Document:

Exhibit 10.5

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended, modified, supplemented or restated, this “Agreement”) dated as of December 31, 2015 (the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity, “Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender, PACIFIC WESTERN BANK, a California state chartered bank with an office located at 406 Blackwell Street, Suite 240, Durham, NC 27701 (“Bank”) (each a “Lender” and collectively, the “Lenders”), and SELECTA BIOSCIENCES, INC., a Delaware corporation, with offices located at 480 Arsenal St., Bldg. 1, Watertown, MA  02472 (“Borrower”), amends and restates in its entirety that certain Loan and Security Agreement dated as of August 9, 2013 by and among Collateral Agent, Oxford, in its capacity as a Lender, Pacific Western Bank (as successor in interest by merger to Square 1 Bank), as a Lender and Borrower (the “Original Agreement”) and provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders.  The parties agree as follows:

 

1.                                      ACCOUNTING AND OTHER TERMS

 

1.1                               Accounting terms not defined in this Agreement shall be construed in accordance with GAAP.  Calculations and determinations must be made in accordance with GAAP.  Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.  All references to “Dollars” or “$” are United States Dollars, unless otherwise noted.

 

2.                                      LOANS AND TERMS OF PAYMENT

 

2.1                               Promise to Pay.  Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

 

2.2                               Term Loans.

 

(a)                                 Availability.

 

(i)                                     Subject to the terms and conditions of the Original Agreement, Lenders loaned to Borrower term loans in an aggregate principal amount equal to Seven Million Five Hundred Thousand Dollars ($7,500,000.00) (the “Original Term Loans”). As of the Effective Date, the principal amount outstanding under the Original Term Loans is Five Million One Hundred Sixty-Four Thousand Two Hundred Sixty Dollars and 26/100 ($5,164,260.26).

 

(ii)                                  Subject to the terms and conditions of this Agreement, Lenders agree, severally and not jointly, to lend to Borrower on the Effective Date, or as soon thereafter as practical, one (1) term loan in an aggregate amount of Six Million Eight Hundred Thirty-Five Thousand Seven Hundred Thirty-Nine Dollars and 74/100 ($6,835,739.74) (the “New Term Loan” and together with the Original Term Loans, the “Term Loans” and each individual a “Term Loan”). Once repaid, the Term Loans may not be re-borrowed.

 

(b)                                 Repayment.  Borrower shall make monthly payments on the Term Loans of interest only commencing on the first (1st) Payment Date following the Funding Date of the New Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date.  Borrower agrees to pay, on the Funding Date of the New Term Loan, any initial partial monthly interest payment otherwise due for the period between the Funding Date of such Term Loan and the first Payment Date thereof.  Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal and interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loans, (2) the effective rate of interest, as determined in

 

1

 

Section 2.3(a), and (3) a repayment schedule equal to thirty (30) months.  All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date.  Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).

 

(c)                                  Mandatory Prepayments.  If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loan(s).

 

(d)                                 Permitted Prepayment of Term Loans.  Borrower shall have the option to prepay all, but not less than all, of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least thirty (30) days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.

 

2.3                               Payment of Interest on the Credit Extensions.

 

(a)                                 Interest Rate.  Subject to Section 2.3(b), the principal amount outstanding under the Term Loans shall accrue interest at a fixed per annum rate (which rate shall be fixed for the duration of the applicable Term Loan) equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the applicable Term Loan, which interest shall be payable monthly in arrears in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and including, the Funding Date of such Term Loan, and shall accrue on the principal amount outstanding under such Term Loan through and including the day on which such Term Loan is paid in full.

 

(b)                                 Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrue interest at a fixed per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “Default Rate”).  Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.

 

(c)                                  360-Day Year.  Interest shall be computed on the basis of a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days.

 

(d)                                 Debit of Accounts.  Collateral Agent and each Lender may debit (or ACH) any deposit accounts, maintained by Borrower or any of its Subsidiaries, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes the Lenders under the Loan Documents when due.  Any such debits (or ACH activity) shall not constitute a set-off.

 

(e)                                  Payments.  Except as otherwise expressly provided herein, all payments by Borrower under the Loan Documents shall be made to the respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month.  Payments of principal and/or interest received after 12:00 noon Eastern time are considered received at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest, and all fees, expenses, indemnities and

 

2

 

reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.

 

2.4                               Secured Promissory Notes.  The Term Loans shall be evidenced by a Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each a “Secured Promissory Note”), and shall be repayable as set forth in this Agreement.  Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receipt of such payment.  The outstanding amount of each Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of Borrower under any Secured Promissory Note or any other Loan Document to make payments of principal of or interest on any Secured Promissory Note when due.  Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.

 

2.5                               Fees.  Borrower shall pay to Collateral Agent:

 

(a)                                 Facility Fee.  A fully earned, non-refundable facility fee of One Hundred Twenty-Five Thousand Dollars ($125,000.00) to be shared between the Lenders pursuant to their respective Commitment Percentages payable on the Effective Date, the receipt of which Collateral Agent and Lenders hereby acknowledge;

 

(b)                                 Final Payment.  The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;

 

(c)                                  Prepayment Fee.  The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;

 

(d)                                 Lenders’ Expenses.  All Lenders’ Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.

 

(e)                                  Good Faith Deposit.  Borrower has paid Lenders a good faith deposit of Ten Thousand Dollars ($10,000.00).  The good faith deposit will be applied toward Lenders’ Expenses for the documentation and negotiation of this Agreement.  If the transaction is not approved, the good faith deposit will be refunded to Borrower.

 

2.6                               Withholding.  Payments received by the Lenders from Borrower hereunder will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority (including any interest, additions to tax or penalties applicable thereto).  Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to the Lenders, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority.  Borrower will, upon request, furnish the Lenders with proof reasonably satisfactory to the Lenders indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower.  The agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.

 

3

 

3.                                      CONDITIONS OF LOANS

 

3.1                               Conditions Precedent to Initial Credit Extension.  Each Lender’s obligation to make a Term  Loan is subject to the condition precedent that Collateral Agent and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and each Lender, such documents, and completion of such other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate, including, without limitation:

 

(a)                                 original Loan Documents, each duly executed by Borrower and each Subsidiary, as applicable;

 

(b)                                 the Warrants;

 

(c)                                  duly executed original Control Agreements with respect to any Collateral Accounts maintained by Borrower;

 

(d)                                 duly executed original Secured Promissory Notes in favor of each Lender according to its Term Loan Commitment Percentage;

 

(e)                                  the certificate(s) for the Shares (excluding any Shares of Selecta Russia), together with Assignment(s) Separate from Certificate, duly executed in blank;

 

(f)                                   the Operating Documents and good standing certificates of Borrower and its Subsidiaries certified by the Secretary of State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

 

(g)                                  a completed Perfection Certificate for Borrower and each of its Subsidiaries;

 

(h)                                 the Annual Projections, for the current calendar year;

 

(i)                                     duly executed original officer’s certificate for Borrower in a form acceptable to Collateral Agent and the Lenders;

 

(j)                                    certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

 

(k)                                 current financial statements, company prepared consolidated and consolidating balance sheets and income statements for the most recently ended month in accordance with Section 6.2, and such other updated financial information as Collateral Agent may reasonably request;

 

(l)                                     a current Compliance Certificate;

 

(m)                             a landlord’s consent executed in favor of Collateral Agent in respect of all of Borrower’s leased locations;

 

(n)                                 a bailee waiver executed in favor of Collateral Agent in respect of each third party bailee where Borrower maintains Collateral having a book value in excess of One Hundred Thousand Dollars ($100,000.00);

 

(o)                                 a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;

 

4

 

(p)                                 evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of the Lenders;

 

(q)                                 a copy of any applicable Registration Rights Agreement or Investors’ Rights Agreement and any amendments thereto; and

 

(r)                                    payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

 

3.2                               Conditions Precedent to all Credit Extensions.  The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

 

(a)                                 receipt by (i) the Lenders of an executed Disbursement Letter in the form of Exhibit B-1 attached hereto; and (ii) Bank of an executed Loan Advance/Paydown Request Form in the form of Exhibit B-2 attached hereto;

 

(b)                                 the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of the Disbursement Letter (and the Loan Advance/Paydown Request Form) and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 hereof are true, accurate and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;

 

(c)                                  in such Lender’s sole discretion, there has not been any Material Adverse Change or any material adverse deviation by Borrower from the Annual Projections of Borrower presented to and accepted by Collateral Agent and each Lender;

 

(d)                                 to the extent not delivered at the Effective Date, duly executed original Secured Promissory Notes and Warrants, in number, form and content acceptable to each Lender, and in favor of each Lender according to its Commitment Percentage, with respect to each Credit Extension made by such Lender after the Effective Date; and

 

(e)                                  payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

 

3.3                               Covenant to Deliver.  Borrower agrees to deliver to Collateral Agent and the Lenders each item required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension.  Borrower expressly agrees that a Credit Extension made prior to the receipt by Collateral Agent or any Lender of any such item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion.

 

3.4                               Procedures for Borrowing.  Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Eastern time three (3) Business Days prior to the date the Term Loan is to be made.  Together with any such electronic, facsimile or telephonic notification, Borrower shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter (and the Loan Advance/Paydown Request Form, with respect to Bank) executed by a Responsible Officer or his or her designee.  The Lenders may rely on any telephone notice given by a person whom

 

5

 

a Lender reasonably believes is a Responsible Officer or designee.  On the Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment.

 

4.                                      CREATION OF SECURITY INTEREST

 

4.1                               Grant of Security Interest.  Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.  Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien.  If Borrower shall acquire a commercial tort claim (as defined in the Code), Borrower, shall promptly notify Collateral Agent in a writing signed by Borrower, as the case may be, of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of the Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent.

 

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash.  Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower.

 

4.2                               Authorization to File Financing Statements.  Borrower hereby authorizes Collateral Agent to file financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights under the Loan Documents, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent under the Code.

 

4.3                               Pledge of Collateral.  Borrower hereby pledges, assigns and grants to Collateral Agent, for the ratable benefit of the Lenders, a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations.  On the Effective Date, or, to the extent not certificated as of the Effective Date, within ten (10) days of the certification of any Shares, the certificate or certificates for the Shares will be delivered to Collateral Agent, accompanied by an instrument of assignment duly executed in blank by Borrower.  To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares.  Upon the occurrence and during the continuance of an Event of Default hereunder, Collateral Agent may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Collateral Agent and cause new (as applicable) certificates representing such securities to be issued in the name of Collateral Agent or its transferee.  Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Collateral Agent may reasonably request to perfect or continue the perfection of Collateral Agent’s security interest in the Shares.  Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms.  All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.

 

6

 

5.                                      REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Collateral Agent and the Lenders as follows:

 

5.1                               Due Organization, Authorization: Power and Authority.  Borrower and each of its Subsidiaries is duly existing and in good standing as a Registered Organization in its jurisdictions of organization or formation and Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its businesses or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a Material Adverse Change.  In connection with this Agreement, Borrower and each of its Subsidiaries has delivered to Collateral Agent a completed perfection certificate signed by an officer of Borrower or such Subsidiary (each a “Perfection Certificate” and collectively, the “Perfection Certificates”).  Borrower represents and warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is that which is indicated on its respective Perfection Certificate and on the signature page of each Loan Document to which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the jurisdiction set forth on its respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth each of Borrower’s and its Subsidiaries’ organizational identification number or accurately states that Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately sets forth Borrower’s and each of its Subsidiaries’ place of business, or, if more than one, its chief executive office as well as Borrower’s and each of its Subsidiaries’ mailing address (if different than its chief executive office); (e) Borrower and each of its Subsidiaries (and each of its respective predecessors) have not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete (it being understood and agreed that Borrower and each of its Subsidiaries may from time to time update certain information in the Perfection Certificates (including the information set forth in clause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement); such updated Perfection Certificates subject to the review and approval of Collateral Agent.  If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one, Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number.

 

The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational documents, including its respective Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or such Subsidiary, or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which Borrower or any of such Subsidiaries, or their respective properties, is bound.  Neither Borrower nor any of its Subsidiaries is in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to have a Material Adverse Change.

 

5.2                               Collateral.

 

(a)                                 Borrower and each of its Subsidiaries have good title to, have rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and neither Borrower nor any of its Subsidiaries have any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other investment accounts, if any, described in the Perfection Certificates delivered to Collateral Agent in connection herewith with respect of which Borrower or such Subsidiary has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a perfected security interest therein as required by Section 6.6. The Accounts are bona fide, existing obligations of the Account Debtors.

 

(b)                                 On the Effective Date, and except as disclosed on the Perfection Certificate (i) the Collateral is not in the possession of any third party bailee (such as a warehouse), and (ii)  no such third party bailee possesses components of the Collateral in excess of One Hundred Thousand Dollars ($100,000.00).  None of the components of the Collateral shall be maintained at locations other than as disclosed in the Perfection Certificates on the Effective Date or as permitted pursuant to Section 6.11.

 

7

 

(c)                                  All Inventory is in all material respects of good and marketable quality, free from material defects.

 

(d)                                 Borrower and each of its Subsidiaries is the sole owner of the Intellectual Property each respectively purports to own, free and clear of all Liens other than Permitted Liens.  Except as noted on the Perfection Certificates, neither Borrower nor any of its Subsidiaries is a party to, nor is bound by, any material license or other material agreement with respect to which Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise restricts Borrower or its Subsidiaries from granting a security interest in Borrower’s or such Subsidiaries’ interest in such material license or material agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s or any Lender’s right to sell any Collateral.  Borrower shall provide written notice to Collateral Agent and each Lender within ten (10) days of Borrower or any of its Subsidiaries entering into or becoming bound by any license or agreement with respect to which Borrower or any Subsidiary is the licensee (other than over-the-counter software that is commercially available to the public).

 

5.3                               Litigation.  Except as disclosed (i) on the Perfection Certificates, or (ii) in accordance with Section 6.9 hereof, there are no actions, suits, investigations, or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than One Hundred Thousand Dollars ($100,000.00).

