Account) is a Controlled Account.
SECTION 6.25 Registration Rights. Except as set forth on Schedule 6.25, no Credit Party and none of its Subsidiaries has granted or agreed to grant any registration rights, including piggyback rights, to any Person.
SECTION 6.26 Royalty and Other Payments. Except as set forth on Schedule 6.26, no Credit Party and none of its Subsidiaries is obligated to pay any royalty, milestone payment, deferred payment or any other contingent payment in respect of any Product.
SECTION 6.27 Sale and Leaseback. No Credit Party and none of its Subsidiaries has entered, directly or indirectly, into any agreement or arrangement providing for the sale or transfer by it
of any property (now owned or hereafter acquired) to a Person and the subsequent lease or rental or such property or other similar property from such Person, except for any transactions permitted by Section 8.13.
SECTION 6.28 Senior Secured Obligations. The Obligations constitute the sole senior secured obligations and sole Indebtedness (except as set forth in Schedule 8.2(c)) of the Credit Parties and their Subsidiaries.
SECTION 6.29 Beneficial Ownership Certification. The information included in the Beneficial Ownership Certification is true and correct in all respects.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Credit Parties hereby jointly and severally covenant and agree for the benefit of the Agent and the Lenders that, until the Termination Date has occurred, the Credit Parties will perform or cause to be performed by each of their respective Subsidiaries, as applicable, the obligations set forth below.
SECTION 7.1 Financial Information, Reports, Notices, Etc. Holdings will furnish the Agent copies of the following financial statements, reports, notices and information:
(a) as soon as available and in any event within thirty (30) days after the end of each calendar month, an unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such month and consolidated statements of income and cash flow of Holdings and its Subsidiaries for such applicable period, including (in each case), in comparative form the figures for the corresponding month in, and year to date portion of, the immediately preceding Fiscal Year and as provided in the budget delivered pursuant to clause (e) below for the current Fiscal Year, certified as complete and correct by the chief financial or accounting Authorized Officer of Holdings (subject to normal year-end audit adjustments) together with evidence satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) that the Credit Parties were in compliance with Section 8.4(a) for such calendar month;
(b) as soon as available and in any event within forty-five (45) days after the end of each Fiscal Quarter (including the last Fiscal Quarter of each Fiscal Year), an unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such Fiscal Quarter, and consolidated statements of income and cash flow of Holdings and its Subsidiaries for such period, including (in each case), in comparative form the figures for the corresponding Fiscal Quarter in, and year to date portion of, the immediately preceding Fiscal Year, certified as complete and correct by the chief financial or accounting Authorized Officer of Holdings and its Subsidiaries (subject to normal year-end audit adjustments);
(c) (i) as soon as available and in any event within one hundred twenty (120) days after the end of each Fiscal Year, an unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such Fiscal Year, and the related unaudited consolidated statements of income and cash flow of Holdings and its Subsidiaries for such Fiscal Year, setting forth in comparative form the figures for the immediately preceding Fiscal Year, certified as complete and correct by the chief financial or accounting Authorized Officer of Holdings and its Subsidiaries; and (ii) as soon as available and in any event within one hundred twenty (120) days after the end of each Fiscal Year, a copy of the consolidated balance sheet of Holdings and its Subsidiaries, and the related consolidated statements of income and cash flow of Holdings and its Subsidiaries for such Fiscal Year, setting forth in comparative form the figures for the immediately preceding Fiscal Year, audited (without any Impermissible
Qualification) by independent public accountants acceptable to the Agent, which shall include a calculation of the financial covenants set forth in Section 8.4 and stating that, in performing the examination necessary to deliver the audited financial statements of Holdings, no knowledge was obtained of any Event of Default;
(d) concurrently with the delivery of the financial information required to be delivered pursuant to clauses (b) and (c) above for each Fiscal Quarter and each Fiscal Year, a Compliance Certificate, executed by the chief financial or accounting Authorized Officer of Holdings, (i) showing compliance with the financial covenants set forth in Section 8.4 and stating that no Default has occurred and is continuing (or, if a Default has occurred, specifying the details of such Default and the action that Holdings or any of its Subsidiaries has taken or proposes to take with respect thereto), (ii) stating that no Subsidiary has been formed or acquired since the delivery of the last Compliance Certificate (or, if a Subsidiary has been formed or acquired since the delivery of the last Compliance Certificate, a statement that such Subsidiary has complied with Section 7.8) and (iii) including a list of all Immaterial Subsidiaries and setting forth in reasonable detail the Net Sales and Assets, in each case, attributable to each such Immaterial Subsidiary for the applicable Measurement Period;
(e) as soon as available and in any event within thirty (30) days after the end of each Fiscal Year, an annual budget, a business plan and financial forecasts of Holdings and its Subsidiaries for the then current Fiscal Year of Holdings, in form and substance as approved by the board of directors (or equivalent) of Holdings, which shall include a projection of income and a projected cash flow statement for each Fiscal Quarter in such Fiscal Year and a projected balance sheet as of the end of each Fiscal Quarter in such Fiscal Year, in each case prepared in reasonable detail, with appropriate presentation and discussion (in reasonable detail) of the principal assumptions upon which such budgets and projections are based, which shall be accompanied by the statement of an Authorized Officer of Holdings to the effect that such budget and projections are based on reasonable and good faith estimates and assumptions made by the management of Holdings for the respective periods covered thereby;
(f) as soon as possible and in any event within three (3) Business Days after Holdings obtains knowledge of the occurrence of a Default, a statement of an Authorized Officer of Holdings setting forth details of such Default, event or occurrence and the action which Holdings has taken and proposes to take with respect thereto;
(g) as soon as possible and in any event within three (3) Business Days after Holdings obtains knowledge of (i) the occurrence of any material adverse development with respect to any litigation, action, proceeding or labor controversy described in Schedule 6.7(a) and in the following clause (ii) or (ii) the commencement of any litigation, action, proceeding or labor controversy of the type and materiality described in Section 6.7 or alleging potential or actual violations of any Healthcare Laws, notice thereof and, to the extent the Agent or any Lender requests, copies of all documentation relating thereto;
(h) as soon as possible and in any event within three (3) Business Days after Holdings obtains knowledge of any return, recovery, dispute or claim related to any Product or inventory that involves more than $1,500,000, written notice thereof from an Authorized Officer of Holdings which notice shall include any statement setting forth details of such return, recovery, dispute or claim;
(i) as soon as possible and in any event within three (3) Business Days after becoming aware of the occurrence of any ERISA Event which could reasonably be expected to result in the incurrence by a Credit Party or any of its Subsidiaries of any material liability, fine or penalty, notice
thereof and copies of all documentation relating thereto, written notice thereof from an Authorized Officer of Holdings, which notice shall include a statement setting forth details of such events;
(j) promptly after the sending or filing thereof, copies of all reports, notices, prospectuses and registration statements which any Credit Party or any of its Subsidiaries files with the SEC or any national securities exchange;
(k) promptly upon receipt thereof, copies of all “management letters” (or equivalent) submitted to Holdings or any of its Subsidiaries by the independent public accountants referred to in Section 7.1(c) in connection with each audit made by such accountants; and
(l) such other financial and other information as the Agent or any Lender may from time to time reasonably request (including information and reports in such detail as the Agent or any Lender may request with respect to the terms of and information provided pursuant to the Compliance Certificate).
SECTION 7.2 Maintenance of Existence; Compliance with Contracts, Laws, Etc. Each Credit Party will, and will cause each of its Subsidiaries to, (i) preserve and maintain its legal existence (except as otherwise permitted by Section 8.8) and (ii) comply in all material respects with all applicable laws, rules, regulations and orders, including all Healthcare Laws and the payment (before the same become delinquent) of all material Taxes imposed upon such Credit Party or such Subsidiary or upon its property, except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on the books of such Credit Party or such Subsidiary.
SECTION 7.3 Maintenance of Properties. Each Credit Party will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its respective material properties in good repair, working order and condition (ordinary wear and tear excepted), and make necessary material repairs, renewals and replacements so that the business carried on by such Credit Party or such Subsidiary may be properly conducted at all times in all material respects, unless the Disposition of such property is otherwise permitted by Section 8.8 or Section 8.9.
SECTION 7.4 Insurance. Each Credit Party will, and will cause each of its Subsidiaries to, maintain:
(a) insurance on its property with financially sound and reputable insurance companies against loss and damage in at least the amounts (and with only those deductibles) customarily maintained, and against such risks as are typically insured against in the same general area, by Persons of comparable size engaged in the same or similar business as such Credit Party or such Subsidiary; and
(b) all worker’s compensation, employer’s liability insurance or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business.
Without limiting the foregoing, on or within forty-five (45) days of the Closing Date (or such longer period as the Agent may agree in its reasonable discretion) all insurance policies required pursuant to this Section shall (i) name the Agent, for the benefit of the Secured Parties, as mortgagee (in the case of property insurance) or loss payee or additional insured (in the case of liability insurance), as applicable, and provide that no cancellation or modification of the policies will be made without the prior written notice to the Agent and (ii) be in addition to any requirements to maintain specific types of insurance contained in the other Loan Documents. If any Credit Party or any of its Subsidiaries fails to
provide or pay for any such insurance, the Agent may but is not obligated to, obtains the same at such Credit Party’s or such Subsidiary’s expense.
SECTION 7.5 Books and Records. Each Credit Party will, and will cause each of its Subsidiaries to, keep books and records that accurately reflect all of its business affairs and transactions and permit the Agent, any Lenders or any of their respective representatives, at reasonable times and intervals upon reasonable notice to Holdings, to visit such Credit Party’s or such Subsidiary’s offices, to discuss such Credit Party’s or such Subsidiary’s financial matters with its officers and employees, and its independent public accountants (and the Credit Parties hereby authorize such independent public accountant to discuss such Credit Party’s or such Subsidiary’s financial matters with the Agent, any Lenders or any of their respective representatives whether or not any representative of such Credit Party or such Subsidiary, as applicable, is present) and to examine (and photocopy extracts from) any of its books and records. The Credit Parties will, and will cause each of their Subsidiaries to, pay all fees and expenses of the Agent or such Lender, including any fees of such independent public accountant incurred in connection with the Agent’s or any Lender’s exercise of its rights pursuant to this Section; provided, however, that in the absence of a Default and an Event of Default, the Credit Parties shall not be responsible for the costs associated with more than one such visit or inspection during any Fiscal Year.
