Document:

Exhibit 10.4

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  SUBJECT TO SECTION 6 BELOW, NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR HOLDER, SATISFACTORY TO COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

 

WARRANT TO PURCHASE SHARES OF SERIES A-1 CONVERTIBLE PREFERRED STOCK

 

November 21, 2011

 

THIS CERTIFIES THAT, for value received, Oxford Finance LLC (“Oxford” or, together with its successors and assigns, “Holder”) is entitled to subscribe for and purchase up to such number of fully paid and nonassessable shares of Series A-1 Convertible Preferred Stock of Radius Health, Inc., a Delaware corporation (the “Company”), as is equal to the Warrant Share Amount (as hereinafter defined) at the Warrant Price (as hereinafter defined), subject to the provisions and upon the terms and conditions hereinafter set forth.  As used herein, the term “Preferred Stock” shall mean Company’s presently authorized Series A-1 Convertible Preferred Stock, $0.0001 par value per share, and/or any stock into which such Preferred Stock may hereafter be converted or exchanged pursuant to Section 7 hereof or otherwise, and the term “Warrant Shares” shall mean the shares of Preferred Stock which Holder may acquire pursuant to this Warrant and/or any other shares of stock into which such shares of Preferred Stock may hereafter be converted or exchanged pursuant to Section 7 hereof or otherwise.

 

1.                                       Warrant Share Amount and Warrant Price.  The “Warrant Share Amount” means such whole number (with any fractions rounded down) as is equal to the quotient of (a) the product of (i) the Second Term Loan (as defined in the Loan and Security Agreement dated May 23, 2011 among General Electric Capital Corporation (“GECC”), the Lenders (as defined therein), and the Company (the “Loan Agreement”)) made pursuant to the terms of the Loan Agreement, multiplied by (ii) four percent (4%), multiplied by (iii) 0.5, divided by (b) the Warrant Price.  The “Warrant Price” shall initially be $81.42 per share, subject to adjustment as provided in Section 7 below.

 

2.                                       Conditions to Exercise.  The purchase right represented by this Warrant may be exercised at any time, or from time to time, in whole or in part during the term commencing on the date hereof and ending at 5:00 P.M. Pacific time on the tenth anniversary of the date of this Warrant (the “Expiration Date”).  As a condition to any exercise of this Warrant, Holder shall, if the Company so requests in writing, become a party to, by execution and delivery to the Company of an Instrument of Adherence in substantially the form of Annex C hereto, that certain Amended and Restated Stockholders’ Agreement dated May 17, 2011 (as amended and in effect from time to time, the “Stockholders’ Agreement”), among the Company and the other parties named therein, solely (i) with respect to the Warrant Shares issued upon such exercise (and the shares of Common Stock, if any, issued upon conversion of such Warrant Shares), (ii) to the extent that all holders of outstanding shares of the same class and series as the Warrant Shares are then parties thereto, and (iii) to the extent such Stockholders’ Agreement is then by its terms in force and effect.

 

 

3.                                       Method of Exercise or Conversion; Payment; Issuance of Shares; Issuance of New Warrant.

 

(a)                                  Cash Exercise.  Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised by Holder hereof, in whole or in part, by the surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company (as set forth in Section 18 below) and by payment to Company, by certified or bank check, or wire transfer of immediately available funds, of an amount equal to the then applicable Warrant Price multiplied by the number of Warrant Shares then being purchased.  In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be in the name of, and delivered to, Holder hereof, or as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder hereof of any applicable transfer taxes).  Such delivery shall be made within 30 days after exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder hereof within 30 days after exercise of this Warrant.

 

(b)                                 Conversion.   In lieu of exercising this Warrant as specified in Section 3(a), Holder may from time to time convert this Warrant, in whole or in part, into Warrant Shares by surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company, in which event Company shall issue to Holder the number of Warrant Shares computed using the following formula:

 

X = Y (A-B)

A

 

Where:

 

X = the number of Warrant Shares to be issued to Holder.

 

Y = the number of Warrant Shares purchasable under this Warrant (at the date of such calculation).

 

A = the Fair Market Value of one share of Company’s Preferred Stock (at the date of such calculation).

 

B = Warrant Price (as adjusted to the date of such calculation).

 

(c)                                  Fair Market Value.  For purposes of this Section 3, Fair Market Value of one share of Company’s Preferred Stock shall mean:

 

(i)                                     In the event of an exercise concurrently with the closing of an initial public offering of the Company’s common stock (“Common Stock”), the per share Fair Market Value for the Preferred Stock shall be the offering price at which the underwriters initially sell Common Stock to the public multiplied by the number of shares of Common Stock into which each share of Preferred Stock is then convertible, provided, however, that if, at the time of the closing of such initial public offering, this Warrant is then exercisable for Common Stock by virtue of any adjustment or adjustments pursuant to Section 7 hereof or otherwise, whether such adjustment or adjustments have occurred prior to such initial public offering or are occurring concurrently with such initial public offering, then, solely for purposes of this Section 3(c)(i), the per share Fair Market Value for such Common Stock shall be the offering price at which the underwriters initially sell Common Stock to the public; or

 

 

(ii)                                  The average of the closing bid and asked prices of Common Stock quoted in the Over-The-Counter Market Summary, the last reported sale price quoted on the Nasdaq Stock Market or on any other exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of the Wall Street Journal for the three (3) trading days prior to the date of determination of Fair Market Value, multiplied by the number of shares of Common Stock into which each share of Preferred Stock is then convertible, provided, however, that if, at the time of any determination of Fair Market Value under this Section 3(c)(ii), this Warrant is then exercisable for Common Stock by virtue of any adjustment or adjustments pursuant to Section 7 hereof or otherwise, whether such adjustment or adjustments have occurred prior to such determination or are occurring concurrently with such determination, then, solely for purposes of this Section 3(c)(ii), the per share Fair Market Value for such Common Stock shall be the average of the closing bid and asked prices of Common Stock quoted in the Over-The-Counter Market Summary, the last reported sale price quoted on the Nasdaq Stock Market or on any other exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of the Wall Street Journal for the three (3) trading days prior to the date of any such determination of Fair Market Value; or

 

(iii)                               In the event of an exercise in connection with a merger, acquisition or other consolidation in which Company is not the surviving entity, the per share Fair Market Value for the Preferred Stock shall be the value to be received per share of Preferred Stock by all holders of the Preferred Stock in such transaction as determined in the reasonable good faith judgment of Company’s Board of Directors; or

 

(iv)                              In any other instance, the per share Fair Market Value for the Preferred Stock shall be as determined in the reasonable good faith judgment of Company’s Board of Directors.

 

In the event of 3(c)(iii) or 3(c)(iv), above, Company’s Board of Directors shall prepare a certificate, to be signed by an authorized officer of Company, setting forth in reasonable detail the basis for and method of determination of the per share Fair Market Value of the Preferred Stock.  The Board of Directors will also certify to Holder that this per share Fair Market Value will be applicable to all holders of Company’s Preferred Stock.  Such certification must be made to Holder at least ten (10) business days prior to the proposed effective date of the merger, consolidation, sale, or other triggering event as defined in 3(c)(iii) or 3(c)(iv).

 

(d)                                 Automatic Exercise.  To the extent this Warrant is not previously exercised, it shall be deemed to have been automatically converted in accordance with Sections 3(b) and 3(c) hereof (even if not surrendered) as of immediately before its expiration, involuntary termination or cancellation if the then-Fair Market Value of a Warrant Share exceeds the then-Warrant Price, unless Holder notifies Company in writing to the contrary prior to such automatic exercise.