 

5.4                               No Material Deterioration in Financial Condition; Financial Statements.  All consolidated financial statements for Borrower and its Subsidiaries, delivered to Collateral Agent fairly present, in conformity with GAAP, in all material respects the consolidated financial condition of Borrower and its Subsidiaries, and the consolidated results of operations of Borrower and its Subsidiaries.  There has not been any material deterioration in the consolidated financial condition of Borrower and its Subsidiaries since the date of the most recent financial statements submitted to any Lender.

 

5.5                               Solvency.  Borrower and each of its Subsidiaries is Solvent.

 

5.6                               Regulatory Compliance.  Neither Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Neither Borrower nor any of its 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).  Borrower and each of its Subsidiaries has complied in all material respects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of its 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.  Neither Borrower nor any of its Subsidiaries has violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a Material Adverse Change.  Neither Borrower’s nor any of its Subsidiaries’ properties or assets has been used by Borrower or such Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws.  Borrower and each of its 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.

 

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its Subsidiaries’ 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.  None of Borrower, any of its Subsidiaries, or to the knowledge of Borrower, any of their 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.

 

5.7                               Investments.  Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership interests or other equity securities except for Permitted Investments.

 

8

 

5.8                               Tax Returns and Payments; Pension Contributions.  Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower and each of its Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower and such Subsidiaries, in all jurisdictions in which Borrower or any such Subsidiary is subject to taxes, including the United States, unless such taxes are being contested in accordance with the following sentence.  Borrower and each of its Subsidiaries, may defer payment of any contested taxes, provided that Borrower or such Subsidiary, (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, the proceedings, and (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.”  Neither Borrower nor any of its Subsidiaries is aware of any claims or adjustments proposed for any of Borrower’s or such Subsidiaries’ prior tax years which could result in additional taxes becoming due and payable by Borrower or its Subsidiaries.  Borrower and each of its Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and neither Borrower nor any of its Subsidiaries have withdrawn from participation in, and have not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.

 

5.9                               Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes.

 

5.10                        Shares.  Borrower has full power and authority to create a first lien on the Shares and no disability or contractual obligation exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement.  To Borrower’s knowledge, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares.  The Shares have been and will be duly authorized and validly issued, and are fully paid and non-assessable.  To Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.

 

5.11                        Full Disclosure.  No written representation, warranty or other statement of Borrower or any of its Subsidiaries in any certificate or written statement given to Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

 

5.12                        Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.

 

6.                                      AFFIRMATIVE COVENANTS

 

Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:

 

6.1                               Government Compliance.

 

(a)                                 Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of organization and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Change.  Comply with all laws, ordinances and regulations to which Borrower or any of its Subsidiaries is subject, the noncompliance with which could reasonably be expected to have a Material Adverse Change.

 

9

 

(b)                                 Obtain and keep in full force and effect, all of the material Governmental Approvals necessary for the performance by Borrower and its Subsidiaries of their respective businesses and obligations under the Loan Documents and the grant of a security interest to Collateral Agent for the ratable benefit of the Lenders, in all of the Collateral.  Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvals obtained by Borrower or any of its Subsidiaries.

 

6.2                               Financial Statements, Reports, Certificates.

 

(a)                                 Deliver to each Lender:

 

(i)                                     as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower and its Subsidiaries, together with aged listings by invoice date of accounts receivable and accounts payable, for such month certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent;

 

(ii)                                  as soon as available, but no later than one hundred ninety (190) days after the last day of Borrower’s fiscal year or within five (5) days of filing with the SEC, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion; provided that, an internally prepared consolidating trial balance statement shall be provided with the audited financial statements;

 

(iii)                               as soon as available after approval thereof by Borrower’s Board of Directors, but no later than ten (10) days after the last day of each of Borrower’s fiscal years, Borrower’s annual financial projections for the entire current fiscal year as approved by Borrower’s Board of Directors, which such annual financial projections shall be set forth in a month-by-month format and are consolidated with regards to Security Corp. (such annual financial projections as originally delivered to Collateral Agent and the Lenders are referred to herein as the “Annual Projections”; provided that, any revisions of the Annual Projections approved by Borrower’s Board of Directors shall be delivered to Collateral Agent and the Lenders no later than seven (7) days after such approval);

 

(iv)                              within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or holders of Subordinated Debt;

 

(v)                                 in the event that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission,

 

(vi)                              prompt notice of any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries, together with any copies reflecting such amendments or changes with respect thereto;

 

(vii)                           prompt notice of any event that could reasonably be expected to materially and adversely affect the value of the Intellectual Property;

 

(viii)                        as soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-end account statements for each Collateral Account maintained by Borrower or its Subsidiaries, which statements may be provided to Collateral Agent and each Lender by Borrower or directly from the applicable institution(s), and

 

(ix)                              other information as reasonably requested by Collateral Agent or any Lender.

 

Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so

 

10

 

delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address.

 

(b)                                 Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) days after the last day of each month, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.

 

(c)                                  Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities.  Borrower shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of Borrower, Collateral Agent or any Lender, during regular business hours upon reasonable prior notice (provided that no notice shall be required when an Event of Default has occurred and is continuing), to visit and inspect any of its properties, to examine and make abstracts or copies from any of its books and records, and to conduct a collateral audit and analysis of its operations and the Collateral.  Such audits shall be conducted no more often than twice every year unless (and more frequently if) an Event of Default has occurred and is continuing.

 

(d)                                 Deliver to Collateral Agent and Alexandria Real Estate, as soon as available, but no later than (i) thirty (30) days after the end of each fiscal quarter and (ii) thirty (30) days after the last day of each month in which Borrower has delivered in excess of One Hundred Thousand Dollars ($100,000.00) worth of new Collateral to the property located at the ARE Leased Location, an updated, fully comprehensive, Exhibit A to the landlord lien waiver among Alexandria Real Estate, Borrower and Collateral Agent.

 

6.3                               Inventory; Returns.  Keep all Inventory in good and marketable condition, free from material defects.  Returns and allowances between Borrower, or any of its Subsidiaries, and their respective Account Debtors shall follow Borrower’s, or such Subsidiary’s, customary practices as they exist at the Effective Date.  Borrower must promptly notify Collateral Agent and the Lenders of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000.00) individually or in the aggregate in any calendar year.

 

6.4                               Taxes; Pensions.  Timely file and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower or its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with the terms of such plans.

 

6.5                               Insurance.  Keep Borrower’s and its Subsidiaries’ business and the Collateral insured for risks and in amounts standard for companies in Borrower’s and its Subsidiaries’ industry and location and as Collateral Agent may reasonably request.  Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent and Lenders.  All property policies shall have a lender’s loss payable endorsement showing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies shall show, or have endorsements showing, Collateral Agent, as additional insured.  The Collateral Agent shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Collateral Agent, that it will give the Collateral Agent thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled.  At Collateral Agent’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments.  Proceeds payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations.  Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Five Hundred Thousand Dollars ($500,000.00) with respect to any loss, but not exceeding Five Hundred Thousand Dollars ($500,000.00), in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the

 

11

 

Obligations.  If Borrower or any of its Subsidiaries fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons, Collateral Agent and/or any Lender may make, at Borrower’s expense, all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent or such Lender deems prudent.

 

6.6                               Operating Accounts.

 

(a)                                 Except for Collateral Accounts maintained by Selecta Russia and Security Corp., maintain all Collateral Accounts with Bank or its Affiliates; in each case, in accounts which are subject to a Control Agreement in favor of Collateral Agent.

 

(b)                                 Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower or any of its Subsidiaries establishes any Collateral Account at or with any Person other than Bank or its Affiliates.  In addition, for each Collateral Account that Borrower or any of its Subsidiaries, at any time maintains, Borrower or such Subsidiary shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with the terms hereunder prior to the establishment of such Collateral Account, which Control Agreement may not be terminated without prior written consent of Collateral Agent.  The provisions of the previous sentence shall not apply to deposit accounts (i) exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s, or any of its Subsidiaries’, employees and identified to Collateral Agent by Borrower as such in the Perfection Certificates or (ii) maintained by Selecta Russia or Security Corp.

 

(c)                                  Neither Borrower nor any of its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts maintained in accordance with Sections 6.6(a) and (b).

 

(d)                                 Notwithstanding anything to the contrary in this Section 6.6, Borrower shall at all times maintain unrestricted cash in an account with Bank subject to a Control Agreement in favor of Collateral Agent that is equal to or greater than the lesser of (i) one hundred five percent (105%) of the principal amount of all outstanding Credit Extensions or (ii) one hundred percent (100%) of the aggregate unrestricted cash and Cash Equivalents of Borrower and Security Corp.  In addition, Security Corp. shall maintain all of its Collateral Accounts with Bank or Bank’s Affiliates.

 

6.7                               Protection of Intellectual Property Rights.  Borrower and each of its Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend and maintain the validity and enforceability of its Intellectual Property that is material to Borrower’s business; (b) promptly advise Collateral Agent in writing of material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Collateral Agent’s prior written consent.

 

6.8                               Litigation Cooperation.  Commencing on the Effective Date and continuing through the termination of this Agreement, make available to Collateral Agent and the Lenders, without expense to Collateral Agent or the Lenders, Borrower and each of Borrower’s officers, employees and agents and Borrower’s Books, to the extent that Collateral Agent or any Lender may reasonably deem them necessary to prosecute or defend any third-party suit or proceeding instituted by or against Collateral Agent or any Lender with respect to any Collateral or relating to Borrower.

 

6.9                               Notices of Litigation and Default.  Borrower will give prompt written notice to Collateral Agent and the Lenders of any litigation or governmental proceedings pending or threatened (in writing) against Borrower or any of its Subsidiaries, which could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of One Hundred Thousand Dollars ($100,000.00) or more or which could reasonably be expected to have a Material Adverse Change.  Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Collateral Agent and the Lenders of such

 

12

 

occurrence, which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

 

6.10                        Intentionally Omitted.

 

6.11                        Landlord Waivers; Bailee Waivers.  In the event that Borrower or any of its Subsidiaries, after the Effective Date, intends to add any new offices or business locations, including warehouses, or otherwise store any portion of the Collateral with, or deliver any portion of the Collateral to, a bailee, in each case pursuant to Section 7.2, then Borrower or such Subsidiary will first receive the written consent of Collateral Agent and, in the event that the Collateral at any new location is valued in excess of One Hundred Thousand ($100,000.00) in the aggregate, such bailee or landlord, as applicable, must execute and deliver a bailee waiver or landlord waiver, as applicable, in form and substance reasonably satisfactory to Collateral Agent prior to the addition of any new offices or business locations, or any such storage with or delivery to any such bailee, as the case may be.

 

6.12                        Creation/Acquisition of Subsidiaries.  In the event Borrower, or any of its Subsidiaries creates or acquires any Subsidiary, Borrower shall provide prior written notice to Collateral Agent and each Lender of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Collateral Agent or any Lender to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant and pledge to Collateral Agent, for the ratable benefit of the Lenders, a perfected security interest in the Shares of each such newly created Subsidiary.

 

6.13                        Further Assurances.

 

(a)                                 Execute any further instruments and take further action as Collateral Agent or any Lender reasonably requests to perfect or continue Collateral Agent’s Lien in the Collateral or to effect the purposes of this Agreement.

 

(b)                                 Deliver to Collateral Agent and Lenders, within five (5) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals material to Borrower’s business or otherwise could reasonably be expected to have a Material Adverse Change.

 

7.                                      NEGATIVE COVENANTS

 

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior written consent of the Required Lenders:

 

7.1                               Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn out or obsolete Equipment; and (c) in connection with Permitted Liens, Permitted Investments and Permitted Licenses.

 

7.2                               Changes in Business, Management, Ownership, or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses engaged in by Borrower as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the management of Borrower unless written notice thereof is provided to Collateral Agent within five (5) days of such change, or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public equity or to venture capital investors so long as Borrower identifies to Collateral Agent the venture capital investors prior to the closing of the transaction).  Borrower shall not, without at least thirty (30) days’ prior written notice to Collateral Agent: (A) add any new offices or business locations, including warehouses

 

13

 

(unless such new offices or business locations contain less than One Hundred Thousand Dollars ($100,000.00) in assets or property of Borrower or any of its Subsidiaries); (B) change its jurisdiction of organization, (C) change its organizational structure or type, (D) change its legal name, or (E) change any organizational number (if any) assigned by its jurisdiction of organization.

 

7.3                               Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary (provided such surviving Subsidiary is a “co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s Obligations hereunder) or with (or into) Borrower provided Borrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom.  Without limiting the foregoing, Borrower shall not, without Collateral Agent’s prior written consent, enter into any binding contractual arrangement with any Person to attempt to facilitate a merger or acquisition of Borrower, unless (i) no Event of Default exists when such agreement is entered into by Borrower, (ii) such agreement does not give such Person the right to claim any fees, payments or damages from Borrower in excess of Two Hundred Fifty Thousand Dollars ($250,000.00), and (iii) Borrower notifies Collateral Agent in advance of entering into such an agreement.

 

7.4                               Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5                               Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein (except for Permitted Liens that are permitted by the terms of this Agreement to have priority over Collateral Agent’s Lien), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent, for the ratable benefit of the Lenders) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.

 

7.6                               Maintenance of Collateral Accounts.  Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.

 

7.7                               Distributions; Investments. (a) Pay any dividends (other than dividends payable solely in capital stock) or make any distribution or payment in respect of or redeem, retire or purchase any capital stock (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, provided such repurchases do not exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate per fiscal year) or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.

 

7.8                               Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower or any of its Subsidiaries, except for (a) transactions that are in the ordinary course of Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that are no less favorable to Borrower or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person, and (b) Subordinated Debt or equity investments by Borrower’s investors in Borrower or its Subsidiaries.

 

7.9                               Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to the Lenders.

 

7.10                        Compliance.  Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to

 

14

 

occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower or any of its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.

 

7.11                        Compliance with Anti-Terrorism Laws.  Collateral Agent hereby notifies Borrower and each of its Subsidiaries that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and each of its Subsidiaries and their principals, which information includes the name and address of Borrower and each of its Subsidiaries and their principals and such other information that will allow Collateral Agent to identify such party in accordance with Anti-Terrorism Laws.  Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists.  Borrower and each of its Subsidiaries shall immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering.  Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

7.12                        Payments to Subsidiaries.  Notwithstanding anything to the contrary contained herein, make any payment or Transfer to Selecta Russia or Security Corp. except for payments or Transfers that meet the requirements of subsection (f) or subsection (k) of the definition of “Permitted Investments”.

