Savara Inc 10-Q for FY2025 Q1
Savara Inc (SVRA)
About this 10-Q
Savara Inc filed this 10-Q on May 13, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $26.64M
- compared with a net loss of $20.35M a year earlier
- Diluted EPS
- -$0.12
- compared with -$0.11 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
||
(Address of principal executive offices) |
|
(Zip Code) |
(
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. ☐
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☐ |
|
☒ |
|
Smaller reporting company |
|
||
|
|
|
|
Emerging growth company |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 13, 2025, the registrant had
Table of Contents
|
|
Page |
PART I. |
1 |
|
Item 1. |
1 |
|
|
1 |
|
|
Condensed Consolidated Statements of Operations and Comprehensive Loss |
2 |
|
3 |
|
|
5 |
|
|
6 |
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
22 |
|
Item 4. |
22 |
|
PART II. |
23 |
|
Item 1. |
23 |
|
Item 1A. |
23 |
|
Item 2. |
Unregistered Shares of Equity Securities and Use of Proceeds |
23 |
Item 3. |
23 |
|
Item 4. |
23 |
|
Item 5. |
23 |
|
Item 6. |
23 |
|
24 |
||
25 |
||
i
PART I – FINANCIAL INFORMATION
Item I. Financial Information
Savara Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(Unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Short-term investments |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
In-process R&D |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and stockholders’ equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term liabilities: |
|
|
|
|
|
|
||
Long-term debt |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders’ equity: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
|
|
For the three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Operating expenses: |
|
|
|
|
|
|
||
Research and development |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
Other income (expense) |
|
|
|
|
|
|
||
Interest income |
|
|
|
|
|
|
||
Foreign currency exchange gain (loss) |
|
|
|
|
|
( |
) |
|
Tax credit income |
|
|
|
|
|
|
||
Loss on extinguishment of debt |
|
|
( |
) |
|
|
— |
|
Total other income, net |
|
|
|
|
|
|
||
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
|
— |
|
|
|
— |
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share: |
|
|
|
|
|
|
||
Basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
||
Basic and diluted |
|
|
|
|
|
|
||
Other comprehensive income (loss): |
|
|
|
|
|
|
||
Gain (loss) on foreign currency translation |
|
|
|
|
|
( |
) |
|
Unrealized loss on short-term |
|
|
( |
) |
|
|
( |
) |
Total comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Periods Ended March 31, 2025 and 2024
(In thousands, except share amounts)
(Unaudited)
|
|
Stockholders’ Equity |
|
|||||||||||||||||||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Number of |
|
|
Amount |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
||||||
Balance on December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of common stock upon |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock for |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Repurchase of shares for |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign exchange translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Unrealized loss on short-term |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance on March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (continued)
Periods Ended March 31, 2025 and 2024
(In thousands, except share amounts)
(Unaudited)
|
|
Stockholders’ Equity |
|
|||||||||||||||||||||
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Number of |
|
|
Amount |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
||||||
Balance on December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of common stock upon |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock for |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Repurchase of shares for |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign exchange translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Unrealized gain on short-term |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance on March 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Savara Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
For the three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Reduction in the carrying value of right-of-use assets |
|
|
|
|
|
|
||
Foreign currency loss |
|
|
— |
|
|
|
|
|
Amortization of debt issuance costs |
|
|
|
|
|
|
||
Loss on extinguishment of debt |
|
|
|
|
|
|
||
Accretion on discount to short-term investments |
|
|
( |
) |
|
|
( |
) |
Stock-based compensation |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Non-current assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable and accrued expenses and other current liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of available-for-sale securities, net |
|
|
( |
) |
|
|
( |
) |
Maturity of available-for-sale securities |
|
|
|
|
|
|
||
Net cash provided by investing activities |
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Repayment of long-term debt |
|
|
( |
) |
|
|
— |
|
Proceeds from long-term debt, net |
|
|
|
|
|
— |
|
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Repurchase of shares for minimum tax withholdings |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Savara Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Organization and Nature of Operations
Description of Business
Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. The Company’s sole program, molgramostim inhalation solution ("MOLBREEVI" or "molgramostim"), is an investigational inhaled biologic, specifically an inhaled granulocyte-macrophage colony-stimulating factor ("GM-CSF") in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). The Company and its wholly-owned domestic and foreign subsidiaries operate in one segment with its principal office in Langhorne, Pennsylvania, though a significant portion of employees work remotely.
Since inception, Savara has devoted its efforts and resources to identifying and developing its product candidates, recruiting personnel, and raising capital. Savara has incurred operating losses and negative cash flow from operations and has
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (“FASB”). The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments that are necessary to fairly present the statements of financial position, operations and cash flows for the periods presented. The results of operations for interim periods shown in this report are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other future annual or interim period.
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted from these condensed consolidated financial statements, as permitted by rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The Company believes the disclosures made in these condensed consolidated financial statements are adequate to make the information herein not misleading. The Company recommends that these condensed consolidated financial statements be read in conjunction with its audited consolidated financial statements and related notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024. The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements. There have been no changes to the Company's significant accounting policies since the date of those financial statements.
Principles of Consolidation
The interim condensed consolidated financial statements of the Company are stated in U.S. dollars and are prepared under U.S. GAAP. These condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The financial statements of the Company’s wholly-owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in Accumulated other comprehensive loss in the condensed consolidated balance sheet. All intercompany transactions and accounts have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 2024 has been derived from the Company's audited consolidated financial statements at that date but does not include all of the information and notes required by U.S. GAAP for complete financial statements.
Liquidity
As of March 31, 2025, the Company had an accumulated deficit of approximately $
The Company is currently focused on the development of MOLBREEVI for the treatment of aPAP and believes such activities will result in the continued incurrence of significant research and development and other expenses related to this program. If the Company’s product candidate does not gain regulatory approval or, if approved, fails to achieve market
6
acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. The Company intends to cover its future operating expenses through cash and cash equivalents on hand, short-term investments, and through a combination of equity offerings, debt financings, government or other third-party funding, and other collaborations and strategic alliances with partner companies. The Company cannot be sure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its stockholders.
The Company’s cash and cash equivalents of $
In order to mitigate risks associated with our banking deposits, the Company maintains a significant portion of its liquidity in U.S. Treasury money market funds and other short-term investments with custodial services provided by U.S. Bank, N.A., and FNZ, refer to Note 5. Short-term Investments and Note 7. Fair Value Measurements.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management’s estimates include those related to the accrual of research and development and general and administrative costs, certain financial instruments recorded at fair value, stock-based compensation, and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates.
Risks and Uncertainties
The product candidate being developed by the Company requires approval from the U.S. Food and Drug Administration (“FDA”) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s product candidate will receive the necessary approvals. If the Company is denied regulatory approval of its product candidate, or if approval is delayed, it will have a material adverse impact on the Company’s business, results of operations, and its financial position.
The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of drug candidates, raising additional capital, development of competing drugs and therapies, protection of proprietary technology, and market acceptance of the Company’s product. As a result of these and other factors and the related uncertainties, there can be no assurance of the Company’s future success.
Concentration of Credit Risk
We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalents and marketable securities with a limited number of financial institutions. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the consolidated balance sheets.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), to require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The amendments in this update should be applied prospectively, with an option to apply them retrospectively, and are effective for fiscal years beginning after December 15, 2024 for public entities. We began an assessment of the impact that this guidance will have on our consolidated financial statements and related disclosures, and our analysis is currently ongoing.
In March 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), to
7
improve the disclosures about a public business entity’s expenses and to provide more detailed information about the types of expenses in commonly presented expense captions. The amendments in this update should be applied either prospectively or retrospectively, and are effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. We began an assessment of the impact that this guidance will have on our consolidated financial statements and related disclosures, and our analysis is currently ongoing.
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Prepaid contracted research and development costs |
|
$ |
|
|
$ |
|
||
R&D tax credit receivable |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
VAT receivable |
|
|
|
|
|
|
||
Deposits and other |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Prepaid Contracted Research and Development Costs
As of March 31, 2025, Prepaid contracted research and development costs are primarily comprised of contractual prepayments associated with the Company's clinical trial for MOLBREEVI for the treatment of aPAP. This includes prepaid amounts paid under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers that provide services in connection with the Company's research and development activities.
R&D Tax Credit Receivable
The Company has recorded a Danish tax credit earned by its subsidiary, Savara ApS, as of March 31, 2025. Under Danish tax law, Denmark remits a research and development tax credit equal to
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of (in thousands):
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
Accrued compensation |
|
$ |
|
|
$ |
|
||
Accrued contracted research and development costs |
|
|
|
|
|
|
||
Accrued general and administrative costs |
|
|
|
|
|
|
||
Lease liability |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Accrued Compensation
As of March 31, 2025, Accrued compensation includes amounts to be paid to employees for salary, bonuses, vacation and non-equity performance-based compensation. At the end of any period, the amounts accrued for such compensation may vary due to many factors including, but not limited to, timing of payments to employees and vacation usage.
Accrued Contracted Research and Development Costs
As of March 31, 2025, Accrued contracted research and development costs are primarily comprised of costs associated with MOLBREEVI for the treatment of aPAP, including expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities.
8
5. Short-term Investments
The Company’s investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. The following table summarizes, by major security type, the Company’s investments (in thousands):
As of March 31, 2025 |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2024 |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total short-term investments |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The Company has classified its investments as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive loss in the condensed consolidated balance sheet. Classification as short-term or long-term is based upon whether the initial maturity of the debt securities is less than or greater than twelve months, as further discussed in Note 7 . Fair Value Measurements.
There were
6. Debt Facility
On March 26, 2025 (the “Closing Date”), the Company, as borrower, entered into a Loan and Security Agreement (the “Hercules Loan Agreement”) with the lenders party thereto (the “Lenders”) and Hercules Capital, Inc., as administrative agent and collateral agent. The Hercules Loan Agreement provides for the Company to borrow up to $
The initial advance of $
The Company's obligations under the Hercules Loan Agreement are secured, subject to customary permitted liens and other agreed-upon exceptions, by a first-priority perfected security interest in all of the tangible and intangible assets of the Company, other than intellectual property, on which there is a negative pledge. The Hercules Loan Agreement includes customary affirmative and negative covenants, repayment terms, prepayment terms subject to a
9
The Hercules Loan Agreement contains an affirmative covenant requiring the Company to maintain unrestricted cash under an account control agreement equal to
Additionally, if the Company draws more than $
The Company is obligated to pay customary closing fees, a facility charge equal to
As of March 31, 2025 approximately $
The Company has identified certain embedded features within the Hercules Loan Agreement. The Company assessed these features and determined the one feature related to Default Penalty interest due upon an event of default is required to be bifurcated from the debt and accounted for separately at fair value. As of the date of issuance and March 31, 2025, the Default Penalty does not have a discernable fair value and no amounts are recorded.
The Company accounted for the repayment of the SVB Loan as an extinguishment in accordance with the guidance in ASC 470-50 and recognized a loss associated with the extinguishment of approximately $
Summary of Carrying Value
The following table summarizes the components of the long-term debt carrying value, which approximates the fair value (in thousands):
Future minimum payments due during the year ended December 31, |
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
2025 |
|
$ |
— |
|
|
$ |
— |
|
2026 |
|
|
— |
|
|
|
|
|
2027 |
|
|
— |
|
|
|
|
|
2028 |
|
|
|
|
|
— |
|
|
2029 |
|
|
|
|
|
— |
|
|
2030 |
|
|
|
|
|
— |
|
|
Total future minimum payments |
|
|
|
|
|
|
||
Unamortized end of term charge |
|
|
( |
) |
|
|
( |
) |
Debt fees |
|
|
( |
) |
|
|
( |
) |
Debt discount related to warrants |
|
|
— |
|
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
|
— |
|
|
|
— |
|
Long-term debt |
|
$ |
|
|
$ |
|
||
7. Fair Value Measurements
The Company measures and reports certain financial instruments at fair value on a recurring basis and evaluates its financial instruments subject to fair value measurements on a recurring and nonrecurring basis to determine the appropriate level in which to classify them in each reporting period.
10
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments annually or whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. These assets and liabilities can include acquired in-process research and development (“IPR&D”) and other long-lived assets that are written down to fair value if they are impaired.
During the three months ended March 31, 2025 and 2024, the Company experienced an increase of approximately $
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company determined that certain investments in debt securities classified as available-for-sale securities were Level 1 financial instruments.
Additional investments in corporate debt securities, commercial paper, and asset-backed securities are considered Level 2 financial instruments because the Company has access to quoted prices but does not have visibility to the volume and frequency of trading for all of these investments. For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.
The fair value of these instruments as of March 31, 2025 and December 31, 2024 was as follows (in thousands):
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
As of March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
The Company did
8. Stockholders’ Equity
Evercore Common Stock Sales Agreement Termination
On
On March 31, 2025, pursuant to Section 12(b) of the ATM Agreement, the Company delivered written notice to Evercore that it was terminating the ATM Agreement, effective
During the three months ended March 31, 2025 and 2024, respectively, the Company did
11
Common Stock Reserved for Issuance
The Company’s shares of common stock reserved for issuance as of the periods indicated were as follows:
|
|
March 31, 2025 |
|
|
December 31, 2024 |
|
||
April 2017 Warrants |
|
|
|
|
|
|
||
June 2017 Warrants |
|
|
|
|
|
|
||
December 2018 Warrants |
|
|
|
|
|
|
||
Pre-funded PIPE Warrants |
|
|
|
|
|
|
||
2021 Pre-funded Warrants |
|
|
|
|
|
|
||
2023 Pre-funded Warrants |
|
|
|
|
|
|
||
Stock options outstanding |
|
|
|
|
|
|
||
Issued and nonvested RSUs |
|
|
|
|
|
|
||
Total shares reserved |
|
|
|
|
|
|
||
Warrants
The following table summarizes the outstanding warrants for the Company’s common stock as of March 31, 2025:
Expiration Date |
|
Shares Underlying |
|
|
Exercise Price |
|
||
|
|
|
|
$ |
|
|||
|
|
|
|
$ |
|
|||
|
|
|
|
$ |
|
|||
|
|
|
|
$ |
|
|||
|
|
|
|
|
|
|
||
Accumulated Other Comprehensive Loss Information
The components of accumulated other comprehensive loss as of the dates indicated and the change during the period were (in thousands):
|
|
Foreign Exchange Translation Adjustment |
|
|
Unrealized Gain (Loss) on ST Investments |
|
|
Total Accumulated Other Comprehensive Loss |
|
|||
Balance, December 31, 2023 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Change |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Balance, December 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Change |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Balance, March 31, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
9. Commitments and Contingencies
Manufacturing and Other Commitments and Contingencies
The Company is subject to various royalties and manufacturing and development payments related to its product candidate, MOLBREEVI.
Additionally, the Company is subject to a purchase requirement under which for ten years following the date of receipt of approval by a regulatory authority of the first regulatory filing for the marketing and sale of the first product containing the API in any country, the Company will purchase from the API manufacturer the API required to produce a percentage of such product it sells each year (the “Purchase Requirement”); provided, however, that the Purchase Requirement will no longer apply if (i) the price charged by the API manufacturer exceeds a certain price charged by an alternative supplier, (ii) there is a shortage of supply, or (iii) API manufacturer at any time fails to materially fulfill a purchase order of the Company.
12
The Company is also subject to certain contingent milestone payments, disclosed in the following table, payable to the manufacturer of the nebulizer used to administer MOLBREEVI. In addition to these milestones, the Company will owe a royalty of three-and one-half percent (
The following table summarizes manufacturing commitments and contingencies as of the period indicated (in thousands):
|
|
March 31, 2025 |
|
|
MOLBREEVI manufacturer: |
|
|
|
|
Achievement of certain milestones related to validation of API and regulatory approval of |
|
$ |
|
|
MOLBREEVI nebulizer manufacturer: |
|
|
|
|
Achievement of various development activities and regulatory approval of nebulizer utilized to administer MOLBREEVI |
|
|
|
|
Total manufacturing and other commitments and contingencies |
|
$ |
|
|
The milestone commitments disclosed in the table above reflect the activities that have (i) not been met or incurred; (ii) not been remunerated; and (iii) not accrued, as the activities are not deemed probable or reasonably estimable, as of March 31, 2025.
Further, in February 2024, the Company entered into a master services agreement with an additional manufacturer to provide development and manufacturing services related to API for the Company’s MOLBREEVI product candidate in accordance with the terms of separate scope of work agreements to be entered into by the parties and to perform a manufacturing campaign for process performance qualification of the API of MOLBREEVI. From inception, the total estimated accumulated fees the Company will have paid the second source manufacturer's services under that original master services agreement, work orders and subsequent change orders is $
Contract Research
As part of its development of MOLBREEVI for the treatment of aPAP, the Company entered into a Master Services Agreement (“MSA”) with Parexel International (IRL) Limited (“Parexel”) pursuant to which Parexel will provide contract research services related to clinical trials. Contemporaneously with entering the MSA, a work order was executed with Parexel, under which they will provide services related to the IMPALA-2 trial. From inception of the the original work order and subsequent change orders, the Company will have paid Parexel service fees, pass-through expenses, and investigator fees estimated to be approximately $
In the second quarter of 2024, the Company initiated an open-label, multicenter clinical trial of MOLBREEVI in pediatric subjects with aPAP ("IMPACT") under a separate work order with Parexel. Pursuant to the IMPACT trial, Parexel has the opportunity to earn up to approximately $
Risk Management
The Company maintains various forms of insurance that the Company's management believes are adequate to reduce the exposure to certain risks associated with operating the Company’s business to an acceptable level.
10. Stock-Based Compensation
Equity Incentive Plans
The Company’s 2024 Omnibus Incentive Plan (the “2024 Plan”) was adopted by the Company’s board of directors in March 2024, was approved by the Company’s stockholders on June 6, 2024, and became effective on June 7, 2024. The 2024 Plan was intended to replace the Company’s Amended and Restated 2015 Omnibus Incentive Plan (the “2015 Plan”), and upon the effectiveness of the 2024 Plan, no further grants may be made under the 2015 Plan. All outstanding awards under the 2015 Plan will continue in accordance with the 2015 Plan and any award agreement executed in connection with such outstanding awards. The 2024 Plan provides for the grant of stock options (both incentive stock options and non-statutory stock options), stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance units, shares, and other stock-based awards. Stock-based awards are subject to terms and conditions established by the board of directors or the compensation committee of the board of directors. As of March 31, 2025, the number of shares of common stock available for grant under the 2024 Plan was
13
The Company’s 2021 Inducement Equity Incentive Plan (the “Inducement Plan”) was adopted by the Company’s board of directors in May 2021 and subsequently amended to increase the shares available for grant. The Inducement Plan provides for the grant of non-statutory stock options, restricted stock, RSUs, stock appreciation rights, performance units, and performance shares. Each award under the Inducement Plan is intended to qualify as an employment inducement grant in accordance with Nasdaq Listing Rule 5635(c)(4). As of March 31, 2025, the number of shares of common stock available for grant under the Inducement Plan was
The Savara Inc. Stock Option Plan (the “2008 Plan”) was adopted in 2008, and the Company
Stock-Based Awards Activity
The following table provides a summary of stock-based awards activity for the three months ended March 31, 2025:
Stock Options:
Outstanding at December 31, 2024 |
|
|
|
|
Granted |
|
|
|
|
Exercised |
|
|
( |
) |
Expired/cancelled/forfeited |
|
|
( |
) |
Outstanding at March 31, 2025 |
|
|
|
The total compensation cost related to non-vested stock options not yet recognized as of March 31, 2025, was $
RSUs:
Outstanding at December 31, 2024 |
|
|
|
|
Granted |
|
|
|
|
Vested |
|
|
( |
) |
Forfeited |
|
|
( |
) |
Outstanding at March 31, 2025 |
|
|
|
The total compensation cost related to unvested RSUs not yet recognized as of March 31, 2025, was $
Stock-Based Compensation
Stock-based compensation expense is included in the following line items in the accompanying statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024 (in thousands):
|
|
Three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
Total stock-based compensation |
|
$ |
|
|
$ |
|
||
11. Segment Reporting
We follow the accounting guidance of ASC Topic 280,
14
geographical segments are presented.
|
|
For the three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Operating expenses: |
|
|
|
|
|
|
||
Research and development operating costs and expenses excluding |
|
|
|
|
|
|
||
Primary program research and development expenses (a) |
|
$ |
|
|
$ |
|
||
Other research and development expenses: |
|
|
|
|
|
|
||
Payroll and benefits |
|
|
|
|
|
|
||
Occupancy and other overhead and operating costs |
|
|
|
|
|
|
||
Total other research and development expenses |
|
|
|
|
|
|
||
Research and development operating costs and expenses excluding |
|
|
|
|
|
|
||
General and administrative expense excluding non-cash stock-based |
|
|
|
|
|
|
||
Other segment income (expense), net (b) |
|
|
|
|
|
|
||
Segment net loss |
|
$ |
( |
) |
|
$ |
( |
) |
12. Net Loss per Share
Basic and diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common stock and pre-funded warrants outstanding during the period without consideration of common stock equivalents. For periods in which the Company generated a net loss, the Company does not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive. Diluted net loss per share is the same as basic net loss per common share since the effects of potentially dilutive securities are antidilutive.
The following equity instruments were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:
|
|
Three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Awards under equity incentive plan |
|
|
|
|
|
|
||
Non-vested restricted shares and restricted stock units |
|
|
|
|
|
|
||
Warrants to purchase common stock(*) |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
* Pre-funded warrants are excluded herein.