 

(e)                                  Treatment of Warrant Upon Acquisition of Company.

 

(i)                                     Certain Definitions.  For the purpose of this Warrant: “Acquisition” means any sale, assignment, or other disposition of all or substantially all of the assets of Company, or any reorganization, consolidation, or merger of Company, or sale of outstanding Company securities by holders thereof, where the holders of Company’s securities as of immediately before the transaction beneficially own less than a majority of the outstanding voting securities of the successor or surviving entity as of immediately after such transaction or, if

 

 

such Company shareholders beneficially own a majority of the outstanding voting securities of the successor or surviving entity as of immediately after the transaction, such successor or surviving entity is not the Company; and “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise or convert this Warrant on or prior to the closing thereof is then traded on a national securities exchange or over-the-counter market, and (iii) Holder would not be restricted by contract or by applicable federal and state securities laws from  publicly re-selling, within six (6) months and one day following the closing of such Acquisition, all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition.

 

(ii)                                  Acquisition for Cash and/or Marketable Securities.  Holder agrees that, in the event of an Acquisition in which the sole consideration is cash and/or Marketable Securities, this Warrant shall terminate on and as of the closing of such Acquisition to the extent not previously exercised.  The Company shall provide Holder with written notice of any proposed Acquisition not later than ten (10) business days prior to the closing thereof setting forth the material terms and conditions thereof, and shall provide Holder with copies of the draft transaction agreements and other documents in connection therewith and with such other information respecting such proposed Acquisition as may reasonably be requested by Holder.

 

(iii)                               Assumption of Warrant.  Upon the closing of any Acquisition other than as particularly described in subsection 3(e)(ii) above, the Company shall cause the surviving or successor entity to assume this Warrant and the obligations of the Company hereunder, and this Warrant shall, from and after such closing, be exercisable for the same class, number and kind of securities, cash and other property as would have been paid for or in respect of the shares issuable (as of immediately prior to such closing) upon exercise in full hereof as if such shares had been issued and outstanding on and as of such closing, at an aggregate Warrant Price equal to the aggregate Warrant Price in effect as of immediately prior to such closing; and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.

 

4.                                       Representations and Warranties of Holder and Company.

 

(a)                                  Representations and Warranties by Holder.  Holder represents and warrants to Company with respect to this purchase as follows:

 

(i)                                     Evaluation.  Holder has substantial experience in evaluating and investing in private placement transactions of securities of companies similar to Company so that Holder is capable of evaluating the merits and risks of its investment in Company and has the capacity to protect its interests.

 

(ii)                                  Resale.  Except for transfers to an affiliate of Holder, Holder is acquiring this Warrant and the Warrant Shares issuable upon exercise of this Warrant (collectively the “Securities”) for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof.  Holder understands that the Securities have not been registered

 

 

under the Securities Act of 1933, as amended (the “Act”) by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein.

 

(iii)                               Rule 144.  Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available.  Holder is aware of the provisions of Rule 144 promulgated under the Act.

 

(iv)                              Accredited Investor.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

(v)                                 Opportunity To Discuss.  Holder has had an opportunity to discuss Company’s business, management and financial affairs with its management and an opportunity to review Company’s facilities.  Holder understands that such discussions, as well as the written information issued by Company, were intended to describe the aspects of Company’s business and prospects which Company believes to be material but were not necessarily a thorough or exhaustive description.

 

(b)                                 Representations and Warranties by Company.   Company hereby represents and warrants to Holder that the statements in the following paragraphs of this Section 4(b) are true and correct (a) as of the date hereof and (b) except where any such representation and warranty relates specifically to an earlier date, as of the date of any exercise of this Warrant.

 

(i)                                     Corporate Organization and Authority.  Company (a) is a corporation duly organized, validly existing, and in good standing in its jurisdiction of incorporation, (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted; and (c) is qualified as a foreign corporation in all jurisdictions where such qualification is required, except where the failure to be so qualified as a foreign corporation would not have a material adverse effect on the Company.

 

(ii)                                  Corporate Power .  Company has all requisite legal and corporate power and authority to execute, issue and deliver this Warrant, to issue the Warrant Shares issuable upon exercise or conversion of this Warrant, and to carry out and perform its obligations under this Warrant and any related agreements.

 

(iii)                               Authorization; Enforceability.  All corporate action on the part of Company, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise of this Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Company enforceable in accordance with its terms.

 

(iv)                              Valid Issuance of Warrant and Warrant Shares.  This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. The Warrant Shares issuable upon conversion of this Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid

 

 

and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Warrant and under applicable state and federal securities laws.  Subject to applicable restrictions on transfer, the issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise or conversion of this Warrant are not subject to any preemptive or other similar rights or any liens or encumbrances except as specifically set forth in Company’s Certificate of Incorporation or this Warrant.  The offer, sale and issuance of the Warrant Shares, as contemplated by this Warrant, are exempt from the prospectus and registration requirements of applicable United States federal and state security laws, and neither Company nor any authorized agent acting on its behalf has or will take any action hereafter that would cause the loss of such exemption.

 

(v)                                 No Conflict.  The execution, delivery, and performance of this Warrant will not result in (a) any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice (1) any provision of Company’s Certificate of Incorporation or by-laws; (2) any provision of any judgment, decree, or order to which Company is a party, by which it is bound, or to which any of its material assets are subject; (3) any contract, obligation, or commitment to which Company is a party or by which it is bound; or (4) any statute, rule, or governmental regulation applicable to Company, or (b) the creation of any lien, charge or encumbrance upon any assets of Company.

 

(vi)                              Capitalization.  The capitalization table of Company attached hereto as Annex A is complete and accurate as of the date hereof (after giving effect to the issuance of this Warrant) and reflects (a) all outstanding capital stock of Company and (b) all outstanding warrants, options, conversion privileges, preemptive rights or other rights or agreements to purchase or otherwise acquire or issue any equity securities or convertible securities of Company.  Company has reserved 15,350 shares of Common Stock for issuance upon conversion of the Preferred Stock.

 

(vii)                           Warrant Price.  As of the date hereof, the Warrant Price is no greater than the lowest price (as adjusted to reflect stock splits, stock combinations and like occurrences) at which Company has issued Series A-1 Convertible Preferred Stock.  The Warrant Price is, and will be, no greater than the lowest price (as adjusted to reflect stock splits, stock combinations and like occurrences) at which the Company issues Series A-1 Convertible Preferred Stock pursuant to that certain Series A-1 Convertible Stock Purchase Agreement, dated April 25, 2011, by and among the Company and the persons listed on Schedule I thereto, as amended from time to time.

 

5.                                       Legends.

 

(a)                                  Legend.  Each certificate representing the Warrant Shares shall be endorsed with substantially the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED (UNLESS SUCH TRANSFER IS TO AN AFFILIATE OF HOLDER) UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A “NO ACTION” LETTER FROM THE SECURITIES

 

 

AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR (IF REASONABLY REQUIRED BY COMPANY) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

Company need not enter into its stock records a transfer of Warrant Shares unless the conditions specified in the foregoing legend are satisfied.  Company may also instruct its transfer agent not to allow the transfer of any of the Warrant Shares unless the conditions specified in the foregoing legend are satisfied.