 

8.                                      EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:

 

8.1                               Payment Default.  Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof).  During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);

 

8.2                               Covenant Default.

 

(a)                                 Borrower or any of its Subsidiaries fails or neglects to perform any obligation in Section 6 or Borrower violates any covenant in Section 7; or

 

(b)                                 Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not

 

15

 

be deemed an Event of Default (but no Credit Extensions shall be made during such cure period).  Grace periods provided under this Section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above;

 

8.3                               Material Adverse Change.  A Material Adverse Change occurs;

 

8.4                               Attachment; Levy; Restraint on Business.

 

(a)                                 (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or any of its Subsidiaries or of any entity under control of Borrower or its Subsidiaries on deposit with any Lender or any Lender’s Affiliate or any bank or other institution at which Borrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against Borrower or any of its Subsidiaries or their respective assets by any government agency, 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 Credit Extensions shall be made during any ten (10) day cure period; and

 

(b)                                 (i) any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or any of its Subsidiaries from conducting any part of its business;

 

8.5                               Insolvency.  (a) Borrower or any of its Subsidiaries is or becomes Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent and/or until any Insolvency Proceeding is dismissed);

 

8.6                               Other Agreements.  There is a default in any agreement to which Borrower or any of its Subsidiaries is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of One Hundred Thousand Dollars ($100,000.00) or that could reasonably be expected to have a Material Adverse Change;

 

8.7                               Judgments.  One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Thousand Dollars ($100,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any of its Subsidiaries and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);

 

8.8                               Misrepresentations.  Borrower or any of its Subsidiaries or any Person acting for Borrower or any of its Subsidiaries makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

 

8.9                               Subordinated Debt.  A default or breach occurs under any agreement between Borrower or any of its Subsidiaries and any creditor of Borrower or any of its Subsidiaries that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with Collateral Agent or the Lenders breaches any terms of such agreement;

 

8.10                        Guaranty.  (a) Any Guaranty terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any Guaranty; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the liquidation, winding up, or termination of existence of any Guarantor;

 

8.11                        Governmental Approvals.  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

 

16

 

revocation, rescission, suspension, modification or non-renewal has resulted in or could reasonably be expected to result in a Material Adverse Change; or

 

8.12                        Lien Priority.  Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfected Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens which are permitted to have priority in accordance with the terms of this Agreement.

 

9.                                      RIGHTS AND REMEDIES

 

9.1                               Rights and Remedies.

 

(a)                                 Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, and at the written direction of Required Lenders shall, without notice or demand, do any or all of the following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall be immediately due and payable without any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders shall be immediately terminated without any action by Collateral Agent or the Lenders).

 

(b)                                 Without limiting the rights of Collateral Agent and the Lenders set forth in Section 9.1(a) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

 

(i)                                     foreclose upon and/or sell or otherwise liquidate, the Collateral;

 

(ii)                                  apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or

 

(iii)                               commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.

 

(c)                                  Without limiting the rights of Collateral Agent and the Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

 

(i)                                     settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;

 

(ii)                                  make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.  Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agent reasonably designates.  Collateral Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Collateral Agent a license to enter and occupy any of its premises, without charge, to exercise any of Collateral Agent’s rights or remedies;

 

(iii)                               ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral.  Collateral Agent is hereby granted a non-exclusive, royalty-free license or other

 

17

 

right to use, without charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Collateral Agent’s exercise of its rights under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under all licenses and all franchise agreements inure to Collateral Agent, for the benefit of the Lenders;

 

(iv)                              place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

 

(v)                                 demand and receive possession of Borrower’s Books;

 

(vi)                              appoint a receiver to seize, manage and realize any of the Collateral, and such receiver shall have any right and authority as any competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business of Borrower or any of its Subsidiaries; and

 

(vii)                           subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

 

Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence and during the continuance of any Event of Default, Collateral Agent shall have the right to exercise any and all remedies referenced in this Section 9.1 without the written consent of Required Lenders following the occurrence of an Exigent Circumstance.  As used in the immediately preceding sentence, “Exigent Circumstance” means any event or circumstance that, in the reasonable judgment of Collateral Agent, imminently threatens the ability of Collateral Agent to realize upon all or any material portion of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of Borrower or any of its Subsidiaries after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral Agent, could reasonably be expected to result in a material diminution in value of the Collateral.

 

9.2                               Power of Attorney.  Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s or any of its Subsidiaries’ names on any checks or other forms of payment or security; (b) sign Borrower’s or any of its Subsidiaries’ names on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Collateral Agent or a third party as the Code or any applicable law permits.  Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign Borrower’s or any of its Subsidiaries’ name on any documents necessary to perfect or continue the perfection of Collateral Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations) have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to make Credit Extensions hereunder.  Collateral Agent’s foregoing appointment as Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Collateral Agent’s and the Lenders’ obligation to provide Credit Extensions terminates.

 

9.3                               Protective Payments.  If Borrower or any of its Subsidiaries fail to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower or any of its Subsidiaries is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate, and secured by the Collateral.  Collateral Agent will make reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance or

 

18

 

making such payment at the time it is obtained or paid or within a reasonable time thereafter.  No such payments by Collateral Agent are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Event of Default.

 

9.4                               Application of Payments and Proceeds.  Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a) Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Collateral Agent from or on behalf of Borrower or any of its Subsidiaries of all or any part of the Obligations, and, as between Borrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any other indebtedness or obligations of Borrower owing to Collateral Agent or any Lender under the Loan Documents.  Any balance remaining shall be delivered to Borrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct.  In carrying out the foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category.  Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise.  Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment of each Lender’s portion of any Term Loan and the ratable distribution of interest, fees and reimbursements paid or made by Borrower.  Notwithstanding the foregoing, a Lender receiving a scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided, however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent.  If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to the payments of amounts due on the other Lenders’ claims.  To the extent any payment for the account of Borrower is required to be returned as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis.  If any Lender shall obtain possession of any Collateral, it shall hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.

 

9.5                               Liability for Collateral.  So long as Collateral Agent and the Lenders comply with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage or destruction of the Collateral.

 

9.6                               No Waiver; Remedies Cumulative.  Failure by Collateral Agent or any Lender, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent or any Lender thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by Collateral Agent and the Required Lenders and then is only effective for the specific instance and purpose for which it is given.  The rights and remedies of Collateral Agent and the Lenders under this Agreement and the other Loan Documents are cumulative.  Collateral Agent and the Lenders have all rights and remedies provided under the Code, any applicable law, by law, or in equity.  The exercise by Collateral Agent or any Lender of one right or remedy is not an election, and Collateral Agent’s or any Lender’s waiver of any Event of Default is not a continuing waiver.  Collateral Agent’s or any Lender’s delay in exercising any remedy is not a waiver, election, or acquiescence.

 

19

 

9.7                               Demand Waiver.  Borrower waives, to the fullest extent permitted by law, 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 Collateral Agent or any Lender on which Borrower or any Subsidiary is liable.

 

10.                               NOTICES

 

All notices, consents, requests, approvals, demands, or other communication (collectively, “Communication”) by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.  Any of Collateral Agent, Lender or Borrower may change its mailing address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

 

	
If to Borrower:
    	
 
    	
SELECTA BIOSCIENCES, INC.
   480 Arsenal St., Bldg. 1
   Watertown, MA 02472
   Attn: David Siewers, CFO
   Fax: (617) 924-3454
   Email: dsiewers@selectbio.com
    
	
 
    	
 
    	
 
    
	
If to Collateral Agent:
    	
 
    	
OXFORD FINANCE LLC
   133 North Fairfax Street
   Alexandria, Virginia 22314
   Attention: Legal Department
   Fax: (703) 519-5225
   Email: LegalDepartment@oxfordfinance.com
    
	
 
    	
 
    	
 
    
	
with a copy to
    	
 
    	
PACIFIC WESTERN BANK
   406 Blackwell Street, Suite 240
   Durham, North Carolina 27701
   Attn: Loan Operations Manager
   and Phil Gager
   FAX: (919) 314-3080
    
	
 
    	
 
    	
 
    
	
with a copy (which shall not constitute notice) to:
    	
 
    	
DLA Piper LLP (US)
   4365 Executive Drive, Suite 1100
   San Diego, California 92121-2133
   Attn: Troy Zander
   Fax: (858) 638-5086
   Email: troy.zander@dlapiper.com
    

 

11.                               CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

 

California law governs the Loan Documents without regard to principles of conflicts of law.  Borrower, Collateral Agent and each Lender each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Collateral Agent or any Lender from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Collateral Agent or any Lender.  Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such

 

20

 

legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court.  The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive.  The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers.  All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief.  The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings.  The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings.  The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge.  The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a).  Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

12.                               GENERAL PROVISIONS

 

12.1                        Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  Borrower may not transfer, pledge or assign this Agreement or any rights or obligations under it without Collateral Agent’s and each Lender’s prior written consent (which may be granted or withheld in Collateral Agent’s and each Lender’s discretion, subject to Section 12.6).  The Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation in (any such sale, transfer, assignment, negotiation, or grant of a participation, a “Lender Transfer”) all or any part of, or any interest in, the Lenders’ obligations, rights, and benefits under this Agreement and the other Loan Documents; provided, however, that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (such approved assignee, an “Approved Lender”).  Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee or Approved Lender as Collateral

 

21

 

Agent reasonably shall require.  Notwithstanding anything to the contrary contained herein, so long as no Event of Default has occurred and is continuing, no Lender Transfer (other than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with (x) assignments by a Lender due to a forced divestiture at the request of any regulatory agency; or (y) upon the occurrence of a default, event of default or similar occurrence with respect to a Lender’s own financing or securitization transactions) shall be permitted, without Borrower’s consent, to any Person which is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.

 

12.2                        Indemnification.  Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or the Lenders (each, an “Indemnified Person”) harmless against:  (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by Indemnified Person in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents between Collateral Agent, and/or the Lenders and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.  Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds except for liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified Person’s gross negligence or willful misconduct.

 

12.3                        Time of Essence.  Time is of the essence for the performance of all Obligations in this Agreement.

 

12.4                        Severability of Provisions.  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

 

12.5                        Correction of Loan Documents.  Collateral Agent and the Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.

 

12.6                        Amendments in Writing; Integration.   No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, or any consent to any departure by Borrower or any of its Subsidiaries therefrom, shall in any event be effective unless the same shall be in writing and signed by Borrower, Collateral Agent and the Required Lenders provided that:

 

(i)                                     no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;

 

(ii)                                  no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;

 

(iii)                               no such amendment, waiver or other modification shall, unless signed by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Term Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Term Loan (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on any Term Loan (other than default interest) or any fees provided for hereunder (other than late charges or

 

22

 

for any termination of any commitment); (C) change the definition of the term “Required Lenders” or the percentage of Lenders which shall be required for the Lenders to take any action hereunder; (D) release all or substantially all of any material portion of the Collateral, authorize Borrower to sell or otherwise dispose of all or substantially all or any material portion of the Collateral or release any Guarantor of all or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement or the other Loan Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by Borrower of any of its rights and obligations under any Loan Document or release Borrower of its payment obligations under any Loan Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amend any of the provisions of Section 12.10.  It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;

 

(iv)                              the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.

 

(b)                                 Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if requested by the Required Lenders, from time to time designate covenants in this Agreement less restrictive by notification to a representative of Borrower.

 

(c)                                  This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

 

12.7                        Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

 

12.8                        Survival.  All covenants, representations and warranties made in this Agreement continue in full force and effect until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied.  The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

 

12.9                        Confidentiality.  In handling any confidential information of Borrower, the Lenders and Collateral Agent shall exercise the same degree of care that it exercises for their own proprietary information, but disclosure of information may be made: (a) subject to the terms and conditions of this Agreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection with a Lender’s own financing or securitization transactions and upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any interest in the Credit Extensions (provided, however, the Lenders and Collateral Agent shall, except upon the occurrence and during the continuance of an Event of Default, obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision or to similar confidentiality terms); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s regulators or as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers appropriate in exercising remedies under the Loan Documents; and (f) to third party service providers of the Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with the Lenders and Collateral Agent

 

23

 

with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s possession when disclosed to the Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing the information.  Collateral Agent and the Lenders may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis.  The provisions of the immediately preceding sentence shall survive the termination of this Agreement.  The agreements provided under this Section 12.9 supersede all prior agreements, understanding, representations, warranties, and negotiations between the parties about the subject matter of this Section 12.9.

 

12.10                 Right of Set Off.  Borrower hereby grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control of Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in transit to any of them.  At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or the Lenders may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.11                 Pacific Western Bank as Agent.  Collateral Agent hereby appoints Bank as its agent (and Bank hereby accepts such appointment) for the purpose of perfecting Collateral Agent’s Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be perfected by possession or control, including without limitation, all Deposit Accounts maintained at Bank.

 

12.12                 Cooperation of Borrower.  If necessary, Borrower agrees to (i) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to an assignee in accordance with Section 12.1, (ii) make Borrower’s management available to meet with Collateral Agent and prospective participants and assignees of Term Loan Commitments or Credit Extensions (which meetings shall be conducted no more often than twice every twelve months unless an Event of Default has occurred and is continuing), and (iii) assist Collateral Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any prospective participant or assignee of a Term Loan Commitment or Term Loan reasonably may request. Subject to the provisions of Section 12.9, Borrower authorizes each Lender to disclose to any prospective participant or assignee of a Term Loan Commitment, any and all information in such Lender’s possession concerning Borrower and its financial affairs which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of Borrower in connection with such Lender’s credit evaluation of Borrower prior to entering into this Agreement.

 

12.13                 Effect of Amendment and Restatement.  Except as otherwise set forth herein, this Agreement is intended to and does completely amend and restate, without novation, the Original Agreement.  All security interests granted under the Original Agreement are hereby confirmed and ratified and shall continue to secure all Obligations under this Agreement.