15
The following table calculates basic earnings per share of common stock and diluted earnings per share of common stock for the three months ended March 31, 2025 and 2024 (in thousands, except share and per share amounts):
|
|
Three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common |
|
|
( |
) |
|
|
( |
) |
Undistributed earnings and net loss |
|
|
( |
) |
|
|
( |
) |
Weighted-average common shares |
|
|
|
|
|
|
||
Basic and diluted net loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
13. Subsequent Events
The Company has evaluated subsequent events through the date these condensed consolidated financial statements were issued and determined there were no additional events that required disclosure or recognition in these condensed consolidated financial statements.
16
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements contained herein that involve risks and uncertainties, such as Savara’s plans, objectives, expectations, intentions, and beliefs should be considered forward-looking statements. Savara’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to the following: the ability to project future cash utilization and reserves needed for contingent future liabilities and business operations, the risks associated with the process of conducting clinical trials and developing, obtaining regulatory approval for and commercializing drug candidates that are safe and effective for use as human therapeutics, the timing and ability to raise additional capital as needed to fund continued operations, natural disasters, pandemics, geopolitical events (including the war between Russia and Ukraine and the war in the Middle East), the Company’s ability to maintain compliance with its covenants under its long-term debt instruments and those discussed in the section entitled “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission ("SEC") on March 27, 2025, all of which are difficult to predict.
Statements made herein are as of the date of the filing of this Quarterly Report with the SEC and should not be relied upon as of any subsequent date. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2024.
Overview
Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we,” “our” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. Our sole program, MOLBREEVI, is an investigational inhaled biologic, specifically, inhaled granulocyte-macrophage colony-stimulating factor ("GM-CSF") in Phase 3 development for autoimmune pulmonary alveolar proteinosis ("aPAP"). Savara previously announced positive top-line results from the Phase 3 clinical trial and, in March 2025, complete the submission of the Biological License Application ("BLA") to the FDA for MOLBREEVI. Savara, together with its wholly-owned subsidiaries, which include Aravas Inc. and Savara ApS, operate in one segment with its principal office in Langhorne, Pennsylvania, though a majority of our employees work remotely.
Since inception, we have devoted our efforts and resources to identifying and developing our product candidates, recruiting personnel, and raising capital. We have incurred operating losses and negative cash flow from operations and have no product revenue from inception to date. From inception to March 31, 2025, we have raised net cash proceeds of approximately $597.9 million, primarily from underwritten offerings of our common stock, private placements of common stock, and debt financings.
We have never been profitable and have incurred operating losses every year since inception. Our net losses for the three months ended March 31, 2025 and 2024 were $26.6 million and $20.3 million, respectively, and the net loss for the year ended December 31, 2024 was $95.9 million. As of March 31, 2025, we had an accumulated deficit of approximately $515.9 million. Our operating losses primarily resulted from expenses attributed to our research and development programs and from general and administrative costs associated with our operations.
We have chosen to operate by outsourcing our manufacturing and most of our clinical operations. We expect to incur significant additional expenses and continue to incur operating losses for at least the next several years as we continue the clinical development of, and seek regulatory approval for, our primary product candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to the timing of clinical development programs and efforts to achieve regulatory approval.
As of March 31, 2025, we had cash and cash equivalents of $19.6 million and short-term investments of $152.9 million. We will continue to require additional capital to continue our clinical development and potential commercialization activities. Although we have sufficient capital to fund many of our planned activities, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and begin to commercialize any approved product. The amount and timing of our future funding requirements will depend on many
17
factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.
Recent Events
BLA Submission Complete
On March 26, 2025, Savara announced that it had completed its submission of the BLA to the FDA for MOLBREEVI for the potential treatment of aPAP, a chronic and debilitating rare lung disease characterized by the abnormal build-up of surfactant in the alveoli of the lungs. This follows our reporting, in June 2024, of top line results from our pivotal IMPALA-2 trial for the treatment of aPAP that demonstrated improvement compared to placebo in gas exchange, as measured by diffusing capacity of the lungs for carbon monoxide, or DLCO, and clinical benefit, as measured by St. George’s Respiratory Questionnaire, or SGRQ, and exercise capacity, measured in peak METs. MOLBREEVI was well tolerated throughout the 48-weeks and no unexpected safety signals were seen. Previously, on December 18, 2024, the Company announced that it had initiated a rolling submission of a BLA to the FDA for MOLBREEVI. MOLBREEVI was also granted Fast Track and Breakthrough Therapy Designations by the FDA in 2019 for the treatment of patients with aPAP.
Debt Financing
On March 26, 2025, the Company announced that it had entered into a Loan and Security Agreement (the “Hercules Loan Agreement”) with the lenders party thereto (the “Lenders”) and Hercules Capital, Inc., as administrative agent and collateral agent. The Hercules Loan Agreement provides for the Company to borrow up to $200 million of term loans (the “Term Loan”) that may be advanced in multiple tranches. The initial advance of $30 million under the Hercules Loan Agreement was drawn on March 26, 2025 and used to repay all outstanding obligations under the Company’s Amended Loan Agreement with Silicon Valley Bank (the “SVB Loan”) as described in Note 6. Debt Facility and extinguish the Company’s obligations thereunder, to pay the Company’s expenses in connection with the Hercules Loan Agreement, including fees and expenses relating to termination of the SVB term loan, and for general corporate purposes. Further Term Loan draws may be made by the Company under the Hercules Loan Agreement as follows:
Sales Agreement Termination
As previously discussed in Note 8. Stockholders’ Equity, on July 6, 2021, the Company entered into a Sales Agreement with Evercore Group L.L.C. (“Evercore”), as sales agent (the “ATM Agreement”), pursuant to which the Company may offer and sell up to an aggregate of $100.0 million of shares of its common stock, par value $0.001 per share, from time to time through Evercore in “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended.
On March 31, 2025, pursuant to Section 12(b) of the ATM Agreement, the Company delivered written notice to Evercore that it was terminating the ATM Agreement, effective April 2, 2025. The Company is not subject to any termination penalties related to the termination of the ATM Agreement. Since December 31, 2024, no shares of common stock have been issued or sold pursuant to the ATM Agreement.
Financial Operations Overview
Research and Development Expenses
We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
18
We expect research and development expenses will remain significant in the future as we advance our MOLBREEVI product candidate through clinical trials and pursue regulatory approvals, which will require a significant increased investment in regulatory support and contract manufacturing activities, including investing in the development of a second source manufacturer and clinical supplies.
The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidate. The probability of success of our product candidate may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability, and commercial viability. As a result, we are unable to accurately determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of MOLBREEVI.
General and Administrative Expenses
General and administrative ("G&A") expenses consist primarily of salaries, benefits, and related costs for personnel in executive, finance and accounting, legal, and investor relations; as well as professional and consulting fees for accounting, legal, investor relations, business development, human resources, and information technology services. Other G&A expenses include facility lease and insurance costs.
Other Income (Expense), Net
Other income (expense) includes amortization expense related to capitalized debt issuance costs and debt discount under our loan agreements. Refer to Note 6. Debt Facility in the notes to the condensed consolidated financial statements included in this Quarterly Report. Interest expense is typically reported net of interest income which includes interest earned on our cash, cash equivalent, and short-term investment balances. Other income (expense) also includes net unrealized and realized gains and losses from foreign currency transactions, loss on extinguishment of debt, refundable tax credits generated by some of our foreign subsidiaries, and securities subject to fair value accounting as well as any other non-operating gains and losses.
Critical Accounting Policies and Estimates
There have not been any material changes during the three months ended March 31, 2025, to the methodology applied by management for critical accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. Please read Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2024, for further description of our critical accounting policies.
Results of Operations – Comparison of Three Months Ended March 31, 2025 and 2024
|
|
For the Three Months Ended March 31, |
|
|
Dollar |
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
19,159 |
|
|
$ |
16,807 |
|
|
$ |
2,352 |
|
General and administrative |
|
|
9,246 |
|
|
|
5,636 |
|
|
|
3,610 |
|
Depreciation and amortization |
|
|
30 |
|
|
|
32 |
|
|
|
(2 |
) |
Total operating expenses |
|
|
28,435 |
|
|
|
22,475 |
|
|
|
5,960 |
|
Loss from operations |
|
|
(28,435 |
) |
|
|
(22,475 |
) |
|
|
(5,960 |
) |
Other income, net |
|
|
1,796 |
|
|
|
2,129 |
|
|
|
(333 |
) |
Net loss |
|
$ |
(26,639 |
) |
|
$ |
(20,346 |
) |
|
$ |
(6,293 |
) |
19
Research and Development
Research and development expenses increased by $2.4 million, or 14.0%, to $19.2 million for the three months ended March 31, 2025 from $16.8 million for the three months ended March 31, 2024. This increase is primarily due to the performance of tasks related to our MOLBREEVI program with $2.3 million related to regulatory affairs and quality assurance, and $0.1 million in departmental overhead.
General and Administrative
General and administrative expenses increased by $3.6 million, or 64.1%, to $9.2 million for the three months ended March 31, 2025 from $5.6 million for the three months ended March 31, 2024. The increase is due to personnel and related costs of $2.4 million, certain commercial activities of $0.8 million, and other departmental overhead of $0.4 million.
Other Income, Net
Other income, net decreased by $0.3 million to $1.8 million for the three months ended March 31, 2025 from $2.1 million for the three months ended March 31, 2024. The decrease is primarily related to a loss on extinguishment of debt.
Liquidity and Capital Resources
As of March 31, 2025, we had $19.6 million of cash and cash equivalents, $152.9 million in short-term investments, and an accumulated deficit of approximately $515.9 million. As discussed in Note 6. Debt Facility in the notes to the condensed consolidated financial statements included in this Quarterly Report, on March 26, 2025, we entered into the Hercules Loan Agreement which provides for a loan facility of up to $200 million. Proceeds from the initial $30 million tranche drawn under the Hercules Loan Agreement were used to repay all outstanding obligations under the SVB Loan, with a carrying value of $26.7 million, to pay certain expenses incurred in connection with the financing, and for general corporate purposes. Subject to satisfaction of certain conditions, including attainment of FDA approval of MOLBREEVI for the treatment of aPAP, we may draw future tranches under the Hercules Loan Agreement to fund our ongoing business operations including the development, regulatory approval, marketing and commercialization of MOLBREEVI.
Further, on March 31, 2025, pursuant to Section 12(b) of the ATM Agreement, the Company delivered written notice to Evercore that it was terminating the ATM Agreement, effective April 2, 2025.
We have used and intend to use our liquidity and capital for working capital and general corporate purposes, which include, but are not limited to, the funding of clinical development of and pursuing regulatory approval for our product candidate and general and administrative expenses. As we continue to progress on the IMPALA-2 trial, pursue regulatory approval, and invest in pre-commercial activities, we will continue to monitor our liquidity and capital requirements.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
|
|
Three months ended March 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in thousands) |
|
|||||
Cash used in operating activities |
|
$ |
(27,189 |
) |
|
$ |
(20,644 |
) |
Cash provided by investing activities |
|
|
29,329 |
|
|
|
10,793 |
|
Cash provided by financing activities |
|
|
2,318 |
|
|
|
49 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(30 |
) |
|
|
2 |
|
Net change in cash and cash equivalents |
|
$ |
4,428 |
|
|
$ |
(9,800 |
) |
Cash flows from operating activities
Cash used in operating activities for the three months ended March 31, 2025 was $27.2 million, consisting of a net loss of $26.6 million and net $3.1 million in changes due to operating assets and liabilities. This was partially offset by approximately $2.5 million of net noncash charges (comprised of depreciation and amortization including right-of-use assets, amortization of debt issuance costs, loss on extinguishment of debt, accretion on discount to short-term investments, and stock-based compensation).
Cash flows from investing activities
Cash used in investing activities of $29.3 million for the three months ended March 31, 2025 was primarily associated with proceeds from maturities of short-term investments partially offset by purchases of short-term investments.
20
Cash flows from financing activities
Cash provided by financing activities of $2.3 million for the three months ended March 31, 2025 was primarily the result of net proceeds from the Hercules Loan Agreement partially offset by repayment of the SVB Loan.
Future Funding Requirements
We have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize our product candidate. At the same time, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacture, and clinical trials of, and seeking regulatory approval for, our product candidate. In addition, subject to obtaining regulatory approval of our product candidate, we anticipate we may need additional funding in connection with our continuing operations.
As of March 31, 2025, we had cash, cash equivalents, and short-term investments of approximately $172.5 million. Although we have sufficient capital to fund our planned activities, including those discussed in Note 9. Commitments – Manufacturing and Other Commitments and Contingencies, in the notes to the condensed consolidated financial statements included in this Quarterly Report, we may need to raise additional capital to further fund the development of, and seek regulatory approvals for our product candidate and to begin commercialization of any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.
Although we believe we are well capitalized based on our current operations, until we can generate a sufficient amount of product revenue to finance our cash requirements, we may finance our future cash needs primarily through the issuance of additional equity securities and potentially through borrowings, grants, and strategic alliances with partner companies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or commercialization efforts or grant rights to develop and market our product candidate to third parties that we would otherwise prefer to develop and market ourselves.
Critical Accounting Policies and Estimates
Except as set forth in Note 2. Summary of Significant Accounting Policies – Recent Accounting Pronouncements of the condensed consolidated financial statements in this Quarterly Report, there have been no material changes in our critical accounting policies and use of estimates during the three months ended March 31, 2025 as compared to those disclosed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the our Annual Report on Form 10-K for the year ended December 31, 2024.
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We have market risk exposure related to our cash, cash equivalents, and short-term investment securities. Such interest-earning instruments carry a degree of interest rate risk; however, we have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates. A hypothetical 1% change in interest rates during any of the periods presented would not have a material impact on our condensed consolidated financial statements. Additionally, our investment securities are fixed income instruments denominated and payable in U.S. dollars and have short-term maturities, typically less than twelve months, and typically carry credit ratings of “A” at a minimum by two of three Nationally Recognized Statistical Rating Organizations, specifically Moody’s, Standard & Poor’s, or Fitch. As such, we do not believe that our cash, cash equivalents, and short-term investment securities have significant risk of default or illiquidity.
We also have interest rate exposure related to our long-term debt. Refer to Note 6. Debt Facility of the unaudited condensed consolidated financial statements in this quarterly report on Form 10-Q for additional discussion. The Hercules Loan Agreement bears interest equal to the greater of (i) the prime rate reported in The Wall Street Journal, plus 1.45%, which was 8.95% on March 31, 2025. Changes in the prime rate would have impacted our interest expense associated with our secured term loan. If a 10% change in interest rates from the interest rates on March 31, 2025, were to have occurred, this change would not have had a material effect on our interest expense with respect to outstanding borrowed amounts.
We have vendors in Denmark and elsewhere in Europe and pay those vendors in local currency, Danish Krone, British Pound sterling or Euros, respectively. We did not recognize any significant exchange rate losses during the three months ended March 31, 2025 and 2024. A 10% change in the Euro-to-dollar, British Pound sterling-to dollar exchange rate or Krone-to-dollar exchange rate on March 31, 2025, would not have had a material effect on our results of operations or financial condition.
Additionally, inflation generally affects us by increasing our cost of labor, supplies and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the periods presented.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial and Administrative Officer, the effectiveness of our disclosure controls and procedures as of March 31, 2025, pursuant to and as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial and Administrative Officer have concluded that, as of March 31, 2025, our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial and Administrative Officer, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
22
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal and administrative proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. We are not currently a party to any material pending litigation or other material legal proceeding.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2024, and the risk factors and other cautionary statements contained in our other filings with the SEC, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, or future results. Except as set forth below, there have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2024, or our other SEC filings.
The Hercules Loan Agreement contains covenants which may adversely impact our business and the failure to comply with such covenants could cause our outstanding debt to become immediately payable or accelerate principal payments.
We are a party to the Hercules Loan Agreement, pursuant to which we have borrowed $30 million of term loans and may borrow up to an additional $170 million of term loans if we are able to satisfy the conditions precedent described under Note 6. Debt Facility of the consolidated financial statements in this quarterly report on Form 10-Q. As security for our borrowings under the Hercules Loan Agreement, we pledged substantially all of our assets other than our intellectual property (which is subject to a negative pledge). The Hercules Loan Agreement includes a number of restrictive covenants, including restrictions on incurring additional debt, making investments, granting liens, disposing of assets, paying dividends, and redeeming or repurchasing capital stock, and a number of affirmative covenants, including the Cash Requirement and the Conditional Minimum Revenue Covenant. Collectively, these covenants could constrain our ability to grow our business through acquisitions or engage in other transactions. The Hercules Loan Agreement includes customary events of default, such as our failure to pay amounts due, our failure to comply with covenants, or the occurrence of an event that would reasonably be expected to have a material adverse event on our business. Upon the occurrence and during the continuation of an event of default, the Lenders could declare all outstanding loans under the Hercules Loan Agreement immediately due and payable and exercise remedies against us and the collateral. Such an event would have a material adverse effect on our liquidity, financial condition, operating results, business, and prospects and cause the price of our common stock to decline.
Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Rule 10b5-1 Trading Plans
During the quarter ended March 31, 2025,
Item 6. Exhibits.
An Exhibit Index has been attached as part of this report and is incorporated by reference.
23
Exhibit Index
Exhibit Number |
|
Description |
|
|
|
3.1 |
*
|
Composite Amended and Restated Certificate of Incorporation, as amended, of the Registrant. |
3.2 |
|
|
10.1 |
* |
|
31.1 |
*
|
|
31.2 |
*
|
|
32.1 |
*
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
# Indicates management contract or compensatory plan |
|
|
* Filed herewith |
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Savara Inc. |
|
|
|
|
Date: May 13, 2025 |
By: |
/s/ Matthew Pauls |
|
|
Matthew Pauls |
|
|
Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer) |
Date: May 13, 2025 |
By: |
/s/ David Lowrance |
|
|
David Lowrance |
|
|
Chief Financial and Administrative Officer (Principal Financial and Accounting Officer) |
25
Exhibit 3.1
MAST THERAPEUTICS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Mast Therapeutics, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), does hereby certify as follows.
1. The name of this corporation is Mast Therapeutics, Inc. and that that this corporation was originally incorporated pursuant to the General Corporation Law on December 1, 1995 under the name Victoria Enterprises, Inc.
2. The Board of Directors of this corporation duly adopted resolutions proposing to amend and restate the Amended and Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows.
RESOLVED, that the Amended and Restated Certificate of Incorporation of this corporation be amended and restated in its entirety to read as set forth on Exhibit A attached hereto and incorporated herein by this reference.
3. Exhibit A referred to above is attached hereto as Exhibit A and is hereby incorporated herein by this reference. This Amended and Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
4. This Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Amended and Restated Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 27th day of April, 2017.
|
|
|
By: |
|
/s/ Brian Culley |
|
|
Brian Culley, Chief Executive Officer |
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION,
OF
MAST THERAPEUTICS, INC.
ARTICLE I
The name of this corporation is Savara Inc. (the “Corporation”).
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808. The name of its registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (the “DGCL”).
ARTICLE IV
(A) Classes of Stock. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is Five Hundred One Million shares (501,000,000), each with a par value of $0.001 per share. Five Hundred Million (500,000,000) shares shall be Common Stock, and One Million (1,000,000) shares shall be Preferred Stock.
Upon the close of trading on the NYSE MKT on April 27, 2017 (the “Effective Time”), each seventy (70) shares of the Common Stock, par value $0.001 per share, of the Corporation issued and outstanding or held in treasury at the Effective Time shall be reclassified as and changed into one (1) share of Common Stock, par value $0.001 per share, of the Corporation, without any action by the holders thereof. In lieu of any fractional shares to which a holder of shares of Common Stock of the Corporation would be otherwise entitled, the Corporation shall pay in cash, without interest, an amount equal to such fractional interest (after taking into account and aggregating all shares of Common Stock then held by such holder) multiplied by the closing price of the Common Stock as last reported on the NYSE MKT on the day of the Effective Time (determined on a post-split basis).
(B) Preferred Stock. Except as otherwise provided in any certificate(s) of designations duly filed with the Secretary of State of the State of Delaware, the Board of Directors of the Corporation (the “Board”) is hereby expressly authorized to provide for the issuance, in one or more series, of all or any of the shares of Preferred Stock and to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon such series of Preferred Stock, and the number of shares constituting any such series and the designations thereof, or of any of them, such designations, preferences, and relative, participating, optional or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such shares and as may be permitted by the DGCL. The rights, privileges, preferences and restrictions of any such series of Preferred Stock may be subordinated to, pari passu with (including, without limitation, inclusion in provisions with respect to liquidation and acquisition preferences, redemption or approval of matters by vote or written consent), or senior to any of those of any present or future class or series of Preferred Stock or Common Stock. The Board is also expressly authorized to increase or decrease the number of shares of any series prior or subsequent to the issue of that series, but not below the number of shares of such series
then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statutes, the Board is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation.
ARTICLE VI
The business and affairs of the Corporation shall be managed by or under the direction of the Board. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. Elections of members of the Board need not be by written ballot unless otherwise provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended, a director shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
(B) The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person, such person’s testator or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer of the Corporation at the request of the Corporation or any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation’s Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
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, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Article VIII.
SAVARA INC.
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Savara Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify that:
“(A) Classes of Stock. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is Two Hundred One Million shares (201,000,000), each with a par value of $0.001 per share. Two Hundred Million (200,000,000) shares shall be Common Stock, and One Million (1,000,000) shares shall be Preferred Stock.”