 

(b)                                 Removal of Legend and Transfer Restrictions.  The legend relating to the Act endorsed on a certificate pursuant to paragraph 5(a) of this Warrant shall be removed and Company shall issue a certificate without such legend to Holder if (i) the Securities are issued by the Company pursuant to a registration statement filed under the Act and a prospectus meeting the requirements of Section 10 of the Act is available or (ii) Holder provides to Company an opinion of counsel for Holder reasonably satisfactory to Company, a no-action letter or interpretive opinion of the staff of the Securities and Exchange Commission (“SEC”) reasonably satisfactory to Company, or other evidence reasonably satisfactory to Company, to the effect that public sale, transfer or assignment of the Securities may be made without registration and without compliance with any restriction such as Rule 144.

 

6.                                       Transfers of Warrant.  In connection with any transfer by Holder of this Warrant, the Company may require the transferee to provide the Company with an Assignment substantially in the form of Annex B hereto, and may require Holder to provide a legal opinion, in form and substance satisfactory to Company and its counsel, that such transfer is exempt from the registration and prospectus delivery requirements of the Act; provided, that the Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that such affiliate is an “accredited investor” as defined in Regulation D promulgated under the Act.  Any transferee (including, without limitation, any affiliate of Holder) shall take this Warrant subject to all of the terms and conditions thereof and such transferee’s rights under this Warrant shall be subject to such transferee’s compliance with all of the terms and conditions of this Warrant that are applicable to Holder.  Following any transfer of this Warrant, at the request of either the Company or the transferee, the transferee shall surrender this Warrant to the Company in exchange for a new warrant of like tenor and date, executed by Company.  Subject to the foregoing, this Warrant is transferable on the books of the Company at its principal office by the registered Holder hereof upon surrender of this Warrant properly endorsed.  Upon any partial transfer, Company will execute and deliver to Holder a new warrant of like tenor with respect to the portion of this Warrant not so transferred.  Holder shall not have any right to transfer any portion of this Warrant to any direct competitor of Company.

 

7.                                       Adjustment for Certain Events. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

 

(a)                                  Reclassification, Recapitalization, Reorganization, Conversion or Merger.  In case of (i) any reclassification, recapitalization, reorganization, conversion or other change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any merger of Company with or into another corporation (other than a merger with another corporation in which Company is the acquiring and the surviving corporation and which does not result in any

 

 

reclassification, recapitalization, reorganization, conversion or other change of outstanding securities issuable upon exercise of this Warrant and other than a merger with respect to which the provisions of Section 3(e)(ii) are applicable), or (iii) any sale of all or substantially all of the assets of Company (other than any such sale with respect to which the provisions of Section 3(e)(ii) are applicable), Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to Holder a new Warrant (in form and substance satisfactory to Holder of this Warrant), or Company shall make appropriate provision without the issuance of a new Warrant, so that Holder shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the Warrant Shares theretofore issuable upon exercise or conversion of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, recapitalization, reorganization, conversion, other change, merger or sale by a holder of the number of shares of Preferred Stock (or any other class or series of stock) then purchasable under this Warrant.  Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 7.  The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and transfers.

 

(b)                                 Subdivision or Combination of Shares.  If Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Preferred Stock (or of any other class or series of stock then purchasable under this Warrant), the Warrant Price shall be proportionately decreased and the number of Warrant Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately increased and the number of Warrant Shares issuable hereunder shall be proportionately decreased in the case of a combination.

 

(c)                                  Stock Dividends and Other Distributions.  If Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Preferred Stock (or with respect to any other class or series of stock then purchasable under this Warrant) payable in Preferred Stock (or shares of such other class or series of stock, if applicable), then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Preferred Stock (or such other class or series of stock then purchasable under this Warrant) outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Preferred Stock (or such other class or series of stock then purchasable under this Warrant) outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Preferred Stock or with respect to any other class or series of stock then purchasable under this Warrant (except any distribution specifically provided for in Sections 7(a) and 7(b)), then, in each such case, provision shall be made by Company such that Holder shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were Holder of the Warrant Shares as of the record date fixed for the determination of the shareholders of Company entitled to receive such dividend or distribution.

 

(d)                                 Adjustment for Dilutive Issuance.  The number of shares of Common Stock issuable upon conversion of any shares of Series A-1 Convertible Preferred Stock that are issuable upon exercise of this Warrant shall be subject to adjustment, from time to time in the manner set forth in Company’s Certificate of Incorporation as if such shares of Series A-1 Convertible Preferred Stock were issued and outstanding on and as of the date of any such required adjustment.  The provisions set forth for the Warrant Shares in Company’s Certificate of Incorporation relating to the above in effect as of the

 

 

date hereof may not be amended, modified or waived, without the prior written consent of Holder, unless such amendment, modification or waiver affects the rights associated with the Warrant Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Warrant Shares.

 

(f)                                    Adjustment for Pay-to-Play Transaction.  In the event that Company’s Certificate of Incorporation provides, or is amended to so provide, for the amendment or modification of the rights, preferences or privileges of the Preferred Stock, or the reclassification, conversion or exchange of the Preferred Stock, in the event that a holder thereof fails to participate in an equity financing transaction (a “Pay-to-Play Provision”), and in the event that such Pay-to-Play Provision becomes operative, this Warrant shall automatically and without any action required become exercisable for that number and type of shares of equity securities as would have been issued or exchanged, or would have remained outstanding, in respect of the Warrant Shares issuable hereunder had this Warrant been exercised in full prior to such event, and the Holder elected to participate in the equity financing or elected not to participate in the equity financing, as the case may be.

 

8.                                       Notice of Adjustments.  Whenever any Warrant Price or the kind or number of securities issuable under this Warrant shall be adjusted pursuant to Section 7 hereof, Company shall prepare a certificate signed by an officer of Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and number or kind of shares issuable upon exercise of this Warrant after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by certified or registered mail, return receipt required, postage prepaid) within thirty (30) days of such adjustment to Holder as set forth in Section 19 hereof.

 

9.                                       Financial and Other Reports.  From time to time up to the earlier of the Expiration Date or the complete exercise of this Warrant, Company shall furnish to Holder, if Company is a private company, (a) unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements within 30 days of each calendar quarter end, in a form reasonably acceptable to Holder and certified by Company’s president or chief financial officer, and (b) Company’s complete annual audited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements certified by an independent certified public accountant selected by Company within 120 days of the fiscal year end or, if sooner, within thirty (30) days after the Company’s Board of Directors receives the audit in final form.  All such statements are to be prepared using GAAP and, if Company is a publicly held company, are to be in compliance with SEC requirements.    At the time of Company’s delivery of quarterly financial statements in accordance with this Section 9, Company shall also deliver to Holder an updated capitalization table of Company in the form attached hereto as Annex A, provided that the Company shall have an obligation to deliver such updated capitalization table only if the Company is not a public company at that time.

 

10.                                 Registration Rights.  The Company agrees that the shares of Common Stock issued and issuable upon conversion of the shares of Preferred Stock issued and issuable upon exercise or conversion of this Warrant (and the shares of Common Stock issued and issuable upon exercise or conversion of this Warrant at all times, if any, when the Warrant Shares shall be Common Stock), shall have all registration rights pursuant to and as set forth in the Stockholders’ Agreement, on a pari passu basis with the investor parties thereto holding shares of Preferred Stock.  The foregoing referenced registration rights are subject to and conditioned upon the Holder, at the time of exercise of this Warrant, becoming a party to the Stockholders’ Agreement in accordance with the requirements of Section 2 hereof and such registration rights will be governed by the terms of the Stockholders’ Agreement.