SECTION 7.6 Environmental Law Covenant. Each Credit Party will, and will cause each of its Subsidiaries to, (i) use and operate all of its and their businesses, facilities and properties in material compliance with all Environmental Laws, and keep and maintain all Environmental Permits and remain in compliance therewith and (ii) promptly notify the Agent of, and provide the Agent with copies of all material claims, complaints, notices or inquiries relating to, any actual or alleged non-compliance with any Environmental Laws or Environmental Permits or any actual or alleged Environmental Liabilities.
SECTION 7.7 Use of Proceeds. Proceeds of the Loans shall be used only to (i) refinance the outstanding obligations under the Existing Credit Agreement and (ii) pay certain fees, costs, and expenses incurred in connection with such refinancing and entry into this Agreement, the other Loan Documents and the transactions contemplated hereby.
SECTION 7.8 Future Guarantors, Security, Etc. Each Credit Party agrees that:
(a) it will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, existing as of the Closing Date to, execute any documents, Mortgages and Mortgage Instruments (subject to the limitation set forth in Section 7.8(c)), UCC-1 financing statements, UCC-3 termination statements, agreements and instruments, and take all further action that may be required under applicable law, or that the Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority (subject to Permitted Liens) of the Liens created or intended to be created by the Loan Documents; including, without limitation, actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction to create any security interests in assets of the Credit Parties located or titled outside of the United States or to perfect or make enforceable any security interests in any Collateral;
(b) it will cause each of its Subsidiaries, except for any Immaterial Subsidiary and any Foreign Excluded Subsidiary, that is acquired or organized by it after the Closing Date to, on or within thirty (30) days of such acquisition or organization (or such longer period as the Agent may agree in its sole discretion), to (i) execute a supplement (in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably)) to each applicable Loan Document (including the Security Agreement, the Intercompany Subordination Agreement, the Copyright Security
Agreement, the Patent Security Agreement, the Trademark Security Agreement and other security documents, and the Subsidiary Guaranty) in favor of the Agent and the other Secured Parties, (ii) execute or deliver such other UCC-1 financing statements, UCC-3 termination statements, documents, Mortgages and Mortgage Instruments, agreements and instruments as the Agent may reasonably request, and (iii) take all further action that may be required under applicable law, or that the Agent may reasonably request, in order to effectuate the transactions contemplated by the Loan Documents and in order to grant, preserve, protect and perfect the validity and first priority (subject to Permitted Liens) of the Liens created or intended to be created by the Loan Documents; provided that no Mortgage or Mortgage Instruments will be required with respect to any real property having a fair market value of less than $2,500,000;
(c) it will cause each of its Subsidiaries organized under the under the laws of England and Wales, except for any Immaterial Subsidiary and any Foreign Excluded Subsidiary, that is acquired or organized by it after the Closing Date to, on or within thirty (30) days of such acquisition or organization (or such longer period as the Agent may agree in its sole discretion), to deliver to the Agent: (A) a certificate, duly executed and delivered by such Person’s Secretary or Assistant Secretary, director, managing member or general partner, as applicable, as to: (i) resolutions of each such Person’s board of directors (or other managing body, in the case of other than a corporation) then in full force and effect authorizing (x) the execution, delivery and performance of each Loan Document to be executed by such Person and the transactions contemplated hereby and thereby and (y) a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Loan Documents to which it is a party; (ii) a copy of (x) a resolution of the board of directors of such Subsidiary approving the terms of the resolution referred to in sub-clause (i) above; (y) a resolution of all of the shareholders of each such subsidiary approving the terms of the resolution referred to in sub-clause (i) above; and (z) a resolution of the board of directors of each shareholder referred to in the preceding sub-clause (y) that is a corporate body, approving the execution by such corporate shareholder of the resolution referred to in the preceding sub-clause (y); (iii) the incumbency and signatures of those of its officers, managing member or general partner, as applicable, authorized to act with respect to each Loan Document to be executed by such Person; (iv) the full force and validity of each Organic Document of such Person and copies thereof; and certifying that each copy document relating to it specified in this clause is correct, complete and in full force and effect and has not been amended or superseded as at the date no earlier than the date of such certificate, in each case in this sub-clause (A), upon which certificates the Agent may conclusively rely until it shall have received a further certificate of the Secretary, Assistant Secretary, director, managing member or general partner, as applicable, of any such Person cancelling or amending the prior certificate of such Person; (B) a certificate, duly executed and delivered by a director of such Subsidiary, which certificate shall be in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably) and shall certify that borrowing or guaranteeing, as applicable, and securing the Loan Commitment Amount would not cause any borrowing, guarantee, security or any similar limit binding on such Subsidiary to be exceeded; (C) at least two originals of an English law debenture (the “Debenture”) executed by such Subsidiary created or expressed to be created in favor of the Agent, together with, a copy of all notices required to be sent under the Debenture executed by such Subsidiary and all share certificates, transfers and stock transfer forms or equivalent duly executed by the relevant Subsidiary in blank in relation to the assets subject to or expressed to be subject to the debenture security and other documents of title to be provided under the Debenture; and (D) with respect to each company incorporated in the United Kingdom whose shares are the subject of the Debenture security (a “Charged Company”), either: (i)a certificate of an Authorized Officer of Holdings certifying that: (A) each of Holdings and its Subsidiaries has complied within the relevant timeframe with any notice it has received pursuant to Part 21A of the Companies Act 2006 from such Charged Company, (B) no “warning notice” or “restrictions notice” (in each case as defined in Schedule 1B of the Companies Act 2006) has been issued in respect of those shares and (C) together with a copy of the “PSC register” (within the meaning
of section 790C(10) of the Companies Act 2006) of such Charged Company, which, in the case of a Charged Company that is a Subsidiary Guarantor, is certified by an Authorized Officer of Holdings to be correct, complete and not amended or superseded as at a date no earlier than the Closing Date; or a certificate of an Authorized Officer of Holdings certifying that such Charged Company is not required to comply with Part 21A of the Companies Act 2006;
(d) it will promptly notify the Agent of any real property subsequently acquired by it or any of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, and will provide the Agent with a description of such real property, the acquisition date thereof and the purchase price therefor, and if reasonably requested by the Agent, on or within sixty (60) days of such acquisition (or such longer period as the Agent may agree in its sole discretion) execute and deliver Mortgages and Mortgage Instruments in order to grant perfected and first priority Liens on such real property; provided that no Mortgage or Mortgage Instruments will be required with respect to any real property having a fair market value of less than $2,500,000;
(e) it will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, to, at its cost and expense, promptly secure the Obligations by pledging or creating, or causing to be pledged or created, perfected Liens with respect to such of its assets and properties as the Agent shall designate, it being agreed that it is the intent of the parties that the Obligations shall at all times be secured by, among other things, substantially all the assets of Credit Parties and such Subsidiaries (including personal property acquired subsequent to the Closing Date), in each case, located in the United States and in any non-U.S. jurisdiction; provided that a pledge of 100% of the Capital Securities of any Foreign Subsidiary acquired or organized after the Closing Date shall be required, except to the extent as reasonably determined by the Borrower after consulting with the Agent, such pledge would reasonably be expected to result in material adverse tax consequences to the Borrower or Holdings, in which case Borrower shall not be required to pledge voting Capital Securities in excess of 65% of the issued and outstanding voting Capital Securities of such Foreign Subsidiary;
(f) it will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries, and Foreign Excluded Subsidiaries to, at its cost and expense, promptly upon acquisition, filing or issuance of any Patent, Trademark, Copyright, material Product Agreement or other Material Intellectual Property anywhere in the world, notify the Agent of such acquisition, filing or issuance of any Patent, Trademark, Copyright, material Product Agreement or other Material Intellectual Property and execute a supplement (in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably)) to each applicable Loan Document (including the Security Agreement, the Copyright Security Agreement, the Patent Security Agreement, the Trademark Security Agreement and other security documents); and
(g) all Liens described above in this Section 7.8 will be created under the Loan Documents in form and substance satisfactory to the Agent (acting on the instructions of the Majority Lenders acting reasonably), and each Credit Party will, and will cause each of its Subsidiaries, except for Immaterial Subsidiaries and Foreign Excluded Subsidiaries, to, deliver or cause to be delivered to the Agent all such instruments and documents (including legal opinions and lien searches) as the Agent shall reasonably request to evidence compliance with this Section 7.8.
SECTION 7.9 Obtaining of Permits, Etc. With respect to Products, each Credit Party will, and will cause each of its Subsidiaries to, obtain, maintain and preserve, and take all necessary action to timely renew all Permits (including Key Permits) and accreditations which are necessary in the proper conduct of its business.
SECTION 7.10 Product Licenses. Each Credit Party will, and will cause each of its Subsidiaries to, (i) maintain each Permit, including each Regulatory Authorization, from, or file any notice or registration in, each jurisdiction in which such Credit Party or such Subsidiary is required to obtain any Permit or Regulatory Authorization or to file any notice or registration, in order to sell or distribute the Products which represented, in the aggregate, 15% or more of Net Sales in any applicable year and (ii) upon request of the Agent, promptly provide evidence of same to the Agent.
SECTION 7.11 Maintenance of Regulatory Authorizations, Contracts, Intellectual Property, Etc. With respect to the Products, each Credit Party will, and will cause each of its Subsidiaries to, (i) maintain in full force and effect all Regulatory Authorizations, contract rights, or other rights necessary for the material operations of its business, (ii) notify the Agent, promptly after learning thereof, of any Product recalls, safety alerts, corrections, withdrawals, marketing suspensions, removals or the like conducted, to be undertaken or issued by such Credit Party, such Subsidiary or its respective suppliers whether or not at the request, demand or order of any Governmental Authority or otherwise with respect to any Product which represented, in the aggregate, 15% or more of Net Sales in any applicable year, or any basis for undertaking or issuing any such action or item, (iii) maintain in full force and effect, and pay all costs and expenses relating to, all Material Intellectual Property owned by such Credit Party or such Subsidiary, (iv) notify the Agent, promptly after learning thereof, of any infringement or other violation by any Person of its Material Intellectual Property and respond to such infringement or other violation in a manner determined within the reasonable judgement and at the sole expense of such Credit Party and (v) notify the Agent, promptly after learning thereof, of (x) any claim by any Person that the conduct of such Credit Party’s or such Subsidiary’s business (including the development, manufacture, use, sale or other commercialization of any Product) infringes any material Intellectual Property of such Person and, if requested by the Agent, use commercially reasonable efforts to resolve such claim, or (y) any event, circumstance, act or omission that could reasonably be expected to cause any representation or warranty contained in Section 6.19 to be incorrect in any material respect if such representation or warranty was to be made at the time such Credit Party or such Subsidiary learned of such event, circumstance, act or omission.