 

13.                               DEFINITIONS

 

13.1                        Definitions.  As used in this Agreement, the following terms have the following meanings:

 

“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

 

24

 

“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

 

“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive  officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Alexandria Real Estate” means ARE-480 Arsenal Street, LLC.

 

“Amortization Date” is, February 1, 2017.

 

“Annual Projections” is defined in Section 6.2(a).

 

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering, including 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.

 

“Approved Fund” is any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of the preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

 

“Approved Lender” is defined in Section 12.1.

 

“ARE Leased Location” means 480 Arsenal St., Bldg 1, Watertown, Massachusetts 02472.

 

“Bank” is defined in the preamble hereof.

 

“Basic Rate” is, with respect to a Term Loan, the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the greater of (i) eight percent (8.00%) and (ii) the sum of (a) the thirty (30) day U.S. LIBOR rate reported in the Wall Street Journal five (5) Business Days prior to the Funding Date of such Term Loan, plus (b) seven and sixty-eight hundredths percent (7.68%).

 

“Blocked Person” is any Person:  (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person 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) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.

 

“Borrower” is defined in the preamble hereof.

 

“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, and state tax returns, records regarding Borrower’s or its 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” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.

 

25

 

“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c) certificates of deposit maturing no more than one (1) year after issue provided that the account in which any such certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent.  For the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities, or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower or any of its Subsidiaries shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this Agreement governing Permitted Investments.  Notwithstanding the foregoing, Cash Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing, purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security (each, an “Auction Rate Security”).

 

“Claims” are defined in Section 12.2.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, 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, Collateral Agent’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

 

“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account, or any other bank account maintained by Borrower or any Subsidiary at any time.

 

“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders.

 

“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to time.

 

“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Communication” is defined in Section 10.

 

“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit C.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably

 

26

 

anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository institution at which Borrower or any of its Subsidiaries maintains a Deposit Account or the securities intermediary or commodity  intermediary at which Borrower or any of its Subsidiaries maintains a Securities Account or a Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant to which Collateral Agent obtains control (within the meaning of the Code) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account.

 

“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.

 

“Credit Extension” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.

 

“Default Rate” is defined in Section 2.3(b).

 

“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Designated Deposit Account” is Borrower’s deposit account, account number 7020179, maintained with Bank.

 

“Disbursement Letter” is that certain form attached hereto as Exhibit B-1.

 

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

 

“Effective Date” is defined in the preamble of this Agreement.

 

“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of Five Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has occurred and is continuing, (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.  Notwithstanding the foregoing, (x) in connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean 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 Eligible Assignee shall mean 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 Collateral Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Collateral Agent reasonably shall require.

 

27

 

“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.

 

“Event of Default” is defined in Section 8.

 

“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to the Term Loan Commitments multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.

 

“Final Payment Percentage” is six percent (6.00%).

 

“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.

 

“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.

 

“General Intangibles” are all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is 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” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

 

“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.

 

“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.2.

 

28

 

“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Insolvent” means not Solvent.

 

“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title and interest in and to the following:

 

(a)                                 its Copyrights, Trademarks and Patents;

 

(b)                                 any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c)                                  any and all source code;

 

(d)                                 any and all design rights which may be available to Borrower;

 

(e)                                  any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and

 

(f)                                   all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

 

“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance, or capital contribution to any Person.

 

“Key Person” is each of Borrower’s (i) Chief Executive Officer and General Director, who is Werner Cautreels as of the Effective Date, (ii) Chief Financial Officer and Treasurer, who is David Siewers as of the Effective Date and (iii) Takashi Kei Kishimoto, Ph.D as of the Effective Date.

 

“Lender” is any one of the Lenders.

 

“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.

 

“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent and/or the Lenders in connection with the Loan Documents.

 

“License Agreement” means that certain Intellectual Property License Agreement, by and between Borrower and Selecta Russia, dated as of November 7, 2011, as in effect on the date of the Original Agreement.

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

 

29

 

“Loan Advance/Paydown Request Form” is that certain form attached hereto as Exhibit B-2.

 

“Loan Documents” are, collectively, this Agreement, the Warrants, the Perfection Certificates, each Compliance Certificate, each Disbursement Letter, each Loan Advance/Paydown Request Form, any subordination agreements, any note, or notes or guaranties executed by Borrower or any other Person, and any other present or future agreement entered into by Borrower, any Guarantor or any other Person for the benefit of the Lenders and Collateral Agent in connection with this Agreement; all as amended, restated, or otherwise modified.

 

“Material Adverse Change” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations or condition (financial or otherwise) of Borrower or any Subsidiary; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Maturity Date” is July 1, 2019.

 

“New Term Loan” is defined in Section 2.2(a)(ii).

 

“Obligations” are all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes the Lenders now or later, in connection with, related to, following, or arising from, out of or under, this Agreement or, the other Loan Documents (other than the Warrants), or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents (other than the Warrants).

 

“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” are, 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.

 

“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (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.

 

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

“Payment Date” is the first (1st) calendar day of each calendar month, commencing on February 1, 2016.

 

“Perfection Certificate” and “Perfection Certificates” is defined in Section 5.1.

 

“Permitted Indebtedness” is:

 

(a)                                 Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents;

 

(b)                                 Indebtedness existing on the Effective Date and disclosed on the Perfection Certificate(s);

 

(c)                                  Subordinated Debt;

 

30

 

(d)                                 unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

 

(e)                                  Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to finance the acquisition, repair, improvement or construction of fixed or capital assets of such person, provided that (i) the aggregate outstanding principal amount of all such Indebtedness does not exceed One Hundred Thousand Dollars ($100,000.00) at any time and (ii) the principal amount of such Indebtedness does not exceed the lower of the cost or fair market value of the property so acquired or built or of such repairs or improvements financed with such Indebtedness (each measured at the time of such acquisition, repair, improvement or construction is made);

 

(f)                                   Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business; and

 

(g)                                  extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (e) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower, or its Subsidiary, as the case may be.

 

“Permitted Investments” are:

 

(a)                                 Investments disclosed on the Perfection Certificate(s) and existing on the Effective Date;

 

(b)                                 (i) Investments consisting of cash and Cash Equivalents, and (ii) any other Investments permitted by Borrower’s investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved in writing by Collateral Agent;

 

(c)                                  Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

 

(d)                                 Investments consisting of deposit accounts in which Collateral Agent has a perfected security interest;

 

(e)                                  Investments in connection with Transfers permitted by Section 7.1;

 

(f)                                   Investments by Borrower in Selecta Russia (i) consisting of payments or Investments made by Borrower to Selecta Russia pursuant to the terms of Section 4.1 of the License Agreement and (ii) payments or Investments by Borrower to Selecta Russia from the proceeds of Borrower’s sale of Series SRN Preferred in accordance with the terms of the Stock Investment Agreement;

 

(g)                                  Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; not to exceed Twenty Five Thousand Dollars ($25,000.00) in the aggregate for (i) and (ii) in any fiscal year;

 

(h)                                 Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

 

(i)                                     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 paragraph (i) shall not apply to Investments of Borrower in any Subsidiary;

 

31

 

(j)                                    non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support; and

 

(k)                                 Investments in Security Corp., provided that Borrower maintains, prior to and immediately after making such Investments, unrestricted cash in an account subject to a Control Agreement in favor of Collateral Agent that is equal to or greater than the lesser of (i) one hundred five percent (105%) of the principal amount of all outstanding Credit Extensions or (ii) one hundred percent (100%) of the aggregate unrestricted cash and Cash Equivalents of Borrower and Security Corp.

 

“Permitted Licenses” are (A) licenses of over-the-counter software that is commercially available to the public, and (B) non-exclusive and exclusive licenses for the use of the Intellectual Property of Borrower or any of its Subsidiaries entered into in the ordinary course of business, provided, that, with respect to each such license described in clause (B), (i) no Event of Default has occurred or is continuing at the time of such license; (ii) the license constitutes an arms-length transaction, the terms of which, on their face, do not provide for a sale or assignment of any Intellectual Property and do not restrict the ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security interest in or lien on, or assign or otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive license, (x) Borrower delivers ten (10) days’ prior written notice and a brief summary of the terms of the proposed license to Collateral Agent and the Lenders and delivers to Collateral Agent and the Lenders copies of the final executed licensing documents in connection with the exclusive license promptly upon consummation thereof, and (y) any such license could not result in a legal transfer of title of the licensed property but may be exclusive in respects other than territory and may be exclusive as to territory only as to discrete geographical areas outside of the United States and the European Union; and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing agreement that are payable to Borrower or any of its Subsidiaries are paid to a Deposit Account that is governed by a Control Agreement.

 

“Permitted Liens” are:

 

(a)                                 Liens existing on the Effective Date and disclosed on the Perfection Certificates or  arising under this Agreement and the other Loan Documents;

 

(b)                                 Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)                                  liens securing Indebtedness permitted under clause (e) of the definition of “Permitted Indebtedness,” provided that (i) such liens exist prior to the acquisition of, or attach substantially simultaneous with, or within twenty (20) days after the, acquisition, lease, repair, improvement or construction of, such property financed or leased by such Indebtedness and (ii) such liens do not extend to any property of Borrower other than the property (and proceeds thereof) acquired, leased or built, or the improvements or repairs, financed by such Indebtedness;

 

(d)                                 Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, and, unless such locations are subject to a bailee waiver in form and substance reasonably satisfactory to Collateral Agent, securing liabilities in the aggregate amount not to exceed Fifty Thousand Dollars ($50,000.00), and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

 

(e)                                  Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

 

32

 

(f)                                   Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

 

(g)                                  leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Collateral Agent or any Lender a security interest therein;

 

(h)                                 banker’s liens, rights of setoff and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with Borrower’s deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar costs and expenses and provided such accounts are maintained in compliance with Section 6.6(b) hereof;

 

(i)                                     Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7; and

 

(j)                                    Liens consisting of Permitted Licenses.

 

“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

 

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:

 

(i)                                     for a prepayment made on or after the Effective Date through and including the first anniversary of the Effective Date, three percent (3.00%) of the principal amount of such Term Loan prepaid;

 

(ii)                                  for a prepayment made after the date which is after the first anniversary of the Effective Date through and including the second anniversary of the Effective Date, two percent (2.00%) of the principal amount of such Term Loan prepaid; and

 

(iii)                               for a prepayment made after the date which is after the second anniversary of the Effective Date and prior to the Maturity Date, one percent (1.00%) of the principal amount of such Term Loan prepaid.

 

“Pro Rata Share” is, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of Term Loans held by such Lender by the aggregate outstanding principal amount of all Term Loans.

 

“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

 

“Required Lenders” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “Original Lender”) have not assigned or transferred any of their interests in their Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding at least sixty six percent (66%) of the aggregate outstanding principal balance of the Term Loan and, in respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any portion of its Term Loan, (B) each assignee or transferee of an Original Lender’s interest in the Term Loan, but only to the extent that such assignee or transferee is an Affiliate or Approved Fund of such Original Lender, and (C) any Person providing financing to any

 

33

 

Person described in clauses (A) and (B) above; provided, however, that this clause (C) shall only apply upon the occurrence of a default, event of default or similar occurrence with respect to such financing.

 

“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Responsible Officer” is any of the President, Chief Executive Officer, or Chief Financial Officer of Borrower acting alone.

 

“Secured Promissory Note” is defined in Section 2.4.

 

“Secured Promissory Note Record” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lender and credits made thereto.

 

“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

 

“Security Corp.” means Selecta Biosciences Security Corporation, a Massachusetts corporation.

 

“Selecta Russia” means Selecta (RUS) LLC, a limited liability company organized under the laws of Russia.

 

“Series SRN Preferred” has the meaning as defined in the Stock Investment Agreement.

 

“Shares” is one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower or Borrower’s Subsidiary, in any Subsidiary.

 

“Solvent” is, with respect to any Person: the fair salable value of such Person’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of such Person’s liabilities; such Person is not left with unreasonably small capital after the transactions in this Agreement; and such Person is able to pay its debts (including trade debts) as they mature.

 

“Stock Investment Agreement” means that certain Series D Preferred Stock Investment Agreement and Series SRN Preferred Stock Investment Agreement, by and among Borrower and the persons and entities listed on Schedule 1A thereto and/or Schedule 1B thereto, dated as of October 27, 2011, as in effect on the Effective Date.

 

“Subordinated Debt” is indebtedness incurred by Borrower or any of its Subsidiaries subordinated to all Indebtedness of Borrower and/or its Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent and the Lenders entered into between Collateral Agent, Borrower, and/or any of its Subsidiaries, and the other creditor), on terms acceptable to Collateral Agent and the Lenders.

 

“Subsidiary” is, with respect to any Person, any Person of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or through one or more intermediaries.

 

“Term Loan” is defined in Section 2.2(a)(ii) hereof.

 

“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on Schedule 1.1.  “Term Loan Commitments” means the aggregate amount of such commitments of all Lenders.

 

34

 

“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

“Transfer” is defined in Section 7.1.

 

“Warrants” are (i) those certain Warrants to Purchase Stock dated as of August 9, 2013, or any date thereafter, issued by Borrower in favor of each Lender or such Lender’s Affiliates and (ii) those certain Warrants to Purchase Stock dated as of the Effective Date, or any date thereafter, issued by Borrower in favor of each Lender or such Lender’s Affiliates.

 

[Balance of Page Intentionally Left Blank]

 

35

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.