 

 

11.                                 No Fractional Shares.  No fractional share of Preferred Stock will be issued in connection with any exercise or conversion hereunder, but in lieu of such fractional share Company shall make a cash payment therefor upon the basis of the Warrant Price then in effect.

 

12.                                 Charges, Taxes and Expenses.  Issuance of certificates for shares of Preferred Stock upon the exercise or conversion of this Warrant shall be made without charge to Holder for any United States or state of the United States documentary stamp tax or other incidental expense with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by Company, and such certificates shall be issued in the name of Holder.

 

13.                                 No Shareholder Rights Until Exercise.  Except as expressly provided herein, this Warrant does not entitle Holder to any voting rights or other rights as a shareholder of Company prior to the exercise hereof.

 

14.                                 Registry of Warrant.  Company shall maintain a registry showing the name and address of the registered Holder of this Warrant.  This Warrant may be surrendered for exchange or exercise, in accordance with its terms, at such office or agency of Company, and Company and Holder shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

 

15.                                 Loss, Theft, Destruction or Mutilation of Warrant.  Upon receipt by Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon surrender and cancellation of this Warrant, Company will execute and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in lieu hereof.

 

16.                                 Miscellaneous.

 

(a)                                  Issue Date.  The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by Company on the date hereof.

 

(b)                                 Successors.  This Warrant shall be binding upon any successors or assigns of Company.

 

(c)                                  Headings.  The headings used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.

 

(d)                                 Saturdays, Sundays, Holidays.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday in the State of New York, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

 

(e)                                  Attorney’s Fees.   In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.

 

17.                                 No Impairment.  Company will not, by amendment of its Certificate of Incorporation or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Holder hereof against impairment.

 

 

18.                                 Addresses.  Any notice required or permitted hereunder shall be in writing and shall be mailed by overnight courier, registered or certified mail, return receipt requested, and postage prepaid, or otherwise delivered by hand or by messenger, addressed as set forth below, or at such other address as Company or Holder hereof shall have furnished to the other party in accordance with the delivery instructions set forth in this Section 18.

 

	
If   to Company:
    	
Radius Health, Inc.
    
	
 
    	
201   Broadway, 6th floor
    
	
 
    	
Cambridge,   Massachusetts 02139
    
	
 
    	
Attn: Chief   Financial Officer
    
	
 
    	
 
    
	
If to Holder:
    	
Oxford   Finance LLC
    
	
 
    	
Attn: Vice   President and General Counsel
    
	
 
    	
133 North Fairfax   Street
    
	
 
    	
Alexandria, VA   22314
    
	
 
    	
Telephone:   703-519-6082
    
	
 
    	
Facsimile:   703-519-5225
    

 

If mailed by registered or certified mail, return receipt requested, and postage prepaid, notice shall be deemed to be given five (5) days after being sent, and if sent by overnight courier, by hand or by messenger, notice shall be deemed to be given when delivered (if on a business day, and if not, on the next business day).

 

19.                                 WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS WARRANT OR THE WARRANT SHARES.

 

20.                                 GOVERNING LAW.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

[Remainder of page intentionally left blank]

 

 

IN WITNESS WHEREOF, Company  has caused this Warrant to be executed by its officer thereunto duly authorized.

 

RADIUS HEALTH, INC.

 

 

	
By:
    	
/s/ C. Richard Edmund Lyttle
    	
 
    
	
 
    	
Name:
    	
C. Richard Edmund Lyttle
    	
 
    
	
 
    	
Title:
    	
President and   Chief Executive Officer
    	
 
    

 

 

Dated as of November 21, 2011

 

 

NOTICE OF EXERCISE

 

To:

Radius Health, Inc.

201 Broadway, 6th floor

Cambridge, Massachusetts 02139

Attn: Chief Financial Officer

 

1.                                       The undersigned Warrantholder (“Holder”) elects to acquire shares of the Series A-1 Convertible Preferred Stock (the “Preferred Stock”) of Radius Health, Inc. (the “Company”), pursuant to the terms of the Stock Purchase Warrant dated May         , 2011 (the “Warrant”).

 

2.                                       Holder exercises its rights under the Warrant as set forth below:

 

	
(           )
    	
 
    	
Holder   elects to purchase                                shares of Preferred Stock as provided in Section 3(a) and tenders herewith a   check in the amount of $                    as payment of the purchase price.
    
	
 
    	
 
    	
 
    
	
(           )
    	
 
    	
Holder elects to   convert the purchase rights into shares of Preferred Stock as provided in   Section 3(b) of the Warrant.
    

 

3.                                       Holder surrenders the Warrant with this Notice of Exercise.

 

Holder represents that it is acquiring the aforesaid shares of Preferred Stock for investment and not with a view to or for resale in connection with distribution and that Holder has no present intention of distributing or reselling the shares.

 

Please issue a certificate representing the shares of the Preferred Stock in the name of Holder or in such other name as is specified below:

 

	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Taxpayer   I.D.:
    	
 
    	
 
    

 

	
 
    	
[NAME   OF HOLDER]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    

 

 

	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    
	
 
    	
Date:
    	
                            , 200     
    
					

 

 

ANNEX A

 

CAPITALIZATION TABLE

 

[SEE ATTACHED]

 

 

ANNEX B

 

ASSIGNMENT

 

For value received, Oxford Finance LLC hereby sells, assigns and transfers unto

 

	
[Name:
    	
[OXFORD   TRANSFEREE]
    	
 
    
	
Address:
    	
 
    	
 
    
	
Tax ID:
    	
 
    	
]
    

 

 

that certain Warrant to Purchase Stock issued by [BORROWER] (the “Company”), on [DATE] (the “Warrant”) together with all rights, title and interest therein.

 

 

	
 
    	
OXFORD FINANCE LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

	
Date:
    	
 
    	
 
    

 

 

By its execution below, and for the benefit of the Company, [OXFORD TRANSFEREE] makes each of the representations and warranties set forth in Section 4(a) of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

	
 
    	
[OXFORD   TRANSFEREE]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

ANNEX C

 

Instrument of Adherence to
 Amended and Restated
 Stockholders’ Agreement
 dated May 17, 2011

 

[                            , 20    ]

 

Reference is hereby made to that certain AMENDED AND RESTATED STOCKHOLDERS’ AGREEMENT, dated the 17th day of May, 2011, entered into by and among Radius Health, Inc., a Delaware corporation (the “Corporation”), and the Stockholder parties thereto, as amended from time to time (the “Agreement”). Capitalized terms used herein without definition shall have the respective meanings ascribed thereto in the Agreement.

 

The undersigned (the “New  Stockholder Party”), in order to become the owner or holder of up to                              shares of Series A-1 Preferred Stock issuable upon exercise of that certain Warrant to Purchase Shares of Series A-1 Convertible Preferred Stock, dated November        , 2011, held by the undersigned as of the date hereof (the “Warrant”) and all other shares of the Corporation’s capital stock hereinafter acquired, hereby agrees that, from and after the date of exercise of the Warrant and the resulting issuance by the Corporation of any shares of Series A-1 Preferred Stock (or shares of Common Stock issuable upon conversion of such shares of Series A-1 Preferred Stock) to the New Stockholder Party, the undersigned has become a Stockholder party to the Agreement in the capacities of a holder of Registrable Securities and a Holder, and is entitled to all of the benefits under, and is subject to all of the obligations, restrictions and limitations set forth in, the Agreement that are applicable to such Stockholder parties and shall be deemed to have made all of the representations and warranties made by such Stockholder parties thereunder.  This Instrument of Adherence shall take effect and shall become a part of the Agreement on the latest date of execution by both the New Stockholder Party and the Corporation.