SECTION 7.12 Cash Management. Each Credit Party will, and will cause each of its Subsidiaries (other than Immaterial Subsidiaries) to:
(a) maintain all deposit accounts, disbursement accounts, investment accounts (and other similar accounts) and lockboxes (other than Excluded Accounts) with a bank or financial institution that has executed and delivered to the Agent a Controlled Account Agreement in form and substance reasonably acceptable to the Agent; each such deposit account, disbursement account, investment account (or similar account) and lockbox (each, a “Controlled Account”) shall be a cash collateral account, with all cash, checks and other similar items of payment in such account securing payment of the Obligations, and the Credit Parties shall have granted a Lien to the Agent, for the benefit of the Secured Parties, over such Controlled Accounts; provided that the Credit Parties shall cause each account existing as of the Closing Date to become a Controlled Account on or within sixty (60) days of the Closing Date (or such longer period as the Agent may agree in its reasonable discretion); and
(b) deposit promptly, and in any event no later than fourteen (14) Business Days after the date of receipt thereof, all checks, drafts, other similar items of payment or cash, in each case, in
an amount in excess of $500,000, in each case, relating to or constituting payments made in respect of any and all accounts and other rights and interests into Controlled Accounts.
At any time after the occurrence and during the continuance of an Event of Default, at the request of the Agent, the Credit Parties and their Subsidiaries will cause all payments constituting proceeds of accounts to be directed into lockbox accounts under Controlled Account Agreements in form and substance satisfactory to the Agent.
ARTICLE VIII
NEGATIVE COVENANTS
The Credit Parties hereby jointly and severally covenant and agree for the benefit of the Agent and the Lenders that until the Termination Date has occurred unless the Majority Lenders shall otherwise consent in writing, the Credit Parties will perform or cause to be performed by each of their respective Subsidiaries, as applicable, the obligations set forth below.
SECTION 8.1 Business Activities. No Credit Party will, nor will it permit any of its Subsidiaries to, engage in any business activity except those business activities engaged in on the date of this Agreement and activities reasonably incidental or complimentary thereto and reasonable extensions thereof.
SECTION 8.2 Indebtedness. No Credit Party will, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, other than the following (“Permitted Indebtedness”):
(a) Indebtedness in respect of the Obligations;
(b) unsecured Indebtedness of any Credit Party pursuant to Hedging Agreements solely for purposes of hedging the rate of interest payable on the outstanding principal amount of the Loans;
(c) Indebtedness existing as of the Closing Date which is identified in Schedule 8.2(c);
(d) Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of business and consistent with past practice but excluding (in each case) Indebtedness incurred through the borrowing of money or Contingent Liabilities in respect thereof;
(e) purchase money Indebtedness and Capitalized Lease Liabilities incurred by any Credit Party in an aggregate amount at any time outstanding, when combined with the aggregate principal amount of all Indebtedness incurred pursuant to Section 8.2(j), not to exceed $4,500,000;
(f) Indebtedness (i) arising from customary agreements for indemnification related to sales of goods, licensing of Intellectual Property or adjustment of purchase price or similar obligations in any case incurred in connection with the acquisition or Disposition permitted hereunder of any business, assets or Subsidiary of Holdings, (ii) representing deferred compensation to employees of a Credit Party or any of its Subsidiaries incurred in the ordinary course of business consistent with past practice, and (iii) representing customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;
(g) Indebtedness with respect to cash management obligations and other Indebtedness in respect of automatic clearing house arrangements, netting services, overdraft protection and similar arrangements, in each case incurred in the ordinary course of business;
(h) unsecured Indebtedness in the nature of account or trade payables originated in the ordinary course of business;
(i) (i) intercompany Indebtedness of any Credit Party or a Subsidiary thereof owing to another Credit Party or a Subsidiary thereof, in each case, subject to the Intercompany Subordination Agreement; provided that any intercompany Indebtedness made to a Subsidiary that is not a Credit Party shall be for the sole purpose of payroll expenses and other operational costs incurred by such Subsidiary in the ordinary course of business and consistent with past practice; and (ii) unsecured guarantees of outstanding Permitted Indebtedness made in the ordinary course of business by the Borrower or any Subsidiary of obligations of any Credit Party permitted hereunder in an aggregate amount not to exceed $1,500,000 at any time outstanding; provided that to the extent that any such Permitted Indebtedness is subordinated to the Obligations, such guarantees are similarly subordinated;
(j) (i) Indebtedness of the Borrower or any Subsidiary Guarantor incurred to finance the acquisition, construction or improvement of any fixed or capital assets; provided that (x) such Indebtedness is incurred prior to or within two hundred seventy (270) days after such acquisition or the completion of such construction or improvement and (y) the aggregate principal amount of Indebtedness permitted by this Section 8.2(j), when combined with the aggregate principal amount of all purchase money Indebtedness and Capitalized Lease Liabilities incurred pursuant to Section 8.2(e), does not exceed $4,500,000 at any time outstanding and (ii) extensions, renewals, refinancings and replacements thereof; provided that no such extension, renewal, refinancing or replacement shall result in an increase in the outstanding principal amount of such Indebtedness;
(k) Indebtedness at any time incurred in connection with financing insurance premiums in respect of insurance policies insuring assets or businesses of any Credit Party written or arranged in the ordinary course of business consistent with past practice;
(l) Indebtedness of any Subsidiary that is not a Credit Party in an aggregate outstanding principal amount not to exceed $2,000,000;
(m) Indebtedness constituting letters of credit in an aggregate face amount at any time outstanding not to exceed $6,000,000; provided, in each case, that any such letter of credit is used solely to secure obligations in respect of a lease or sublease of a Credit Party or any of its Subsidiaries; and other Indebtedness in an aggregate outstanding principal amount not to exceed $1,500,000; and
(n) unsecured Indebtedness of Holdings in respect of any subordinated convertible promissory note, in an aggregate principal amount not to exceed $75,000,000 (plus the amount of interest paid-in-kind thereon pursuant to the terms of such notes on the date of incurrence thereof); provided that (x) such Indebtedness shall not mature before the date that is ninety-one (91) days after the Maturity Date, (y) such Indebtedness shall not permit cash payments with respect to the principal or interest thereon and (z) such Indebtedness shall at all times be subject to a subordination agreement in form and substance satisfactory to the Agent;
provided that, no Indebtedness otherwise permitted by clauses (e) or (j) of this Section 8.2 shall be assumed, created or otherwise incurred if at the time of such assumption, creation or incurrence, a Default has occurred and is then continuing or could reasonably be expected to result therefrom.
SECTION 8.3 Liens. No Credit Party will, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Lien upon any of its property (including Capital Securities of any Person), revenues or assets, whether now owned or hereafter acquired, except for the following (“Permitted Liens”):
(a) Liens securing payment of the Obligations;
(b) Liens existing on the Closing Date which are disclosed in Schedule 8.3(b);
(c) Liens in favor of carriers, warehousemen, mechanics, materialmen and landlords granted in the ordinary course of business for amounts not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;
(d) Liens incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, bids, leases or other similar obligations (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety and appeal bonds or performance bonds;
(e) judgment Liens in existence for less than sixty (60) days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies and which do not otherwise result in an Event of Default under Section 9.1(f);
(f) easements, rights-of-way, zoning restrictions, minor defects or irregularities in title and other similar encumbrances not interfering in any material respect with the value or use of the property to which such Lien is attached;
(g) Liens for Taxes not yet due and payable or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;
(h) purchase money security interests in real property, improvements thereto, equipment or other assets hereafter acquired (or, in the case of improvements, constructed) by the Borrower or any Subsidiary Guarantor; provided that (i) such security interests secure Indebtedness permitted by Section 8.2(e) or Section 8.2(j), (ii) such security interests are incurred, and the Indebtedness secured thereby is created, within two hundred seventy (270) days after such acquisition (or construction) (or in the case of the first or any successive extensions, renewals or refinancings of the underlying Indebtedness, such security interests are incurred and the security is created within thirty (30) days after the incurrence of such new Indebtedness), (iii) the Indebtedness secured thereby does not exceed the cost of such real property, improvements or equipment at the time of such acquisition (or construction) and (iv) such security interests do not apply to any other property or assets of the Borrower or any Subsidiary;
(i) any interest or title of a lessor under any lease entered into by the Borrower or any of its Subsidiaries as lessees in the ordinary course of business and covering only the assets soleased;
(j) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation ofgoods;
(k) Liens arising solely by virtue of any statutory or common law provision relating to bankers’ liens, rights of set-off or similar rights;
(l) the cash collateralization of any letter of credit obligations incurred pursuant to Section 8.2(m) in an amount not to exceed 105% of the face amount thereof; and
(m) other Liens securing Indebtedness and other obligations in an aggregate outstanding principal amount not to exceed $1,500,000.