 

	
BORROWER:
    	
 
    
	
 
    	
 
    	
 
    
	
SELECTA   BIOSCIENCES, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By 
    	
/s/ David Siewers
    	
 
    
	
Name: 
    	
David Siewers
    	
 
    
	
Title: 
    	
CFO
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
COLLATERAL AGENT AND LENDER:
    	
 
    
	
 
    	
 
    	
 
    
	
OXFORD   FINANCE LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By 
    	
/s/ Timothy A. Lex
    	
 
    
	
Name: 
    	
Timothy A. Lex
    	
 
    
	
Title:
    	
Chief Operating   Officer & Executive Vice President
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
LENDER:
    	
 
    
	
 
    	
 
    	
 
    
	
PACIFIC WESTERN BANK
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By 
    	
/s/ Ashley N. Pittman
    	
 
    
	
Name: 
    	
Ashley N. Pittman
    	
 
    
	
Title: 
    	
Vice President
    	
 
    

 

[Signature Page to Amended and Restated Loan and Security Agreement]

 

 

 

SCHEDULE 1.1

 

Lenders and Commitments

 

Term Loans

 

	
Lender
    	
 
    	
 
    	
Term Loan Commitment
    	
 
    	
Commitment Percentage
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
$
    	
6,000,000.00
    	
 
    	
50.00
    	
%
    
	
PACIFIC WESTERN BANK
    	
 
    	
$
    	
6,000,000.00
    	
 
    	
50.00
    	
%
    
	
TOTAL
    	
 
    	
$
    	
12,000,000.00
    	
 
    	
100.00
    	
%
    

 

 

EXHIBIT A

 

Description of Collateral

 

The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as noted below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include (i) any Intellectual Property; provided, however (x) the Collateral shall include all Accounts and all proceeds of Intellectual Property and (y) if a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Collateral Agent’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property and (ii) any license or contract, in each case if the granting of a Lien in such license or contract is prohibited by or would constitute a default under the agreement governing such license or contract (but (A) only to the extent such prohibition is enforceable under applicable law and (B) other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409 (or any other Section) of Division 9 of the Code); provided that upon the termination, lapsing or expiration of any such prohibition, such license or contract, as applicable, shall automatically be subject to the security interest granted in favor of Collateral Agent hereunder and become part of the “Collateral.”

 

Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Borrower has agreed not to encumber any of its Intellectual Property.

 

 

EXHIBIT B-1

 

Form of Disbursement Letter

 

[see attached]

 

 

DISBURSEMENT LETTER

 

 

The undersigned, being the duly elected and acting                                                          of SELECTA BIOSCIENCES, INC., a Delaware Corporation with offices located at 480 Arsenal St., Bldg. 1, Watertown, MA  02472 (“Borrower”) on behalf of each Borrower, does hereby certify to OXFORD FINANCE LLC (“Oxford” and “Lender”), as collateral agent (the “Collateral Agent”) in connection with that certain Amended and Restated Loan and Security Agreement dated as of December 31, 2015, by and among Borrower, Collateral Agent and the Lenders from time to time party thereto (the “Loan Agreement”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that:

 

1.                                      The representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof.

 

2.                                      No event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document.

 

3.                                      Borrower is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.

 

4.                                      All conditions referred to in Section 3 of the Loan Agreement to the making of a Term Loan to be made on or about the date hereof have been satisfied or waived by Collateral Agent.

 

5.                                      No Material Adverse Change has occurred.

 

6.                                      The undersigned is a Responsible Officer.

 

[Balance of Page Intentionally Left Blank]

 

 

7.                                      The proceeds of the Term Loan shall be disbursed as follows:

 

	
Disbursement   from Oxford:
    	
 
    	
 
    	
 
    
	
Loan Amount
    	
 
    	
$
    	
               
    	
 
    
	
Plus:
    	
 
    	
 
    	
 
    
	
—Deposit   Received
    	
 
    	
$
    	
               
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Less:
    	
 
    	
 
    	
 
    
	
—Facility Fee
    	
 
    	
$
    	
(               
    	
)
    
	
[—Interim   Interest
    	
 
    	
$
    	
(               
    	
)]
    
	
—Lender’s Legal   Fees
    	
 
    	
$
    	
(               
    	
)*
    
	
 
    	
 
    	
 
    	
 
    
	
Net Proceeds   due from Oxford:
    	
 
    	
$
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Disbursement   from Pacific Western Bank:
    	
 
    	
 
    	
 
    
	
Loan Amount
    	
 
    	
$
    	
               
    	
 
    
	
Plus:
    	
 
    	
 
    	
 
    
	
—Deposit   Received
    	
 
    	
$
    	
               
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Less:
    	
 
    	
 
    	
 
    
	
—Facility Fee
    	
 
    	
$
    	
(               
    	
)
    
	
[—Interim   Interest
    	
 
    	
$
    	
(               
    	
)]
    
	
 
    	
 
    	
 
    	
 
    
	
Net   Proceeds due from Pacific Western Bank:
    	
 
    	
$
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
TOTAL   TERM LOAN NET PROCEEDS FROM LENDERS
    	
 
    	
$
    	
 
    	
 
    

 

8.                                      The Term Loan shall amortize in accordance with the Amortization Table attached hereto.

 

9.                                      The aggregate net proceeds of the Term Loans shall be transferred to the Designated Deposit Account as follows:

 

	
Account Name:
    	
 
    	
SELECTA BIOSCIENCES, INC.
    
	
 
    	
 
    	
 
    
	
Bank Name:
    	
 
    	
PACIFIC WESTERN BANK
    
	
 
    	
 
    	
 
    
	
Bank Address:
    	
 
    	
406 Blackwell Street, Suite 240
   Durham, North Carolina 27701
    
	
 
    	
 
    	
 
    
	
Account Number:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
ABA Number:
    	
 
    	
 
    	
 
    

 

[Balance of Page Intentionally Left Blank]

 

* Legal fees and costs are through the Effective Date.  Post-closing legal fees and costs, payable after the Effective Date, to be invoiced and paid post-closing.

 

 

Dated as of the date first set forth above.

 

	
BORROWER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SELECTA   BIOSCIENCES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
COLLATERAL AGENT AND LENDER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
OXFORD FINANCE LLC
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
LENDER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
PACIFIC   WESTERN BANK
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
					

 

[Signature Page to Disbursement Letter]

 

 

AMORTIZATION TABLE
  (Term Loan)

 

[see attached]

 

 

EXHIBIT B-2

 

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS  5:30 P.M. Eastern Time*

FORMULA BASED LINES:  DEADLINE FOR NEXT DAY PROCESSING IS 5:30 P.M. Eastern Time
 DEADLINE FOR WIRE TRANSFERS IS 4:30 P.M., Eastern Time

*At month end and the day before a holiday, the cut off time is 1:30 P.M., Eastern Time

**Subject to 3 day advance notice.

 

	
TO:  Loan Analysis
    	
DATE:
    	
TIME:
    
	
FAX #:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
FROM:
    	
 
    	
SELECTA BIOSCIENCES, INC.
    	
TELEPHONE REQUEST (For Bank Use Only):
    
	
 
    	
 
    	
Borrower’s Name
    	
 
    
	
FROM:
    	
 
    	
 
    	
The following person is   authorized to request the loan payment transfer/loan advance on the   designated account and is known to me.
    
	
 
    	
 
    	
Authorized Signer’s Name
    
	
FROM:
    	
 
    	
 
    
	
 
    	
 
    	
Authorized Signature   (Borrower)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Authorized   Request & Phone #
    
	
PHONE #:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Received by   (Bank) & Phone #
    
	
FROM ACCOUNT#:
    	
 
    	
 
    	
 
    	
 
    
	
(please include Note   number, if applicable)
    	
 
    	
 
    
	
TO ACCOUNT #:
    	
 
    	
 
    	
 
    	
 
    
	
(please include Note   number, if applicable)
    	
 
    	
Authorized Signature   (Bank)
    
	
 
    
	
REQUESTED TRANSACTION TYPE
    	
 
    	
REQUESTED DOLLAR AMOUNT
    	
 
    	
For Bank Use Only
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
PRINCIPAL INCREASE*   (ADVANCE)
    	
 
    	
$
    	
 
    	
Date Rec’d:
    
	
PRINCIPAL PAYMENT (ONLY)
    	
 
    	
$
    	
 
    	
Time:
    
	
 
    	
 
    	
 
    	
 
    	
Comp. Status:
    	
YES
    	
NO
    
	
OTHER INSTRUCTIONS:
    	
 
    	
 
    	
 
    	
Status Date:
    
	
 
    	
 
    	
 
    	
 
    	
Time:
    
	
 
    	
 
    	
 
    	
 
    	
Approval:
    
												

 

All representations and warranties of Borrower stated in the Loan Agreement are true, correct and complete in all material respects as of the date of the telephone request for and advance confirmed by this Loan Advance/Paydown Request Form; provided, however, that those representations and warranties the date expressly referring to another date shall be true, correct and complete in all material respects as of such date. 

 

	
*IS THERE   A WIRE REQUEST TIED TO THIS LOAN ADVANCE?    (PLEASE CIRCLE ONE) 
    	
YES
    	
NO
    
	
If   YES, the Outgoing Wire Transfer Instructions must be completed below.
    
	
 
    

 

	
OUTGOING   WIRE TRANSFER INSTRUCTIONS
    	
Fed Reference Number
    	
Bank Transfer Number
    
	
 
    	
 
    	
 
    
	
The items marked with an asterisk (*) are required to be   completed.
    
	
 
    
	
*Beneficiary   Name
    	
 
    
	
*Beneficiary   Account Number
    	
 
    
	
*Beneficiary   Address
    	
 
    
	
Currency   Type
    	
US DOLLARS ONLY
    
	
*ABA   Routing Number (9 Digits)
    	
 
    
	
*Receiving   Institution Name
    	
 
    
	
*Receiving   Institution Address
    	
 
    
	
*Wire   Account
    	
$
    
				

 

 

EXHIBIT C

 

Compliance Certificate

 

	
TO:
    	
 
    	
OXFORD FINANCE LLC, as Collateral Agent and Lender
   PACIFIC WESTERN BANK, as Lender
    
	
 
    	
 
    	
 
    
	
FROM:
    	
 
    	
SELECTA BIOSCIENCES, INC.
    

 

The undersigned authorized officer (“Officer”) of SELECTA BIOSCIENCES, INC. (“Borrower”), hereby certifies on behalf of each Borrower that in accordance with the terms and conditions of the Amended and Restated Loan and Security Agreement by and among Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “Loan Agreement;” capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement),

 

(a)                                 Borrower is in complete compliance for the period ending                 with all required covenants except as noted below;

 

(b)                                 There are no Events of Default, except as noted below;

 

(c)                                  Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date and for the period described in (a), above; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.

 

(d)                                 Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Loan Agreement;

 

(e)                                  No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Collateral Agent and the Lenders.

 

Attached are the required documents, if any, supporting our certification(s).  The Officer, on behalf of Borrower, further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements.

 

Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column.

 

	
 
    	
 
    	
Reporting Covenant
    	
 
    	
Requirement
    	
 
    	
Actual
    	
 
    	
Complies
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1)
    	
 
    	
Financial statements
    	
 
    	
Monthly within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
Annual (CPA Audited) statements
    	
 
    	
Within 190 days after FYE
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3)
    	
 
    	
Annual Financial Projections/Budget (prepared on a   monthly basis)
    	
 
    	
Annually (within 10 days of FYE), and when revised
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    

 

 

	
4)
    	
 
    	
A/R & A/P agings
    	
 
    	
Monthly within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
5)
    	
 
    	
8-K, 10-K and 10-Q Filings
    	
 
    	
If applicable, within 5 days of filing
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6)
    	
 
    	
Compliance Certificate
    	
 
    	
Monthly within 30 days
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7)
    	
 
    	
IP Report
    	
 
    	
When required
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8)
    	
 
    	
Total amount of Borrower’s cash and cash equivalents   at the last day of the measurement period
    	
 
    	
 
    	
 
    	
$        
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9)
    	
 
    	
Total amount of Borrower’s Subsidiaries’ cash and   cash equivalents at the last day of the measurement period
    	
 
    	
 
    	
 
    	
$        
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
10)
    	
 
    	
Updated Exhibit A to Landlord Waiver
    	
 
    	
Quarterly within 30 days, and in any month where new   Collateral in excess of $100,000 was delivered to ARE Leased Location
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
N/A
    

 

Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

 

	
 
    	
 
    	
Institution Name
    	
 
    	
Account Number
    	
 
    	
New Account?
    	
 
    	
Account Control Agreement in place?
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Yes
    	
 
    	
No
    	
 
    	
Yes
    	
 
    	
No
    

 

Other Matters

 

	
1)
    	
 
    	
Have there been any changes in management since the   last Compliance Certificate?
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2)
    	
 
    	
Have there been any   transfers/sales/disposals/retirement of Collateral or IP prohibited by the   Loan Agreement?
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3)
    	
 
    	
Have there been any new or pending claims or causes   of action against Borrower that involve more than One Hundred Thousand   Dollars ($100,000.00)?
    	
 
    	
Yes
    	
 
    	
No
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4)
    	
 
    	
Have there been any amendments of or other changes   to the capitalization table of Borrower and to the Operating Documents of   Borrower or any of its Subsidiaries? If yes, provide copies of any such   amendments or changes with this Compliance Certificate.
    	
 
    	
Yes
    	
 
    	
No
    

 

 

Exceptions

 

Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.”  Attach separate sheet if additional space needed.)

 

 

	
SELECTA   BIOSCIENCES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    
					

 

 

	
 
    	
LENDER   USE ONLY
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Received   by:
    	
 
    	
 
    	
Date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Verified   by:
    	
 
    	
 
    	
Date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Compliance   Status:
    	
Yes
    	
No
    
									

 

 

EXHIBIT D

 

Form of Secured Promissory Note

 

[see attached]

 

 

SECURED PROMISSORY NOTE
 (Term Loan)

 

	
$                    
    	
 
    	
Dated: December 31, 2015
    

 

FOR VALUE RECEIVED, the undersigned, SELECTA BIOSCIENCES, INC., a Delaware corporation, with offices located at 480 Arsenal St., Bldg. 1, Watertown, MA 02472 (“Borrower”) HEREBY PROMISES TO PAY to the order of [OXFORD FINANCE LLC][PACIFIC WESTERN BANK] (“Lender”) the principal amount of [           ] MILLION DOLLARS ($              ) or such lesser amount as shall equal the outstanding principal balance of the Term Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term Loan, at the rates and in accordance with the terms of the Loan and Security Agreement dated December 31, 2015 by and among Borrower, Lender, Oxford Finance LLC, as Collateral Agent, and the other Lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”).  If not sooner paid, the entire principal amount and all accrued and unpaid interest hereunder shall be due and payable on the Maturity Date as set forth in the Loan Agreement.  Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.