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by its duly authorized officer as of the 4th day of June, 2018.
SAVARA INC.
/s/ Rob Neville
Name: Rob Neville
Title: Chief Executive Officer
SAVARA INC.
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Savara Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify that:
“(A) Classes of Stock. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is Three Hundred One Million shares (301,000,000), each with a par value of $0.001 per share. Three Hundred Million (300,000,000) shares shall be Common Stock, and One Million (1,000,000) shares shall be Preferred Stock.”
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by its duly authorized officer as of the 10th day of June, 2021.
SAVARA INC.
/s/ Matthew Pauls
Name: Matthew Pauls
Title: Chief Executive Officer
SAVARA INC.
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Savara Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify that:
“(A) To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended, no director or officer shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, as applicable.”
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by its duly authorized officer as of the 6th day of June, 2024.
SAVARA INC.
/s/ Matthew Pauls
Name: Matthew Pauls
Title: Chief Executive Officer
Exhibit 10.1
Certain identified information in this document has been excluded because it is both (i) not material and (ii) is the type the registrant treats as private or confidential. [***] indicates where such information has been omitted.
Certain information contained in this exhibit has been redacted where indicated because disclosure of such information would constitute a clearly unwarranted invasion of personal privacy.
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made and dated as of March 26, 2025 and is entered into by and among SAVARA INC., a Delaware corporation (“Company”), and each other Person who from time to time may deliver a Borrower Joinder Agreement pursuant to Section 7.13 (together with Company, individually or collectively, as the context may require, “Borrower”), Original Guarantor and each Additional Guarantor from time to time party hereto, the several banks and other financial institutions or entities from time to time party hereto (each, a “Lender”, and collectively “Lenders”) and HERCULES CAPITAL, INC., a Maryland corporation, in its capacity as administrative agent and collateral agent for itself and Lenders (in such capacity, including any successors or assigns, “Agent”).
RECITALS
AGREEMENT
NOW, THEREFORE, the Loan Parties, Agent and Lenders agree as follows:
1.1 Unless otherwise defined herein, the following capitalized terms shall have the following meanings:
“Account Control Agreement(s)” means any agreement entered into by and among Agent, the applicable Loan Party and a third-party bank or other institution (including a Securities Intermediary) in which the applicable Loan Party maintains a Deposit Account or an account holding Investment Property and which perfects Agent’s first priority security interest in the subject account or accounts.
“ACH Authorization” means the ACH Debit Authorization Agreement in substantially the form of Exhibit H, which account numbers shall be redacted for security purposes if and when filed publicly by the Company.
“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business, line of business or division or other unit of operation of a Person, (b) the acquisition of fifty percent (50%) or more of the Equity Interests of any Person, whether or not involving a merger, consolidation or similar transaction with such other Person, or otherwise causing any Person to become a Subsidiary of any Loan Party, or (c) the acquisition of, or the right to develop or sell (in each case, including
through exclusive licensing (other than “off-the-shelf” licenses)), any product, product line or intellectual property that would constitute a Borrower Product upon acquisition of or from any other Person.
“Advance(s)” means a Term Loan Advance.
“Advance Date” means the funding date of any Advance.
“Advance Request” means a request for an Advance submitted by Borrower to Agent in substantially the form of Exhibit A, which account numbers shall be redacted for security purposes if and when filed publicly by the Company.
“Affiliate” means (a) any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question, (b) any Person directly or indirectly owning, controlling or holding with power to vote twenty percent (20%) or more of the outstanding voting securities of another Person, or (c) any Person twenty percent (20%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held by another Person with power to vote such securities. As used in the definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Agreement” means this Loan and Security Agreement, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to any Loan Party or any of their respective controlled Affiliates from time to time concerning or relating to bribery or corruption, including without limitation the United States Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act 2010 and other similar legislation in any other jurisdictions.
“Anti‑Terrorism Laws” means any laws, rules, regulations or orders relating to terrorism or money laundering, including without limitation Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.
“Bankruptcy Code” means the federal bankruptcy law of the United States as from time to time in effect, currently as Title 11 of the United States Code. Section references to current sections of the Bankruptcy Code shall refer to comparable sections of any revised version thereof if section numbering is changed.
“Biologics License Application” means an application for licensure of a biological product submitted to the FDA under 42 U.S.C. § 262(k) for permission to introduce, or deliver for introduction, a biologic product into interstate commerce.
“Blocked Person” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.
2
“Board of Directors” means, with respect to any Person that is a corporation, its board of directors, with respect to any Person that is a limited liability company, its board of managers, board of members or similar governing body, and with respect to any other Person that is another form of a legal entity, such Person’s governing body in accordance with its Organizational Documents.
“Board Reviewed Forecast” means the Original Plan; provided, however, that after Borrower achieves the Approval Milestone, Borrower may from time to time update the Original Plan with a forecast prepared in good faith and approved by Borrower’s Board of Directors subject to the consent of Agent (acting reasonably).
“Borrower Products” means all products, software, service offerings, technical data or technology currently being designed, manufactured or sold or that are under clinical investigation or development by any Loan Party or any of their respective Subsidiaries or which any Loan Party or any of their respective Subsidiaries intends to sell, license, or distribute in the future including any products or service offerings under development, collectively, together with all products, software, service offerings, technical data or technology that have been sold, licensed or distributed by any Loan Party since its formation or incorporation, as applicable.
“Borrower’s Books” means any Loan Party’s or any of their respective Subsidiaries’ books and records including ledgers, federal, state, local and foreign tax returns, records regarding any Loan Party’s or their respective Subsidiaries’ assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Business Day” means any day other than Saturday, Sunday and any other day on which banking institutions in the State of California are closed for business.
“Cash” means all cash, cash equivalents and liquid funds.
“Change in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of Securities Exchange Act of 1934, as amended), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)‑5 under Securities Exchange Act of 1934, as amended), directly or indirectly, of forty-nine percent (49.0%)or more of the ordinary voting power for the election of directors, partners, managers and members, as applicable, of Company (determined on a fully diluted basis); (b) “change of control”, “fundamental change”, “make-whole fundamental change” or any comparable term under and as defined in any indenture governing any Permitted Convertible Debt Financing has occurred; (c) during any period of twelve (12) consecutive months, a majority of the members of the Board of Directors of Company cease to be composed of individuals (i) who were members of that Board of Directors on the first (1st) day of such period, (ii) whose election or nomination to that Board of Directors was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that Board of Directors or (iii) whose election or nomination to that Board of Directors was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that Board of Directors; or (d) at any time, Company shall cease to own and control, of record and beneficially, directly or indirectly, one hundred percent (100.0%) of each class of outstanding stock, partnership, membership, or other ownership interest or other equity securities of each Subsidiary of Company free and clear of all Liens (other than Permitted Liens) other than as a result of one or more transactions permitted hereunder.
3
“Charter” means, with respect to any Person, such Person’s incorporation, formation or equivalent documents, as in effect from time to time.
“Closing Date” means the date of this Agreement.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Collateral Claim” means any and all present and future “claims” (used in its broadest sense, as contemplated by and defined in Section 101(5) of the Bankruptcy Code, but without regard to whether such claim would be disallowed under the Bankruptcy Code) of a Lender now or hereafter arising or existing under or relating to this Agreement and related Loan Documents, whether joint, several, or joint and several, whether fixed or indeterminate, due or not yet due, contingent or non-contingent, matured or unmatured, liquidated or unliquidated, or disputed or undisputed, whether under a guaranty or a letter of credit, and whether arising under contract, in tort, by law, or otherwise, any interest or fees thereon (including interest or fees that accrue after the filing of a petition by or against any Loan Party under the Bankruptcy Code, irrespective of whether allowable under the Bankruptcy Code), any costs of Enforcement Actions, including reasonable attorneys’ fees and costs, and any prepayment or termination premiums.
“Common Stock” means the Common Stock, One Thousandth of One Dollar ($0.001) par value per share, of Company.
“Compliance Certificate” means a certificate in the form attached hereto as Exhibit E.
“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any Indebtedness, lease (excluding operating leases of real property), dividend, letter of credit or other obligation of another Person, including any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designed to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed, without duplication of the primary obligation, to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.
“Copyright License” means any written agreement granting any right to use any Copyright or Copyright registration, now owned or hereafter acquired by a Loan Party or in which a Loan Party now holds or hereafter acquires any interest.
“Copyrights” means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States of America, any State thereof, or of any other country.
“Current Company IP” means each pending, registered, issued or in-licensed Intellectual Property that, individually or taken together with any other such Intellectual Property, is material to the business of Borrower and its Subsidiaries, taken as a whole, relating to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale,
4
distribution or sale of the Borrower Products, and is owned or co-owned, by or exclusively in-licensed to or otherwise controlled by the Borrower or any of its Subsidiaries.
“Default” means any event, circumstance or condition that has occurred or exists, that would, with the passage of time or the requirement that notice be given or both, become an Event of Default.
“Deposit Accounts” means any “deposit accounts”, as such term is defined in the UCC, and includes any checking account, savings account, or certificate of deposit.
“Disqualified Equity Interests” means any Equity Interests that, by their terms (or by the terms of any security or other Equity Interests into which they are convertible or for which they are exchangeable), or upon the happening of any event or condition (a) mature or are mandatorily redeemable (other than solely for Qualified Equity Interests) pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Secured Obligations), (b) are redeemable at the option (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Secured Obligations) of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provide for scheduled payments of dividends in Cash, or (d) are or become convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is one hundred eighty (180) days after the Term Loan Maturity Date.
“Disqualified Institution” means any Person described expressly in a writing (including via email) from Borrower to Agent, and acknowledged by Agent, on or before the Closing Date as constituting a “Disqualified Institution”.
“Division” means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware law, Section 17-220 of the Delaware Revised Uniform Limited Partnership Act for limited partnerships formed under Delaware law, or any analogous action taken pursuant to any other applicable law with respect to any corporation, limited liability company, partnership or other entity.
“Domestic Subsidiary” means any Subsidiary organized under the laws of the United States of America, any State thereof, the District of Columbia, or any other jurisdiction within the United States of America.
“Enforcement Action” means, with respect to any Lender and with respect to any Collateral Claim of such Lender or any item of Collateral in which such Lender has or claims a security interest lien or right of offset, any action, whether judicial or nonjudicial, to repossess, collect, accelerate, offset, recoup, give notification to third parties with respect to, sell, dispose of, foreclose upon, give notice of sale, disposition, or foreclosure with respect to, or obtain equitable or injunctive relief with respect to, such Collateral Claim or Collateral. The filing, or the joining in the filing, by any Lender of an involuntary bankruptcy or Insolvency Proceeding against any Loan Party also is an Enforcement Action.
“Equity Interests” means, with respect to any Person, the capital stock, partnership or limited liability company interest, or other equity securities or equity ownership interests of such Person.
5
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“Excluded Accounts” means any of the following Deposit Accounts which are designated as such in writing to Agent as of the Closing Date or, with respect to any Deposit Account opened after the Closing Date, in the next Compliance Certificate delivered after such Deposit Account is opened: (a) Deposit Accounts exclusively used for payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of a Loan Party’s employees holding an aggregate amount across all such accounts of not more than amounts needed for the then-next two (2) payroll cycles, (b) any Deposit Account which is a zero-balance disbursement account, (c) any Deposit Account which is solely used for disbursements and payments of withheld income taxes, payroll taxes and/or federal, state or local employee taxes, or (d) any Deposit Account which is solely used as a trust account, escrow account, or other fiduciary account.
“FDA” means the U.S. Food and Drug Administration or any successor thereto.
“Foreign Subsidiary” means a Subsidiary other than any Domestic Subsidiary.
“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.
“Governmental Approval” means any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof (including the FDA) or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state or locality of the United States, the United States, or a foreign government.
“Guarantor” means each Original Guarantor or an Additional Guarantor.
“Guaranty” means the guarantee of the Secured Obligations provided by the Guarantors under Section 12.
“Immaterial Subsidiary” means as of any date of determination, (a) Aires Pharmaceuticals, Inc., a Delaware corporation, (b) SD Pharmaceuticals, Inc., a Delaware corporation and (c) any direct or indirect Foreign Subsidiary of Company so long as, with respect to any of clauses (a), (b) and (c), any such Subsidiary (i) is not actively engaged in any business activities, (ii) maintains assets of not more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate at any time, (iii) does not own any Intellectual Property material to Borrower’s business, and (iv) is not a party to any Material Agreement.
“Indebtedness” means indebtedness of any kind, including (a) all indebtedness for borrowed money or the deferred purchase price of property or services (excluding trade credit entered into in the ordinary course of business due within one hundred twenty (120) days), including reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, (d) all Disqualified Equity Interests (e) “earnouts”, purchase price adjustments, profit sharing arrangements, deferred purchase money amounts and similar payment obligations, in each case, arising out of purchase and sale contracts, in each
6
case only to the extent required to be reflected as a liability on a balance sheet prepared in accordance with GAAP, excluding, in any event, customary post-closing working capital adjustments, indemnification obligations, and holdbacks the full amount of which have been reserved on the books and records of the applicable obligor, (f) obligations arising under bonus, deferred compensation, incentive compensation or similar arrangements owed to sellers or target management in connection with purchase and sale contracts (other than those reflecting reasonable market terms for salary, bonus, deferred and incentive compensation for services actually to be rendered) (g) non-contingent obligations to reimburse any bank or Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, and (h) all Contingent Obligations.
“Initial Minimum Revenue Test Date” means the date on or after the Initial Test Date on which the amount of the advanced Term Loan Advances is first greater than Fifty Million Dollars ($50,000,000).
“Initial Test Date” means the date that reporting is due pursuant to Section 7.1(b) for the first calendar quarter which is at least nine (9) months after the date that Borrower achieves the Approval Milestone; provided, that the Initial Test Date shall be extended by six (6) months if Borrower has raised an aggregate amount of at least Seventy-Five Million Dollars ($75,000,000) in Qualified Equity Issuance Net Proceeds between the Closing Date and June 30, 2026.
“Insolvency Proceeding” means any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy, liquidation, moratorium, receivership, or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, administration, arrangement, receivership or other similar relief proceedings in the applicable jurisdiction from time to time in effect and affecting the rights of creditors generally.
“Intellectual Property” means all of each Loan Party’s Copyrights; Trademarks; Patents; Licenses; trade secrets and inventions; mask works; each Loan Party’s applications therefor and reissues, extensions, or renewals thereof; and each Loan Party’s goodwill associated with any of the foregoing, together with each Loan Party’s rights to sue for past, present and future infringement of Intellectual Property and the goodwill associated therewith.
“Intellectual Property Security Agreement” means the Intellectual Property Security Agreement dated as of the Closing Date and effective as of the IPSA Trigger Date between the Loan Parties party thereto and Agent, as the same may from time to time be amended, restated, modified or otherwise supplemented.
“Investment” means (a) any beneficial ownership (including stock, shares, partnership interests, limited liability company interests, or other equity securities or ownership interests) of or in any Person, (b) any loan, advance or capital contribution to any Person, (c) any Acquisition, or (d) other transfers on behalf of or in connection with any equity ownership or similar transfers.
“IPSA Trigger Date” means the first date from and after the Closing Date on which the Borrower’s Qualified Cash is at any time less than Fifty Million Dollars ($50,000,000).
“IRS” means the U.S. Internal Revenue Service.
7
“Joinder Agreements” means for each Subsidiary required to join as a Borrower or as a Guarantor pursuant to Section 7.13, a completed and executed Joinder Agreement in substantially the form attached hereto as Exhibit F.
“License” means any Copyright License, Patent License, Trademark License or other Intellectual Property license of rights or interests.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, and any lease in the nature of a security interest.
“Loan” means the Advances made under this Agreement.
“Loan Documents” means this Agreement, the promissory notes (if any), the ACH Authorization, the Account Control Agreements, any Joinder Agreement, all UCC Financing Statements, any Guaranty, the Pledge Agreement, the Intellectual Property Security Agreement (from and after the IPSA Trigger Date), and any other documents executed in connection with the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented or restated.
“Loan Party” means Borrower or any Guarantor.
“Market Capitalization” means, for any given date of determination, an amount equal to (a) the average of the daily volume weighted average price of Company’s common Equity Interests as reported for each of the five (5) Trading Days preceding such date of determination multiplied by (b) the total number of issued and outstanding shares of Company’s common Equity Interests that are issued and outstanding on the date of the determination and listed on the Principal Stock Exchange, subject to appropriate adjustment for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.
“Market Disruption Event” means any of the following events: (a) any suspension of, or limitation imposed on, trading by the Principal Stock Exchange in shares of common Equity Interests during any period or periods aggregating one hour or longer and whether by reason of movements in price exceeding limits permitted by the Principal Stock Exchange or otherwise relating to the common Equity Interests; or (b) the failure to open of the exchange or quotation system on which the common Equity Interests are traded or the closure of such exchange or quotation system prior to its respective scheduled closing time for the regular trading session on such day (without regard to after hours or other trading outside the regular trading session hours).
“Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties, assets or financial condition of the Loan Parties and their respective Subsidiaries taken as a whole; or (ii) the ability of Borrower to perform or pay the Secured Obligations in accordance with the terms of the Loan Documents, or the ability of Agent or Lenders to enforce any of its rights or remedies with respect to the Secured Obligations; or (iii) the Collateral or Agent’s Liens on the Collateral or the priority of such Liens.
“Material Agreement” means (a) the Material License, (b) that certain Manufacture and Supply Agreement dated as of April 26, 2019 by and between Savara ApS and GEMABIOTECH SAU or (c) any license, agreement or other contractual arrangement the termination of which could reasonably be expected to result in a Material Adverse Effect.
8
“Material License” means that certain Research Collaboration and License Agreement dated as of November 7, 2014 by and between Serendex Pharmaceuticals A/S and PARI Pharma GmbH, as amended by Amendment 1.
“Net Product Revenue” means Borrower’s net product revenue (as determined in accordance with GAAP) solely from the sale of molgramostim (which may include profit sharing, or sales-based milestone revenue recognized in accordance with GAAP, but which shall not include any upfront or non-sales-based milestone payments under business development or licensing transactions), measured on as of the date of the most recently delivered monthly or quarterly financial statements in accordance with Section 7.1(a) or Section 7.1(b). For the avoidance of doubt, net product revenue shall not include any of the following to the extent not recognizable as revenue in accordance with GAAP: (i) trade, quantity and cash discounts allowed by Borrower, (ii) discounts, refunds, rebates, charge backs, retroactive price adjustment and any other allowances which effectively reduce net selling price, (iii) product returns and allowances, (iv) allowances for shipping or other distribution expenses, (iv) set-offs and counterclaims, and (v) any other similar and customary deductions that are typically deducted from gross revenue and not included in net revenue in accordance with GAAP.
“Non-Disclosure Agreement” means that certain Mutual Confidential Disclosure Agreement by and between the Company and Hercules Capital, Inc. dated as of September 11, 2024.
“OFAC” means the U.S. Department of Treasury Office of Foreign Assets Control.
“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.
“Organizational Documents” means with respect to any Person, such Person’s Charter, and (a) if such Person is a corporation, its bylaws, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
“Original Guarantor” means Aravas Inc, a Delaware corporation.
“Original Plan” means the forecast delivered by Borrower to Agent and Lenders, and acknowledged by Agent as constituting the Original Plan, in each case, prior to the Closing Date, as the Original Plan may be updated as set forth in the definition of Board Reviewed Forecast.
“Patent License” means any written agreement granting any right with respect to any invention on which a Patent is in existence or a Patent application is pending, in which agreement a Loan Party now holds or hereafter acquires any interest.
“Patents” means all letters patent of, or rights corresponding thereto, in the United States of America or in any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto, in the United States of America or any other country.
“Perfection Certificate” means a completed certificate entitled “Perfection Certificate and Diligence Request”, dated as of the Closing Date, delivered by Company to Agent and Lenders, signed by Company (as amended pursuant to the terms of this Agreement).
9
“Permitted Convertible Debt Financing” means issuance by Company of convertible notes in an aggregate principal amount of not more than Three Hundred Million Dollars ($300,000,000) (“Permitted Convertible Debt”); provided that such convertible notes shall (a) both immediately prior to and immediately after giving effect (including pro forma effect) thereto, no Default or Event of Default shall exist or result therefrom, (b) have no scheduled amortization or principal payments, mandatory redemptions or other required payments of principal prior to the date that is one hundred eighty (180) days after the Term Loan Maturity Date, other than customary payments upon a “change of control”, “fundamental change”, “make-whole fundamental change” or any comparable term (it being understood that a holder’s option to convert any such Indebtedness into Common Stock (and Cash in lieu of fractional shares) shall not be considered a required mandatory redemption or payment of principal), (c) be unsecured, (d) not be guaranteed by any Subsidiary of Company that is not a Borrower or a guarantor of the Secured Obligations, (e) contain usual and customary subordination terms for underwritten offerings of senior subordinated convertible notes, (f) shall be Indebtedness of Company and not of any Subsidiary thereof, and (g) if secured, shall specifically designate this Agreement and all Secured Obligations as “designated senior indebtedness” or similar term so that the subordination terms referred to in clause (e) of this definition specifically refer to such notes as being subordinated to the Secured Obligations pursuant to such subordination terms. For the avoidance of doubt, Permitted Convertible Debt Financing shall not constitute Subordinated Indebtedness.