 

Executed as of the date set forth above.

 

 

	
 
    	
Print Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Signature:
    	
 
    

 

Accepted:

RADIUS HEALTH, INC.

 

 

	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:Exhibit 10.4

 

THIRD AMENDMENT TO CREDIT AGREEMENT

 

This Third Amendment to Credit Agreement (this “Third Amendment”) is made as of this 17th day of November, 2011 by and among:

 

TUESDAY MORNING, INC., a Texas corporation, for itself and as agent (in such capacity, the “Lead Borrower”) for the other Borrowers party hereto;

 

the BORROWERS party hereto;

 

the GUARANTORS party hereto;

 

the LENDERS party hereto; and

 

BANK OF AMERICA, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer;

 

in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

W I T N E S S E T H:

 

WHEREAS, reference is made to that certain Credit Agreement, dated as of December 15, 2008 (as amended, amended and restated, modified, supplemented or restated and in effect from time to time, the “Credit Agreement”), by and among (i) the Borrowers, (ii) the Guarantors, (iii) the Lenders party thereto (the “Lenders”), and (iv) Bank of America, N.A., as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer; and

 

WHEREAS, the parties hereto have agreed to amend certain provisions of the Credit Agreement as set forth herein.

 

NOW, THEREFORE, it is hereby agreed as follows:

 

1.                                       Definitions.  All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.

 

2.                                       Amendments to Article I of Credit Agreement.  The provisions of Article I of the Credit Agreement are hereby amended as follows:

 

(a)                                  By amending the definition of “Accelerated Borrowing Base Delivery Event” set forth therein by deleting the phrase “Borrowing Base” in its entirety therefrom and substituting in its stead the phrase “Loan Cap”.

 

(b)                                 By deleting the definition of “Adjustment Date” in its entirety therefrom and substituting in its stead the following new definition:

 

1

 

“Adjustment Date” means the first day of each Fiscal Quarter, provided  that the first Adjustment Date after the Third Amendment Effective Date shall be February 1, 2012.

 

(c)                                  By deleting the definition of “Applicable Margin” in its entirety therefrom and substituting in its stead the following new definition:

 

“Applicable Margin” means:

 

(a)                                  From and after the Third Amendment Effective Date until the first Adjustment Date thereafter, the percentages set forth in Level II of the pricing grid below, unless Average Daily Availability does not support the requirements of Level II or lower, in which event the Applicable Margin will be set at Level III.  In no event shall the Applicable Margin be set at Level I prior to the first Adjustment Date following the Third Amendment Effective Date (even if the Average Daily Availability requirements for Level I have been met); and

 

(b)                                 From and after the first Adjustment Date following the Third Amendment Effective Date, the Applicable Margin shall be determined from the following pricing grid based upon the Average Daily Availability for the most recent Fiscal Quarter ended immediately preceding such Adjustment Date; provided, however, that notwithstanding anything to the contrary set forth herein, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and at the direction of the Required Lenders shall, immediately increase the Applicable Margin to that set forth in Level III (even if the Average Daily Availability requirements for a different Level have been met); provided  further that, if any Borrowing Base Certificate delivered pursuant to Section 6.02(b) of this Agreement is at any time restated or otherwise revised, or if the information set forth in any such Borrowing Base Certificate otherwise proves to be false or incorrect such that the Applicable Margin would have been higher than was otherwise in effect during any period, without constituting a waiver of any Default or Event of Default arising as a result thereof, interest due under this Agreement shall be immediately recalculated at such higher rate for any applicable periods and shall be due and payable on demand.

 

	
Level
    	
 
    	
Average Daily
   Availability
    	
 
    	
LIBO Applicable
   Margin
    	
 
    	
Prime Rate
   Applicable Margin
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
I
    	
 
    	
Greater than $150,000,000
    	
 
    	
1.75
    	
%
    	
0.75
    	
%
    

 

2

 

	
II
    	
 
    	
Less than or equal to $150,000,000 but greater than $75,000,000
    	
 
    	
2.00
    	
%
    	
1.00
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
III
    	
 
    	
Less than or equal to $75,000,000
    	
 
    	
2.25
    	
%
    	
1.25
    	
%
    

 

The Average Daily Availability requirements set forth in this definition may be modified by the Administrative Agent in its reasonable discretion in the event that the Aggregate Commitments are increased pursuant to the terms of Section 2.15 or decreased pursuant to the terms of Section 2.06, in each case, in order to preserve the original intent of such requirements.

 

(d)                                 By deleting the definition of “Availability Condition” in its entirety therefrom and substituting in its stead the following new definition:

 

“Availability Condition” means at the time of determination with respect to any specified transaction or payment, Availability for the three months immediately preceding, and on a pro forma basis for the six months immediately following, and after giving effect to, such transaction or payment was, and is projected to be, equal to or greater than an amount equal to fifteen percent (15%) of the Aggregate Commitments.

 

(e)                                  By deleting the definition of “Borrowing Base” in its entirety therefrom and substituting in its stead the following new definition:

 

“Borrowing Base” means, at any time of calculation, an amount equal to:

 

(a)                                  the face amount of Eligible Credit Card Receivables multiplied by the Credit Card Advance Rate;

 

plus

 

(b)                                 the Cost of Eligible Inventory, net of Inventory Reserves, multiplied by the Appraisal Percentage of the Appraised Value of Eligible Inventory;

 

plus

 

3

 

(c)                                  with respect to any Eligible Letter of Credit, the Cost of the Inventory supported by such Eligible Letter of Credit, net of Inventory Reserves, multiplied by the Appraisal Percentage of the Appraised Value of the Inventory supported by such Eligible Letter of Credit;

 

plus

 

(d)                                 ninety-eight percent (98%) of all Eligible Cash on Hand, provided  that Eligible Cash on Hand included in the Borrowing Base may not be withdrawn from the Blocked Account in which it is maintained, thereby reducing the Borrowing Base, unless and until the Lead Borrower furnishes the Administrative Agent with (i) a request for such proposed withdrawal and written instructions designating the account to which the Lead Borrower would like the withdrawn funds to be transferred and (ii) a Borrowing Base Certificate as of the date of such proposed withdrawal reflecting that, after giving effect to such withdrawal, no Overadvance will result;

 

Minus, without duplication,

 

(e)                                  the then amount of all Availability Reserves.