 

Principal, interest and all other amounts due with respect to the Term Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Secured Promissory Note (this “Note”).  The principal amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note.

 

The Loan Agreement, among other things, (a) provides for the making of a secured Term Loan by Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.

 

This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan Agreement.

 

This Note and the obligation of Borrower to repay the unpaid principal amount of the Term Loan, interest on the Term Loan and all other amounts due Lender under the Loan Agreement is secured under the Loan Agreement.

 

Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby waived.

 

Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due.

 

This Note shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of California.

 

The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent.  Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation.  Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity.

 

[Balance of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.

 

	
BORROWER:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
SELECTA   BIOSCIENCES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    

 

 

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

	
Date
    	
 
    	
Principal
   Amount
    	
 
    	
Interest Rate
    	
 
    	
Scheduled
   Payment Amount
    	
 
    	
Notation By
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

PACIFIC WESTERN BANK

Member FDIC

 

ITEMIZATION OF AMOUNT FINANCED

DISBURSEMENT INSTRUCTIONS

(Term Loan)

 

	
Name(s):  SELECTA BIOSCIENCES, INC.                                                                                       Date:               ,   2015
    
	
 
    	
 
    
	
$           
    	
credited   to deposit account   No.               when Advances are requested or disbursed to Borrower by cashier’s check or   wire transfer
    
	
 
    	
 
    
	
Amounts   paid to others on your behalf:
    
	
 
    	
 
    
	
$          
    	
to   Pacific Western Bank for Facility Fee
    
	
$          
    	
to   Pacific Western Bank for Document Fee (if applicable)
    
	
$          
    	
to   Pacific Western Bank for accounts receivable audit (estimate)
    
	
$          
    	
to   Bank counsel fees and expenses
    
	
$
    	
to                 
    
	
$
    	
to                 
    
	
$          
    	
TOTAL   (AMOUNT FINANCED)
    

 

Upon consummation of this transaction, this document will also serve as the authorization for Pacific Western Bank to disburse the loan proceeds as stated above.

 

 

	
 
    	
 
    	
 
    
	
Signature
    	
 
    	
Signature
    

 

 

USA PATRIOT ACT
 NOTICE
 OF
 CUSTOMER IDENTIFICATION

 

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

 

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.

 

WHAT THIS MEANS FOR YOU:  when you open an account, we will ask your name, address, date of birth, and other information that will allow us to identify you.  We may also ask to see your driver’s license or other identifying documents.

 

 

	
PACIFIC WESTERN BANK
    	
 
    	
 
    
	
 
    	
 
    	
AUTOMATIC DEBIT AUTHORIZATION
    
	
Member FDIC
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
To: Pacific Western Bank
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Re: Loan #                                      
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
You are hereby authorized and instructed to charge   account   No.                             in the name of SELECTA BIOSCIENCES, INC. for facility fees, principal, interest   and other payments due on above referenced loan as set forth below and credit   the loan referenced above.
    
	
 
    
	
x  Debit the Facility Fee as it becomes   due according to the terms of the Amended and Restated Loan and Security   Agreement and any renewals or amendments thereof.
    
	
 
    
	
x  Debit each interest payment as it   becomes due according to the terms of the Amended and Restated Loan and   Security Agreement and any renewals or amendments thereof.
    
	
 
    
	
x  Debit each principal payment as it   becomes due according to the terms of the Amended and Restated Loan and   Security Agreement and any renewals or amendments thereof.
    
	
 
    
	
x  Debit each payment for Bank Expenses   as it becomes due according to the terms of the Amended and Restated Loan and   Security Agreement and any renewals or amendments thereof.
    
	
 
    
	
This Authorization is to remain in full force and   effect until revoked in writing.
    
	
 
    	
 
    	
 
    
				

 

	
Borrower Signature
    	
 
    	
Date
    
	
 
    	
 
    	
              ,   2015
    
	
 
    	
 
    	
              ,   2015
    

 

 

CORPORATE BORROWING CERTIFICATE

 

	
BORROWER:
    	
 
    	
SELECTA BIOSCIENCES, INC.
    	
 
    	
DATE:   December 31, 2015
    
	
LENDERS:
    	
 
    	
OXFORD FINANCE LLC, as Collateral Agent and Lender
    	
 
    	
 
    
	
 
    	
 
    	
PACIFIC WESTERN BANK, as Lender
    	
 
    	
 
    

 

I hereby certify as follows, as of the date set forth above:

 

1.                                      I am the Secretary, Assistant Secretary or other officer of Borrower.  My title is as set forth below.

 

2.                                      Borrower’s exact legal name is set forth above.  Borrower is a Corporation existing under the laws of the State of Delaware.

 

3.                                      Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and complete copies of (i) Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws.  Neither such Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.

 

4.                                      Attached hereto as Exhibit C and Exhibit D, respectively, are the resolutions that were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors and the resolutions that were duly and validly adopted by the Audit Committee of Borrower’s Board of Directors pursuant to a unanimous written consent.  All such resolutions (the “Resolutions”) are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and the Lenders may rely on them until each Lender receives written notice of revocation from Borrower.

 

5.                                      Below are the names, offices and signatures of Borrower’s officers authorized by the Resolutions to act on behalf of Borrower as set forth in the Resolutions:

 

 

	
Name
    	
 
    	
Title
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Werner Cautreels
    	
 
    	
President and Chief Executive Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
David Siewers
    	
 
    	
Chief Financial Officer and Treasurer
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
David Abraham
    	
 
    	
Secretary and General Counsel
    	
 
    	
 
    

 

[Balance of Page Intentionally Left Blank]

 

 

I, the Secretary of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.

 

	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name: 
    	
 David Abraham
    
	
 
    	
 
    	
 
    
	
 
    	
Title: 
    	
Secretary
    

 

 

I, the Treasurer of Borrower, also hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.

 

	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name: 
    	
 David Siewers
    
	
 
    	
 
    	
 
    
	
 
    	
Title: 
    	
Treasurer
    

 

 

EXHIBIT A

 

Certificate of Incorporation (including amendments)

 

[see attached]

 

 

EXHIBIT B

 

Bylaws

 

[see attached]

 

 

EXHIBIT C

 

Resolutions Adopted by the Board of Directors

 

RESOLVED:                                                 That the Company’s management team be, and they hereby are, authorized to: enter into negotiations with one or more institutional lenders (each a “Lender”) for the purpose of obtaining up to $12 million in debt financing for the Company on terms that are, when considered in the aggregate, no less favorable to the Company than those set forth in Exhibit D (a “Debt Financing”); accept, execute and deliver, on behalf of the Company, a letter with a Lender summarizing key terms of the Debt Financing and containing binding terms regarding the payment of a deposit and the reimbursement of certain of the Lender’s expenses; and then negotiate definitive documents for the Debt Financing, provided that the Company shall not enter into any definitive documents for the Debt Financing or consummate the Debt Financing unless and until such definitive agreements have been reviewed and approved by the Audit Committee of the Board.

 

RESOLVED:                                                 That in connection with the Debt Financing and following the filing of any necessary charter amendment, the Company issue warrants (“Warrants”) to purchase shares of the Company’s capital stock (the “Warrant Shares”) as required by the terms of the Debt Financing negotiated by the Company’s management team and that upon such issuance the requisite number of shares of the Company’s capital stock will be automatically reserved for the exercise of the Warrants and the conversion of the Warrant Shares, if any, and the Warrant Shares and the capital stock issued upon conversion of the Warrant Shares, if any, shall constitute duly authorized, validly issued and outstanding, and fully paid and nonassessable shares of capital stock of the Company.

 

RESOLVED:                                                 That the officers of the Company be, and they hereby are, and each of them acting singly hereby is, authorized, for and on behalf of the Company and in its name, to prepare, execute, acknowledge, file, record and deliver, under seal if required or desirable, all such agreements, instruments and other documents, and to take all such other actions, as each of them shall deem necessary or desirable to give effect to, or otherwise carry out the purposes of, the foregoing Resolutions; and that the execution, acknowledgment, filing, recording or delivery of any such agreement, instrument or document, or the taking of any such action, by each of them shall be conclusive evidence of its having been authorized by these Resolutions.

 

 

EXHIBIT D

 

Resolutions Adopted by the Audit Committee

 

The undersigned, being all the directors of Selecta Biosciences, Inc., a Delaware corporation (the “Company”), who constitute the Audit Committee, do hereby take the following actions by written consent and without a meeting, which actions shall have the same force and effect as if duly adopted at a meeting duly called and held at which a quorum was present and acting throughout:

 

WHEREAS the Board of Directors of the Company at the December 4, 2015 Board meeting authorized the Company’s management team to negotiate additional debt financing on terms no less favorable than present at such meeting, and further authorized the Company to complete such financing subject to approval by the Audit Committee of the definitive documents for such financing,

 

Now, therefore, be it hereby:

 

RESOLVED:                         That the Company obtain financing (the “Financing”) from Oxford Finance LLC and Pacific Western Bank (the “Lenders”) pursuant to an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) in substantially the form attached hereto as Exhibit A with such changes as the Chief Executive Officer or the Chief Financial Officer of the Company (together, the “Authorized Officers”) shall deem necessary and appropriate; that the Authorized Officers be, and each singly hereby is, authorized, for and on behalf of the Company and in its name, to execute and deliver the Loan Agreement; and that the execution of the Loan Agreement by an Authorized Officer shall be conclusive evidence of such Officer’s approval of the Loan Agreement and of the due authorization of the execution and delivery of the Loan Agreement;

 

RESOLVED:                         That in connection with the Financing, the Company issue warrants to purchase up to 37,978 shares of the Company’s Series E Preferred Stock (the “Warrant Shares”), each in substantially the form attached hereto as Exhibit B (the “Warrants”) with such changes as an Authorized Officer shall deem necessary and appropriate;

 

RESOLVED:                         That each of the Authorized Officers be, and each singly hereby is, authorized for and on behalf of the Company and in its name, to execute, seal and deliver the Warrants and that the execution of the Warrants by either such Officer shall be conclusive evidence of such Officer’s approval of the Warrants and that such Warrants were authorized by these Resolutions;

 

RESOLVED:                         That the each of the Authorized Officers of the Company be, and each singly hereby is, authorized, for and on behalf of the Company and in its name, to execute and deliver the Secured Promissory Notes in substantially the form attached to the Loan Agreement and a Deposit Account Control Agreement in substantially the form attached hereto as Exhibit C, each with such changes as such Authorized Officer shall deem necessary and appropriate;

 

RESOLVED:                         That the officers of the Company be, and each of them hereby is, authorized, for and on behalf of the Company and in its name, to prepare, execute, acknowledge, record, file, seal and deliver all other agreements and documents, and to take all such other actions, as the officer so acting shall deem necessary, desirable or convenient to give effect to, or otherwise carry out the purposes of, the foregoing Resolutions; and that the execution, acknowledgment, filing, recording or delivery of any such document, or the taking of any such action, by such officer shall be conclusive evidence of its having been authorized by these Resolutions.

 

 

	
DEBTOR:
    	
 
    	
SELECTA BIOSCIENCES, INC.
    
	
 
    	
 
    	
 
    
	
SECURED PARTY:
    	
 
    	
OXFORD FINANCE LLC,
   as Collateral Agent
    

 

EXHIBIT A TO UCC FINANCING STATEMENT

 

Description of Collateral

 

The Collateral consists of all of Debtor’s right, title and interest in and to the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as noted below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include (i) any Intellectual Property; provided, however (x) the Collateral shall include all Accounts and all proceeds of Intellectual Property and (y) if a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Collateral Agent’s security interest in such Accounts and such other property of Debtor that are proceeds of the Intellectual Property and (ii) any license or contract, in each case if the granting of a Lien in such license or contract is prohibited by or would constitute a default under the agreement governing such license or contract (but (A) only to the extent such prohibition is enforceable under applicable law and (B) other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409 (or any other Section) of Division 9 of the Code); provided that upon the termination, lapsing or expiration of any such prohibition, such license or contract, as applicable, shall automatically be subject to the security interest granted in favor of Collateral Agent hereunder and become part of the “Collateral.”

 

Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Debtor has agreed not to encumber any of its Intellectual Property.

 

Capitalized terms used but not defined herein have the meanings ascribed in the Uniform Commercial Code in effect in the State of California as in effect from time to time (the “Code”) or, if not defined in the Code, then in the Loan and Security Agreement by and between Debtor, Secured Party and the other Lenders party thereto (as modified, amended and/or restated from time to time).Exhibit 10.6(a)

 

CERTAIN MATERIAL (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

 

EXCLUSIVE PATENT LICENSE AGREEMENT

 

 

TABLE OF CONTENTS

 

	
R E C I T A L S
    	
1
    
	
 
    	
 
    
	
1. DEFINITIONS
    	
3
    
	
 
    	
 
    
	
2. GRANT OF RIGHTS
    	
9
    
	
 
    	
 
    
	
3. COMPANY DILIGENCE OBLIGATIONS
    	
16
    
	
 
    	
 
    
	
4. ROYALTIES AND   PAYMENT TERMS
    	
19
    
	
 
    	
 
    
	
5. REPORTS AND RECORDS
    	
27
    
	
 
    	
 
    
	
6. PATENT PROSECUTION
    	
30
    
	
 
    	
 
    
	
7. INFRINGEMENT
    	
31
    
	
 
    	
 
    
	
8. INDEMNIFICATION AND   INSURANCE
    	
34
    
	
 
    	
 
    
	
9. NO REPRESENTATIONS   OR WARRANTIES
    	
36
    
	
 
    	
 
    
	
10. ASSIGNMENT
    	
37
    
	
 
    	
 
    
	
11. GENERAL COMPLIANCE   WITH LAWS
    	
38
    
	
 
    	
 
    
	
12. TERMINATION
    	
39
    
	
 
    	
 
    
	
13. DISPUTE RESOLUTION
    	
41
    
	
 
    	
 
    
	
14. CONFIDENTIAL   INFORMATION
    	
43
    
	
 
    	
 
    
	
15. MISCELLANEOUS
    	
44
    
	
 
    	
 
    
	
APPENDIX A
    	
48
    
	
 
    	
 
    
	
APPENDIX B
    	
49
    
	
 
    	
 
    
	
EXHIBIT A
    	
50
    
	
 
    	
 
    
	
EXHIBIT B
    	
52
    
	
 
    	
 
    
	
EXHIBIT C
    	
 
    
	
 
    	
 
    
	
EXHIBIT D
    	
 
    

 

ii

 

MASSACHUSETTS INSTITUTE OF TECHNOLOGY
 EXCLUSIVE PATENT LICENSE AGREEMENT

 

This Agreement, effective as of the date set forth above the signatures of the parties below (the “EFFECTIVE DATE”), is between the Massachusetts Institute of Technology (“M.I.T.”), a Massachusetts corporation, with a principal office at 77 Massachusetts Avenue, Cambridge, MA 02139-4307 and Selecta Biosciences, Inc. (“COMPANY”), a Delaware corporation, with a principal place of business at 480 Arsenal Street, Building One, Watertown, MA 02472.