“Permitted Indebtedness” means:
(i) Indebtedness of Borrower in favor of any Lender or Agent arising under this Agreement or any other Loan Document;
(ii) Indebtedness existing on the Closing Date which is disclosed in Schedule 1A;
(iii) Indebtedness of up to Five Hundred Thousand Dollars ($500,000) outstanding at any time secured by a Lien described in clause (vii) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the cost of the Equipment, software or other Intellectual Property financed with such Indebtedness;
(iv) Indebtedness incurred in the ordinary course of business with corporate credit cards in an aggregate outstanding amount not to exceed Five Hundred Thousand Dollars ($500,000) at any time;
(v) unsecured Indebtedness arising from customary cash management and treasury services and the honoring of a check, draft or similar instrument against insufficient funds or from the endorsement of instruments for collection, in each case, in the ordinary course of business;
(vi) Indebtedness that also constitutes a Permitted Investment or is secured by a Permitted Lien;
(vii) Subordinated Indebtedness;
(viii) reimbursement obligations in connection with letters of credit that are at any time outstanding and secured by Cash and issued on behalf of Borrower or a Subsidiary in an amount not to exceed Five Hundred Thousand Dollars ($500,000);
(ix) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
10
(x) other unsecured Indebtedness in an amount not to exceed Five Hundred Thousand Dollars ($500,000) at any time outstanding;
(xi) intercompany Indebtedness of any Loan Party owing to another Loan Party;
(xii) the Permitted Convertible Debt Financing;
(xiii) Indebtedness with respect to a Permitted Royalty Transaction; and
(xiv) Indebtedness arising with respect to Borrower’s or any Subsidiary’s real property lease and operating lease obligations in the ordinary course of business;
(xv) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business, not to exceed an aggregate amount outstanding at any time of Five Hundred Thousand Dollars ($500,000);
(xvi) Indebtedness owed to any Person providing property, casualty, liability, or other insurance to a Borrower or any of Subsidiary thereof to finance the premiums therefor in the ordinary course of business, so long as the amount of such Indebtedness is not in excess of the amount of the unpaid cost of, and shall be incurred during and only to defer the cost of such insurance for, a coverage period not to exceed one (1) year; and
(xvii) extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased (other than as a result of the capitalization of fees, expenses and accrued and unpaid interest on a non-default basis in accordance with the terms thereof) or the terms modified to impose materially more burdensome terms upon Borrower or its Subsidiary, as the case may be, and subject to any limitations on the aggregate amount of such Indebtedness.
“Permitted Investment” means:
(i) Investments existing on the Closing Date which are disclosed in Schedule 1B;
(ii) (a) cash, (b) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof currently having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (c) commercial paper maturing no more than one year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (d) certificates of deposit issued by any bank with assets of at least Five Hundred Million Dollars ($500,000,000) maturing no more than one year from the date of investment therein, and (e) money market accounts;
(iii) repurchases of stock of Borrower from former employees, directors, or consultants of Borrower under the terms of applicable repurchase agreements at the original issuance price of such securities in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year, provided that no Event of Default has occurred, is continuing or could exist after giving effect to the repurchases; provided, to the extent restricted stock units or stock options are granted to employees, directors or consultants of Borrower, the retention of a portion thereof by Borrower in connection with such issuance or exercise thereof for the purpose of paying the relevant tax liabilities associated therewith shall not be deemed or construed to constitute a “repurchase” of stock hereunder;
11
(iv) Investments accepted in connection with Permitted Transfers;
(v) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of a Loan Party’s business;
(vi) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subsection (vi) shall not apply to Investments of any Loan Party in any Subsidiary of a Loan Party;
(vii) Investments consisting of loans not involving the net transfer on a substantially contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of Company pursuant to employee stock purchase plans or other similar agreements approved by Company’s Board of Directors;
(viii) Investments consisting of: (A) travel advances and employee relocation loans in the ordinary course of business, and (B) loans to employees, officers, managers or directors relating to the purchase of equity securities of Borrower pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors or similar governing body; not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate for (A) and (B), collectively, at any time outstanding;
(ix) Investments in newly-formed Subsidiaries, provided that each such Subsidiary enters into a Joinder Agreement promptly after its formation and executes such other documents as shall be reasonably requested by Agent;
(x) Investments in Foreign Subsidiaries to fund the reasonable business needs of such Foreign Subsidiaries, in each case in the ordinary course of business and consistent with past practices, as such ordinary course of business and past practices may reasonably be modified in consultation with Agent, for proper business purposes and responsive to the business needs of such Foreign Subsidiaries, as a result of the Borrower and its Subsidiaries’ ability and authorization to generate revenue;
(xi) joint ventures or strategic alliances in the ordinary course of a Loan Party’s business consisting of the nonexclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by the Loan Parties do not exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year;
(xii) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Loan Parties’ business;
(xiii) Investments consisting of deposit accounts (but only to the extent that Borrower is permitted to maintain such accounts pursuant to Section 7.12 of this Agreement);
(xiv) Investments consisting of the creation of a Subsidiary for the purpose of consummating a merger transaction permitted by Section 7.9;
(xv) additional Investments that do not exceed Five Hundred Thousand Dollars ($500,000) in the aggregate.
12
“Permitted Liens” means:
(i) Liens in favor of Agent or Lenders;
(ii) Liens existing on the Closing Date which are disclosed in Schedule 1C;
(iii) Liens for taxes, fees, assessments or other governmental charges or levies, either not yet due or being contested in good faith by appropriate proceedings diligently conducted; provided, that the Loan Parties maintain adequate reserves therefor on Borrower’s Books in accordance with GAAP;
(iv) Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like Persons arising in the ordinary course of the Loan Parties’ business and imposed without action of such parties; provided, that the payment thereof is not yet required;
(v) Liens arising from judgments, decrees or attachments in circumstances which do not constitute an Event of Default hereunder;
(vi) the following deposits, to the extent made in the ordinary course of business: deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than Liens arising under ERISA or environmental Liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds;
(vii) Liens on Equipment or software or other intellectual property constituting purchase money Liens and other Liens in connection with capital leases securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness”;
(viii) Liens incurred in connection with Subordinated Indebtedness;
(ix) leasehold interests in leases or subleases and licenses (other than with respect to Intellectual Property) granted in the ordinary course of business and not interfering in any material respect with the business of the licensor;
(x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become due;
(xi) Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets);
(xii) statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutions and brokerage firms;
(xiii) easements, servitudes, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or marketability of the related property;
13
(xiv) (a) Liens on Cash securing obligations permitted under clause (vii) of the definition of Permitted Indebtedness and (b) security deposits in connection with real property leases, the combination of (a) and (b) in an aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000) at any time;
(xv) Licenses that qualify as Permitted Transfers;
(xvi) Liens solely on the royalty interests purchased pursuant to a Permitted Royalty Transaction and proceeds thereon; provided that no Liens shall be granted with respect to any Intellectual Property of Borrower or its Subsidiaries other than with respect to molgramostim in the case of a synthetic royalty transaction, as long as any such Lien is second priority to Agent’s first priority Lien, pursuant to a subordination or intercreditor agreement on terms and conditions satisfactory to Agent in its sole discretion; and
(xvii) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clauses (i) through (xvi) above; provided, that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.
“Permitted Royalty Transaction” means either a true royalty or synthetic royalty financing whereby Borrower receives upfront net cash proceeds of no less than One Hundred Million Dollars ($100,000,000) in exchange for rights to receive future payments based on net sales or revenue, as applicable, of molgramostim in an amount not to exceed, in the aggregate for all such Permitted Royalty Transactions, ten percent (10.00%) of worldwide net sales or revenue, as applicable, of molgramostim provided that such transaction (a) in the case of any synthetic royalty participation (and not royalty purchases or buyouts) with respect to molgramostim, shall be subject to an intercreditor agreement in form and substance satisfactory to Agent in its sole discretion, (b) for which any security is granted, shall have such grant of security limited solely to molgramostim, and (c) shall not have a scheduled maturity date, guaranteed minimum return payment or “true-up” payment earlier than one hundred eighty (180) days after the Term Loan Maturity Date and/or subject to the payment in full of the Secured Obligations as required hereunder and (d) shall be with a purchaser reasonably satisfactory to Agent (such approval not to be unreasonably withheld, delayed or conditioned); provided further that Borrower shall not engage in more than one such transaction at any one time.
“Permitted Transfers” means:
(i) sales of Inventory in the ordinary course of business;
(ii) licenses and similar arrangements for the use of Intellectual Property in the ordinary course of business on an arms’ length basis, including in connection with business development transactions, co-development or co-promotion transactions, collaborations, licensing, partnering or similar transactions with third parties and that are entered into with commercially reasonable terms, that are not exclusive or could not result in a legal transfer of title of the licensed property that may be exclusive in respects other than territory or may be exclusive as to territory but only as to discrete geographical areas outside of the United States of America in the ordinary course of business;
(iii) transfers by and among Loan Parties;
14
(iv) transfers constituting the making of Permitted Investments, or the granting of Permitted Liens;
(v) dispositions of worn-out, obsolete or surplus Equipment at fair market value in the ordinary course of business;
(vi) Transfers consisting of royalty payments in connection with any Permitted Royalty Transaction;
(vii) to the extent constituting a Transfer, entering into and performing under Material Licenses;
(viii) the abandonment of Intellectual Property that is, in the reasonable judgment of Borrower, no longer economically practicable or commercially desirable to maintain or that is not material to the conduct of the business of Borrower and its Subsidiaries; and
(ix) (A) arms-length Transfers of Immaterial Subsidiaries (including by merger) to third party buyers or acquirors for fair value or (B) the dissolution and termination of Immaterial Subsidiaries; and
(x) other Transfers of assets having a fair market value of not more than Five Hundred Thousand Dollars ($500,000) in the aggregate in any fiscal year.
“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, other entity or government.
“Pledge Agreement” means the Pledge Agreement dated as of the Closing Date between each pledgor party thereto and Agent, as the same may from time to time be amended, restated, modified or otherwise supplemented.
“Principal Stock Exchange” means the NASDAQ or, if the common Equity Interests are not listed on the NASDAQ, the principal national securities exchange or public quotation system on which the common Equity Interests are then listed for trading or quoted.
“Qualified Cash” means an amount equal to (a) the amount of the Loan Parties’ Cash held in accounts in the United States subject to a perfected Lien in favor of Agent, minus (b) the Qualified Cash A/P Amount.
“Qualified Cash A/P Amount” means the amount of the Loan Parties’ accounts payable under GAAP not paid after the120th day following the invoice for such account payable.
“Qualified Equity Interests” means any Equity Interests that are not Disqualified Equity Interests.
“Qualified Equity Issuance Net Proceeds” means the net proceeds in Cash (excluding any conversion of existing notes, share repurchases, or other holdbacks or discounts) received by Company as consideration for any (a) public or private sale or issuance of any Qualified Equity Interests of Company, (b) contribution to the equity capital of Company (other than in exchange for Disqualified Equity Interests), (c) sale or issuance of Indebtedness of Company (other than intercompany Indebtedness) that has been converted into or exchanged for Qualified Equity Interests of Company and which constitutes a Permitted
15
Convertible Debt Financing, (d) interest, returns, profits, dividends, distributions and similar amounts received in connection with a Permitted Royalty Transaction, (d) sale or issuance of Subordinated Indebtedness, or (e) entry into a development and commercialization agreement relating to a product candidate of Borrower; provided that the amount of Cash received by Company is, (i) in the case of clauses (a) and (b) above, measured at the time made and without adjustment for subsequent changes in value, payable for the fair market value of sale, issuance or contribution and any other property received in connection with such sale, issuance or contribution, and paid by any Person that is not a Loan Party or an Affiliate thereof, and (ii) in the case of clause (c) above, the aggregate principal amount of Indebtedness so converted or exchanged.
“Receivables” means (i) all of the Loan Parties’ Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter of credit, and Letter of Credit Rights, and (ii) all customer lists, software, and business records related thereto.
“Redemption Conditions” means, with respect to any redemption by Borrower of any Permitted Convertible Debt, satisfaction of each of the following events: (a) no Default or Event of Default shall exist or result therefrom, and (b) both immediately before and at all times after such redemption, the Borrower’s Qualified Cash shall be no less than 150% of the Secured Obligations.
“Registration” means any registration, authorization, approval, license, permit, clearance, certificate, and exemption issued or allowed by the FDA or state pharmacy licensing authorities (including, without limitation, new drug applications, Biologics License Applications, abbreviated new drug applications, investigational new drug applications, pricing and reimbursement approvals, labelling approvals or their foreign equivalent, and wholesale distributor permits).
“Required Lenders” means at any time, the holders of more than fifty percent (50%) of the sum of the aggregate unpaid principal amount of the Term Loans then outstanding. Notwithstanding the generality of the foregoing, so long as Hercules Capital, Inc. is a Lender, Required Lenders shall be required to include Hercules Capital, Inc.
“Restricted License” means any material License or other agreement with respect to which a Loan Party is the licensee (a) that prohibits or otherwise restricts such Loan Party from granting a security interest in such Loan Party’s interest in such License or agreement or any other property, or (b) for which a default under or termination of could reasonably be expected to materially interfere with Agent’s right to sell any Collateral.
“Sanctioned Country” means, at any time, a country or territory which is the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or by the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or His Majesty’s Treasury of the United Kingdom.
16
“SBA Funding Date” means each date on which a Lender which is an SBIC funds any portion of the Term Loans.
“Secured Obligations” means the Loan Parties’ obligations under this Agreement and any Loan Document, including any obligation to pay any amount now owing or later arising.
“Subordinated Indebtedness” means Indebtedness subordinated to the Secured Obligations in amounts and on terms and conditions reasonably satisfactory to Agent and subject to a subordination agreement in form and substance satisfactory to Agent in its sole discretion.
“Subsidiary” means an entity, whether a corporation, partnership, limited liability company, joint venture or otherwise, in which a Loan Party owns or controls, either directly or indirectly, fifty percent (50%) or more of the outstanding voting securities, including each entity listed on Schedule 1.
“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 Loan” means any Term Loan Advance made under this Agreement.
“Term Loan Advance” means each Tranche 1 Advance, Tranche 2 Advance, Tranche 3 Advance and any other funds advanced under Section 2.2(a).
“Trademark License” means any written agreement granting any right to use any Trademark or Trademark registration, now owned or hereafter acquired by a Loan Party or in which a Loan Party now holds or hereafter acquires any interest.
“Trademarks” means all trademarks (registered, common law or otherwise) and any applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State thereof or any other country or any political subdivision thereof.
“Trading Day” means any day on which (a) there is no Market Disruption Event and (b) the Principal Stock Exchange is open for trading; provided that a “Trading Day” only includes those days that have a scheduled closing time of 4:00 p.m. (Eastern time) or the then standard closing time for regular trading on the relevant exchange or trading system.
“Tranche” means the Tranche 1 Advance, Tranche 2 Advance and/or the Tranche 3 Advance, as applicable.
“U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.
“UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of California; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdiction other than the State of California, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.
17
Defined Term |
Section |
1940 Act |
5.6(b) |
Agent |
Preamble |
Amortization Date |
Exhibit K |
Assignee |
11.14 |
Borrower |
Preamble |
Claims |
11.11(a) |
Collateral |
3.1 |
Company |
Preamble |
Confidential Information |
11.13 |
Due Diligence Fee |
Exhibit K |
End of Term Charge |
Exhibit K |
End of Term Charge Percentage |
Exhibit K |
Event of Default |
9 |
Financial Statements |
7.1 |
Indemnified Person |
6.3 |
Initial Facility Charge |
Exhibit K |
Interest Only Extension Conditions |
Exhibit K |
Lenders |
Preamble |
Liabilities |
6.3 |
Maximum Rate |
2.3 |
Maximum Term Loan Amount |
Exhibit K |
Minimum Advance Amount |
Exhibit K |
Participant Register |
11.8 |
Payment Date |
2.2(e) |
Prepayment Charge |
Exhibit K |
Prime Rate |
Exhibit K |
Publicity Materials |
11.19 |
Register |
11.7 |
Revenue Milestone |
Exhibit K |
Rights to Payment |
3.1 |
RTI Amount |
Exhibit K |
SBA |
7.16 |
SBIC |
7.16 |
SBIC Act |
7.16 |
Subsequent Financing |
Exhibit K |
Term Commitment |
Exhibit K |
Term Loan Interest Rate |
Exhibit K |
18
Term Loan Maturity Date |
Exhibit K |
Tranche 1 Advance |
2.2(a) |
Tranche 1 Commitment |
Exhibit K |
Tranche 2 Advance |
2.2(a) |
Tranche 2-A Commitment |
Exhibit K |
Tranche 2-A Commitment Period |
Exhibit K |
Tranche 2-B Commitment |
Exhibit K |
Tranche 2-B Commitment Period |
Exhibit K |
Tranche 2-C Commitment |
Exhibit K |
Tranche 2-C Commitment Period |
Exhibit K |
Tranche 3 Advance |
2.2(a) |
Tranche 3 Commitment |
Exhibit K |
Tranche 3 Commitment Period |
Exhibit K |
Tranche Facility Charge |
Exhibit K |
Transfer |
7.8 |
19
SECTION 2. THE LOAN
2.1 [Reserved]
2.2 Term Loan Advances.
20
21
2.3 Maximum Interest. Notwithstanding any provision in this Agreement or any other Loan Document to the contrary, it is the parties’ intent not to contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law that a court of competent jurisdiction shall deem applicable hereto (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest on commercial loans) (the “Maximum Rate”). If a court of competent jurisdiction shall finally determine that Borrower has actually paid to Lenders an amount of interest in excess of the amount that would have been payable if all of the Secured Obligations had at all times borne interest at the Maximum Rate, then such excess interest actually paid by Borrower shall be applied as follows: first, to the payment of the Secured Obligations consisting of the outstanding principal; second, after all principal is repaid, to the payment of Lenders’ accrued interest, costs, expenses, professional fees and any other Secured Obligations; and third, after all Secured Obligations are repaid, the excess (if any) shall be refunded to Borrower.
2.4 Default Interest. In the event any payment is not paid on the scheduled payment date, an amount equal to four percent (4%) of such past due amount shall be payable on demand. In addition, automatically upon the occurrence and during the continuation of an Event of Default pursuant to Sections 9.1 or 9.5 hereunder and, in respect of any other Event of Default hereunder, from and after the occurrence and during the continuation of such Event of Default, upon the election of the Required Lenders, all outstanding Secured Obligations, including principal, interest, compounded interest, and professional fees, shall bear interest at a rate per annum equal to the rate set forth in Section 2.2(d) plus four percent (4%) per annum. In the event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded at the rate set forth in Section 2.2(d) or 2.4, as applicable.
2.5 Prepayment. At its option, Borrower may prepay all or a portion of the outstanding Advances by paying the entire principal balance (or such portion thereof), all accrued and unpaid interest thereon, all unpaid Lender’s fees and expenses due hereunder accrued to the date of the repayment (including, without limitation, the portion of the End of Term Charge applicable to the aggregate original principal amount of the Term Loan Advances being prepaid in accordance with Section 2.6(a)), together with a Prepayment Charge with respect to the outstanding principal amount of such Advance amount being so prepaid. Borrower agrees that the Prepayment Charge is a reasonable calculation of Lenders’ lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early repayment of the Advances. Borrower shall prepay the outstanding amount of all principal and accrued interest through the prepayment date and the Prepayment Charge upon the occurrence of any other prepayment hereunder. Notwithstanding
22
the foregoing, Agent and Lenders agree to waive the Prepayment Charge if (a) Agent and Lenders (in their sole and absolute discretion) agree in writing to refinance the Advances prior to the Term Loan Maturity Date or (b) an early repayment of the Advances occurs as a result of a Change in Control of a Borrower arising from a merger or acquisition of a Borrower. Any amounts paid under this Section shall be applied by Agent to the then unpaid amount of any outstanding Secured Obligations (including principal and interest) in such order and priority as Agent may choose in its sole discretion. For the avoidance of doubt, if a payment hereunder becomes due and payable on a day that is not a Business Day, the due date thereof shall be the immediately subsequent Business Day.
2.6 End of Term Charge.
2.7 Pro Rata Treatment. Each payment (including prepayment) on account of any fee and any reduction of the Term Loan Advances shall be made pro rata according to the Term Commitments of the relevant Lender.
2.8 Taxes; Increased Costs. Borrower, Agent and Lenders each hereby agree to the terms and conditions set forth on Addendum 1 attached hereto.
2.9 Treatment of Prepayment Charge and End of Term Charge. Borrower agrees that any Prepayment Charge and any End of Term Charge payable shall be presumed to be the liquidated damages sustained by each Lender as the result of the early termination, and Borrower agrees that it is reasonable under the circumstances currently existing and existing as of the Closing Date. The Prepayment Charge and the End of Term Charge shall also be payable in the event the Secured Obligations (and/or this Agreement) are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure, or by any other means. Each Loan Party expressly waives (to the fullest extent it may lawfully do so) the provisions of any present or future statute or law that prohibits or may prohibit the collection of the foregoing Prepayment Charge and End of Term Charge in connection with any such acceleration. Borrower agrees (to the fullest extent that each may lawfully do so): (a) each of the Prepayment Charge and the End of Term Charge is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (b) each of the Prepayment Charge and the End of Term Charge shall be payable notwithstanding the then prevailing market rates at the time payment is made; (c) there
23
has been a course of conduct between Lenders and Borrower giving specific consideration in this transaction for such agreement to pay the Prepayment Charge and the End of Term Charge as a charge (and not interest) in the event of prepayment or acceleration; and (d) Borrower shall be estopped from claiming differently than as agreed to in this Section. Borrower expressly acknowledges that its agreement to pay each of the Prepayment Charge and the End of Term Charge to Lenders as herein described was on the Closing Date and continues to be a material inducement to Lenders to provide the Term Loan Advances.