 

(f)                                    By deleting the definition of “Cash Dominion Event” in its entirety therefrom and substituting in its stead the following new definition:

 

“Cash Dominion Event” means either (a) the occurrence and continuance of any Event of Default, or (b) the failure of the Borrowers to maintain Availability for five (5) consecutive Business Days equal to or greater than the greater of (i) twelve and one-half percent (12.5%) of the Loan Cap, and (ii) $17,500,000.  For purposes of this Agreement, the occurrence of a Cash Dominion Event shall be deemed continuing, (x) so long as such Event of Default has not been waived, and/or (y) if such Cash Dominion Event arises as a result of the Borrowers’ failure to maintain Availability as required hereunder, until either (A) Availability is equal to or greater than the greater of (i) twelve and one-half percent (12.5%) of the Loan Cap, and (ii) $17,500,000 for sixty (60) consecutive calendar days or (B) (1) Availability is equal to or greater than the greater of (i) twelve and one-half percent (12.5%) of the Loan Cap, and (ii) $17,500,000 for thirty (30) consecutive calendar days and (2) the Borrowers have provided evidence reasonably satisfactory to the Administrative Agent that Availability, on a pro forma basis for the twelve months following the discontinuance of such Cash Dominion Event, is projected to be equal to or greater than fifteen percent (15%) of the Loan Cap, in which case such Cash Dominion Event shall no longer be deemed to be continuing for purposes of this Agreement; provided  that a Cash Dominion Event shall be deemed continuing (even if an Event of Default is no longer continuing and/or the conditions specified in clause (y) of this definition have been satisfied) 

 

4

 

at all times after a Cash Dominion Event has occurred and been discontinued on two (2) occasions after the Closing Date.  The termination of a Cash Dominion Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Cash Dominion Event in the event that the conditions set forth in this definition again arise.

 

(g)                                 By deleting the definition of “Credit Card Advance Rate” in its entirety therefrom and substituting in its stead the following new definition:

 

“Credit Card Advance Rate” means 90%.

 

(h)                                 By deleting the definition of “Deteriorating Lender” in its entirety therefrom and substituting in its stead the following new definition:

 

“Deteriorating Lender” means any Defaulting Lender or any Lender as to which (a) the L/C Issuer, the Administrative Agent or the Swing Line Lender believes in good faith that such Lender has defaulted in fulfilling its obligations under one or more other syndicated credit facilities, or (b) a Person that Controls such Lender has been deemed insolvent by the L/C Issuer, the Administrative Agent or the Swing Line Lender or become the subject of any proceeding under any Debtor Relief Law.

 

(i)                                     By deleting the definition of “Fee Letter” in its entirety therefrom and substituting in its stead the following new definition:

 

“Fee Letter” means the letter agreement, dated October 7, 2011, among the Borrowers, the Administrative Agent and MLPFS.

 

(j)                                     By deleting the definition of “Maturity Date” in its entirety therefrom and substituting in its stead the following new definition:

 

“Maturity Date” means November 17, 2016.

 

(k)                                  By deleting the definition of “Measurement Period” in its entirety therefrom and substituting in its stead the following new definition:

 

“Measurement Period” means, at any date of determination, the most recently completed twelve months of the Parent.

 

(l)                                     By deleting the definition of “Payment Conditions” in its entirety therefrom and substituting in its stead the following new definition:

 

“Payment Conditions” means, at the time of determination with respect to any specified transaction or payment, that (a) no Default or Event of Default then exists or would arise as a result of the entering into of such transaction or the 

 

5

 

making of such payment, and (b) the Availability Condition has been satisfied and the Consolidated Fixed Charge Coverage Ratio, as calculated on a trailing twelve months basis and as projected on a pro-forma basis for the twelve months following such transaction or payment, will be equal to or greater than 1.00:1.00.  Prior to undertaking any transaction or making any payment which is subject to the Payment Conditions, the Loan Parties shall deliver to the Administrative Agent evidence of satisfaction of the conditions contained in clause (b) above on a basis (including, without limitation, giving due consideration to results for prior periods) reasonably satisfactory to the Administrative Agent.

 

(m)                               By amending the definition of “Permitted Acquisition” by deleting the phrase “Availability Condition” from clause (j) thereof in its entirety and substituting the phrase “Payment Conditions” in its stead.

 

(n)                                 By amending the definition of “Permitted Encumbrances” by deleting the phrase “permitted under” from clause (m) thereof in its entirety and substituting the phrase “not prohibited under” in its stead.

 

(o)                                 By amending the definition of “Permitted Investments” by deleting the phrase “Closing Date” from clause (f) thereof in its entirety and substituting the phrase “Third Amendment Effective Date” in its stead.

 

(p)                                 By adding the following new definitions thereto in appropriate alphabetical order:

 

“Adjusted Availability Condition” means at the time of determination with respect to any specified Restricted Payment, Availability for the three months immediately preceding, and on a pro forma basis for the six months immediately following, and after giving effect to, such Restricted Payment was, and is projected to be, equal to or greater than an amount equal to seventeen and one-half percent (17.5%) of the Aggregate Commitments.

 

“Adjusted Payment Conditions” means, at the time of determination with respect to any specified Restricted Payment, that (a) no Default or Event of Default then exists or would arise as a result of the making of such Restricted Payment, and (b) the Adjusted Availability Condition has been satisfied and the Consolidated Fixed Charge Coverage Ratio, as calculated on a trailing twelve months basis and as projected on a pro-forma basis for the twelve months following the making of such Restricted Payment, will be equal to or greater than (i) if such Restricted Payment is made at any time during the period commencing on the Third Amendment Effective Date and ending on the first anniversary of such date, 1.00:1.00, or (ii) if such Restricted Payment is made at any time following the first anniversary of the Third Amendment Effective Date, 1.10:1.00.  Prior to undertaking any Restricted Payment which is subject to the Adjusted Payment Conditions, the Loan Parties shall deliver to the Administrative Agent evidence of 

 

6

 

satisfaction of the conditions contained in clause (b) above on a basis (including, without limitation, giving due consideration to results for prior periods) reasonably satisfactory to the Administrative Agent.

 

“MLPFS” means Merrill Lynch, Pierce, Fenner & Smith Incorporated and its successors.

 

“Third Amendment Effective Date” means November 17, 2011.

 

(q)                                 By deleting the definitions of “Clean-down Period”, “Early Termination Fee” and “Inventory Advance Rate” in their entirety therefrom.

 

3.                                       Amendments to Article II of Credit Agreement.  The provisions of Article II of the Credit Agreement are hereby amended as follows:

 

(a)                                  By amending Section 2.04 thereof by adding the following at the end of such Section:

 

The Swing Line Lender shall have all of the benefits and immunities (A) provided to the Agents in Article IX with respect to any acts taken or omissions suffered by the Swing Line Lender in connection with Swing Line Loans made by it or proposed to be made by it as if the term “Agents” as used in Article IX included the Swing Line Lender with respect to such acts or omissions, and (B) as additionally provided herein with respect to the Swing Line Lender.

 

(b)                                 By deleting clause (d) of Section 2.05 thereof in its entirety and substituting in its stead the following new clause (d):

 

(d)                                 [Reserved.]

 

(c)                                  By amending the provisions of clause (c) of Section 2.06 thereof by deleting the phrase “, Early Termination Fees” in its entirety therefrom.

 

(d)                                 By amending the provisions of Section 2.09 thereof as follows:

 

(i)                                     By deleting clause (a) thereof in its entirety and substituting in its stead the following new clause (a):

 

(a) Commitment Fee.  The Borrowers shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a commitment fee (the “Commitment Fee”) based upon the average daily outstanding Credit Extensions (excluding Swing Line Loans) for the most recent Fiscal Quarter ended immediately preceding the applicable payment date equal to three-eighths of one percent 

 

7

 

(0.375%) times the actual daily amount by which the Aggregate Commitments exceed the Total Outstandings.  The Commitment Fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable monthly in arrears on the last Business Day of each calendar month, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period; provided  that any Commitment Fee accrued with respect to the Commitment of a Defaulting Lender during the period prior to the time that such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrowers so long as such Lender shall remain a Defaulting Lender, except to the extent that such Commitment Fee shall otherwise have been due and payable by the Borrowers prior to such time; provided  further that no Commitment Fee shall accrue on the Commitment of a Defaulting Lender so long as such Lender shall be a Defaulting Lender.