SECTION 8.4 Financial Covenants.Minimum Liquidity. The Credit Parties shall maintain at all times Liquidity in an amount equal to or greater than $25,000,00015,000,000 (the “Liquidity Covenant”); provided that in the event that the Credit Parties fail to comply with the Liquidity Covenant as of any date from and after the date of written notice to, or knowledge of, the Borrower of such noncompliance until the expiration of the thirtieth (30th) Business Day subsequent to such date of such written notice or knowledge, Holdings shall have the right to issue common equity (or other Qualified Capital Securities that are preferred equity or other equity) for cash or otherwise receive cash contributions to its capital and, in either case, directly contribute any such cash to the common equity (or other Qualified Capital Securities that are preferred equity or other equity) capital of the Borrower (the “Liquidity Cure Right”), and upon the receipt by the Borrower of such cash in an amount not less than the greater of (x) $5,000,000 and (y) the amount necessary to cure the failure to comply with the Liquidity Covenant (the “Liquidity Cure Amount”), the calculation of Liquidity as used in the Liquidity Covenant shall be recalculated giving effect to the following pro forma adjustments: (a) Liquidity shall be increased, solely for the purpose of measuring the Liquidity Covenant for each day prior to receipt of the Liquidity Cure Amount for which a Liquidity Cure Right has been exercised in accordance with this Section 8.4(a) and not for any determination made following receipt of such Liquidity Cure Amount or for any other purpose under this Agreement, by an amount equal to the Liquidity Cure Amount (it being understood and agreed that previously received proceeds of any exercise of the Liquidity Cure Right shall be counted in calculating Liquidity following receipt thereof to the extent and for so long as such proceeds constitute Liquidity) and (b) if, after giving effect to the foregoing recalculation, the Borrower shall then be in compliance with the Liquidity Covenant, the Borrower shall be deemed to have satisfied the requirements of such covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default that had occurred shall be deemed cured for all purposes of this Agreement.
(b) Minimum Net Sales. As of the last day of each Fiscal Quarter set forth below, Net Sales for the twelve (12) consecutive month period ending on the last day of such Fiscal Quarter shall not be less than the corresponding amount set forth opposite such Fiscal Quarter:
| | | | | | | | | | | | | | |
| | Fiscal Quarter Ending | Net Sales | |
| | | |
| | June 30, 2024 | $78,872,953 | |
| | September 30, 2024 | $88,399,787 | |
| | December 31, 2024 | $98,680,724 | |
| | March 31, 2025 | $109,528,429 | |
| | June 30, 2025 | $110,000,000 | |
| | September 30, 2025 | $110,000,000 | |
| | December 31, 2025 | $110,000,000 | |
| | March 31, 2026 | $110,000,000 | |
| | June 30, 2026 | $110,000,000 | |
| | September 30, 2026 | $110,000,000 | |
| | | | | | | | | | | | | | |
| | December 31, 2026 | $110,000,000 | |
| | March 31, 2027 | $110,000,000 | |
| | June 30, 2027 | $110,000,000 | |
| | September 30, 2027 | $110,000,000 | |
| | December 31, 2027 | $110,000,000 | |
| | March 31, 2028 | $110,000,000 | |
; provided that compliance with this covenant shall not be required for any Fiscal Quarter with respect to which (i) the Credit Parties maintain Liquidity in an amount greater than or equal to $60,000,000 as of the end of such Fiscal Quarter and (ii) there has not occurred a Two-Consecutive Fiscal Quarter Net Sales Decline as of the end of such Fiscal Quarter.
SECTION 8.5 Investments. No Credit Party will, nor will it permit any of its Subsidiaries to, purchase, make, incur, assume or permit to exist any Investment in any other Person, except (“Permitted Investments”):
(a) Investments existing on the Closing Date and identified in Schedule 8.5(a);
(b) cash and Cash Equivalent Investments;
(c) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;
(d) Investments consisting of any deferred portion of the sales price received by a Credit Party or any of its Subsidiaries in connection with any Disposition permitted under Section 8.9;
(e) (i) Investments in and loans to any Credit Party and (ii) Investments in and loans to any Subsidiary that is not a Credit Party (x) to the extent made by any other Subsidiary that is not a Credit Party or (y) constituting payroll expenses and other operational costs incurred by such Subsidiary in the ordinary course of business consistent with past practice;
(f) Investments constituting (i) accounts receivable arising, (ii) trade debt granted, or (iii) deposits made in connection with the purchase price of goods or services, in each case in the ordinary course of business;
(g) Investments and loans by a Credit Party in a Subsidiary that is not a Credit Party that do not include the Disposition of Material Intellectual Property or Capital Securities with respect to Subsidiaries that directly or indirectly own, or hold a license in respect of, Material Intellectual Property, in an aggregate amount, together with the aggregate amount of Permitted Dispositions made pursuant to clause (v)(C) of the definition thereof, not to exceed $2,000,000; and
(h) other Investments that do not include Material Intellectual Property or Capital Securities with respect to Subsidiaries that directly or indirectly own, or hold a license in respect of, Material Intellectual Property in an aggregate amount not to exceed $5,000,000.
SECTION 8.6 Restricted Payments, Etc. No Credit Party will, nor will it permit any of its Subsidiaries to, declare or make a Restricted Payment, or make any deposit for any Restricted Payment, other than:
(a) Restricted Payments made by Subsidiaries of the Borrower to the Borrower; and
(b) so long as (i) no Default or Event of Default has occurred and is continuing, (or could be reasonably expected to occur as a result thereof) and (ii) Holdings (or any direct or indirect parent of Holdings) is the parent of a consolidated group for U.S. federal income tax purposes that includes the Borrower, Restricted Payments made in cash by the Borrower to Holdings (or such direct or indirect parent of Holdings), the proceeds of which shall be used solely to pay Taxes of Holdings or such direct or indirect parent of Holdings (other than any Taxes attributable to any action or activity that constitutes or results in a breach by Holdings of Section 8.20); and
(c) so long as no Event of Default has occurred and is continuing (or could be reasonably expected to occur as a result thereof), share repurchases in an aggregate amount not to exceed $1,000,000 per Fiscal Year plus any amounts pursuant to this clause (c) that were unused in any preceding Fiscal Year.
SECTION 8.7 Issuance of Capital Securities. No Credit Party will, nor will it permit any of its Subsidiaries to, issue any Capital Securities (whether for value or otherwise) to any Person other than:
(a) in the case of Subsidiaries of the Credit Parties, Qualified Capital Securities issued to a Credit Party so long as such issuance could not reasonably be expected to result in a Default or an Event of Default; and
(b) the issuance of Qualified Capital Securities of Holdings so long as such issuance could not reasonably be expected to result in an Event of Default.
SECTION 8.8 Consolidation, Merger, Etc. No Credit Party will, nor will it permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge or amalgamate into or with, any other Person, or purchase or otherwise acquire any other Person or all or substantially all of the assets of any other Person (or any division thereof), except that (i) any Subsidiary (other than the Borrower) of a Credit Party may liquidate or dissolve voluntarily into, and may merge or amalgamate with and into, a Credit Party; provided, that such Credit Party is the surviving entity; and provided, further, that immediately following any such merger or amalgamation, the Credit Parties directly or indirectly hold the same or greater percentage of the issued and outstanding Capital Securities of such Subsidiary as the Credit Parties held immediately prior to such merger or amalgamation; (ii) any Credit Party (other than Holdings) may liquidate or dissolve voluntarily into, and may merge or amalgamate with and into, a Credit Party; provided, that if the Borrower is a party thereto, the Borrower is the surviving entity; and (iii) any Subsidiary that is not a Credit Party may liquidate or dissolve voluntarily into, and may merge or amalgamate with and into, another Subsidiary that is not a Credit Party.
SECTION 8.9 Permitted Dispositions. No Credit Party will, nor will it permit any of its Subsidiaries to, Dispose of any of its assets (including accounts receivable and Capital Securities) to any Person in one transaction or series of transactions except for Permitted Dispositions.
SECTION 8.10 Modification of Certain Agreements. No Credit Party will, nor will it permit any of its Subsidiaries to, amend, supplement, waive or otherwise modify, consent to any amendment, supplement, waiver or other modification of, or enter into any forbearance from exercising any rights with respect to the terms or provisions contained in (i) any Organic Documents of a Credit Party or any of its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect or in a manner that could be materially adverse to the interests of the Agent or any of the Lenders without the consent of the Agent; provided that a transaction expressly permitted pursuant to Section 8.8 that does not materially adversely effect the interests of the Agent or any of the Lenders shall not require any
consent under this Section 8.10 or (ii)(A) any Material Agreement or any documents relating thereto (in each case, other than any amendments, supplements, waivers, or other modifications to the AWS Agreement (or any replacement cloud hosting agreement that is a Material Agreement) or any documents relating thereto, in each case, that are made from time to time by AWS (or any counterparty to such replacement cloud hosting agreement or any documents relating thereto)), or (B) any material Product Agreement or any documents relating thereto, in any such case in this clause (ii), in a manner that could be materially adverse to the interests of the Agent or any of the Lenders without the consent of the Agent.
SECTION 8.11 Transactions with Affiliates. No Credit Party will, nor will it permit any of its Subsidiaries to, enter into or cause or permit to exist any arrangement, transaction or contract (including for the purchase, lease or exchange of property or the rendering of services) with any of its other Affiliates, unless such arrangement, transaction or contract (i) is on fair and reasonable terms no less favorable to such Credit Party or such Subsidiary than it could obtain in an arm’s-length transaction with a Person that is not an Affiliate (it being understood that this Section shall not apply to any transaction that is expressly permitted under this Agreement between or among the Credit Parties and not involving any other Affiliate) or (ii) is set forth on Schedule 6.20.
SECTION 8.12 Restrictive Agreements, Etc. No Credit Party will, nor will it permit any of its Subsidiaries to, enter into any agreement (i) prohibiting the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or limiting in any way granting to the Secured Parties (or any of them) a Lien on any of its assets, (ii) restricting the ability of a Credit Party or any of its Subsidiaries to amend or otherwise modify any Loan Document, (iii) containing any provision which could reasonably be expected to be violated or breached by a party hereunder by the performance by such party of any of its obligations hereunder or under any other Loan Document, (iv) encumbering or restricting the ability of a Credit Party or any of its Subsidiaries to (a) make any payments, directly or indirectly, to the Borrower, including by way of dividends, advances, repayments of Indebtedness owed to the Borrower, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, (b) make loans or advances to the Borrower or (c) transfer any of its assets or properties to the Borrower. The foregoing prohibitions shall not apply to restrictions (x) contained in any Loan Document or (y) in the case of clause (i), (I) by reason of applicable law, (II) in any agreement governing any Indebtedness permitted by clause (e) of Section 8.2 as to the assets financed with the proceeds of such Indebtedness, (III) in contracts (A) existing as of the Closing Date and set forth on Schedule 8.12 or any renewal or extension thereof; provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith and (B) of a Person existing at the time such Person becomes a Subsidiary of a Credit Party in a transaction permitted hereunder, provided that any such contract was not created in anticipation of or in connection with the transaction or series of transactions pursuant to which such Person became a Subsidiary of a Credit Party, or (IV) any Permitted Lien or any document or instrument governing any Permitted Lien; provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien.