2.10 Due Diligence Fee. Borrower agrees that the Due Diligence Fee has been paid to Agent and received by Agent prior to the Closing Date, and shall be deemed fully earned on such date regardless of the early termination of this Agreement.
SECTION 3. SECURITY INTEREST
3.1 Grant of Security Interest. As security for the prompt and complete payment when due (whether on the payment dates or otherwise) of all the Secured Obligations, each Loan Party grants to Agent a security interest in all of such Loan Party’s right, title, and interest in, to and under all of such Loan Party’s personal property and other assets including without limitation the following (except as set forth herein) whether now owned or hereafter acquired (collectively, the “Collateral”): (a) Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles (other than, prior to the IPSA Trigger Date, Intellectual Property); (e) Inventory; (f) Investment Property; (g) Deposit Accounts; (h) Cash; (i) Goods; and all other tangible and intangible personal property of such Loan Party whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, such Loan party and wherever located, and any of such Loan Party’s property in the possession or under the control of Agent; and, to the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing; provided, however, that prior to the IPSA Trigger Date, the Collateral shall include all Accounts and General Intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in, the Intellectual Property (the “Rights to Payment”). Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that, prior to the IPSA Trigger Date, a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of the date of this Agreement, include the Intellectual Property to the extent necessary to permit perfection of Agent’s security interest in the Rights to Payment.
3.2 Notwithstanding the broad grant of the security interest set forth in Section 3.1, above, the Collateral shall not include (a) more than 65% of the presently existing and hereafter arising issued and outstanding Equity Interests owned by Borrower of any Excluded Subsidiary which Equity Interests entitle the holder thereof to vote for directors or any other matter to the extent that Borrower has provided Agent reasonably satisfactory evidence that the grant of a security interest in excess of such percentage to secure the Secured Obligations could reasonably be expected cause material adverse tax consequences for any Loan Party, (b) any “intent to use” trademarks at all times prior to the first use thereof, whether by the actual use thereof in commerce, the recording of a statement of use with the United States Patent and Trademark Office or otherwise, provided, that, from and after the IPSA Trigger Date, upon submission and acceptance by the United States Patent and Trademark Office of an amendment to allege use of an intent-to-use trademark application pursuant to 15 U.S.C. Section 1060(a) (or any successor provision) such intent-to-use application shall constitute Collateral, (c) nonassignable licenses or contracts, which by their terms require the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406, 9407 and 9408 of the UCC) and (d) any Excluded Account.
24
Section 4. CONDITIONS PRECEDENT TO LOAN
The obligations of Lenders to make the Loan hereunder are subject to the satisfaction by Borrower of the following conditions:
4.1 Initial Advance. On or prior to the Closing Date, Borrower shall have delivered to Agent the following:
25
4.2 All Advances. On each Advance Date:
4.3 [Reserved].
4.4 No Default. As of the Closing Date and at the time of and immediately after each Advance Date, (i) no fact or condition exists that could (or could, with the passage of time, the giving of notice, or both) constitute an Event of Default, (ii) no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing and (iii) there has been no material adverse deviation by the Loan Parties from the most recent business plan of the Loan Parties presented to and accepted by Agent.
4.5 Post-Close Obligations. Notwithstanding any provision herein or in any other Loan Document to the contrary, to the extent not actually delivered on or prior to the Closing Date, Borrower shall deliver to Agent (or its designated agent):
26
Section 5. REPRESENTATIONS AND WARRANTIES OF BORROWER
Each Loan Party represents and warrants that:
5.1 Corporate Status; Execution and Delivery; Binding Effect. Each Loan Party is duly organized, legally existing and in good standing under the laws of its jurisdiction of incorporation or formation, as applicable, and is duly qualified as a foreign corporation, limited liability company or partnership, as the case may be, in all jurisdictions in which the nature of its business or location of its properties require such qualifications and where the failure to be qualified could reasonably be expected to have a Material Adverse Effect. Each Loan Party’s present name, former names (if any), locations, place of formation, tax identification number, organizational identification number and other information are correctly set forth in Exhibit B, as may be updated by Borrower in a written notice (including any Compliance Certificate) provided to Agent after the Closing Date in accordance with this Agreement. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by the Borrower. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of each Loan Party, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium or other laws affecting creditors’ rights generally and by general principles of equity.
5.2 Collateral. Each Loan Party owns or otherwise has the rights to use the Collateral and owns, or has rights to, the Intellectual Property, free of all Liens, except for Permitted Liens.
27
Each Loan Party has the power and authority to grant to Agent a Lien in the Collateral as security for the Secured Obligations.
5.3 Consents. Each Loan Party’s execution, delivery and performance of this Agreement and all other Loan Documents to which it is a party, (i) have been duly authorized by all necessary action of such Loan Party in accordance with its Organizational Documents and applicable law, (ii) will not result in the creation or imposition of any Lien upon the Collateral, other than Permitted Liens, (iii) do not violate any provisions of such Loan Party’s Organizational Documents or any, law, regulation, order, injunction, judgment, decree or writ to which such Loan Party is subject and (iv) except as described on Schedule 5.3, do not violate any contract or agreement or require the consent or approval of any other Person or Governmental Authority which has not already been obtained. The individual or individuals executing the Loan Documents are duly authorized to do so.
5.4 Material Adverse Effect. Since December 31, 2023 or, if later, the date of the most recently audited financials delivered to Agent pursuant to Section 7.1(c), no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing. No Loan Party is aware of any event or circumstance that is likely to occur that is reasonably expected to result in a Material Adverse Effect.
5.5 Actions Before Governmental Authorities. There are no actions, suits, claims, disputes or proceedings at law or in equity or by or before any Governmental Authority now pending or, to the knowledge of any Loan Party, threatened against or affecting any Loan Party or its property, that is reasonably expected to result in a Material Adverse Effect.
5.6 Laws.
(a) No Loan Party nor any of its Subsidiaries is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority to which such Loan Party or such Subsidiaries are subject, where such violation or default could reasonably be expected to result in a Material Adverse Effect. No Loan Party is in default in any manner under any provision of any agreement or instrument evidencing material Indebtedness, or any other material agreement to which it is a party or by which it is bound.
(b) No Loan Party nor any of their respective Subsidiaries is an “investment company,” a company that would be an “investment company” except for the exclusion from the definition of “investment company” in Section 3(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), or a company “controlled” by an “investment company” under the 1940 Act. No Loan Party nor any of their respective Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Each Loan Party and each of their respective Subsidiaries has complied in all material respects with the Federal Fair Labor Standards Act. No Loan Party nor any of their respective Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. No Loan Party’s nor any of their respective Subsidiaries’ properties or assets have been used by such Loan Party or such Subsidiary or, to such Loan Party’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws. Each Loan Party and each of their respective Subsidiaries has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
28
(c) No Loan Party nor any of their respective Subsidiaries, nor any of any Loan Party’s or its Subsidiaries’ controlled Affiliates or any of their respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. No Loan Party nor any of their respective Subsidiaries, or (to the knowledge of any Loan Party) any of their controlled Affiliates or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law. None of the funds to be provided under this Agreement will be used, directly or, to the knowledge of any Loan Party, indirectly, (a) for any activities in violation of any applicable anti-money laundering, economic sanctions and anti-bribery laws and regulations or (b) for any payment to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
5.7 Information Correct and Current. No information, report, Advance Request, financial statement, exhibit or schedule furnished, by or on behalf of a Loan Party to Agent in connection with any Loan Document or included therein or delivered pursuant thereto contained, or, when taken as a whole, contains or will contain any material misstatement of fact or, when taken together with all other such information or documents, omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not materially misleading at the time such statement was made or deemed made. Additionally, any and all financial or business projections provided by any Loan Party to Agent, whether prior to or after the Closing Date, shall be (i) provided in good faith and based on the most current data and information available to the Loan Parties, and (ii) the most current of such projections provided to the Loan Parties’ respective Board of Directors; provided, business and financial projections are not to be viewed as facts and that actual results during the period or periods covered by such projections may differ from the projected results and such differences may be material.
5.8 Tax Matters. Except as set forth on Schedule 5.8, (a) each Loan Party and their respective Subsidiaries have filed all federal and state income Tax returns and other material Tax returns that they are required to file, (b) each Loan Party and its Subsidiaries have duly and timely paid all federal and state income Taxes and other material Taxes that they are required to pay, except Taxes being contested in good faith by appropriate proceedings and for which such Loan Party and its Subsidiaries maintain adequate reserves in accordance with GAAP, and (c) to the best of each Loan Party’s knowledge, no proposed or pending Tax assessments, deficiencies, audits or other proceedings with respect to such Loan Party or any Subsidiary have had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
5.9 Intellectual Property Claims. Each Loan Party is the sole owner of, or otherwise has the right to use, the Intellectual Property material to such Loan Party’s business. Except as described on Schedule 5.9, (i) each of the material Copyrights, Trademarks and Patents is valid and enforceable, (ii) no material part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (iii) no claim has been made to any Loan Party that the ownership of or use of any material part of the Intellectual Property violates the rights of any third
29
party. Exhibit C is a true, correct and complete list of each Loan Party’s Patents, registered Trademarks, registered Copyrights, and material agreements under which Borrower licenses Intellectual Property from third parties (other than shrink-wrap software licenses or other than “off-the-shelf” licenses or open-source software), together with application or registration numbers, as applicable, owned by any Loan Party or any Subsidiary. No Loan Party is in material breach of, nor has any Loan Party failed to perform any material obligations under, any of the foregoing contracts, licenses or agreements and, to each Loan Party’s knowledge, no third party to any such contract, license or agreement is in material breach thereof or has failed to perform any material obligations thereunder.
5.10 Intellectual Property.
(a) Except as described on Schedule 5.10, Each Loan Party has all material rights with respect to intellectual property necessary or material in the operation or conduct of such Loan Party’s business as currently conducted and proposed to be conducted by such Loan Party. Without limiting the generality of the foregoing, except for restrictions that are unenforceable under Division 9 of the UCC or otherwise permitted under this Agreement with respect to Licenses, Each Loan Party has the right, to the extent required to operate such Loan Party’s business, to freely transfer, license or assign Intellectual Property necessary or material in the operation or conduct of such Loan Party’s business as currently conducted and proposed to be conducted by such Loan Party, without condition, restriction or payment of any kind (other than license payments in the ordinary course of business) to any third party. Except as disclosed on Schedule 5.10, no Loan Party is a party to, nor is it bound by, any Restricted License.
(b) [Reserved].
(c) There are no material unpaid fees or royalties under any Material Agreements that have become overdue. Each Material Agreement is in full force and effect and is legal, valid, binding, and enforceable in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability. Except as set forth on Schedule 5.10(c), to the knowledge of each Loan Party (i) no Loan Party nor any of its Subsidiaries, as applicable, is in breach of or default in any manner that could reasonably be expected to materially affect the Borrower Products under any Material Agreement to which it is a party, and (ii) no circumstances or grounds exist that would give rise to a claim of breach or right of rescission, termination or nonrenewal of any of the Material Agreements, including the execution, delivery and performance of this Agreement and the other Loan Documents.
(d) Each Loan Party and each of its Subsidiaries has taken all commercially reasonable measures customary in the biopharmaceutical industry to protect the confidentiality and value of all trade secrets owned by any Loan Party or any of their respective Subsidiaries or used or held for use by any Loan Party or any of their respective Subsidiaries, in each case relating to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Borrower Products.
(e) At the time of any shipment of Borrower Product in the United States occurring prior to the Closing Date, the units thereof so shipped complied with their relevant specifications and were manufactured in all material respects in accordance with applicable current FDA Good Manufacturing Practices.
30
(f) Except as set forth on Schedule 5.10(f) (as it may be updated in a Compliance Certificate delivered in accordance with Section 7.1(d)), there are no settlements, covenants not to sue, consents, judgments, orders or similar obligations which: (i) restrict the rights of any Loan Party or any of their respective Subsidiaries to use any Intellectual Property relating to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Borrower Products, or (ii) permit any third parties to use any of its Intellectual Property.
(g) [Reserved].
(h) [Reserved].
(i) [Reserved].
(j) No Loan Party nor any of their respective Subsidiaries has undertaken or omitted to undertake any acts, and no circumstance or grounds exist that would invalidate or reduce, in whole or in part, the enforceability or scope of (i) the Current Company IP in any manner that could reasonably be expected to materially adversely affect the Borrower Products, or (ii) in the case of Current Company IP owned or co-owned or exclusively or non-exclusively licensed by any Loan Party or any of their respective Subsidiaries, except as set forth on Schedule 5.10(j), each Loan Party and each of their respective Subsidiary’s entitlement to own or license and exploit such Current Company IP.
5.11 Borrower Products. Except as set forth on Schedule 5.11, no Intellectual Property owned by any Loan Party or Borrower Product has been or is subject to any actual or, to the knowledge of any Loan Party, litigation threatened in writing, proceeding (including any proceeding in the United States Patent and Trademark Office or any corresponding foreign office or agency) or outstanding decree, order, judgment, settlement agreement or stipulation that restricts in any material respect such Loan Party’s use, transfer or licensing thereof or that may affect the validity, use or enforceability thereof. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision entered into in connection with any litigation or proceeding that obligates any Loan Party to grant licenses or ownership interest in any future Intellectual Property related to the operation or conduct of the business of such Loan Party or Borrower Products that could reasonably be expected to have a Material Adverse Effect. No Loan Party has received any written notice or claim or, to the knowledge of any Loan Party, oral notice or claim, challenging or questioning such Loan Party’s ownership in any material Intellectual Property (or written notice of any claim challenging or questioning the ownership in any licensed Intellectual Property of the owner thereof) or suggesting that any third party has any claim of legal or beneficial ownership with respect thereto and wherein to any Loan Party’s knowledge, there would be a reasonable basis for any such claim. To the knowledge of any Responsible Officer of each Loan Party, no Loan Party’s use of its Intellectual Property nor the production and sale of Borrower Products infringes the Intellectual Property or other rights of others.
5.12 Financial Accounts. Exhibit D, as may be updated by Borrower in a written notice provided to Agent after the Closing Date, is a true, correct and complete list of (a) all banks and other financial institutions at which any Loan Party or any Subsidiary maintains Deposit Accounts and (b) all institutions at which any Loan Party or any Subsidiary maintains an account holding Investment Property, and such exhibit correctly identifies the name, address and telephone number of each bank or other institution, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.
31
5.13 Employee Loans. Except for loans constituting Permitted Investments or as described on Schedule 5.13, no Loan Party has outstanding loans to any employee, officer or director of such Loan Party nor has any Loan Party guaranteed the payment of any loan made to an employee, officer or director of such Loan Party by a third party.
5.14 Capitalization and Subsidiaries. Each Loan Party’s capitalization as of the Closing Date is set forth on Schedule 5.14 annexed hereto. No Loan Party owns any stock, partnership interest or other securities of any Person, except for Permitted Investments. Attached as Schedule 5.14, as may be updated by Borrower in a written notice provided after the Closing Date, is a true, correct and complete list of each Subsidiary.
5.15 Solvency. The fair salable value of the Loan Parties’ consolidated assets (including goodwill minus disposition costs) exceeds the fair value of the Loan Parties’ liabilities; no Loan Party is left with unreasonably small capital after the transactions in this Agreement; and each Loan Party and each of their respective Subsidiaries are able to pay their debts (including trade debts) as they mature. The amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.
5.16 Immaterial Subsidiaries. Each Foreign Subsidiary that has not complied with the requirements set forth in Section 7.13 of this Agreement is an Immaterial Subsidiary.
6.1 Coverage. Borrower shall cause to be carried and maintained commercial general liability insurance covering the Loan Parties and their respective Subsidiaries, on an occurrence form, against risks and in such amounts customarily insured against in the Loan Parties’ line of business. Such risks shall include the risks of bodily injury, including death, property damage, personal injury, advertising injury, and contractual liability per the terms of the indemnification agreement found in Section 6.3. The Loan Parties must maintain a minimum of Four Million Dollars ($4,000,000) of commercial general liability insurance for each occurrence. The Loan Parties maintain and shall continue to maintain a minimum of Four Million Dollars ($4,000,000) of directors’ and officers’ insurance for each occurrence and Ten Million Dollars ($10,000,000) in the aggregate. So long as there are any Secured Obligations outstanding (other than inchoate indemnity obligations which, by their terms, survive termination of this Agreement), the Loan Parties shall also cause to be carried and maintained insurance upon the business and assets of the Loan Parties and their respective Subsidiaries, insuring against substantially all risks of physical loss or damage howsoever caused, in an amount not less than the full replacement cost of the Collateral, provided that such insurance may be subject to standard exceptions and deductibles. If any Loan Party fails to obtain the insurance called for by this Section 6.1 or fails to pay any premium thereon or fails to pay any other amount which such Loan Party is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Agent may obtain such insurance or make such payment, and all amounts so paid by Agent are immediately due and payable, bearing interest at the then highest rate applicable to the Secured Obligations, and secured by the Collateral. Agent will make reasonable efforts to provide Borrower with notice of Agent obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Agent are deemed an agreement to make similar payments in the future or Agent’s waiver of any Event of Default.
6.2 Certificates. Borrower shall deliver to Agent certificates of insurance that evidence the Loan Parties’ compliance with its insurance obligations in Section 6.1 and the obligations contained in this Section 6.2. The Loan Parties’ insurance certificates shall reflect Agent (shown as
32
“Hercules Capital, Inc., as Agent, and its successors and/or assigns”) as an additional insured for commercial general liability and a lenders loss payable for special form property insurance. Attached to the certificates of insurance will be additional insured endorsements for liability and lender’s loss payable endorsements for special form property damage insurance. All certificates of insurance will provide for a minimum of thirty (30) days advance written notice to Agent of cancellation (other than cancellation for non-payment of premiums, for which ten (10) days’ advance written notice shall be sufficient). Any failure of Agent to scrutinize such insurance certificates for compliance is not a waiver of any of Agent’s rights, all of which are reserved. the Loan Parties shall provide Agent with copies of each insurance policy, and upon entering into or amending any insurance policy required hereunder, the Loan Parties shall provide Agent with copies of such policies and shall promptly deliver to Agent updated insurance certificates with respect to such policies.
6.3 Indemnity. each Loan Party agrees to indemnify and hold Agent, Lenders and their officers, directors, employees, agents, in-house attorneys, representatives and shareholders (each, an “Indemnified Person”) harmless from and against any and all third-party claims, costs, expenses, damages and liabilities (including such claims, costs, expenses, damages and liabilities based on liability in tort, including strict liability in tort), including reasonable attorneys’ fees and disbursements and other costs of investigation or defense (including those incurred upon any appeal) (collectively, “Liabilities”), that may be instituted or asserted against or incurred by such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents or the administration of such credit, or in connection with or arising out of the transactions contemplated hereunder and thereunder, or any actions or failures to act in connection therewith, or arising out of the disposition or utilization of the Collateral, excluding in all cases Liabilities to the extent such Liabilities arise out of bad faith, gross negligence or willful misconduct of any Indemnified Person or changes in income tax rates. This Section 6.3 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim. In no event shall any Indemnified Person be liable on any theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings). This Section 6.3 shall survive the repayment of indebtedness under, and otherwise shall survive the expiration or other termination of, this Agreement, in each case, subject to the applicable statute of limitations.
Each Loan Party agrees as follows:
7.1 Financial Reports. Borrower shall furnish to Agent the financial statements and reports listed hereinafter (the “Financial Statements”):
33
34
No Loan Party shall (without the consent of Agent, such consent not to be unreasonably withheld or delayed), make any change in its (a) accounting policies or reporting practices, except as required by GAAP or (b) fiscal years or fiscal quarters. The fiscal year of each Loan Party shall end on December 31.
The executed Compliance Certificate, and all Financial Statements required to be delivered hereunder shall be sent per instructions (i) specified on Addendum 2 or (ii) otherwise provided by Agent to Borrower via a written notice from time to time.
7.2 Inspection Rights. Each Loan Party shall permit any representative that Agent or Lenders authorizes, including its attorneys and accountants, to inspect the Collateral and examine and make copies and abstracts of the books of account and records of the Loan Parties at reasonable times and upon reasonable notice during normal business hours; provided, however, that so long as no Event of Default has occurred and is continuing, such examinations shall be limited to no more often than once per fiscal year. In addition, in connection with such inspections, any such representative shall have the right to meet with management and officers of the Loan Parties to discuss such books of account and records. In addition, Agent or Lenders shall be entitled at reasonable times and intervals to consult with and advise the management and officers of the Loan Parties concerning significant business issues affecting the Loan Parties. Such consultations shall not unreasonably interfere with such Loan Party’s business operations. The parties intend that the rights granted Agent and Lenders shall constitute “management rights” within the meaning of 29 C.F.R. Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or participation by Agent or Lenders with respect to any business issues shall not be deemed to give Agent or Lenders, nor be deemed an exercise by Agent or Lenders of, control over the Loan Parties’ management or policies.