 

R E C I T A L S

 

WHEREAS, M.I.T. is the owner or joint owner of certain PATENT RIGHTS (as later defined herein) relating to M.I.T. Case No. [***], by [***], Robert S. Langer, [***] and [***]; M.I.T. Case No. [***], by [***], Robert S. Langer and [***]; M.I.T. Case No. [***], by [***], Robert S. Langer, [***] and [***]; and M.I.T. Case No. [***], by Omid C. Farokhzad, [***] and Robert S. Langer, and has the right to grant licenses under said PATENT RIGHTS;

 

WHEREAS, M.I.T. and Brigham and Women’s Hospital (hereinafter “BRIGHAM”) jointly own certain of the PATENT RIGHTS relating to M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***] and Robert S. Langer; M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***] and Robert S. Langer; M.I.T. Case No. [***], by Omid C. Farokhzad, Robert S. Langer and [***]; M.I.T. Case No. [***], by Omid C. Farokhzad, [***], Robert S. Langer and [***]; M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***], Robert S. Langer, [***] and [***]; M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***], Robert S. Langer and [***]; M.I.T. Case No. [***], by Omid C. Farokhzad, Robert S. Langer, [***] and [***]; and M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***], Robert S. Langer, [***] and [***], and have signed a Joint Invention Agreement dated as of June 30, 2007, that appoints the M.I.T. Technology Licensing Office as the sole and exclusive agent for licensing such PATENT RIGHTS;

 

WHEREAS, M.I.T., BRIGHAM, the President and Fellows of Harvard College (hereinafter “HARVARD”) and the Immune Disease Institute (hereinafter “INSTITUTE”) 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

1

 

jointly own certain of the PATENT RIGHTS relating to M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***], Robert S. Langer, [***], Ulrich H. Von Andrian and [***], and have signed a Joint Invention Agreement dated as of October 23, 2007, that appoints the M.I.T. Technology Licensing Office as the exclusive agent for licensing such PATENT RIGHTS;

 

WHEREAS, M.I.T. and Children’s Medical Center Corporation (hereinafter “CMCC”) jointly own certain of the PATENT RIGHTS relating to M.I.T. Case No. [***], by [***], Robert S. Langer, [***] and [***], and have signed a Joint Invention Agreement dated as of May 30, 2002, that appoints the M.I.T. Technology Licensing Office as the exclusive agent for licensing such PATENT RIGHTS;

 

WHEREAS, M.I.T., BRIGHAM, and HARVARD jointly own certain of the PATENT RIGHTS relating to M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***], Robert S. Langer and Ulrich H. Von Andrian; and M.I.T. Case No. [***], by [***], Omid C. Farokhzad, [***], Robert S. Langer, [***] and Ulrich H. Von Andrian, and have signed Joint Invention Agreements dated as of November 17, 2008, that appoints the M.I.T. Technology Licensing Office as the exclusive agent for licensing such PATENT RIGHTS;

 

WHEREAS, because Robert S. Langer, who is an inventor of certain of the PATENT RIGHTS and a current employee of M.I.T., has acquired equity in COMPANY, the Conflict Avoidance Statement of Robert S. Langer is attached as Exhibit A hereto;

 

WHEREAS, because Robert S. Langer, who is an inventor of certain of the PATENT RIGHTS, has acquired equity in COMPANY not resulting from this Agreement, the Inventor/Author Acknowledgment of No Equity Distribution in M.I.T.’s institutional equity share of Robert S. Langer is attached as Exhibit B hereto;

 

WHEREAS, M.I.T.’s Vice President for Research has approved that Robert S. Langer, who is an inventor of certain of the PATENT RIGHTS, now holds equity in COMPANY and that M.I.T. is accepting equity as partial consideration for the rights and licenses granted under this Agreement;

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

2

 

WHEREAS, M.I.T. desires to have the PATENT RIGHTS developed and commercialized to benefit the public and is willing to grant a license thereunder;

 

WHEREAS, M.I.T. and COMPANY understand and accept that it may serve the public good for there to be competitive sources of LICENSED PRODUCTS in certain markets, with appropriate safeguards to COMPANY’S economic interests in other markets as more fully specified herein, and that the result of this may be the availability of drugs at affordable prices to poor segments of the world’s populations;

 

WHEREAS, COMPANY has represented to M.I.T., to induce M.I.T. to enter into this Agreement, that COMPANY shall commit itself to a [***] program of exploiting the PATENT RIGHTS so that public utilization shall result therefrom; and

 

WHEREAS, COMPANY desires to obtain a license under the PATENT RIGHTS upon the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, M.I.T. and COMPANY hereby agree as follows:

 

1. DEFINITIONS

 

1.1                               “AFFILIATE”.  In the case of COMPANY, “AFFILIATE” shall mean any legal entity (such as a corporation, partnership, or limited liability company) that is controlled by COMPANY. In the case of BRIGHAM and CMCC, “AFFILIATE” shall mean any corporation or other legal entity other than BRIGHAM or CMCC, in whatever country organized, controlling, controlled by or under common control with BRIGHAM or CMCC. For the purposes of this definition, the term “control” means (i) in the case of COMPANY: (a) beneficial ownership of at least fifty percent (50%) of the voting securities of a corporation or other business organization with voting securities or (b) a fifty percent (50%) or greater interest in the net assets or profits of a partnership or other business organization without voting securities; and (ii) in the case of BRIGHAM or CMCC: the power, direct or indirect, to elect or appoint fifty percent (50%) or more of the directors or trustees, or to cause direction of management and policies, whether through the ownership of voting securities, by contract, or otherwise.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

3

 

1.2                               “CONFIDENTIAL INFORMATION” shall mean any confidential or proprietary information furnished by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) in connection with this Agreement, provided that such information is specifically designated as confidential. Such CONFIDENTIAL INFORMATION shall include, without limitation, any diligence reports furnished to M.I.T. under Article 3, royalty reports furnished to M.I.T. under Section 5.2, copies of sublicenses furnished to M.I.T. under Section 2.6, and any patent prosecution correspondence under Article 6.

 

1.3                               “CORPORATE PARTNER INCOME” shall mean any payments that COMPANY or an AFFILIATE receives from a non-SUBLICENSEE third party in consideration of COMPANY’S or AFFILIATE’S practice of the PATENT RIGHTS or development of LICENSED PRODUCTS and/or LICENSED PROCESSES on behalf of or in collaboration with such third party (including without limitation [***]), including without limitation fees, milestone payments, agreement maintenance fees, and other payments, but specifically excluding RESEARCH SUPPORT PAYMENTS, and (ii) payments made as consideration for debt or equity securities (excluding amounts in excess of the FAIR MARKET VALUE of such securities).

 

 

1.4                               “DEVELOPING COUNTRIES” shaft mean, within the TERRITORY, the countries designated by [***], as such list may change from time to time, or any subsequent list that may be mutually agreed to by M.I.T. and COMPANY.

 

1.5                               “DIAGNOSTIC LICENSED PRODUCT” shall mean any product used for a diagnostic purpose that, in whole or in part:

 

(a)                                   absent the license granted hereunder, would infringe one or more claims of the PATENT RIGHTS; or

 

(b)                                   is manufactured by using a LICENSED PROCESS or that, when used, practices a LICENSED PROCESS.

 

1.6                               “EXCLUSIVE PERIOD” shall mean the period of time set forth in Section 2.4.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

4

 

1.7                               “FAIR MARKET VALUE” of a share of Common Stock or other security of COMPANY (a “SECURITY”) shall be the highest price per share that COMPANY could reasonably be expected to obtain from a willing buyer (not a current employee or director) for shares of such SECURITY sold by COMPANY, from authorized but unissued shares, as determined in good faith by the Board of Directors of COMPANY, unless COMPANY shall become subject to a merger, acquisition or other consolidation pursuant to which COMPANY is not the surviving party, in which case the current fair market value of a share of such SECURITY shall be deemed to be the value received by holders of such SECURITY for each share of such SECURITY pursuant to COMPANY’S acquisition. Notwithstanding the foregoing, if such SECURITY is publicly traded on a nationally recognized exchange or market, then the FAIR MARKET VALUE shall be the closing share price of such SECURITY on the date of the grant or sale of such SECURITY.

 

1.8                                “FIELD” shall mean use of a therapeutic or prophylactic vaccine for therapy and/or [***].

 

1.9                                “FULLY FUNDED PROJECT” shall mean a development project for a specific LICENSED PRODUCT or LICENSED PROCESS at a level of funding no less than [***] dollars ($[***]) for the first [***] years of the project and [***] dollars ($[***]) per year thereafter, ending upon [***].

 

1.10                         “[***] PRODUCT” shall mean a LICENSED PRODUCT and/or LICENSED PROCESS for the therapy and/or prophylaxis of [***].

 

1.11                         “LICENSED PRODUCT” shall mean any product that is solely a therapeutic or prophylactic vaccine that, in whole or in part:

 

(a)                                   absent the license granted hereunder, would infringe one or more claims of the PATENT RIGHTS; or

 

(b)                                   is manufactured by using a LICENSED PROCESS or that, when used, practices a LICENSED PROCESS.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

5

 

For clarification, LICENSED PRODUCT shall specifically exclude DIAGNOSTIC LICENSED PRODUCTS, REAGENT LICENSED PRODUCTS and THERAPEUTIC LICENSED PRODUCTS.

 

1.12                         “LICENSED PROCESS” shall mean any process that, absent the license granted hereunder, would infringe one or more claims of the PATENT RIGHTS or which uses a LICENSED PRODUCT.

 

1.13                         “NET SALES” shall mean the gross amount billed by COMPANY and its AFFILIATES and SUBLICENSEES for LICENSED PRODUCTS and LICENSED PROCESSES less the following:

 

(a)                                   customary trade, quantity, or cash discounts to the extent actually allowed and taken;

 

(b)                                   amounts repaid or credited by reason of rejection or return;

 

(c)                                    to the extent separately stated on purchase orders, invoices, or other documents of sale, any taxes or other governmental charges levied on the production, sale, transportation, delivery, or use of a LICENSED PRODUCT or LICENSED PROCESS which is paid by or on behalf of COMPANY or any of its AFFILIATES or SUBLICENSEES; and

 

(d)                                   outbound transportation costs prepaid or allowed and costs of insurance in transit.

 

No deductions shall be made for commissions paid to individuals whether they be with independent sales agencies or regularly employed by COMPANY and on its payroll, or for cost of collections. NET SALES shall occur on the earlier to occur of receipt of payment or ninety (90) days after the date of billing for a LICENSED PRODUCT or LICENSED PROCESS. If a LICENSED PRODUCT or LICENSED PROCESS is distributed at a discounted price that is substantially lower than the customary price charged by COMPANY, or distributed for non-cash consideration (whether or not at a discount), NET SALES shall be calculated based on the non- discounted amount of the LICENSED PRODUCT or LICENSED PROCESS charged to an

 

6

 

independent third party during the same REPORTING PERIOD or, in the absence of such sales, on the fair market value of the LICENSED PRODUCT or LICENSED PROCESS.

 

Non-monetary consideration shall not be accepted by COMPANY, any AFFILIATE, or any SUBLICENSEE for any LICENSED PRODUCTS or LICENSED PROCESSES without the prior written consent of M.I.T.

 

NET SALES will be calculated only once with respect to each LICENSED PRODUCT or LICENSED PROCESS sold by COMPANY, any AFFILIATE and/or any SUBLICENSEE, even if such LICENSED PRODUCT or LICENSED PROCESS is sold more than once in the course of its transfer to the ultimate end-user. The transfer or sale of LICENSED PRODUCTS or LICENSED PROCESSES between COMPANY and an AFFILIATE and/or SUBLICENSEE, e.g., in a manufacturing or supply arrangement, shall not be included in NET SALES, unless such transfer or sale is a final purchase by COMPANY, AFFILIATE or SUBLICENSEE, without the intent to resell or redistribute to a third party.

 

1.14                         “PATENT CHALLENGE” shall mean a challenge to the validity, patentability, enforceability and/or non-infringement of any of the PATENT RIGHTS or otherwise opposing any of the PATENT RIGHTS.

 

1.15                         “PATENT RIGHTS” shall mean:

 

(a)                                   the United States and international patents listed on Appendix A;

 

(b)                                   the United States and international patent applications and/or provisional applications listed on Appendix A (or resulting from invention disclosures listed there) and the resulting patents;

 

(c)                                    any patent applications resulting from the provisional applications or invention disclosures listed on Appendix A, and any divisionals, continuations, continuation-in-part applications, and continued prosecution applications (and their relevant international equivalents) of the patent applications listed on Appendix A and of such patent applications that result from the provisional applications listed on Appendix A, only to the extent the claims of any divisionals, continuations, continuation-in-part applications, and continued prosecution applications (and their relevant international equivalents) are directed to subject matter

 

7

 

specifically described in the patent applications listed on Appendix A or resulting from the provisional applications or invention disclosures listed on Appendix A, and the resulting patents;

 

(d)                                   any patents resulting from reissues, reexaminations, or extensions (and their relevant international equivalents) of the patents described in (a), (b), and (c) above; and

 

(e)                                    international (non-United States) patent applications filed after the EFFECTIVE DATE and the relevant international equivalents to divisionals, continuations, continuation-in-part applications and continued prosecution applications of the patent applications, only to the extent the claims of such international patent applications are directed to subject matter specifically described in the patents or patent applications referred to in (a), (b), (c), and (d) above and claim a priority date of a patent application listed on in Appendix A (or resulting from invention disclosures listed there), and the resulting patents.