 

(ii)                                  By deleting clause (b) thereof in its entirety and substituting in its stead the following new clause (b):

 

(b)                                 [Reserved.]

 

(e)                                  By amending the provisions of Section 2.15 thereof as follows:

 

(i)                                     By amending the first sentence of clause (a) thereof by adding thereto the phrase “From and after the Third Amendment Effective Date,” immediately prior to the phrase “provided no Default or Event of Default then exists or would arise therefrom,”.

 

(ii)                                  By deleting clause (f) thereof in its entirety and substituting in its stead the following new clause (f):

 

(f)                                    [Reserved.]

 

4.                                       Amendments to Article V of Credit Agreement.  The provisions of Article V of the Credit Agreement are hereby amended as follows:

 

(a)                                  By amending the provisions of Section 5.21 thereof by deleting each reference to the phrase “Closing Date” set forth therein and substituting in its stead the phrase “Third Amendment Effective Date”.

 

(b)                                 By amending the provisions of Section 5.24 thereof by deleting each reference to the phrase “Closing Date” set forth therein and substituting in its stead the phrase “Third Amendment Effective Date”.

 

8

 

5.                                       Amendments to Article VI of Credit Agreement.  The provisions of Section 6.10 of the Credit Agreement are hereby amended by deleting the phrase “fifty percent (50%)” from the third sentence of clause (b) thereof in its entirety and substituting the phrase “forty percent (40%)” in its stead.

 

6.                                       Amendments to Article VII of Credit Agreement.  The provisions of Article VII of the Credit Agreement are hereby amended as follows:

 

(a)                                  By amending the provisions of Section 7.06 thereof by deleting in its entirety the phrase “Payment Conditions” from each of clauses (c) and (d) thereof and substituting the phrase “Adjusted Payment Conditions” in its stead in each such clause.

 

(b)                                 By deleting Sections 7.15 and 7.16 in their entirety therefrom and substituting in their stead the following new Section 7.15:

 

7.15                           Financial Covenant.  The Borrower shall at all times maintain Availability of not less than the greater of (i) ten percent (10%) of the Loan Cap and (ii) $15,000,000.

 

7.                                       Amendments to Article IX of Credit Agreement.  The provisions of Section 9.16 of the Credit Agreement are hereby amended by deleting clause (a) thereof in its entirety and substituting in its stead the following new clause (a):

 

(a)                                  If for any reason any Lender shall become a Defaulting Lender, then, in addition to the rights and remedies that may be available to the other Credit Parties, the Loan Parties or any other party at law or in equity, and not at limitation thereof, (i) such Defaulting Lender’s right to participate in the administration of, or decision-making rights related to, the Obligations, this Agreement or the other Loan Documents shall be suspended during the pendency of such failure or refusal, and (ii) a Defaulting Lender shall be deemed to have assigned any and all payments due to it from the Loan Parties, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining non-Defaulting Lenders for application to, and reduction of, their proportionate shares of all outstanding Obligations until, as a result of application of such assigned payments the Lenders’ respective Applicable Percentages of all outstanding Obligations shall have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency, and (iii) at the option of the Administrative Agent, any amount payable to such Defaulting Lender hereunder (whether on account of principal, interest, fees or otherwise) shall, in lieu of being distributed to such Defaulting Lender, be retained by the Administrative Agent as cash collateral for future funding obligations of the Defaulting Lender in respect of any Loan or existing or future participating interest in any Swing Line Loan or Letter of Credit.  The Defaulting Lender’s decision-making and participation rights and rights to payments as set forth in clauses (i), (ii) and (iii) hereinabove shall be restored only upon the 

 

9

 

payment by the Defaulting Lender of its Applicable Percentage of any Obligations, any participation obligation, or expenses as to which it is delinquent, together with interest thereon at the rate set forth in Section 2.12 hereof from the date when originally due until the date upon which any such amounts are actually paid.

 

8.                                       Amendments to Article X of Credit Agreement.  The provisions of Article X of the Credit Agreement are hereby amended as follows:

 

(a)                                  By amending the provisions of Section 10.01 thereof as follows:

 

(i)                                     By deleting clauses (d) and (l) thereof in their entirety and substituting in their stead the following new clauses (d) and (l), respectively:

 

(d)                                 [Reserved.];

 

(l)                                     [Reserved.];

 

(ii)                                  By adding the phrase “or Deteriorating Lender” immediately following the phrase “Defaulting Lender” where such phrase appears in the last sentence of the penultimate paragraph thereof.

 

(b)                                 By amending the provisions of Section 10.13 thereof by adding the phrase “or a Deteriorating Lender” immediately following the phrase “Defaulting Lender” in the first sentence thereof.

 

9.                                       Amendments to Exhibits to Credit Agreement.

 

(a)                                  Exhibit D to the Credit Agreement is hereby amended by deleting such exhibit in its entirety and restating it in its entirety in the form of Exhibit D attached hereto

 

(b)                                 Exhibit F to the Credit Agreement is hereby amended by deleting such exhibit in its entirety and restating it in its entirety in the form of Exhibit F attached hereto.

 

10.                                 Amendments to Schedules to Credit Agreement.  Schedules  5.21(a), 5.21(b), 5.24 and 7.02 to the Credit Agreement are hereby amended by deleting such schedules in their entirety and restating them in their entirety in the form of the corresponding schedule in Annex A attached hereto.

 

11.                                 General Amendment.  The provisions of the Credit Agreement are hereby amended by deleting each reference to the phrase “BAS” set forth therein (other than in Section 4.01(i)) and substituting in its stead the phrase “MLPFS”.

 

12.                                 Ratification of Loan Documents.  Except as otherwise expressly provided herein, all terms and conditions of the Credit Agreement and the other Loan Documents remain in full force and effect.  The Loan Parties hereby ratify, confirm, and reaffirm that all 

 

10

 

representations and warranties of the Loan Parties contained in the Credit Agreement or any other Loan Document are true and correct in all material respects on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date.  The Guarantors hereby acknowledge, confirm and agree that the Guaranteed Obligations of the Guarantors under, and as defined in, the Facility Guaranty include, without limitation, all Obligations of the Borrowers at any time and from time to time outstanding under the Credit Agreement and the other Loan Documents, as such Obligations have been amended pursuant to this Third Amendment.  The Loan Parties hereby acknowledge, confirm and agree that the Security Documents and any and all Collateral previously pledged to the Collateral Agent, for the benefit of the Credit Parties, pursuant thereto, shall continue to secure all Secured Obligations (as defined in the Security Agreement) at any time and from time to time outstanding under the Credit Agreement and the other Loan Documents.

 

13.                                 Conditions to Effectiveness.  This Third Amendment shall not be effective until each of the following conditions precedent has been fulfilled to the reasonable satisfaction of the Administrative Agent:

 

(a)                                  The Administrative Agent shall have received counterparts of this Third Amendment duly executed and delivered by each of the parties hereto.