7.3 Further Assurances. Each Loan Party shall, and shall cause each other Loan Party to, from time to time execute, deliver and file, alone or with Agent, any financing statements, security agreements, collateral assignments, notices, control agreements, promissory notes or other documents to perfect, give the highest priority to Agent’s Lien on the Collateral or otherwise evidence Agent’s rights herein. Each Loan Party shall from time to time procure any instruments or documents as may be reasonably requested by Agent, and take all further action that may be necessary, or that Agent may reasonably request, to perfect and protect the Liens granted hereby or pursuant to applicable Loan Documents. In addition, and for such purposes only, each Loan Party hereby authorizes Agent to execute and deliver on behalf of such Loan Party and to file such financing statements (including an indication that the financing statement covers “all assets or all personal property” of such Loan Party in accordance with Section 9504 of the UCC), collateral assignments, notices, control agreements, security agreements and other documents without the signature of such Loan Party either in Agent’s name or in the name of Agent as agent and attorney-in-fact for such Loan Party. Each Loan Party shall protect and defend such Loan Party’s title to the Collateral and Agent’s Lien thereon against all Persons claiming any interest adverse to such Loan Party or Agent other than Permitted Liens.
35
7.4 Indebtedness. No Loan Party shall create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on any Loan Party an obligation to prepay any Indebtedness, except for (a) Indebtedness permitted by clauses (i), (ii), (iii), (iv), (v), (vi), (viii), (ix), (xiv), (xv) and (xiv) of the defined term “Permitted Indebtedness”, (b) the conversion of Indebtedness into equity securities and the payment of cash in lieu of fractional shares in connection with such conversion, (c) purchase money Indebtedness pursuant to its then applicable payment schedule, (d) prepayment by any Subsidiary of (i) inter-company Indebtedness owed by such Subsidiary to any Loan Party, or (ii) if such Subsidiary is not a Loan Party, intercompany Indebtedness owed by such Subsidiary to another Subsidiary that is not a Loan Party, (e) payments made on Subordinated Indebtedness to the extent permitted under the relevant Subordination Agreement or (f) as otherwise permitted hereunder or approved in writing by Agent.
Notwithstanding anything to the contrary in the foregoing, the issuance of, performance of obligations under (including any payments of interest), and conversion, exercise, repurchase, redemption (including, for the avoidance of doubt, a required repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the share price of Shares of Common Stock), settlement or early termination or cancellation of (whether in whole or in part and including by netting or set-off) (in each case, whether in cash, Shares of Common Stock or, following a merger event or other change of the Shares of Common Stock, other securities or property), or the satisfaction of any condition that would permit or require any of the foregoing, any Permitted Convertible Debt shall not constitute a prepayment of Indebtedness by any Loan Party for the purposes of this Section 7.4 provided that principal payments in cash (other than cash in lieu of fractional shares) shall be allowed with respect to any repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the share price of Shares of Common Stock only if the Redemption Conditions are satisfied in respect of such redemption and at all times after such redemption.
Notwithstanding the foregoing, any Loan Party may repurchase, exchange or induce the conversion of Permitted Convertible Debt by deliver of shares of Shares of Common Stock and/or a different series of Permitted Convertible Debt and/or by payment of cash (in an amount that does not exceed the proceeds received by such Loan Party from the substantially concurrent issuance of Shares of Common Stock and/or such different series of Permitted Convertible Debt.
7.5 Collateral. Each Loan Party shall at all times (a) keep the Collateral, the Intellectual Property and all other property and assets used in such Loan Party’s business or in which such Loan Party now or hereafter holds any interest free and clear from any legal process or Liens whatsoever (except for Permitted Liens), and (b) shall give Agent prompt written notice of any legal process affecting the Collateral, the Intellectual Property, such other property and assets, or any Liens thereon, provided however, that the Collateral and such other property or assets may be subject to Permitted Liens. No Loan Party agree with any Person other than Agent or Lenders not to encumber its property other than in connection with Permitted Liens. No Loan Party shall enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of its property (including Intellectual Property), whether now owned or hereafter acquired, to secure its obligations under the Loan Documents to which it is a party other than (i) this Agreement and the other Loan Documents, (ii) any agreements governing any purchase money Liens or capital lease obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby) and (iii) customary restrictions on the assignment of leases, licenses and other agreements. Each Loan Party shall cause its Subsidiaries to protect and defend such Subsidiary’s title to its assets from and against all Persons claiming any interest adverse to such
36
Subsidiary, and each Loan Party shall cause its Subsidiaries at all times to keep such Subsidiary’s property and assets free and clear from any legal process or Liens whatsoever (except for Permitted Liens, provided however, that there shall be no Liens whatsoever on Intellectual Property), and shall give Agent prompt written notice of any legal process affecting such Subsidiary’s assets.
7.6 Investments. No Loan Party shall directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries to do so, other than Permitted Investments.
Notwithstanding the foregoing, and for the avoidance of doubt, this Section 7.6 shall not prohibit (i) the conversion or exchange by holders of (including any cash payment upon conversion or exchange), or required payment of any principal or premium on (including, for the avoidance of doubt, in respect of a required repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the share price of Shares of Common Stock) or required payment of any interest with respect to, any Permitted Convertible Debt in each case, in accordance with the terms of the indenture governing such Permitted Convertible Debt provided that principal payments in cash (other than cash in lieu of fractional shares) shall be allowed with respect to any repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the share price of Shares of Common Stock only if the Redemption Conditions are satisfied in respect of such redemption and at all times after such redemption, or (ii) the withholding of shares of Shares of Common Stock upon the vesting of performance stock units and restricted stock units issued to the Loan Parties’ employees under the Loan Parties’ equity incentive plan upon vesting of such stock units.
Notwithstanding the foregoing, any Loan Party may repurchase, exchange or induce the conversion of Permitted Convertible Debt by delivery of shares of Shares of Common Stock and/or a different series of Permitted Convertible Debt and/or by payment of cash (in an amount that does not exceed the proceeds received by any Loan Party from the substantially concurrent issuance of Shares of Common Stock and/or such different series of Permitted Convertible Debt.
7.7 Distributions. No Loan Party shall, nor shall any Loan Party allow any Subsidiary to, (a) repurchase or redeem any class of stock or other Equity Interest other than pursuant to employee, director or consultant repurchase plans or other similar agreements, provided, however, in each case the repurchase or redemption price does not exceed the original consideration paid for such stock or Equity Interest, or (b) declare or pay any cash dividend or make any other cash distribution on any class of stock or other Equity Interest, except that a Subsidiary may pay dividends or make other distributions to any Loan Party or any Subsidiary of any Loan Party, or (c) except for Permitted Investments, lend money to any employees, officers or directors or guarantee the payment of any such loans granted by a third party in excess of One Hundred Thousand Dollars ($100,000) in the aggregate per year, or (d) convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof other than pursuant to the terms thereof so long as such conversion does not result in a Change in Control, or (e) waive, release or forgive any Indebtedness owed by any employees, officers or directors in excess of One Hundred Thousand Dollars ($100,000) in the aggregate per year.
Notwithstanding the foregoing, and for the avoidance of doubt, this Section 7.7 shall not prohibit (i) the conversion by holders of (including any cash payment upon conversion), or required payment of any principal or premium on (including, for the avoidance of doubt, in respect of a required repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the share price of Shares of Common Stock) or required payment of any interest with respect to, any Permitted Convertible Debt in each case, in accordance with the terms of the indenture governing such Permitted Convertible Debt or (ii) the withholding of Shares of Common Stock upon the vesting of restricted stock units and performance stock units
37
issued to any Loan Party’s employees under such Loan Party’s equity incentive plan upon vesting of such stock units and any related cash payments required to be paid to such employees and or any governmental authority on account of Taxes related thereto, in each case in the ordinary course of business of such Loan Party.
Notwithstanding the foregoing, any Loan Party may repurchase, exchange or induce the conversion of Permitted Convertible Debt by delivery of shares of Shares of Common Stock and/or a different series of Permitted Convertible Debt and/or by payment of cash (in an amount that does not exceed the proceeds received by any Loan Party from the substantially concurrent issuance of Shares of Common Stock and/or such different series of Permitted Convertible Debt.
7.8 Transfers. Except for Permitted Transfers, no Loan Party shall, nor shall any Loan Party permit any Subsidiary to, voluntarily or involuntarily transfer, sell, lease, license, lend or in any other manner convey (“Transfer”) any equitable, beneficial or legal interest in any material portion of its assets (including, without limitation, pursuant to a Division). Notwithstanding the foregoing, and for the avoidance of doubt, this Section 7.8 shall not prohibit (i) the conversion by holders of any Permitted Convertible Debt Financing in accordance with the terms of the indenture governing such Permitted Convertible Debt Financing or any Loan Party’s delivery of the conversion consideration in connection therewith or the delivery of Common Stock, and Cash in lieu of fractional shares of Common Stock in exchange for, or to induce conversions of, Permitted Convertible Debt Financing; provided that the conversion consideration (or exchange or inducement consideration) paid to such holders is limited to (A) Common Stock and (B) Cash in lieu of fractional shares of Common Stock (provided further that the amount of Cash in lieu of fractional shares of Common Stock paid to holders of Permitted Convertible Debt Financing in connection with the conversion or exchange thereof, or the inducement to convert Permitted Convertible Debt Financing, shall not exceed Fifty Thousand Dollars ($50,000) in the aggregate in any fiscal year of Borrower).
7.9 Mergers and Consolidations. Except to the extent entered into in connection with a Permitted Investment, No Loan Party shall, nor will it permit any Subsidiary to, merge, dissolve, liquidate, consolidate with or into another Person, or dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person (other than (1) mergers or consolidations of (a) a Subsidiary which is not a Loan Party into another Subsidiary or into Borrower (b) a Loan Party which is not a Borrower into another Loan Party which is not a Borrower, and (c) a Borrower into another Borrower, and (2) the dissolution, liquidation or other winding down and cessation of business of any Immaterial Subsidiary).
7.10 Taxes. Each Loan Party shall, and shall cause each of its Subsidiaries to, pay when due all material Taxes of any nature whatsoever now or hereafter imposed or assessed against any Loan Party or such Subsidiary or the Collateral or upon any Loan Party’s (or such Subsidiary’s) ownership, possession, use, operation or disposition thereof or upon any Loan Party’s (or such Subsidiary’s) rents, receipts or earnings arising therefrom. Each Loan Party shall, and shall cause each of its Subsidiaries to, accurately file on or before the due date therefor (taking into account proper extensions) all federal and state income Tax returns and other material Tax returns required to be filed. Notwithstanding the foregoing, each Loan Party and their respective Subsidiaries may contest, in good faith and by appropriate proceedings diligently conducted, Taxes for which such Loan Party and its Subsidiaries maintain adequate reserves in accordance with GAAP.
38
7.11 Corporate Changes.
7.12 Deposit Accounts; Initial Loan Funding. No Loan Party shall maintain any Deposit Accounts, or accounts holding Investment Property, except with respect to which Agent has an Account Control Agreement, provided that no Account Control Agreement shall be required for (a) any Excluded Account, and (b) Deposit Accounts with a total balance held in all such accounts in the aggregate of less than Two Hundred Fifty Thousand Dollars ($250,000) at any time that are not subject to an Account Control Agreement.
7.13 Joinder of Subsidiaries. Each Loan Party shall notify Agent of each Subsidiary formed or acquired subsequent to the Closing Date (including any new Subsidiary formed by Division) and, within fifteen (15) days of such formation or acquisition (or such longer period of time as agreed to by Agent in writing in its sole discretion), shall cause any such Subsidiary that is not an Immaterial Subsidiary to execute and deliver to Agent a Joinder Agreement and such other documents and instruments as shall be requested by Agent to effectuate the transactions contemplated by such Joinder Agreement (in each case in form and substance acceptable to Agent), or, if requested by Agent, a Guaranty and appropriate collateral security documents to secure the obligations pursuant to such Guaranty (in each case in form and substance acceptable to Agent); it
39
being agreed that if such new Subsidiary is formed by a Division, the foregoing requirements shall be satisfied substantially concurrently with the formation of such Subsidiary.
7.14 Regulatory and Product Notices. The Borrower, on behalf of the Loan Parties, shall promptly (but in any event within five (5) Business Days) after the receipt or occurrence thereof notify Agent of:
7.15 Notification of Event of Default. Borrower shall notify Agent promptly, but in any within two (2) Business Days, of the occurrence of any Event of Default.
7.16 SBA. One or more affiliates of Agent have received a license from the U.S. Small Business Administration (“SBA”) to extend loans as a small business investment company (“SBIC”) pursuant to the Small Business Investment Act of 1958, as amended, and the associated regulations, as amended (collectively, the “SBIC Act”). Portions of the Loan to Borrower may be made by a Lender that is a SBIC. Addendum 3 to this Agreement outlines various responsibilities of Agent, each Lender and Borrower associated with a loan made by a SBIC, and such Addendum 3 is hereby incorporated in this Agreement. Borrower shall immediately notify Agent of any failure to comply with its obligations under Addendum 3 upon acquiring knowledge thereof.
7.17 Use of Proceeds. Borrower agrees that the proceeds of the Loans shall be used solely to refinance existing indebtedness, to pay related fees and expenses in connection with this Agreement and for working capital and general corporate purposes. The proceeds of the Loans will not be used in violation of Anti-Corruption Laws or applicable Sanctions.
40
7.18 [Reserved].
7.19 Material Agreement. No Loan Party shall (a) without the consent of Agent, terminate the Material License or amend the Material License in a manner that is reasonably likely to have a material negative impact on the Loan Parties or their Subsidiaries, and (b) fail to give prompt written notice to Agent of entering into a Material Agreement or materially amending or terminating a Material Agreement.
7.20 Compliance with Laws.
41
7.21 Financial Covenant.
If any Loan Party makes a redemption or any other cash payment in respect of Permitted Convertible Debt, subject to satisfaction of the Redemption Conditions, Borrower shall, at all times thereafter, maintain Qualified Cash in an amount equal to the greater of: (i) the amount required by the defined term “Redemption Conditions” or (ii) the amount required by Section 7.21(a).
7.22 Intellectual Property. Each Loan Party shall (i) protect, defend and maintain the validity and enforceability of its material Intellectual Property; (ii) promptly advise Agent in writing of infringements of its material Intellectual Property; and (iii) not allow any Intellectual Property material to such Loan Party’s business to be abandoned, forfeited or dedicated to the public without Agent’s written consent. If, from and after the IPSA Trigger Date, any Loan Party (a) obtains any Patent, registered Trademark, registered Copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (b) applies for any Patent or the registration of any Trademark, Copyright or mask work, then such Loan Party shall promptly provide written notice thereof to Agent and shall within 30 days thereafter execute such intellectual property security agreements and other documents and take such other actions as Agent may request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Agent in such property which such intellectual property security agreements Agent may record with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. From and after the IPSA Trigger Date, each Loan Party shall promptly provide to Agent copies of all applications that it files for Patents or for the registration of Trademarks, Copyrights or mask works, together with evidence of the recording of the intellectual property security agreement required for Agent to perfect and maintain a first priority perfected security interest in such property. From and after the IPSA Trigger Date, each Loan Party shall provide written notice to Agent within thirty (30) days of entering or becoming bound by any Restricted License (other than off-the-shelf software that is commercially available to the public). From and after the IPSA Trigger Date, each Loan Party shall take such steps as Agent reasonably
42
requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (1) any Restricted License to be deemed “Collateral” and for Agent to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (2) Agent to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Agent’s rights and remedies under this Agreement and the other Loan Documents.
7.23 Transactions with Affiliates. Except as otherwise described on Schedule 7.23, no Loan Party shall, nor shall it permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction of any kind with any Affiliate of such Loan Party or such Subsidiary on terms that are less favorable to such Loan Party or such Subsidiary, as the case may be, than those that might be obtained in an arm’s length transaction from a Person who is not an Affiliate of such Loan Party or such Subsidiary.
7.24 Permitted Convertible Debt Financing. (a) Make or permit any payment on Permitted Convertible Debt Financing except (i) interest payments to the extent otherwise permitted by this Agreement and (ii) any Loan Party’s delivery of conversion consideration in connection with the conversion by holders of any Permitted Convertible Debt Financing in accordance with the terms of the indenture governing such Permitted Convertible Debt Financing or the delivery of common stock and Cash in lieu of fractional shares of Common Stock to induce the conversion of Permitted Convertible Debt Financing; provided that the conversion consideration (or inducement consideration) paid to such holders is limited to (A) Common Stock and (B) Cash in lieu of fractional shares of Common Stock (provided further that the amount of Cash in lieu of fractional shares of Common Stock paid to holders of Permitted Convertible Debt Financing in connection with the conversion thereof, or the inducement to convert Permitted Convertible Debt Financing, shall not exceed Fifty Thousand Dollars ($50,000) in the aggregate in any fiscal year of Borrower), or (b) redeem or repurchase any Permitted Convertible Debt Financing (other than repurchase of Permitted Convertible Debt Financing in exchange for Common Stock and Cash in lieu of fractional shares of Common Stock); provided that the repurchase consideration paid to the holders of Permitted Convertible Debt Financing is limited to (A) Common Stock and (B) Cash in lieu of fractional shares of Common Stock (provided further that the amount of Cash in lieu of fractional shares of Common Stock paid to holders of Permitted Convertible Debt Financing in connection with the repurchase thereof shall not exceed Fifty Thousand Dollars ($50,000) in the aggregate in any fiscal year of Borrower). In no event shall the foregoing permit any Loan Party to pay holders of Permitted Convertible Debt Financing Cash in connection with mandatory repurchase rights granted to such holders upon the occurrence of a “change of control”, “fundamental change”, “make-whole fundamental change” or any comparable term until the Secured Obligations (other than inchoate indemnity obligations which, by their terms, survive termination of this Agreement) are repaid. Notwithstanding the foregoing, this Section 7.24 shall not prohibit principal payments in cash (other than cash in lieu of fractional shares) with respect to any repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the share price of Shares of Common Stock only if the Redemption Conditions are satisfied in respect of such redemption and at all times after such redemption.
43
8.1 Lenders or their assignee or nominee shall, for so long as such applicable Lender shall constitute a “Lender” under this Agreement, have the right, in its discretion, to participate in any Subsequent Financing in an aggregate amount of up to the RTI Amount on the same terms, conditions and pricing afforded to others participating in any such Subsequent Financing. This Section 8.1, and all rights and obligations provided for hereunder, shall terminate upon the earliest to occur of (a) termination of this Agreement and (b) such time that the Lenders or their assignees or nominees, have purchased Borrower’s Equity Interests in an aggregate amount of at least the RTI Amount in Subsequent Financings.
SeCTION 9. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall be an “Event of Default”:
9.1 Payments. A Loan Party fails to pay any amount due under this Agreement or any of the other Loan Documents (i) in respect of principal and interest on the Loans, on the due date therefor, and (ii) in respect of fees, expense reimbursements or other amounts due and owing hereunder, within three (3) Business Days of the due date therefor; provided, however, that an Event of Default shall not occur on account of a failure to pay due solely to an administrative or operational error of Agent or Lenders or such Loan Party’s bank if such Loan Party had the funds to make the payment when due and makes the payment within three (3) Business Days following such Loan Party’s knowledge of such failure to pay; or
9.2 Covenants. A Loan Party breaches or defaults in the performance of any covenant or Secured Obligation under this Agreement, or any of the other Loan Documents or any other agreement among any Loan Party, Agent and Lenders, and (a) with respect to a Default under any covenant under this Agreement (other than under Sections 4.5, 6, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.15, 7.16, 7.17, 7.19, 7.21, 7.22, and 7.24), any other Loan Document, or any other agreement among any Loan Party, Agent and Lenders, such default continues for more than fifteen (15) days after the earlier of the date on which (i) Agent or Lenders has given notice of such default to Borrower and (ii) any Loan Party has actual knowledge of such default or (b) with respect to a Default under any of Sections 4.5, 6, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.15, 7.16, 7.17, 7.19, 7.21, 7.22, and 7.24, the occurrence of such Default; or
9.3 Material Adverse Effect. A circumstance has occurred that could reasonably be expected to have a Material Adverse Effect; or
9.4 Representations. Any representation or warranty made by any Loan Party in any Loan Document shall have been false or misleading in any material respect when made or when deemed made; or
9.5 Insolvency. (a) A Loan Party or any of its Subsidiaries (other than an Immaterial Subsidiary) fails to be solvent as described under Section 5.15 hereof; (b) a Loan Party or any of its Subsidiaries (other than an Immaterial Subsidiary) begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against a Loan Party or any of its Subsidiaries (other than an Immaterial Subsidiary) and is not dismissed or stayed within forty-five (45) days (but no Advances shall be made while any of the conditions described in clause (a) exist or until any Insolvency Proceeding is dismissed); or
44
9.6 Judgments; Penalties. One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount, individually or in the aggregate, of at least One Million Dollars ($1,000,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against any Loan Party or any of its Subsidiaries (other than an Immaterial Subsidiary) by any Governmental Authority, and the same are not, within ten (10) days after the entry, assessment or issuance thereof, paid, discharged, or after execution thereof, or stayed pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Advances shall be made prior to the discharge, or stay of such fine, penalty, judgment, order or decree); or
9.7 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of any Loan Party or any of its Subsidiaries (other than an Immaterial Subsidiary), or (ii) a notice of lien or levy is filed against any of any Loan Party’s or any of its Subsidiaries’ (other than an Immaterial Subsidiary’s) assets by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Advances shall be made during any ten (10) day cure period; or
(b) (i) any material portion of any Loan Party’s or any of its Subsidiaries’ (other than an Immaterial Subsidiary’s) assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents any Loan Party from conducting all or any material part of its business
9.8 Other Obligations. The occurrence of any default under (i) any agreement or obligation of a Loan Party involving any Indebtedness in excess of One Million Dollars ($1,000,000), or (ii) any Material Agreement that could reasonably be expected to result in the termination of such Material Agreement or have a material negative impact on the Loan Parties or their Subsidiaries.