SECTION 8.13 Sale and Leaseback. Except in a transaction permitted by Section 8.9, or transactions with an aggregate fair market value not in excess of $750,000, no Credit Party will, nor will it permit any of its Subsidiaries to, directly or indirectly enter into any agreement or arrangement providing for the sale or transfer by it of any property (now owned or hereafter acquired) to a Person and the subsequent lease or rental of such property or other similar property from such Person.
SECTION 8.14 Product Sales. No Credit Party will, nor will it permit any of its Subsidiaries to, sell or distribute Products which represented, in the aggregate, 15% or more of Net Sales in any applicable year, or permit any sale or distribution of such Products above such threshold where a Credit Party or any of its Subsidiaries is required to obtain any Permit, or to file any notice or registration in any
jurisdiction prior to any such sale or distribution of such Products above such threshold, in each case, until such Credit Party or such Subsidiary has obtained such required Permit or filed such notice or registration.
SECTION 8.15 Change in Name, Location, Executive Office, or Executive Management; Change in Fiscal Year. No Credit Party will, nor will it permit any of its Subsidiaries to, (i) change its legal name without ten (10) days’ prior written notice to the Agent, (ii) change its jurisdiction of organization or legal structure, (iii) relocate its chief executive office or principal place of business, relocate any other office in which it maintains books or records relating to its business (including the establishment of any new office or facility), except, in each case, within the State of California or into the State of Texas and with ten (10) days’ prior written notice to the Agent, or (iv) change its Fiscal Year or any of its Fiscal Quarters.
SECTION 8.16 Negative Pledge. No Credit Party will, nor will it permit any of its Subsidiaries to, create, permit or suffer to exist any Lien (whether such interest is based on common law, statute, other law or contract and whether junior or equal or superior in priority to the security interests and Liens created by the Loan Documents) upon any of its property (including Capital Securities of any Person), revenues or assets, whether now owned or hereafter acquired, except Permitted Liens. No Credit Party will, nor will it permit any of its Subsidiaries to, incur senior secured obligations other than the Obligations incurred hereunder. For the avoidance of doubt, this Section 8.16 shall not restrict the Credit Parties’ (i) incurrence of Indebtedness (A) secured by Permitted Liens that are permitted pursuant to Section 8.3(h) or (B) constituting letters of credit incurred in reliance upon Section 8.2(m) or (ii) cash collateral securing any such letter of credit in reliance upon Section 8.3(l).
SECTION 8.17 Sanctions. No Credit Party will, and no Credit Party will permit any of its Affiliates to, use any proceeds of the Loans for the purpose of: (i) providing financing to or otherwise making funds directly or indirectly available to any Sanctioned Person, or (ii) providing financing to or otherwise funding any transaction which would be prohibited by Sanctions or would otherwise cause the Agent or any of the Lenders to be in breach of any Sanction.
(b) No Credit Party will, and no Credit Party will permit any of its Affiliates to, fund any repayment of the credit with proceeds derived from any transaction that would be prohibited by Sanctions or would otherwise cause the Agent or any of the Lenders to be in breach of any Sanction.
SECTION 8.18 Passive Holding Company. Holdings will not conduct, transact or otherwise engage in any active trade or business or operations, incur any Indebtedness or other liability, or own any assets other than Capital Securities of the Borrower; provided that the foregoing will not prohibit Holdings from the following: (i) the maintenance of its legal existence and obligations that are incidental thereto (including the ability to incur reasonable fees, costs, expenses and other liabilities directly relating to such maintenance), (ii) obligations that are limited to obligations under the Loan Documents to which it is a party, (iii) the making of contributions to (or other equity investments in) the Borrower, which contributions shall be subordinated to the Obligations, (iv) participating in tax, accounting and other administrative and fiduciary matters as a direct owner of the Borrower, in accordance with the terms of the Loan Documents to which Holdings is a party, (v) providing customary compensation, indemnification and insurance coverage to officers and directors (or equivalent), (vi) the consummation of an IPO or SPAC Transaction, and (vii) making Restricted Payments or issuing any Capital Securities to the extent expressly permitted hereunder.
SECTION 8.19 USRPHC Status. No Credit Party will, nor will it permit any of its Subsidiaries to, become a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code.
SECTION 8.20 Hazardous Materials. No Credit Party will, nor will it permit any of its Subsidiaries to, cause or suffer to exist a Release of any Hazardous Material at, on, under, to or from any real estate that would violate any Environmental Law, form the basis for any Environmental Liabilities or otherwise adversely affect the value or marketability of any real estate (whether or not owned by any Credit Party or any Subsidiary of any Credit Party), other than such violations, Environmental Liabilities and effects that would not, in the aggregate, reasonably be expected to result in a material liability.
SECTION 8.21 Licenses. No Credit Party will, nor will it permit any of its Subsidiaries to, grant any license to any Material Intellectual Property other than a license that:
(a) is in the ordinary course of business;
(b) is (i) on a non-exclusive basis or (ii) on an exclusive basis so long as each such exclusive license is limited to a particular geographic area (other than the U.S, U.K. or Japan);
(c) will not prevent, restrict or otherwise impair such Credit Party’s or such Subsidiary’s or the Agent’s ability to use or otherwise monetize such Material Intellectual Property; and
(d) will not prevent, restrict or otherwise impair the Agent’s ability to assume such Credit Party’s or such Subsidiary’s rights under such license.
SECTION 8.22 Subordinated Indebtedness.
Except as expressly permitted by the subordination agreement with respect to any subordinated Indebtedness, no Credit Party shall make any payment or distribution in respect of such subordinated Indebtedness, other than in the form of Capital Securities (other than Disqualified Capital Securities) of Holdings. No Credit Party shall, without the prior written consent of the Administrative Agent, amend or otherwise modify the terms of any subordinated Indebtedness, except as expressly permitted by the subordination agreement with respect to such subordinated Indebtedness. No Credit Party shall permit the transfer of any subordinated Indebtedness, unless the transferee party is, or becomes, a party to the subordination agreement with respect to such subordinated Indebtedness.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1 Listing of Events of Default. Each of the following events or occurrences described in this Article shall constitute an “Event of Default”.
(a) Non-Payment of Obligations. (i) The Borrower shall default in the payment or prepayment when due of any principal on the Loans, or (ii) any Credit Party, including the Borrower, shall default in the payment or prepayment of interest or any fee described in Article III or any other monetary Obligation, and in the case of clause (ii) such default shall continue unremedied for a period of three (3) Business Days after such amount was due.
(b) Breach of Representation or Warranty. Any representation or warranty made or deemed to be made by a Credit Party or its Subsidiaries in any Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect in any material respect when made or deemed to have been made or, in the case of any representation or warranty that, by its terms, is qualified by materiality, Material Adverse Effect or similar qualification, such representation or warranty is or shall be incorrect in any respect when made or deemed made.
(c) Non-Performance of Certain Covenants and Obligations. A Credit Party or any of its Subsidiaries shall default in the due performance or observance of any of its obligations under Sections 7.1(a), 7.1(b), 7.1(c), 7.1(d), 7.7, 7.8 or 7.12 or Article VIII ((i) other than Section 8.10(ii) and (ii) with respect to Section 8.4(a), subject to the Liquidity Cure Right set forth therein).
(d) Non-Performance of Other Covenants and Obligations. A Credit Party or any of its Subsidiaries shall default in the due performance and observance of any other covenant, obligation or agreement contained in any Loan Document (other than any default of the type contemplated by any other subsection of this Section 9.1) executed by it, and such default shall continue unremedied for a period of thirty (30) days after the earlier to occur of (i) written notice thereof given to Holdings by the Agent or the Majority Lenders or (ii) the date on which a Credit Party or any of its Subsidiaries has knowledge of such default.
(e) Default on Other Indebtedness. A default shall occur in the payment of any amount when due (subject to any applicable grace period), whether by acceleration or otherwise, of any principal or stated amount of, or interest or fees on, any Indebtedness (other than Indebtedness permitted under Section 8.2(a)) of any Credit Party or any of its Subsidiaries having a principal or stated amount, individually or in the aggregate, in excess of $4,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause or declare such Indebtedness to become due and payable or to require such Indebtedness to be prepaid, redeemed, purchased or defeased, or require an offer to purchase or defease such Indebtedness to be made, prior to its expressed maturity.
(f) Judgments. Any judgment or order for the payment of money individually or in the aggregate in excess of $4,000,000 (exclusive of any amounts fully covered by insurance (less any applicable deductible) and as to which the insurer has acknowledged its responsibility to cover such judgment or order) shall be rendered against any Credit Party or any of its Subsidiaries and such judgment shall not have been vacated or discharged or stayed or bonded pending appeal within sixty
(60) days after the entry thereof or enforcement proceedings shall have been commenced by any creditor upon such judgment or order.
(g) Change in Control. Any Change in Control shall occur.
(h) Bankruptcy, Insolvency, Etc. Any Credit Party or any of its Subsidiaries shall:
(i) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness generally to pay, debts as they become due;
(ii) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, sequestrator or other custodian for any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors;
(iii) in the absence of such application, consent or acquiescence in or permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within sixty (60) days; provided that, the Credit Parties and their Subsidiaries hereby expressly authorize the Agent to appear in any court conducting any relevant proceeding during such sixth (60) day period to preserve, protect and defend its rights under the Loan Documents;
(iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law or any dissolution, winding up or liquidation proceeding, in respect thereof, and, if any such case or proceeding is not commenced by a Credit Party or any of its Subsidiaries, such case or proceeding shall be consented to or acquiesced in by a Credit Party or any of its Subsidiaries or shall result in the entry of an order for relief or shall remain for sixty (60) days undismissed; provided that, the Credit Parties and their Subsidiaries hereby expressly authorize the Agent to appear in any court conducting any such case or proceeding during such sixty (60) day period to preserve, protect and defend its rights under the Loan Documents; or
(v) take any action authorizing, or in furtherance of, any of the foregoing in clause (ii), (iii) or (iv) above.