 

(b)                                 The Administrative Agent shall have received (A) reasonably satisfactory opinions of counsel to the Loan Parties (which shall cover, among other things, authority, legality, validity, binding effect and enforceability of this Third Amendment and the documents, instruments and agreements executed in connection herewith), and (B) satisfactory evidence that the Agent (on behalf of the Credit Parties) shall continue to have a valid and perfected first priority (subject to the exceptions set forth in the Credit Agreement) lien and security interest in the Collateral.

 

(c)                                  All corporate and shareholder action on the part of the Loan Parties necessary for the valid execution, delivery and performance by the Loan Parties of this Third Amendment shall have been duly and effectively taken and evidence thereof reasonably satisfactory to the Administrative Agent shall have been provided to the Administrative Agent.

 

(d)                                 There shall not have occurred since June 30, 2011 any event or circumstance that has had or could be reasonably expected, either individually or in the aggregate, to have a Material Adverse Effect.

 

(e)                                  The Administrative Agent shall have received and be reasonably satisfied with detailed financial projections and business assumptions for the Parent and its Subsidiaries on (x) a monthly basis for the twelve month period following the 

 

11

 

Third Amendment Effective Date, and (y) on an annual basis, for each fiscal year thereafter through the Maturity Date, including, in each case, a consolidated income statement, a balance sheet, a statement of cash flow and a borrowing base availability analysis.  All of such information shall have been prepared in good faith based upon assumptions believed to be reasonable at the time (it being acknowledged and agreed that, with respect to any projections, actual results may vary from such projections and related information and that such variations may be significant).

 

(f)                                    All fees required to be paid to the Agents or MLPFS on or before the Third Amendment Effective Date in accordance with the Fee Letter shall have been paid in full, and all fees required to be paid to the Lenders on or before the Third Amendment Effective Date shall have been paid in full.

 

(g)                                 All outstanding Credit Party Expenses (including, without limitation, in respect of the preparation, negotiation, administration, management, execution and delivery of this Third Amendment and any related documents, instruments and agreements) shall have been paid.

 

(h)                                 The Administrative Agent shall have received, in form and substance reasonably satisfactory to it, all inventory appraisals, field audits, and such other reports, audits or certifications as it may reasonably request.

 

(i)                                     After giving effect to (i) all Loans outstanding as of, to be made at, and immediately subsequent to, the Third Amendment Effective Date, and (ii) all Letters of Credit outstanding as of, to be issued at, and immediately subsequent to, the Third Amendment Effective Date, Availability shall be not less than $100,000,000.  The Administrative Agent shall have received a Borrowing Base Certificate dated as of the Third Amendment Effective Date and showing the Borrowing Base as of the close of business as of the last day of the most recent Fiscal Month ending at least fifteen (15) days prior to the Third Amendment Effective Date.

 

(j)                                     After giving effect to this Third Amendment, no Default or Event of Default shall have occurred and be continuing.

 

(k)                                  The Administrative Agent shall have received such additional documents, instruments, and agreements as any Agent may have reasonably requested prior to the date hereof in connection with the transactions contemplated hereby.

 

14.                                 Representations and Warranties.

 

(a)                                  The execution, delivery and performance by each Loan Party of this Third Amendment and the other Loan Documents executed in connection herewith and the performance of each Loan Party’s obligations hereunder and thereunder have 

 

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been duly authorized by all necessary corporate or other organizational action, do not and shall not: (i) contravene the terms of any of such Person’s Organization Documents; (ii) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (x) any Material Contract or any Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries, or (y) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject, except, in each case referred to in this clause (ii), to the extent that any such conflict, breach, termination, contravention, default or payment could not reasonably be expected to have a Material Adverse Effect; (iii) result in or require the creation of any Lien upon any asset of any Loan Party (other than Liens in favor of the Collateral Agent under the Security Documents); or (iv) violate any Law, except to the extent that any such violation could not reasonably be expected to have a Material Adverse Effect.

 

(b)                                 No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Third Amendment or any other Loan Document to which it is a party.

 

(c)                                  No Default or Event of Default has occurred and is continuing.

 

15.                                 Miscellaneous.

 

(a)                                  This Third Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page to this Third Amendment by telecopy or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Third Amendment.

 

(b)                                 This Third Amendment, together with the other Loan Documents, expresses the entire understanding of the parties with respect to the transactions contemplated hereby.  No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

 

(c)                                  Any determination that any provision of this Third Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not effect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Third Amendment.

 

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(d)                                 The Loan Parties represent and warrant that they have consulted with independent legal counsel of their selection in connection with this Third Amendment and are not relying on any representations or warranties of the Agents or the Lenders or their counsel in entering into this Third Amendment.

 

(e)                                  This Third Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties have hereunto caused this Third Amendment to be executed and their seals to be hereto affixed as of the date first above written.

 

	
 
    	
 
    	
TUESDAY   MORNING, INC., as Lead Borrower and as a Borrower
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stephanie Bowman
    
	
 
    	
 
    	
Name:
    	
Stephanie   Bowman
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer and Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
TUESDAY   MORNING PARTNERS, LTD., as a Borrower
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
Days   of the Week, Inc., its General Partner
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stephanie Bowman
    
	
 
    	
 
    	
Name:
    	
Stephanie   Bowman
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer and Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
TUESDAY   MORNING CORPORATION, as a Guarantor
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stephanie Bowman
    
	
 
    	
 
    	
Name:
    	
Stephanie   Bowman
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer, Secretary and Treasurer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
TMI   HOLDINGS, INC., as a Guarantor
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stephanie Bowman
    
	
 
    	
 
    	
Name:
    	
Stephanie   Bowman
    
	
 
    	
 
    	
Title:
    	
Vice   President, Secretary and Treasurer
    

 

Signature Page to Third Amendment to Credit Agreement

 

 

	
 
    	
 
    	
FRIDAY   MORNING, INC., as a Guarantor
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stephanie Bowman
    
	
 
    	
 
    	
Name:
    	
Stephanie   Bowman
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer and Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
DAYS   OF THE WEEK, INC., as a Guarantor
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stephanie Bowman
    
	
 
    	
 
    	
Name:
    	
Stephanie   Bowman
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President, Chief Financial Officer and Secretary
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
NIGHTS   OF THE WEEK, INC., as a Guarantor
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Stephanie Bowman
    
	
 
    	
 
    	
Name:
    	
Stephanie   Bowman
    
	
 
    	
 
    	
Title:
    	
Vice   President, Secretary and Treasurer
    

 

Signature Page to Third Amendment to Credit Agreement

 

 

	
 
    	
 
    	
BANK   OF AMERICA, N.A., as Administrative Agent, Collateral Agent, L/C Issuer and Swingline   Lender and as a Lender
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Andrew Cerussi
    
	
 
    	
 
    	
Name:
    	
Andrew   Cerussi
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President
    

 

Signature Page to Third Amendment to Credit Agreement

 

 

	
 
    	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION (as successor by merger to Wells Fargo   Retail Finance, LLC), as a Lender
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Emily Abrahamson
    
	
 
    	
 
    	
Name:
    	
Emily   Abrahamson
    
	
 
    	
 
    	
Title:
    	
Vice   President
    

 

Signature Page to Third Amendment to Credit Agreement

 

 

	
 
    	
 
    	
REGIONS   BANK, as a Lender
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Kevin R. Rogers
    
	
 
    	
 
    	
Name:
    	
Kevin   R. Rogers
    
	
 
    	
 
    	
Title:
    	
Attorney-In-Fact
    

 

Signature Page to Third Amendment to Credit Agreement

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