9.9 Governmental Approvals; FDA Action. (a) Any Governmental Approval shall have been revoked, rescinded, suspended, modified in an adverse manner, or not renewed in the ordinary course for a full term and such revocation, rescission, suspension, modification or non renewal has resulted in or could reasonably be expected to result in a Material Adverse Effect; or (b) (i) the FDA, DOJ or other Governmental Authority initiates a regulatory action or any other enforcement action against any Loan Party or any of their respective Subsidiaries (other than an Immaterial Subsidiary) or any supplier of any Loan Party or any of their respective Subsidiaries (other than an Immaterial Subsidiary) that causes any Loan Party or any of their respective Subsidiaries (other than an Immaterial Subsidiary) to recall, withdraw, remove or discontinue manufacturing, distributing, and/or marketing any of its products, even if such action is based on previously disclosed conduct; (ii) the FDA or any other comparable Governmental Authority issues a warning letter to any Loan Party or any of their respective Subsidiaries (other than an Immaterial Subsidiary) with respect to any of its activities or products which could reasonably be expected to result in a Material Adverse Effect; (iii) any Loan Party or any of their respective Subsidiaries (other than an Immaterial Subsidiary) conducts a mandatory or voluntary recall which could reasonably be expected to result in liability and expense to any Loan Party or any of their respective Subsidiaries of One Million Dollars ($1,000,000) or more; (iv) any Loan Party or any of their respective Subsidiaries (other than an Immaterial Subsidiary) enters into a settlement agreement with the FDA, DOJ or other Governmental Authority that results in aggregate liability as to any single or related series of transactions, incidents or conditions, of One Million Dollars ($1,000,000) or more, or that could
45
reasonably be expected to result in a Material Adverse Effect, even if such settlement agreement is based on previously disclosed conduct; or (v) the FDA or any other comparable Governmental Authority revokes any authorization or permission granted under any Registration, or any Loan Party or any of their respective Subsidiaries (other than an Immaterial Subsidiary) withdraws any Registration, that could reasonably be expected to result in a Material Adverse Effect.
SeCTION 10. REMEDIES
10.1 General. Upon the occurrence of any one or more Events of Default, Agent may, and at the direction of the Required Lenders shall, accelerate and demand payment of all or any part of the outstanding Secured Obligations together with a Prepayment Charge and declare them to be immediately due and payable (provided, that upon the occurrence of an Event of Default of the type described in Section 9.5, all of the Secured Obligations (including, without limitation, the Prepayment Charge and the End of Term Charge) shall automatically be accelerated and made due and payable, in each case without any further notice or act). Each Loan Party hereby irrevocably appoints Agent as its lawful attorney-in-fact to: (a) exercisable following the occurrence of an Event of Default, (i) sign such Loan Party’s name on any invoice or bill of lading for any account or drafts against account debtors; (ii) demand, collect, sue, and give releases to any account debtor for monies due, settle and adjust disputes and claims about the accounts directly with account debtors, and compromise, prosecute, or defend any action, claim, case, or proceeding about any Collateral (including filing a claim or voting a claim in any bankruptcy case in Agent’s or such Loan Party’s name, as Agent may elect); (iii) make, settle, and adjust all claims under such Loan Party’s insurance policies; (iv) pay, contest or settle any Lien, charge, encumbrance, security interest, or other claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (v) transfer the Collateral into the name of Agent or a third party as the UCC permits; and (vi) receive, open and dispose of mail addressed to such Loan Party; and (b) regardless of whether an Event of Default has occurred, (i) endorse such Loan Party’s name on any checks, payment instruments, or other forms of payment or security; and (ii) notify all account debtors to pay Agent directly. Each Loan Party hereby appoints Agent as its lawful attorney-in-fact to sign such Loan Party’s name on any documents necessary to perfect or continue the perfection of Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Secured Obligations have been satisfied in full and the Loan Documents have been terminated. Agent’s foregoing appointment as each Loan Party’s attorney in fact, and all of Agent’s rights and powers, coupled with an interest, are irrevocable until all Secured Obligations (other than inchoate indemnity obligations which, by their terms, survive termination of this Agreement) have been fully repaid and performed and the Loan Documents have been terminated. Agent may, and at the direction of the Required Lenders shall, exercise all rights and remedies with respect to the Collateral under the Loan Documents or otherwise available to it under the UCC and other applicable law, including the right to release, hold, sell, lease, liquidate, collect, realize upon, or otherwise dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral. All Agent’s rights and remedies shall be cumulative and not exclusive.
10.2 Collection; Foreclosure. Upon the occurrence and during the continuance of any Event of Default, Agent may, and at the direction of the Required Lenders shall, at any time or from time to time, apply, collect, liquidate, sell in one or more sales, lease or otherwise dispose of, any or all of the Collateral, in its then condition or following any commercially reasonable preparation or processing, in such order as Agent may elect. Any such sale may be made either at public or private sale at its place of business or elsewhere. Each Loan Party agrees that any such public or private sale may occur upon ten (10) calendar days’ prior written notice to such Loan Party. Agent may require the Loan Parties to assemble the Collateral and make it available to Agent at a place designated by Agent that is reasonably convenient to Agent and the Loan Parties. The proceeds of
46
any sale, disposition or other realization upon all or any part of the Collateral shall be applied by Agent in the following order of priorities:
First, to Agent, in an amount equal to the sum of all fees owing to Agent hereunder and under any other Loan Document;
Second, to Agent and Lenders in an amount sufficient to pay in full Agent’s and Lenders’ reasonable costs and professionals’ and advisors’ fees and expenses as described in Section 11.12;
Third, to Lenders, ratably, in an amount equal to the sum of all accrued interest owing to Lenders on the Term Loan Advances hereunder;
Fourth, to Lenders, ratably, in an amount equal to the sum of the outstanding principal and premium, if any owing to Lenders from Borrower on the Term Loan Advances hereunder;
Fifth, to Lenders and Agent, ratably (in proportion to all remaining Secured Obligations owing to each), in an amount equal to the sum of all other outstanding and unpaid Secured Obligations (including principal, interest, and the default rate interest set forth in Section 2.4, if required under this Agreement), in such order and priority as Agent may choose in its sole discretion; and
Finally, after the full and final payment in Cash of all of the Secured Obligations (other than inchoate obligations which, by their terms, survive termination of this Agreement), to any creditor holding a junior Lien on the Collateral, or to Borrower or its representatives or as a court of competent jurisdiction may direct.
Agent shall be deemed to have acted reasonably in the custody, preservation and disposition of any of the Collateral if it complies with the obligations of a secured party under the UCC.
10.3 No Waiver. Agent shall be under no obligation to marshal any of the Collateral for the benefit of the Loan Parties or any other Person, and each Loan Party expressly waives all rights, if any, to require Agent to marshal any Collateral.
10.4 Waivers. Each Loan Party waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Agent on which any Loan Party is liable.
10.5 Cumulative Remedies. The rights, powers and remedies of Agent hereunder shall be in addition to all rights, powers and remedies given by statute or rule of law and are cumulative. The exercise of any one or more of the rights, powers and remedies provided herein shall not be construed as a waiver of or election of remedies with respect to any other rights, powers and remedies of Agent.
SECTION 11. MISCELLANEOUS
11.1 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective only to the extent and duration of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
47
11.2 Notice. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication (including the delivery of Financial Statements) that is required, contemplated, or permitted under the Loan Documents or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (i) the day of transmission by electronic mail or hand delivery or delivery by an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States of America mails, with proper first class postage prepaid, in each case addressed to the party to be notified as follows:
HERCULES CAPITAL, INC.
Legal Department
Attention: Chief Legal Officer, Tom Hertzberg and Brian Powers
1 North B Street, Suite 2000
San Mateo, CA 94401
email: [redacted]
Telephone: [redacted]
HERCULES CAPITAL, INC.
HERCULES CAPITAL IV L.P.
Legal Department
Attention: Chief Legal Officer, Tom Hertzberg and Brian Powers
1 North B Street, Suite 2000
San Mateo, CA 94401
email: [redacted]
Telephone: [redacted]
c/o SAVARA INC.
Attention: Dave Lowrance, Chief Financial & Administrative Officer
One Summit Square
1717 Newton Road, Suite 300
Langhorne, PA 19047
email: [redacted]
Telephone: [redacted]
or to such other address as each party may designate for itself by like notice.
11.3 Entire Agreement; Amendments.
48
11.4 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
11.5 No Waiver. The powers conferred upon Agent and Lenders by this Agreement are solely to protect their rights hereunder and under the other Loan Documents and their interest in the Collateral and shall not impose any duty upon Agent or Lenders to exercise any such powers. No omission or delay by Agent or Lenders at any time to enforce any right or remedy reserved to them, or to require performance of any of the terms, covenants or provisions hereof by any Loan Party at any time designated, shall be a waiver of any such right or remedy to which Agent or Lenders are entitled, nor shall it in any way affect the right of Agent or Lenders to enforce such provisions thereafter.
11.6 Survival. All agreements, representations and warranties contained in this Agreement and the other Loan Documents or in any document delivered pursuant hereto or thereto shall be for the benefit of Agent and Lenders and shall survive the execution and delivery of this Agreement. Sections 6.3, 11.9, 11.11, 11.14, 11.15, 11.17 and 11.18 shall survive the termination of this Agreement.
11.7 Successors and Assigns. The provisions of this Agreement and the other Loan Documents shall inure to the benefit of and be binding on each Loan Party and its permitted assigns (if any). No Loan Party shall assign its obligations under this Agreement or any of the other Loan Documents without Agent’s express prior written consent, and any such attempted assignment shall be void and of no effect. Agent and Lenders may assign, transfer, or endorse its rights hereunder
49
and under the other Loan Documents without prior notice to any Loan Party, and all of such rights shall inure to the benefit of Agent’s and Lenders’ successors and assigns; provided that as long as no Event of Default has occurred and is continuing, neither Agent nor any Lender may assign, transfer or endorse its rights hereunder or under the Loan Documents to any party that is (i) a direct competitor of Borrower (as reasonably determined by Agent) or (ii) a Disqualified Institution, it being acknowledged that in all cases, any transfer to an Affiliate of any Lender or Agent shall be allowed. Notwithstanding the foregoing, (x) in connection with any assignment by a Lender as a result of a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Agent and Lenders may assign, transfer or endorse its rights hereunder and under the other Loan Documents to any Person or party and (y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Agent and Lenders may assign, transfer or endorse its rights hereunder and under the other Loan Documents to any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for such Lender as a party hereto until Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such assignee as Agent reasonably shall require. Agent, acting solely for this purpose as a non-fiduciary agent of the Loan Parties, shall maintain at one of its offices in the United States a register for the recordation of the names and addresses of Lender(s), and the Term Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Loan Parties, Agent and Lender(s) shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
11.8 Participations. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of any Loan Party, 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, 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, letter of credit 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, Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register. Each Loan Party agrees that each participant shall be entitled to the benefits of the provisions in Addendum 1 attached hereto (subject to the requirements and limitations therein, including the requirements under Section 7 of Addendum 1 attached hereto (it being understood that the documentation required under Section 7 of Addendum 1 attached hereto shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.7; provided that such participant shall not be entitled to receive any greater payment under Addendum 1 attached hereto, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent
50
such entitlement to receive a greater payment results from a change in law that occurs after the participant acquired the applicable participation.
11.9 Governing Law. This Agreement and the other Loan Documents have been negotiated and delivered to Agent and Lenders in the State of California, and shall have been accepted by Agent and Lenders in the State of California. Payment to Agent and Lenders by the Loan Parties of the Secured Obligations is due in the State of California. This Agreement and the other Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.
11.10 Consent to Jurisdiction and Venue. All judicial proceedings (to the extent that the reference requirement of Section 11.11 is not applicable) arising in or under or related to this Agreement or any of the other Loan Documents may be brought in any state or federal court located in the State of California. By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to nonexclusive personal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement or the other Loan Documents. Service of process on any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 11.2, and shall be deemed effective and received as set forth in Section 11.2. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.
11.11 Mutual Waiver of Jury Trial / Judicial Reference.
51
11.12 Professional Fees. Borrower promises to pay Agent’s and Lenders’ fees and expenses necessary to finalize the Loan Documents, including but not limited to reasonable attorneys’ fees, UCC searches, filing costs, and other miscellaneous expenses. In addition, Borrower promises to pay any and all reasonable attorneys’ fees and expenses, , and other professionals’ fees and expenses incurred by Agent and Lenders after the Closing Date in connection with or related to: (a) the Loan; (b) the administration, collection, or enforcement of the Loan; (c) the amendment or modification of the Loan Documents; (d) any waiver, consent, release, or termination under the Loan Documents; (e) the protection, preservation, audit, field exam, sale, lease, liquidation, or disposition of Collateral or the exercise of remedies with respect to the Collateral; (f) any legal, litigation, administrative, arbitration, or out of court proceeding in connection with or related to any Loan Party or the Collateral, and any appeal or review thereof; and (g) any bankruptcy, restructuring, reorganization, assignment for the benefit of creditors, workout, foreclosure, or other action related to any Loan Party, the Collateral, the Loan Documents, including representing Agent or Lenders in any adversary proceeding or contested matter commenced or continued by or on behalf of any Loan Party’s estate, and any appeal or review thereof.
11.13 Confidentiality. Agent and Lenders acknowledge that certain items of Collateral and information provided to Agent and Lenders by the Loan Parties are confidential and proprietary information of the Loan Parties, if and to the extent such information either (x) is marked as confidential by such Loan Party at the time of disclosure, or (y) should reasonably be understood to be confidential (the “Confidential Information”). Accordingly, Agent and Lenders agree that any Confidential Information it may obtain in the course of acquiring, administering, or perfecting Agent’s security interest in the Collateral shall not be disclosed to any other Person or entity in any manner whatsoever, in whole or in part, without the prior written consent of Borrower, except that Agent and Lenders may disclose any such information: (a) to its Affiliates and its partners, investors, lenders, directors, officers, employees, agents, advisors, counsel, accountants, representatives and other professional advisors if Agent or Lenders in their sole discretion determine that any such party should have access to such information in connection with such party’s responsibilities in connection with the Loan or this Agreement and, provided that such recipient of such Confidential Information either (i) agrees to be bound by the confidentiality provisions of this Section or (ii) is otherwise subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information; (b) if such information is generally available to the public or to the extent such information becomes publicly available other than as a result of a breach of this Section or becomes available to Agent or any Lender, or any of their respective Affiliates on a non-confidential basis from a source other than a Loan Party; (c) if required or appropriate in any report, statement or testimony submitted to any Governmental Authority having or claiming to have jurisdiction over Agent or Lenders and any rating agency; (d) if required or appropriate in response to any summons or subpoena or in connection with any litigation, to the extent permitted or deemed advisable by Agent’s or Lenders’ counsel; (e) to comply with any legal requirement or law applicable to Agent or Lenders or demanded by any Governmental Authority; (f) to the extent reasonably necessary in connection with the exercise of, or preparing to exercise, or the enforcement of, or preparing to enforce, any right or remedy under any Loan Document (including Agent’s sale, lease, or other disposition of Collateral after the occurrence of a Default), or any action or proceeding relating to any Loan Document; (g) to any participant or assignee of Agent or Lenders or any prospective participant or assignee, provided, that such participant or assignee or prospective participant or assignee is subject to confidentiality restrictions that reasonably protect against the disclosure of
52
Confidential Information; (h) to any investor or potential investor (and each of their respective Affiliates or clients) in Agent or Lenders (or each of their respective Affiliates); provided that such investor, potential investor, Affiliate or client is subject to confidentiality obligations with respect to the Confidential Information; (i) otherwise to the extent consisting of general portfolio information that does not identify the Loan Parties; or (j) otherwise with the prior consent of Borrower; provided, that any disclosure made in violation of this Agreement shall not affect the obligations of the Loan Parties or any of its Affiliates or any guarantor under this Agreement or the other Loan Documents. Agent’s and Lenders’ obligations under this Section 11.13 shall supersede all of their respective obligations under the Non-Disclosure Agreement.
11.14 Assignment of Rights. each Loan Party acknowledges and understands that Agent or Lenders may, subject to Section 11.7, sell and assign all or part of its interest hereunder and under the Loan Documents to any Person or entity (an “Assignee”). After such assignment the term “Agent” or “Lender” as used in the Loan Documents shall mean and include such Assignee, and such Assignee shall be vested with all rights, powers and remedies of Agent and Lenders hereunder with respect to the interest so assigned; but with respect to any such interest not so transferred, Agent and Lenders shall retain all rights, powers and remedies hereby given. No such assignment by Agent or Lenders shall relieve any Loan Party of any of its obligations hereunder. Lenders agree that in the event of any transfer by it of the promissory note(s) (if any), it will endorse thereon a notation as to the portion of the principal of the promissory note(s), which shall have been paid at the time of such transfer and as to the date to which interest shall have been last paid thereon.
11.15 Revival of Secured Obligations. This Agreement and the Loan Documents shall remain in full force and effect and continue to be effective if any petition is filed by or against any Loan Party for liquidation or reorganization, if any Loan Party becomes insolvent or makes an assignment for the benefit of creditors, if a receiver or trustee is appointed for all or any significant part of any Loan Party’s assets, or if any payment or transfer of Collateral is recovered from Agent or Lenders. The Loan Documents and the Secured Obligations and Collateral security shall continue to be effective, or shall be revived or reinstated, as the case may be, if at any time payment and performance of the Secured Obligations or any transfer of Collateral to Agent, or any part thereof is rescinded, avoided or avoidable, reduced in amount, or must otherwise be restored or returned by, or is recovered from, Agent, Lenders or by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment, performance, or transfer of Collateral had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or recovered, the Loan Documents and the Secured Obligations shall be deemed, without any further action or documentation, to have been revived and reinstated except to the extent of the full, final, and indefeasible payment to Agent or Lenders in Cash.
11.16 Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.
11.17 No Third-Party Beneficiaries. No provisions of the Loan Documents are intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any Person other than Agent, Lenders and the Loan Parties unless specifically provided otherwise herein, and, except as otherwise so provided, all provisions of the Loan Documents will be personal and solely among Agent, Lenders and the Loan Parties party thereto.
53
11.18 Agency. Agent and each Lender hereby agree to the terms and conditions set forth on Addendum 4 attached hereto. Each Loan Party acknowledges and agrees to the terms and conditions set forth on Addendum 4 attached hereto.
11.19 Publicity. Notwithstanding anything else herein to the contrary, Agent and Lender may, at Agent’s or such Lender's sole expense, solely with Borrower’s prior written consent (but without need for any compensation to any Loan Party), (1) make a public announcement of the transactions contemplated by this Agreement, and (2) publicize or use (a) the other party’s name (including a brief description of the relationship among the parties hereto), logo or hyperlink to such other parties’ web site, separately or together, in written and oral presentations, advertising, promotional and marketing materials, client lists, public relations materials or on its web site (together, the “Publicity Materials”); (b) the names of officers of such other parties in the Publicity Materials; and (c) such other parties’ name, trademarks, servicemarks in any news or press release concerning such party, in each case to the extent such information is not deemed confidential in accordance with Section 11.13.
11.20 Multiple Loan Parties. Each Loan Party hereby agrees to the terms and conditions set forth on Addendum 5 attached hereto.
11.21 [Reserved].
11.22 Managerial Assistance. Borrower acknowledges that Hercules Capital, Inc. has elected to be regulated as a business development company under the 1940 Act, and as such is required to make available significant managerial assistance to its portfolio companies. Significant managerial assistance may include, but is not limited to, guidance and counsel concerning the portfolio company’s management, operations, business objectives and policies, arrangement of financing, management of relationships with financing sources, recruitment of management personnel and evaluation of acquisition and divestiture opportunities. Borrower hereby acknowledges and agrees that it may request such assistance at any time from Hercules Capital, Inc. by contacting [redacted].
11.23 Electronic Execution of Certain Other Documents. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including without limitation assignments, assumptions, amendments, waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the California Uniform Electronic Transactions Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
54
SECTION 12. Guaranty.
12.1 Guaranty. Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, to Agent on behalf of the Lenders the due and prompt payment (whether at stated maturity, upon acceleration or otherwise and at all times thereafter), performance and discharge of all Secured Obligations. Each Guarantor further agrees that the Secured Obligations may be increased, amended, extended, renewed or otherwise modified in whole or in part without notice to or consent from such Guarantor, and that such actions will not affect the liability of such Guarantor under this Guaranty. All terms of this Guaranty apply to and may be enforced by or on behalf of any domestic or foreign branch or Affiliate of any Lender that extended any portion of the Secured Obligations. Each Guarantor hereby agrees that it is jointly and severally liable for this Guaranty. This guaranty of the Secured Obligations includes in all cases all such Secured Obligations which arise after the filing of a bankruptcy petition with respect to any Loan Party and all such Secured Obligations which would become due but for the operation of (i) the automatic stay under Section 362(a) of the Bankruptcy Code, (ii) Section 502(b) of the Bankruptcy Code, or (iii) Section 506(b) of the Bankruptcy Code, including interest accruing under the Loan Documents after the filing of a bankruptcy petition, whether or not allowed or allowable as a claim in the Insolvency Proceeding. This Guaranty is a guaranty of prompt and punctual payment of the Secured Obligations, whether at stated maturity, by acceleration or otherwise, and is not merely a guaranty of collection.