(i) Impairment of Security, Etc. Any Loan Document or any Lien granted thereunder shall (except in accordance with its terms), in any material respect, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of a Credit Party or any of its Subsidiaries party thereto; any Credit Party or any of its Subsidiaries shall, directly or indirectly, contest in writing such effectiveness, validity, binding nature or enforceability; or, except as permitted under any Loan Document, any Lien securing any Obligation shall, in any material respect, cease to be a perfected first priority Lien, except to the extent that any such loss of perfection results from the failure of the Agent to maintain possession of certificates actually delivered to or representing securities pledged under this Agreement or any other Loan Documents.
(j) Regulatory Matters. If any of the following events or circumstances occur: (i) the FDA or the Department of Justice (DOJ) on its behalf, or any other Governmental Authority (A) makes a final determination that any Product which represented, in the aggregate, 15% or more of Net Sales in any applicable year lacks a required Regulatory Authorization or otherwise takes a regulatory or enforcement action that until and unless successfully resolved through Credit Party responsive action and remediation, dispute resolution, appeal, or other action prohibits or enjoins the distribution of such a Product above such threshold by Credit Party under the then-held Regulatory Authorization, or (B)
initiates enforcement action against, including but not limited to issuing a warning letter with respect to, or proposing a consent decree of permanent injunction with respect to, any Products of any Credit Party or any of its Subsidiaries which represented, in the aggregate, 15% or more of Net Sales in any applicable year, in any case that causes such Credit Party or such Subsidiary to discontinue operating in any applicable jurisdiction or (ii) any Credit Party or any of its Subsidiaries enters into a settlement agreement with the FDA and DOJ or any other Governmental Authority that results in aggregate liability as to any single or related series of transactions, incidents or conditions, in excess of $4,000,000.
(k) Pension Plans. Any of the following events shall occur with respect to any Pension Plan which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:
(i) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien on any Credit Party or any ERISA Affiliate under Section 303(k) of ERISA or under Section 430(k) of the Code; or
(ii) any ERISA Event shall occur that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries.
(l) Key Permit Events. Any of the following events shall occur:
(i) any Key Permit relating to FFRct issued by the United States, any state thereof or any instrumentality of the foregoing is terminated, suspended or amended by the Governmental Authority issuing such Key Permit or a court of competent jurisdiction in a manner that (x) results in the cessation of a material portion of the revenue generating business of a Credit Party or any of its Subsidiaries or (y) requires the commercialization of any of the material Products by a Credit Party or any of its Subsidiaries to be stopped or halted for a material amount of time; or
(ii) any other Key Permit is terminated, suspended or amended by the Governmental Authority issuing such Key Permit or a court of competent jurisdiction in a manner that (x) results in the cessation of a material portion of the revenue generating business of a Credit Party or any of its Subsidiaries or (y) requires the commercialization of any of the material Products by a Credit Party or any of its Subsidiaries to be stopped or halted for a material amount of time; provided that, if, after excluding the Net Sales as of the last period for which a Compliance Certificate has been delivered (or was required to be delivered) to the Agent pursuant to Section 7.1(d) for which such Key Permit is necessary, the Credit Parties remain in compliance with the financial covenant set forth in Section 8.4(b) (without giving effect to the proviso contained in such Section), as evidenced by calculations in reasonable detail certified by an Authorized Officer of the Borrower to the Agent within two (2) Business Days after such termination, suspension or amendment, no Event of Default shall occur;
provided that, in each case of the foregoing clauses (i) and (ii), to the extent such termination, suspension or amendment with respect to such Key Permit is of an administrative and technical nature that can be remedied without the consent of any third party or Governmental Authority and is so remedied within five (5) Business Days after the occurrence thereof, no Event of Default shall occur.
(m) Material Agreements. Any default or event of default shall occur under any Material Agreement, or any Material Agreement shall cease, for any reason, to be in full force and effect other than upon expiration thereof in accordance with its terms unless the Credit Party party thereto determines in the exercise of its good faith business judgment that termination thereof by Credit Party is
beneficial to such Credit Party, or any party to any Material Agreement (other than a Credit Party) shall challenge or repudiate its obligations under such Material Agreement or the enforceability of such Material Agreement, in each case, to the extent that any such occurrence has or could reasonably be expected to have a Material Adverse Effect; provided that, for the avoidance of doubt and notwithstanding anything to the contrary in this Agreement or any other Loan Document, in no event shall an Event of Default occur as a result of any termination of the AWS Agreement (x) by the Credit Parties to the extent that, prior to or concurrently with such termination, the Credit Parties have entered into an agreement with another provider for cloud hosting services that (taken as a whole) are not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) provided to the Credit Parties in the AWS Agreement (or, if such cloud hosting services are materially worse, then not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) customarily provided in the market at such time for similarly situated Persons in the same industry as the Credit Parties) or (y) by AWS to the extent that, within thirty (30) days after such termination, the Credit Parties have entered into an agreement with another provider for cloud hosting services that (taken as a whole) are not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) provided to the Credit Parties in the AWS Agreement (or, if such cloud hosting services are materially worse, then not materially worse to the Credit Parties than the cloud hosting services (taken as a whole) customarily provided in the market at such time for similarly situated Persons in the same industry as the Credit Parties).
(n) Patents. Any Patents, the loss of which would constitute a Material Adverse Effect, are found invalid as determined by a court of competent jurisdiction by final and non-appealable judgment.
SECTION 9.2 Action if Bankruptcy. If any Event of Default described in Section 9.1(h) with respect to any Credit Party or any of its Subsidiaries shall occur, and the outstanding principal amount of the Loans and all other Obligations shall automatically be and become immediately due and payable, without notice, demand or presentment to or on any Person.
SECTION 9.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 9.1(h)) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Agent or the Majority Lenders may, by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable whereupon the full unpaid amount of the Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment to or on any Person.
ARTICLE X
ADMINISTRATIVE AGENT
SECTION 10.1 Appointment. Each of the Lenders hereby irrevocably appoints Hayfin Services LLP to act on its behalf as the Agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article X are solely for the benefit of the Agent and the Lenders, and neither any Credit Party nor any of its respective Subsidiaries will have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable
law. Instead, such term is used as a matter of market custom and is intended to create or reflect only an administrative relationship between contracting parties.
SECTION 10.2 Rights as a Lender. The Person serving as the Agent hereunder will have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent, and the term “Lender” or “Lenders” will, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for, and generally engage in any kind of business with, the Borrower or any of its Affiliates as if such Person were not the Agent hereunder and without any duty to account therefor to the Lenders.
SECTION 10.3 Exculpatory Provisions.The Agent will not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder are administrative in nature. Without limiting the generality of the foregoing, the Agent:
(i) will not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(ii) will not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Majority Lenders (or such other number or percentage of the Lenders as will be expressly provided for herein or in the other Loan Documents); provided that the Agent will not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any debtor relief law; and
(iii) will not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and will not be liable for the failure to disclose, any information relating to any Credit Party or any of its Subsidiaries or Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.
(b) The Agent will not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as will be necessary, or as the Agent believes in good faith will be necessary, under the circumstances as provided in Sections 9.2, 9.3, and 11.1) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Agent will be deemed not to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to the Agent in writing by the Borrower or a Lender.
(c) The Agent will not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set
forth in Article V or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.
SECTION 10.4 Reliance by Agent. The Agent will be entitled to rely upon, and will not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and will not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of the Loans that by its terms must be fulfilled to the satisfaction of a Lender, the Agent may presume that such condition is satisfactory to such Lender unless the Agent has received notice to the contrary from such Lender prior to the making of such Loans. The Agent may consult with legal counsel (who may be counsel for the Borrower or any of its Affiliates), independent accountants and other experts selected by it, and will not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
SECTION 10.5 Delegation of Duties. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory provisions of this Article X will apply to any such sub-agent and to the Affiliates of the Agent and any such sub-agent and will apply to their respective activities in connection with the syndication of the facility as well as activities as the Agent. The Agent will not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
SECTION 10.6 Resignation of Agent.The Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Majority Lenders will have the right, with the consent of the Borrower (unless an Event of Default is in existence), to appoint a successor. If no such successor will have been so appointed by the Majority Lenders and will have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation (or such earlier day as will be agreed by the Majority Lenders) (the “Resignation Effective Date”), then the retiring Agent may (but will not be obligated to), on behalf of the Lenders, appoint a successor Agent meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation will become effective in accordance with such notice on the Resignation Effective Date.
(b) With effect from the Resignation Effective Date (i) the retiring Agent will be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by the Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent will continue to hold such Collateral until such time as a successor Agent is appointed) and (ii) except for any indemnity payments owed to the retiring Agent, all payments, communications and determinations provided to be made by, to or through the Agent will instead be made by or to each Lender directly, until such time, if any, as the Majority Lenders appoint a successor Agent as provided for above. Upon the acceptance of a successor’s appointment as the Agent hereunder, such successor will succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Agent (other than any rights to indemnity payments owed to the retiring Agent), and the retiring Agent will be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Agent will be the same as those payable to its
predecessor unless otherwise agreed among the Borrower and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article X, Section 11.3 and Section 11.4 will continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as the Agent.
SECTION 10.7 Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their respective Affiliates and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their respective Affiliates and based on such documents and information as it will from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
SECTION 10.8 Agent May File Proofs of Claim. In case of the pendency of any insolvency proceeding or any other judicial proceeding relative to the Borrower, the Agent (irrespective of whether the principal of the Loans will then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Agent has made any demand on the Borrower) will be entitled and empowered (but not obligated), by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid hereunder or under any other Loan Document to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Agent and their respective agents and counsel and all other amounts due the Lenders and the Agent under Sections 3.7, 3.8, 11.3 and 11.4) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Agent and, in the event that the Agent consents to the making of such payments directly to the Lenders, to pay to the Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agent and its agents and counsel, and any other amounts due the Agent under Sections 3.7, 3.8, 11.3 and 11.4.