12.2 Limitation of Liability. Notwithstanding any other provision of this Guaranty, the amount guaranteed by each Guarantor hereunder shall be limited to the extent, if any, required so that its obligations under this Guaranty will not constitute a fraudulent transfer or conveyance and not be subject to avoidance under any applicable Debtor Relief Law or any state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act, Uniform Voidable Transactions Act or similar statute or common law.
12.3 Term; Reinstatement.
55
12.4 Guaranty Absolute and Unconditional; Waiver of Defenses. The liability of each Guarantor under this Guaranty is irrevocable, continuing, unconditional and absolute and the obligations of each Guarantor under this Guaranty will not be reduced, limited, impaired, discharged, subject to setoff, counterclaim, recoupment, or termination, or otherwise affected for any reason (other than repayment in full of all Secured Obligations (other than inchoate indemnity obligations, inchoate reimbursement obligations and/or other obligations which, by their terms, are to survive the termination of this Agreement)), and each Guarantor hereby irrevocably waives any defenses to enforcement it may have (now or in the future) based on or arising out of any defense of any Loan Party or the unenforceability of all or any part of the Secured Obligations or any Loan Document or any related agreement or instrument from any cause, or the cessation from any cause of the liability of any Loan Party or any other Person liable for the Secured Obligations, other than repayment in full of all Secured Obligations (other than inchoate indemnity obligations, inchoate reimbursement obligations and/or other obligations which, by their terms, are to survive the termination of this Agreement). Without limiting the foregoing, the obligations of any Loan Party hereunder are not discharged or impaired or otherwise affected by, without limitation: (a) any claim of waiver, release, extension, renewal, settlement, surrender, alteration, change in terms or compromise of any of the Secured Obligations or any other obligation of any Loan Party under any Loan Document, by operation of law or otherwise; (b) any rescission, waiver, amendment or other modification of any Loan Document or any other agreement, including any increase in the Secured Obligations; (c) any change in the corporate existence, structure or ownership of any Loan Party or any of its Subsidiaries; (d) any Insolvency Proceeding affecting any Person, or their assets or any resulting release or discharge of any obligation of any Person; (e) the existence of any claim, setoff or other rights which any Loan Party may have at any time against any Lender or any other Person, whether in connection herewith or in any unrelated transactions; (f) any sale, disposition, application of proceeds, taking, exchange, substitution, release, impairment, or non-perfection of any collateral, or any taking, release, impairment, amendment, waiver, or other modification of any guaranty, for the Secured Obligations; (g) any default in the performance of the Secured Obligations; (h) any failure of any Lender or such Lender’s Affiliates to disclose to any Loan Party any information relating to the business, condition, operations, performance, properties, or prospects of any other Loan Party now or hereafter known to such Person; (i) the release or reduction of liability of any Loan Party, or other guarantor or surety, with respect to the Secured Obligations; (j) the failure of any Loan Party to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise; or (k) any other circumstance (including any statute of limitations) or manner of administering the Loans or any existence of or reliance on any representation by any Lender that might vary the risk of any Loan Party or otherwise operate as a defense available to, or a legal or equitable discharge of, any Loan Party or any other guarantor or surety (other than repayment in full of all Secured Obligations (other than inchoate indemnity obligations, inchoate reimbursement obligations and/or other obligations which, by their terms, are to survive the termination of this Agreement)). Each Loan Party agrees that the payment of all sums payable under the Loan Documents or any part thereof or other act which tolls any statute of limitations applicable to the Loan Documents shall similarly operate to toll the statute of limitations applicable to such Loan Party’s liability under this Guaranty.
12.5 Waivers and Acknowledgments.
56
12.6 Agreement to Pay; Subrogation; Etc. Without limiting any other right that any Lender has at law or in equity against any Loan Party, if any Loan Party fails to pay any Secured Obligation when and as due, whether at maturity, by acceleration, after notice of prepayment, or otherwise, each other Loan Party agrees to promptly pay the amount of such unpaid Secured Obligations to Agent in cash. Each Loan Party hereby defers and no Loan Party shall exercise any rights which it may acquire by reason of any payment made under this Guaranty, whether by way of subrogation, reimbursement or otherwise, in each case, until the prior repayment in full of all Secured Obligations (other than inchoate indemnity obligations, inchoate reimbursement obligations and/or other obligations which, by their terms, are to survive the termination of this Agreement). Any amount paid to any Loan Party on account of any payment made under this Guaranty prior to repayment in full of all Secured Obligations (other than inchoate indemnity obligations, inchoate reimbursement obligations and/or other obligations which, by their terms, are to survive the termination of this Agreement) shall be held in trust for the benefit of Agent and promptly turned over to Agent. So long as any Secured Obligations remain outstanding, each Loan Party will not take any action or commence any proceeding against any Loan Party, whether in connection with an Insolvency Proceeding or otherwise, to recover any amounts in respect of payments made to any Lender under this Guaranty.
57
12.7 Taxes. For the avoidance of doubt, each Guarantor agrees to observe and perform each of the terms and conditions set forth in Addendum 1 as it relates to such Guarantor in connection with any payments or performance under this Guaranty.
12.8 Additional Guarantors. Each Person that is required to become a Guarantor pursuant to Section 7.13 will become a Guarantor, with the same force and effect as if they were originally named as a Guarantor herein, for all purposes of this Agreement upon the execution and delivery by such Person of a joinder in form and substance acceptable to Agent. Each reference to “Guarantor” or “Loan Party” (or any words of like import referring to a Guarantor) in this Agreement or any other Loan Document shall also mean such additional Guarantor; and each reference in this Agreement or any other Loan Document to this “Guaranty” or “Agreement” (or words of like import referring to this Agreement) shall mean this Agreement as supplemented by such joinder. No consent of any other Loan Party will be required for the execution and delivery of any such joinder. The rights and obligations of each Loan Party will remain in full force and effect notwithstanding the addition of any Guarantor as a party to this Agreement.
12.9 Cumulative Liability. The liability of each Loan Party as a Guarantor under this Section 12 is in addition to and shall be cumulative with all liabilities of such Loan Party to any Lender under this Agreement and the other Loan Documents to which such Loan Party is a party or in respect of any obligations or liabilities of the other Loan Parties, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.
(SIGNATURES TO FOLLOW)
58
IN WITNESS WHEREOF, the Loan Parties, Agent and Lenders have duly executed and delivered this Loan and Security Agreement as of the day and year first above written.
LOAN PARTIES: |
|
BORROWER: |
|
SAVARA INC. |
|
Signature: |
/s/ Dave Lowrance |
Print Name: |
Dave Lowrance |
Title: |
Chief Financial and Administrative Officer |
GUARANTORS: |
|
ARAVAS INC. |
|
Signature: |
/s/ Dave Lowrance |
Print Name: |
Dave Lowrance |
Title: |
Chief Financial and Administrative Officer |
Accepted in San Mateo, California:
AGENT: |
|
HERCULES CAPITAL, INC. |
|
Signature: |
/s/ Seth H Meyer |
Print Name: |
Seth Meyer |
Title: |
Chief Financial Officer |
LENDERS: |
|
HERCULES CAPITAL, INC. |
|
Signature: |
/s/ Seth H Meyer |
Print Name: |
Seth Meyer |
Title: |
Chief Financial Officer |
59
HERCULES CAPITAL IV, L.P. |
|
By: Hercules Technology SBIC Management, LLC, its General Partner |
|
By: Hercules Capital, Inc., its Manager |
|
Signature: |
/s/ Seth H Meyer |
Print Name: |
Seth Meyer |
Title: |
Chief Financial Officer |
HERCULES SBIC V, L.P. |
|
By: Hercules Technology SBIC Management, LLC, its General Partner |
|
By: Hercules Capital, Inc., its Manager |
|
Signature: |
/s/ Seth H Meyer |
Print Name: |
Seth Meyer |
Title: |
Chief Financial Officer |
HERCULES PRIVATE CREDIT FUND 1 L.P. |
|
By: Hercules Adviser LLC, its Investment Advisor |
|
Signature: |
/s/ Seth H Meyer |
Print Name: |
Seth Meyer |
Title: |
Authorized Signatory |
HERCULES PRIVATE GLOBAL VENTURE GROWTH FUND I L.P. |
|
By: Hercules Adviser LLC, its Investment Advisor |
|
Signature: |
/s/ Seth H Meyer |
Print Name: |
Seth Meyer |
Title: |
Authorized Signatory |
60
HERCULES VENTURE GROWTH CREDIT OPPORTUNITIES FUND 1 L.P. |
|
By: Hercules Adviser LLC, its Investment Advisor |
|
Signature: |
/s/ Seth H Meyer |
Print Name: |
Seth Meyer |
Title: |
Authorized Signatory |
61
Table of Addenda, Exhibits and Schedules
Addendum 1: |
Taxes; Increased Costs |
Addendum 2: |
Delivery Instructions |
Addendum 3: |
SBA Provisions |
Addendum 4: |
Agent and Lender Terms |
Addendum 5: |
Multiple Loan Party Terms |
Exhibit A1: |
Advance Request Attachment to Advance Request |
Exhibit B+: |
Name, Locations, and Other Information for Borrower |
Exhibit C+: |
Loan Parties’ Patents, Trademarks, Copyrights and Licenses |
Exhibit D+: |
Loan Parties’ Deposit Accounts and Investment Accounts |
Exhibit E+: |
Compliance Certificate |
Exhibit F+: |
Joinder Agreement |
Exhibit G: |
[Reserved.] |
Exhibit H+: |
ACH Debit Authorization Agreement |
Exhibit I: |
[Reserved] |
Exhibit J-1+: |
Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit J-2+: |
Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit J-3+: |
Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit J-4+: |
Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes) |
Exhibit K: |
Certain Economic Terms |
Annex A: |
Revenue Milestone |
+ Intentionally omitted. To be provided to the Securities and Exchange Commission upon request.
62
Annex B: |
Minimum Revenue Covenant |
Schedule 1.1+ |
Commitments |
Schedule 1+ |
Subsidiaries |
Schedule 1A+ |
Existing Permitted Indebtedness |
Schedule 1B+ |
Existing Permitted Investments |
Schedule 1C+ |
Existing Permitted Liens |
Schedule 5.3+ |
Consents, Etc. |
Schedule 5.8+ |
Tax Matters |
Schedule 5.9+ |
Intellectual Property Claims |
Schedule 5.10+ |
Intellectual Property |
Schedule 5.11+ |
Borrower Products |
Schedule 5.13+ |
Employee Loans |
Schedule 5.14+ |
Capitalization |
Schedule 7.23+ |
Affiliate Transactions |
63
ADDENDUM 1 to LOAN AND SECURITY AGREEMENT
TAXES; INCREASED COSTS
64
65
66
67
68
Exhibit 10.1
Certain identified information in this document has been excluded because it is both (i) not material and (ii) is the type the registrant treats as private or confidential. [***] indicates where such information has been omitted.
Certain information contained in this exhibit has been redacted where indicated because disclosure of such information would constitute a clearly unwarranted invasion of personal privacy.
ADDENDUM 2 to LOAN AND SECURITY AGREEMENT
Delivery Instructions
Documents required to be delivered pursuant to Section 7.01(a), (b), (c) or (f) or, to the extent any such documents are included in materials otherwise filed with the SEC, any other provision of Section 7.01 shall, in each case, be deemed delivered under this Agreement when such materials are electronically filed with the SEC.
The Compliance Certificate shall be uploaded and executed via Lumonic2.
All other financial reports required to be furnished to Agent pursuant to Section 7.1, and not otherwise addressed above, shall be submitted via Lumonic.
The Compliance Certificate and other financial reports required to be furnished to Agent pursuant to Section 7.1 may be sent to [redacted] with a copy to [redacted], should access to Lumonic be temporarily unavailable.
2 All references to Lumonic shall be interpreted as the Portfolio Management Software currently in use by Agent. Lumonic can be reached at the following URL: https://lumonic.com/
ADDENDUM 3 to LOAN AND SECURITY AGREEMENT
SBIC
2
3
ADDENDUM 4 to LOAN AND SECURITY AGREEMENT
Agent and Lender Terms
from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, which may be imposed on, incurred by or asserted against the Indemnified Lender in any way
2
relating to or arising out of this Agreement, or any action taken or omitted by the Indemnified Lender hereunder; provided, however, that the Indemnified Lender shall not be reimbursed or indemnified for an Indemnified Payment, except to the extent that the Indemnified Lender paid more than its ratable share of such payment. All Indemnified Payments as set forth in this clause (e) to an Indemnified Lender are intended to be paid ratably by the other Lender.
3
ADDENDUM 5 to LOAN AND SECURITY AGREEMENT
Multiple Loan Party Terms
4
5
6
EXHIBIT K
CERTAIN ECONOMIC TERMS
“Amortization Date” |
If the Interest Only Extension Conditions are satisfied, April 1, 2030. If the Interest Only Extension Conditions are not satisfied, April 1, 2028. |
“Approval Milestone” |
Agent’s receipt of evidence in form and substance satisfactory to Agent that (a) no Default or Event of Default shall have occurred and (b) Borrower has received FDA approval for molgramostim for the treatment of aPAP with a label that is consistent in all material respects with that sought in Borrower’s Biologics License Application for molgramostim, subject to verification by Agent (including supporting documentation requested by Agent). |
“Due Diligence Fee” |
Seventy-Five Thousand Dollars ($75,000) |
“End of Term Charge” |
An amount equal to the End of Term Charge Percentage multiplied by (x) the aggregate principal amount of such Term Loan Advances made hereunder, minus (y) the aggregate amount of payments made pursuant to Section 2.6(a). |
“End of Term Charge Percentage” |
If the circumstances set forth in Section 2.6(a)(i), (ii), (iii), or (iv) occur (a) prior to the 24 month anniversary of the Closing Date, 3.95%, (b) on or after the 24 month anniversary of the Closing Date but prior to the 36 month anniversary of the Closing Date, 4.95%, (c) on or after the 36 month anniversary of the Closing Date but prior to the 48 month anniversary of the Closing Date, 5.95%, and (d) from and after the 48 month anniversary of the Closing Date, 6.95%. |
“Initial Facility Charge” |
One Hundred Fifty Thousand Dollars ($150,000). |
“Interest Only Extension Conditions” |
Satisfaction of each of the following events: (a) no Default or Event of Default shall have occurred; and (b) Borrower’s achievement of the Approval Milestone. |
“Maximum Term Loan Amount” |
Two Hundred Million Dollars ($200,000,000). |
“Minimum Advance Amount” |
Ten Million Dollars ($10,000,000). |
“Prepayment Charge” |
(a) The outstanding principal amount of each Advance amount being prepaid multiplied by (b) (i) two percent (2.0)% if the principal amount of such Advance amounts are prepaid on or prior to the date which is twenty-four (24) months following the Closing Date; and (ii) one percent (1.0)% if the principal amount of such Advance amounts are prepaid after the date which is twenty-four (24) months following the Closing Date prior to the Term Loan Maturity Date. |
“Prime Rate” |
The “prime rate” as reported in The Wall Street Journal or any successor publication thereto; provided, however, that in no event shall the Prime Rate be less than six percent (6.0%) per annum. |
“Revenue Milestone” |
Agent’s receipt of evidence, in form and substance satisfactory to Agent, that (a) no Default or Event of Default shall have occurred, and (b) Borrower has generated Net Product Revenue for any period from and including the calendar quarter ended March 31, 2027, measured on a trailing six (6) month basis, of at least seventy-five percent (75%) of the Net Product Revenue included in the Board Reviewed Forecast for such period, with such minimum levels for the Original Plan as set forth on Annex A (as may be updated in accordance with the definition of Original Plan), subject to verification by Agent (including supporting documentation requested by Agent). |
“RTI Amount” |
Five Million Dollars ($5,000,000). |
“Subsequent Financing” |
The closing of any follow-on public offering of Borrower’s Equity Interests which becomes effective after the Closing Date. |
“Term Commitment” |
The obligation, if any, of any Lender to make a Term Loan Advance to Borrower in a principal amount not to exceed the amount set forth under the heading “Tranche 1 Commitment”, “Tranche 2-A Commitment”, “Tranche 2-B Commitment”, “Tranche 2-C Commitment”, or “Tranche 3 Commitment”, as the case may be, opposite such Lender’s name on Schedule 1.1. |
“Term Loan Interest Rate” |
A per annum rate of interest equal to (x) the Prime Rate plus (y) (A) at all times prior to the first full fiscal quarter following Borrower’s achievement of the Revenue Milestone, one and nine twentieths of one percent (1.45%), and (B) from and after the first full fiscal quarter after Borrower’s achievement of the Revenue Milestone, one and two tenths of one percent (1.20%). |
“Term Loan Maturity Date” |
April 1, 2030. |
“Tranche 1 Commitment” |
The obligation, if any, of any Lender to make a Term Loan Advance to Borrower in a principal amount not to exceed the amount set forth under the heading Tranche 1 Commitment opposite such Lender’s name on Schedule 1.1. |
“Tranche 2-A Commitment” |
The obligation, if any, of any Lender to make a Term Loan Advance to Borrower in a principal amount not to exceed the amount set forth under the heading Tranche 2-A Commitment opposite such Lender’s name on Schedule 1.1. |
“Tranche 2-A Commitment Period” |
The period beginning on the date that (a) no Event of Default has occurred and is continuing, and (b) Borrower achieves the Approval Milestone and continuing through March 15, 2026. |
“Tranche 2-B Commitment” |
The obligation, if any, of any Lender to make a Term Loan Advance to Borrower in a principal amount not to exceed the amount set forth under the heading Tranche 2-B Commitment opposite such Lender’s name on Schedule 1.1. |
“Tranche 2-B Commitment Period” |
The period beginning on the date that (a) no Event of Default has occurred and is continuing, and (b) the earlier of (i) the date that the Borrower draws the entire amount of the Tranche 2-A Commitment, and (ii) the expiration of the Tranche 2-A Commitment Period, and continuing through December 15, 2026. |
“Tranche 2-C Commitment” |
The obligation, if any, of any Lender to make a Term Loan Advance to Borrower in a principal amount not to exceed the amount set forth under the heading Tranche 2-C Commitment opposite such Lender’s name on Schedule 1.1. |
“Tranche 2-C Commitment Period” |
The period beginning on the date that (a) no Event of Default has occurred and is continuing, (b) the Borrower achieves the Revenue Milestone, and (c) the Borrower draws the entire amount of the Tranche 2-A Commitment and Tranche 2-B Commitment, and continuing through December 31, 2027. |
“Tranche 3 Commitment” |
The obligation, if any, of any Lender to make a Term Loan Advance to Borrower in a principal amount not to exceed the amount set forth under the heading Tranche 3 Commitment opposite such Lender’s name on Schedule 1.1. |
“Tranche 3 Commitment Period” |
The period beginning on the Closing Date and continuing through the day prior to the Amortization Date. |
“Tranche Facility Charge” |
A fee in an amount equal to one half of one percent (0.50%) of any Advance (other than a Tranche 1 Advance), which is payable to Lenders in accordance with Section 4.2(d). |
ANNEX A
REVENUE MILESTONE
Quarter End |
Revenue Milestone Level |
3/31/2027 |
[***] |
6/30/2027 |
[***] |
9/30/2027 |
[***] |
12/31/2027 |
[***] |
3/31/2028 |
[***] |
6/30/2028 |
[***] |
9/30/2028 |
[***] |
12/31/2028 |
[***] |
3/31/2029 |
[***] |
6/30/2029 |
[***] |
9/30/2029 |
[***] |
12/31/2029 |
[***] |
3/31/2030 |
[***] |
6/30/2030 |
[***] |
9/30/2030 |
[***] |
12/31/2030 |
[***] |
ANNEX B
MINIMUM REVENUE COVENANT
Quarter End |
Minimum T6M Revenue Covenant Level |
6/30/2026 |
[***] |
9/30/2026 |
[***] |
12/31/2026 |
[***] |
3/31/2027 |
[***] |
6/30/2027 |
[***] |
9/30/2027 |
[***] |
12/31/2027 |
[***] |
3/31/2028 |
[***] |
6/30/2028 |
[***] |
9/30/2028 |
$100,000,000.00 |
12/31/2028 |
$100,000,000.00 |
3/31/2029 |
$100,000,000.00 |
6/30/2029 |
$100,000,000.00 |
9/30/2029 |
$100,000,000.00 |
12/31/2029 |
$100,000,000.00 |
3/31/2030 |
$100,000,000.00 |
6/30/2030 |
$100,000,000.00 |
9/30/2030 |
$100,000,000.00 |
12/31/2030 |
$100,000,000.00 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Pauls, certify that:
1. I have reviewed this Form 10-Q of Savara Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: May 13, 2025 |
|
/s/ Matthew Pauls |
|
|
Matthew Pauls |
|
|
Chief Executive Officer and Chair of the Board of Directors |
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Lowrance, certify that:
1. I have reviewed this Form 10-Q of Savara Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: May 13, 2025 |
|
/s/ David Lowrance |
|
|
David Lowrance |
|
|
Chief Financial and Administrative Officer |
|
|
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Savara Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew Pauls, principal executive officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
May 13, 2025
/s/ Matthew Pauls |
Matthew Pauls |
Chief Executive Officer and Chair of the Board of Directors |
(Principal Executive Officer) |
In connection with the Quarterly Report of Savara Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Lowrance, principal financial officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
May 13, 2025
/s/ David Lowrance |
David Lowrance |
Chief Financial and Administrative Officer |
(Principal Financial and Accounting Officer) |