SECTION 10.9 Collateral and Guaranty Matters.Without limiting the provisions of Section 10.8, the Lenders irrevocably authorize the Agent, at its option and in its discretion:
(i) to release any Lien on any property granted to or held by the Agent under any Loan Document (A) on the Termination Date (or such other date on which all Obligations then outstanding have been paid in full), (B) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted under the Loan Documents or (C) subject to Section 11.1, if approved, authorized or ratified in writing by the Majority Lenders; and
(ii) to release any Guarantor from its obligations under its Guaranty if such Person ceases to be a Subsidiary as a result of a transaction permitted under the Loan Documents.
Upon request by the Agent at any time, the Majority Lenders will confirm in writing the Agent’s authority to release or subordinate its interest in particular types or items of Collateral, or to release any Guarantor from its obligations under its Guaranty pursuant to this Section 10.9.
(b) The Agent will not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Agent’s Lien thereon, or any certificate prepared by the Borrower in connection therewith, nor will the Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.
(c) The Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or any Security Agreement which may be necessary to perfect and maintain perfected the Liens on the Collateral granted pursuant to any such Security Agreement or protect and preserve the Agent’s ability to enforce the Liens or realize upon the Collateral.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 Waivers, Amendments, Etc. Except as otherwise provided herein or in any other Loan Document, (i) no amendment to any provision of this Agreement or any of the other Loan Documents will in any event be effective unless the same is in writing and signed by Holdings, the Borrower (and/or any Guarantor or other party thereto, as applicable), the Agent and the Majority Lenders (or the Agent with the written consent of the Majority Lenders) and (ii) no waiver of any provision of this Agreement or any other Loan Document, or consent to any departure by a Credit Party, any of its Subsidiaries or other party therefrom, will in any event be effective unless the same is in writing and signed by the Agent and the Majority Lenders (or the Agent with the consent of the Majority Lenders). Any such amendment, waiver or consent will be effective only in the specific instance and for the specific purpose for which given; provided that, notwithstanding the foregoing provisions of this Section 11.1, any term or provision of Article X (other than the provisions of Section 10.6 pertaining to the Borrower’s consent) may be amended without the agreement or consent of, or prior notice to, a Credit Party or any of its Subsidiaries; provided that such amendment does not add any additional obligations or burdens on such Credit Party or such Subsidiary.
No failure or delay on the part of the Agent or the Lenders in exercising any power or right under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on Holdings, the Borrower or any other Subsidiary in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Agent or the Lenders under any Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2 Notices; Time. All notices and other communications provided under any Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted, if to Holdings, the Borrower or the Agent, to the applicable Person at its address or facsimile number set forth on Schedule 11.2 hereto, or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile or email, shall be deemed given when the confirmation of transmission
thereof is received by the transmitter. Unless otherwise indicated, all references to the time of a day in a Loan Document shall refer to New York City time.
SECTION 11.3 Payment of Costs and Expenses. The Credit Parties agree to, jointly and severally, pay promptly on demand all reasonable and documented or invoiced out-of-pocket expenses of the Agent and the Lenders (or any of them) (including the reasonable fees and documented or invoiced out-of-pocket expenses of DLA Piper LLP (US), U.S. counsel to the Agent and the Lenders and of one local counsel in each relevant jurisdiction, if any, who may reasonably be retained by or on behalf of the Agent and the Lenders (or any of them)) in connection with:
(a) the negotiation, preparation, execution and delivery of (i) each Loan Document, including schedules and exhibits, whether or not the transactions contemplated hereby are consummated; provided that, with respect to legal fees of DLA Piper LLP (US) (U.S. counsel to the Agent and the Lenders) for services rendered as of the Closing Date, the Credit Parties shall have no obligation to pay more than $250,000 (plus the amount of any out-of-pocket disbursements of such counsel), and (ii) any amendments, waivers, consents, supplements or other modifications to any Loan Document as may from time to time be entered into after the Closing Date;
(b) the filing or recording of any Loan Document (including any financing statements) and all amendments, supplements, amendment and restatements and other modifications to any thereof, searches made after the date hereof in jurisdictions where financing statements (or other documents evidencing Liens in favor of the Agent and the other Secured Parties) have been recorded and any and all other documents or instruments of further assurance required to be filed or recorded by the terms of any Loan Document; and
(c) the preparation and review of the form of any document or instrument relevant to any Loan Document, including any amendments or other modifications thereto.
The Credit Parties further agree to, jointly and severally, pay, and to save the Agent and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of each Loan Document, the Loans or the issuance of the Notes, excluding any Other Taxes, which are governed by Section 4.3(c). The Credit Parties also agree to reimburse the Agent and the Lenders upon demand for all reasonable and documented or invoiced out-of-pocket expenses (including all reasonable and documented or invoiced out-of-pocket attorneys’ fees and legal expenses of counsel to Agent and the Lenders (or any of them)) incurred by the Agent and the Lenders (or any of them) in connection with (i) the negotiation of any restructuring or “work-out” with Holdings or the Borrower, whether or not consummated, of any Obligations and (ii) the enforcement of any Obligations.
SECTION 11.4 Indemnification.Reimbursement by the Borrower. In consideration of the execution and delivery of this Agreement by the Agent and the Lenders, the Credit Parties hereby, jointly and severally, indemnify, agree to defend, exonerate and hold the Agent, the Lenders and each of their respective officers, directors, employees and agents (collectively, the “Indemnified Parties”) free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities, obligations and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable and documented or invoiced out-of-pocket attorneys’ and professionals’ fees and disbursements, of one primary counsel for all Indemnified Parties (and, in the case of an actual or perceived conflict of interest where the Indemnified Party affected by such conflict notifies the Borrower of the existence of such conflict and thereafter retains its own counsel, another counsel for each such affected Indemnified Party), and one local counsel in each relevant jurisdiction, whether incurred in connection with actions between the parties hereto or the parties hereto and third parties (collectively, the
“Indemnified Liabilities”), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (i) the entering into and performance of any Loan Document by any of the Indemnified Parties or (ii) any Environmental Liability, any actual or alleged breach of or non-compliance with Environmental Laws or Environmental Permits, any Hazardous Materials, or any other decision, act, omission or matter relating to the environment, natural resources, health, safety or welfare; provided that such indemnity shall not, as to any Indemnified Party, be available to the extent that such Indemnified Liabilities (A) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnified Party, (B) result from a claim brought by any Credit Party against an Indemnified Party for breach in bad faith of such Indemnified Party’s obligations hereunder or under any other Loan Document, if such Credit Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (C) result from a claim not involving an act or omission of any Credit Party and that is brought by an Indemnified Party against another Indemnified Party (other than against the Agent in its capacity as such).
(b) If and to the extent that the foregoing indemnification may be unenforceable for any reason, the Credit Parties agree to, jointly and severally, make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. To the fullest extent permitted by applicable law, no party hereunder shall assert, and each hereby waives, any claim against any other party hereunder, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, or the use of the proceeds thereof. No Indemnified Party shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby. All amounts due under this Section shall be payable promptly after demand therefor. This Section 11.4 shall not apply to Taxes, other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.
(c) Reimbursement by the Lenders. To the extent that Holdings or the Borrower for any reason fails to pay any amount required under Section 11.3 or subsection (a) of this Section to be paid by it to the Agent (or any sub-agent thereof) or any Affiliate thereof, each Lender severally agrees to pay to the Agent (or any such sub-agent) or such Affiliate, as the case may be, such Lender’s Pro Rata Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s Pro Rata Share at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub-agent), or such Affiliate acting for the Agent (or any such sub-agent) in connection with such capacity. The obligations of the Lenders under this subsection (b) are subject to the provisions of Section 11.6.
SECTION 11.5 Survival. The obligations of the Borrower under Section 4.1, Section 4.2, Section 4.3, Section 11.3, Section 11.4 and this Section 11.5, shall in each case survive any assignment by the Lender and the occurrence of the Termination Date. The representations and warranties made by the Borrower in each Loan Document shall survive the execution and delivery of such Loan Document.
SECTION 11.6 Obligations Several. The obligations of the Lenders under the Loan Documents are several. The failure of any Lender or the Agent to carry out its obligations thereunder will not relieve any other Lender or the Agent of any obligations thereunder, nor will any Lender or the Agent be responsible for the obligations of, or any action taken or omitted by, any other Person hereunder or
thereunder. Nothing contained in any Loan Documents will be deemed to cause any Lender or the Agent to be considered a partner or a joint venture with any other Lender or Lenders or the Agent.
SECTION 11.7 Severability. Any provision of any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 11.8 Headings. The various headings of each Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of such Loan Document or any provisions thereof.
SECTION 11.9 Execution, Effectiveness, Etc.
(a) Execution in Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement.
(b) Effectiveness. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and the Lenders shall have been received by the Agent.
(c) Electronic Signatures. Delivery of an executed counterpart of a signature page to this Agreement by email (e.g. “pdf” or “tiff”) or telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. 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 contemplated hereby or by any other Loan Document, 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.
SECTION 11.10 Governing Law; Entire Agreement. EACH LOAN DOCUMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THE LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 11.11 Register; Successors and Assigns.(a) 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 register for the recordation of the names and addresses of the Lenders, 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 error, and 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 under this Agreement. The Register shall be available for inspection by any Credit Party and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(b) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that, the Credit Parties may not assign or transfer their rights or obligations hereunder without the prior written consent of the Agent. The Lenders may freely assign, participate or otherwise transfer any or all of their rights and/or obligations hereunder and/or under the other Loan Documents (in each case, other than to a Disqualified Institution); provided that, except in the case of an assignment to a Lender, an Affiliate of a Lender or related funds, (i) so long as no Event of Default pursuant to Section 9.1(a) or Section 9.1(h) has occurred and is continuing, there shall be no assignment, sale or participation to any Person without the written consent of the Borrower (except in each case with respect to a Disqualified Institution, such consent not to be unreasonably withheld or delayed and such consent to be deemed to have been given if the Borrower has not responded within ten (10) Business Days of a request for such consent), and (ii) any such assignment, sale or participation shall be in an integral multiple of $1,000,000 (or, if less, the entire remaining amount of such Lender’s then outstanding Loans). In the event of any assignment, the Lender making such assignment shall provide prompt notice thereof to the Agent so such assignment can be reflected on the 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 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 the Agent) shall have no responsibility for maintaining a Participant Register. Each participant shall be entitled to the benefits of Sections 4.1, 4.2 and 4.3 (subject to the requirements and limitations therein, including the requirements under Section 4.3(g) (it being understood that the documentation required under Section 4.3(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment; provided that such participant shall not be entitled to receive any greater payment under Section 4.1 or 4.3, with respect to any participation, than its participating lender would have been entitled to receive, except to the extent that such entitlement to receive a greater payment results from a Change in Law that occurs after the participant acquired the applicable participation.
SECTION 11.12 Other Transactions. Nothing contained herein shall preclude the Agent or any of the Lenders, from engaging in any transaction, in addition to those contemplated by the Loan Documents, with a Credit Party, any of its Subsidiaries or any of their Affiliates in which such Credit Party or such Affiliate is not restricted hereby from engaging with any other Person.
SECTION 11.13 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS (OR ANY OF THEM), OR ANY CREDIT PARTY (OR ANY OF ITS SUBSIDIARIES) IN CONNECTION
HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT, ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT’S OR SUCH LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 11.2. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS.
SECTION 11.14 Waiver of Jury Trial. THE AGENT, EACH OF THE LENDERS, AND THE CREDIT PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, EACH LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE CREDIT PARTIES IN CONNECTION THEREWITH. EACH PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THE LOAN DOCUMENTS.
SECTION 11.15 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If the Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
SECTION 11.16 Acknowledgment and Consent to Bail-In of Affected 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 Financial 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.
SECTION 11.17 Judgment Currency.
(a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in one currency (the “first currency”) into another currency (the “other 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 the first currency with such other currency at the applicable 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 Credit Parties in respect of any sum due to the Agent hereunder or 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, the Credit Parties agree, jointly and severally, 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 the Credit Parties.
SECTION 11.18 Specified Repayment Fee. The parties hereto acknowledge and agree that, to the extent the Specified Repayment Fee is applicable to any repayment or prepayment of principal of any Loan at any time, such Specified Repayment Fee is not intended to be a penalty assessed as a result of any such repayment or prepayment of the Loans, but rather is the product of a good faith, arm’s length commercial negotiation between the Borrower and the Lenders relating to the mutually satisfactory compensation payable to the Lenders by the Borrower in respect of the Loans made hereunder. In furtherance of the foregoing, to the fullest extent permitted by applicable law, the Credit Parties hereby jointly and severally waive any rights or claims any of them may have under any such applicable law (whether or not in effect on the Closing Date) that would prohibit or restrict the payment of the Specified
Repayment Fee under any of the circumstances provided herein or in any other Loan Document, including payment after acceleration of the Loans.
SECTION 11.19 USA PATRIOT Act. The Agent and the Lenders hereby notify the Credit Parties that pursuant to the requirements of the Patriot Act, they are required to obtain, verify and record information that identifies each Credit Party, which information includes the name and address of each Credit Party and other information that shall allow such Person to identify such Credit Party in accordance with the Patriot Act. Promptly following any written request therefor, Holdings or the Borrower shall deliver to the Agent such information and documentation in respect of any Credit Party reasonably requested by the Agent or any Lender for purposes of compliance by the Agent or such Lender with applicable “know your customer” requirements under the Patriot Act, the Beneficial Ownership Regulation or other applicable anti-money laundering laws.
SECTION 11.20 Erroneous Payments. If a payment is made by the Agent (or its Affiliates) in error (whether known to the recipient or not) or if a Lender or another recipient of funds is not otherwise entitled to receive such funds at such time of such payment or from such Person in accordance with the Loan Documents, then such Lender or recipient shall forthwith on demand repay to the Agent the portion of such payment that was made in error (or otherwise not intended (as determined by the Agent) to be received) in the amount made available by the Agent (or its Affiliate) to such Lender or recipient, with interest thereon, for each day from and including the date such amount was made available by the Agent (or its Affiliate) to it to but excluding the date of payment to the Agent, at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation; provided that, without limiting any other rights or remedies (whether at law or in equity), the Agent may not make any such demand under this Section 11.20 with respect to such payment unless such demand is made within sixty (60) days of the date of receipt of such payment by the applicable Lender. Each Lender and other party hereto waives the discharge for value defense in respect of any such payment.
SECTION 11.21 Reaffirmation. Each Credit Party as borrower, debtor, grantor, pledgor, guarantor, assignor or in any other similar capacity in which such Credit Party has granted liens or security interests in its property or otherwise acts as accommodation party, under any instruments, documents and agreements entered into in connection with the Existing Credit Agreement that will remain outstanding to secure the Obligations hereunder, hereby (a) ratifies and reaffirms all of its performance and observance obligations and liabilities, whether contingent or otherwise, under each of such instruments, documents and agreements and (ii) ratifies and reaffirms such grant of security interests and liens and confirms and agrees that such security interests and liens hereafter secured all of the Obligations hereunder.
ARTICLE XII
GUARANTEE
SECTION 12.1 The Guarantee. Each of Holdings, the Subsidiary Guarantors and any other Person that becomes a Subsidiary Guarantor after the Closing Date hereby guarantees to the Agent and the Lenders, and their respective successors, endorsees, transferees and assigns, the full and prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise) and performance of the indebtedness, liabilities and other obligations of the Borrower to the Agent and the Lenders under or in connection with this Agreement, the Notes and the other Loan Documents, including all unpaid principal of the Loans, all interest accrued thereon, all fees due under this Agreement and all other amounts payable by the Borrower to the Agent and the Lenders hereunder or in connection herewith. The terms “indebtedness,” “liabilities” and “obligations” are used herein in their most comprehensive sense and include any and all advances, debts, obligations and liabilities, now existing or hereafter arising, whether voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether recovery upon such indebtedness, liabilities and obligations may be or hereafter become unenforceable or shall be an allowed or disallowed claim in any insolvency proceeding and including interest that accrues after the commencement by or against any Credit Party or any of its Subsidiaries of any insolvency proceeding naming such Credit Party or such Subsidiary as the debtor in such insolvency proceeding. The foregoing indebtedness, liabilities and other obligations of the Borrower, and all other indebtedness, liabilities and obligations to be paid or performed by Holdings and/or the Subsidiary Guarantors in connection with this Section shall hereinafter be collectively referred to as the “Guaranteed Obligations.”
SECTION 12.2 Obligations Unconditional. The obligations of Holdings and the Subsidiary Guarantors under Section 12.1 are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower 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 law, 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 12.1 that the obligations of Holdings and the Subsidiary Guarantors hereunder shall be absolute and unconditional under any and all circumstances other than the Payment in Full of the Guaranteed Obligations. 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 Holdings or 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 Holdings or 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 Loan Document 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.
Each of Holdings and the Subsidiary Guarantors hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or the Lenders exhaust any right, power or remedy or proceed against the Borrower 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.
SECTION 12.3 Reinstatement. The obligations of Holdings and the Subsidiary Guarantors under this Article XII 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, and each of Holdings and the Subsidiary Guarantors agrees that it will indemnify the Agent and the Lenders on demand for all reasonable costs and expenses (including reasonable fees of one primary counsel and one local counsel in each relevant jurisdiction) incurred by such Persons in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.
SECTION 12.4 Subrogation. Until the Guaranteed Obligations shall be satisfied in full (other than inchoate indemnification, expense reimbursement obligations and other contingent obligations for which no claim has been asserted), neither Holdings nor any Subsidiary Guarantor shall directly or indirectly exercise, (i) any rights that it may acquire by way of subrogation under this Article XII, by any payment hereunder or otherwise, (ii) any rights of contribution, indemnification, reimbursement or similar suretyship claims arising out of this Article XII or (iii) any other right which it might otherwise have or acquire (in any way whatsoever) which could entitle it at any time to share or participate in any right, remedy or security of the Agent or any Lender as against the Borrower or other Credit Parties (or any of their Subsidiaries), whether in connection with this Article XII, any of the other Loan Documents or otherwise. If any amount shall be paid to Holdings or the Subsidiary Guarantors on account of the foregoing rights at any time when all the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Agent and the Lenders and shall forthwith be paid to the Agent to be credited and applied to the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents.
SECTION 12.5 Remedies. Each of Holdings and the Subsidiary Guarantors agrees that, as between Holdings or any Subsidiary Guarantor, 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 Article IX (and shall be deemed to have become automatically due and payable in the circumstances provided in Article IX) for purposes of Section 12.1 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 Holdings and the Subsidiary Guarantors for purposes of Section 12.1.
SECTION 12.6 Instrument for the Payment of Money. Each of Holdings and the Subsidiary Guarantors hereby acknowledges that the guarantee in this Article XII 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 Holdings or any 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.
SECTION 12.7 Continuing Guarantee. The guarantee in this Article XII is a continuing guaranty and agreement of subordination relating to any Guaranteed Obligations, including Guaranteed Obligations which may exist continuously or which may arise from time to time under successive transactions, and each of Holdings and the Subsidiary Guarantors expressly acknowledges that the guarantee in this Article XII shall remain in full force and effect notwithstanding that there may be periods in which no Guaranteed Obligations exist. The guarantee in this Article XII shall continue in effect and be binding upon Holdings and the Subsidiary Guarantors until payment and performance in full of the Guaranteed Obligations (other than inchoate indemnification, expense reimbursement obligations and other contingent obligations for which no claim has been asserted).
SECTION 12.8 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 Holdings or any Subsidiary Guarantor under Section 12.1 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 12.1, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by Holdings, the Subsidiary Guarantors, the Agent, the Lenders 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.
[SIGNATURE PAGES FOLLOW]
List of Subsidiaries
| | | | | |
| Company Name | Country |
| HeartFlow Japan G.K. | Japan |
| HeartFlow U.K. Limited | United Kingdom |
| HeartFlow Technology U.K. Limited | United Kingdom |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1 of Heartflow, Inc. of our report dated March 26, 2025 relating to the financial statements of HeartFlow Holding, Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
July 17, 2025