 

1.16                         “REAGENT LICENSED PRODUCT” shall mean any product used primarily as a reagent for research or other non-therapeutic and non-diagnostic purpose that, in whole or in part:

 

(a)                                   absent the license granted hereunder, would infringe one or more claims of the PATENT RIGHTS; or

 

(b)                                   is manufactured by using a LICENSED PROCESS or that, when used, practices a LICENSED PROCESS.

 

1.17                         “REPORTING PERIOD” shall begin on the first day of each calendar quarter and end on the last day of such calendar quarter.

 

1.18                         “RESEARCH SUPPORT PAYMENTS” shall mean payments to COMPANY or an AFFILIATE from a SUBLICENSEE or corporate partner that are expressly intended only to fund or pay for (i) [***], or (ii) [***], to achieve a bona fide research or development goal for the commercialization of LICENSED PRODUCTS or LICENSED PROCESSES, as indicated by

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

8

 

their inclusion as specific line items in a written agreement between COMPANY or AFFILIATE and the SUBLICENSEE or corporate partner.

 

1.19                         “SUBLICENSE INCOME” shall mean any payments that COMPANY or an AFFILIATE receives from a SUBLICENSEE in consideration of the sublicense of the rights granted COMPANY and AFFILIATES under Section 2.1, including without limitation license fees, milestone payments, license maintenance fees, and other payments, but specifically excluding (i) royalties on NET SALES, (ii) RESEARCH SUPPORT PAYMENTS, and (iii) payments made as consideration for debt or equity securities (excluding amounts in excess of the FAR MARKET VALUE of such securities).

 

1.20                         “SUBLICENSEE” shall mean any non-AFFILIATE sublicensee of the rights granted COMPANY under Section 2.1.

 

1.21                         “TERM” shall mean the term of this Agreement, which shall commence on the EFFECTIVE DATE and shall remain in effect until the expiration or abandonment of all issued patents and filed patent applications within the PATENT RIGHTS, unless earlier terminated in accordance with the provisions of this Agreement.

 

1.22                         “TERRITORY” shall mean worldwide.

 

1.23                         “THERAPEUTIC LICENSED PRODUCT” shall mean any therapeutic product except therapeutic or prophylactic vaccines (which are specifically excluded from the definition of THERAPEUTIC LICENSED PRODUCT), used for a therapeutic purpose that, in whole or in part:

 

(a)                                   absent the license granted hereunder, would infringe one or more claims of the PATENT RIGHTS; or

 

(b)                                   is manufactured by using a LICENSED PROCESS or that, when used, practices a LICENSED PROCESS.

 

2. GRANT OF RIGHTS.

 

2.1                               License Grants. Subject to the terms of this Agreement, M.I.T. hereby grants to COMPANY and its AFFILIATES for the TERM a royalty-bearing license under the PATENT

 

9

 

RIGHTS solely to develop, make, have made, use, sell, offer to sell, lease, and import LICENSED PRODUCTS in the FIELD in the TERRITORY and to develop and perform LICENSED PROCESSES solely to develop, make, have made, use, sell, offer to sell, lease, and import LICENSED PRODUCTS in the FIELD in the TERRITORY.

 

2.2                               Limited-Term Option to License IMPROVEMENTS Dominated by Patent Rights.

 

(a)                                   Subject to any obligations of M.I.T. to third parties, M.I.T. hereby grants to COMPANY a first option to add to the PATENT RIGHTS of this Agreement M.I.T.’s (and not BRIGHAM’S) patent rights in inventions disclosed to the M.I.T. Technology Licensing Office and conceived and reduced to practice: (i) before [***]; (ii) dominated by the claims of the PATENT RIGHTS exclusively licensed under this Agreement and listed on Appendix A as of the EFFECTIVE DATE and (iii) arising from research performed solely in the laboratory of Robert S. Langer and related to [***] (but specifically excluding [***], and (iv) directly related to a FULLY FUNDED PROJECT as of, or within [***] months of, COMPANY’S being provided a copy of the invention disclosure form by M.I.T (such invention, an “IMPROVEMENT”). Such option shall not include BRIGHAM’s ownership rights in IMPROVEMENTS.

 

(b)                                   Within [***] days after the M.I.T Technology Licensing Office (the “TLO”) receives disclosure of an IMPROVEMENT, the TLO shall notify COMPANY in writing of the IMPROVEMENT, furnishing COMPANY a copy of the invention disclosure and any related patent application. Such invention disclosure and any related patent application shall be kept confidential. Notwithstanding the foregoing, M.I.T. shall be under no obligation to file patent applications for any IMPROVEMENT unless COMPANY exercises its option with respect to such IMPROVEMENT. COMPANY may exercise its option to obtain a license to patent rights on such IMPROVEMENT by notifying M.I.T. thereof in writing within [***] months after receipt of the disclosure for such IMPROVEMENT. If COMPANY does not exercise its option within such [***] month period, M.I.T. shall be free to license patent rights to such IMPROVEMENT to any third party.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

10

 

(c)                                    COMPANY will pay M.I.T. a fee of $[***] for each patent or patent application so added to this Agreement. Upon COMPANY’S exercise of such right and payment of the fee, Appendix A shall be deemed to have been amended to add the invention disclosure (and any related patent applications) covering such IMPROVEMENT, and such IMPROVEMENT and any resulting patent applications and patents shall thereafter be included in PATENT RIGHTS for all purposes of this Agreement. Upon request, M.I.T. shall provide COMPANY with an updated Appendix A for its records.

 

(d)                                   In the event that BRIGHAM and M.I.T. are joint owners of an IMPROVEMENT and COMPANY duly exercises its option in accordance with this Section 2.2, then COMPANY would have non-exclusive rights to such IMPROVEMENT until such time, if any, that COMPANY negotiates an exclusive license to such IMPROVEMENT from BRIGHAM.

 

2.3                               M.I.T. Case No. [***] and M.I.T. Case No. [***].

 

(a)                                   M.I.T., BRIGHAM and HARVARD have received an invention disclosure for M.I.T. Case No. [***] (BRIGHAM Case No. [***]; HARVARD Case No. [***]), “[***]”, by [***], Omid C. Farokhzad, [***], Robert S. Langer and Ulrich H. Von Andrian, and M.I.T. Case No. [***] (BRIGHAM Case No. [***]; HARVARD Case No. [***]), “[***]”, by [***], Omid C. Farokhzad, [***], Robert S. Langer, [***] and Ulrich H. Von Andrian (each, a “MIT/BRIGHAM/HARVARD Invention Disclosure”). As of the EFFECTIVE DATE, M.I.T. has not filed any patent applications on such MIT/BRIGHAM/HARVARD Invention Disclosures. M.I.T. shall use reasonable efforts to file patent applications on such MIT/BRIGHAM/HARVARD Invention Disclosures within [***] days of the EFFECTIVE DATE. Subject to any obligations to third parties, M.I.T. agrees to add to the PATENT RIGHTS of this Agreement M.I.T.’s, BRIGHAM’S and HARVARD’S rights in any patent applications filed on the MIT/BRIGHAM/HARVARD Invention Disclosures, in accordance with Section 1.15.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

11

 

(b)                                   Within [***] days after: (i) the filing of a patent application on a MIT/BRIGHAM/HARVARD Invention Disclosure with the United States Patent and Trademark Office, and (ii) the recordal of an assignment document(s) with the United States Patent and Trademark Office whereby the inventors have assigned their inventorship interests rights in any such patent application to M.I.T., BRIGHAM or HARVARD, as applicable, the TLO shall notify COMPANY in writing of the filing of such application and shall provide COMPANY with a copy of such patent application as filed. Such patent application shall be kept confidential.

 

(c)                                    In accordance with Section 6.1, M.I.T. shall provide COMPANY an opportunity to comment on drafts of the applications and shall give good faith consideration to COMPANY’S comments. In accordance with Section 6.3, COMPANY shall pay all reasonable fees and costs relating to the filing, prosecution and maintenance of the patent applications relating to the MIT/BRIGHAM/HARVARD Invention Disclosures.

 

(d)                                   COMPANY and M.I.T. shall amend the Agreement to update Appendix A to include patent applications corresponding to patent rights on the inventions disclosed in the MIT/BRIGHAM/HARVARD Invention Disclosures within [***] days of the filing of such patent applications. Such amendment shall provide that such patent application(s) on a MIT/BRIGHAM/HARVARD Invention Disclosure shall thereafter be included in Appendix A for all purposes of this Agreement. No fees will be due for the addition of any patent application on a MIT/BRIGHAM/HARVARD Invention Disclosure so added to this Agreement.

 

2.4                               Exclusivity. In order to establish an exclusive period for COMPANY and its AFFILIATES, M.I.T. agrees that, subject to Sections 2.2(d), 2.5, 2.8 and 3.1(1), it shall not grant any other license under the PATENTS RIGHTS (except M.I.T. Case No. [***]) to develop, make, have made, use, sell, offer to sell, lease or import LICENSED PRODUCTS in the FIELD in the TERRITORY or to develop or perform LICENSED PROCESSES in the FIELD in the TERRITORY during the TERM, unless sooner terminated as provided in this Agreement.

 

For clarity, the grant to M.I.T. Case No. [***] is non-exclusive.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

12

 

2.5                               Access to [***] PRODUCTS in DEVELOPING COUNTRIES.

 

(a)                                   If M.I.T. or COMPANY or an AFFILIATE receives a bona fide request from a capable third party for a license under the PATENT RIGHTS to develop and commercialize an [***] PRODUCT at reasonably affordable prices in one or more specific DEVELOPING COUNTRIES that is not being sold (including without limitation sold in sufficient volume to meet market demand in such country(ies) at reasonably affordable prices by COMPANY or an AFFILIATE or SUBLICENSEE at such time in such DEVELOPING COUNTRY(IES), then the party receiving such inquiry shall promptly notify the other party in writing within [***] days after receipt of such inquiry (a “Developing Countries Inquiry Notice”), setting forth the type of [***] PRODUCT desired, the specific DEVELOPING COUNTRY(IES) desired, the name and contact information of the third party, and any other pertinent information.

 

(b)                                   Within [***] months after the date of a Developing Countries Inquiry Notice, COMPANY (or an AFFILIATE or SUBLICENSEE, as applicable) shall either:

 

(i)                                        in the event that such [***] PRODUCT has been approved for commercial sale in such DEVELOPING COUNTRY(IES), then COMPANY or an AFFILIATE or SUBLICENSEE shall begin and continue to sell such product in such DEVELOPING COUNTRY(IES) at reasonably affordable prices in sufficient volume to meet market demand in such country(ies);

 

(ii)                                     in the event that such [***] PRODUCT has not been approved for commercial sale in such DEVELOPING COUNTRY(IES), but has been approved for commercial sale in other jurisdictions, then COMPANY shall commit to M.I.T., in writing with mutually agreed upon timelines (such timelines to be enforceable under this Agreement), that it or an AFFIILATE or SUBLICENSEE will (A) promptly apply for approval for commercial sale of such [***] PRODUCT in such DEVELOPING COUNTRY(IES), and (B) promptly after receiving approval, begin and continue to sell such [***] PRODUCT in such DEVELOPING COUNTRY(IES) at reasonably affordable prices in sufficient volume to meet market demand in such country(ies);

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

13

 

(iii)                                  in the event that such [***] PRODUCT has not been approved for commercial sale in any jurisdiction, then COMPANY or an AFFILIATE or SUBLICENSEE shall: (A) begin or continue a FULLY FUNDED PROJECT to develop such [***] PRODUCT; (B) provide M.I.T. with a business plan, containing mutually agreed upon diligence milestones (such milestones to be enforceable under this Agreement) for the commercial development of such [***] PRODUCT, including development for DEVELOPING COUNTRIES; and (C) in conjunction with such business plan, COMPANY shall commit to M.I.T. that it or an AFFILIATE or SUBLICENSEE shall: (I) promptly after completion of any requisite clinical trials, apply for approval for commercial sale of such [***] PRODUCT in such DEVELOPING COUNTRY(IES), and (II) promptly after receiving approval, begin and continue to sell such [***] PRODUCT in such DEVELOPING COUNTRY(IES) at reasonably affordable prices in sufficient volume to meet market demand in such country(ies); or

 

(iv)                                 COMPANY or an AFFILIATE shall enter into a non-exclusive sublicense agreement containing commercially reasonable terms and conditions with such third party for the requested [***] PRODUCT in the requested DEVELOPING COUNTRY(IES).

 

(c)                                    If COMPANY (or an AFFILIATE or SUBLICENSEE, as applicable) does not satisfy the conditions of one of Sections 2.5(b)(i), (ii), (iii) or (iv) within [***] months after the date of a Developing Countries Inquiry Notice, and M.I.T., at its sole discretion, determines that a sublicense to such third party is reasonable under the totality of the circumstances (taking into account the development efforts of COMPANY, AFFILIATES and SUBLICENSEES to make [***] PRODUCTS available in DEVELOPING COUNTRIES), then M.I.T shall have the right to grant a non-exclusive license under the PATENT RIGHTS to such third party for such purposes, and shall notify COMPANY prior to or upon granting any such non-exclusive license. For clarity, any license granted by M.I.T. under this Section 2.5(c) shall be solely for the purpose of bringing [***] PRODUCTS to market in DEVELOPING COUNTRIES [***], and shall expressly exclude the right of the third party licensee to export or sell, directly or indirectly, [***] PRODUCTS from such DEVELOPING COUNTRIES into other markets or jurisdictions. Notwithstanding the foregoing, any such license granted by M.I.T. under this Section 2.5(c) shall allow the third party licensee to export or sell [***] PRODUCTS from a DEVELOPING

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

14

 

COUNTRY(IES) into any other DEVELOPING COUNTRY(IES) during any period of time in which an adequate supply of such [***] PRODUCTS is not reasonably available in such other DEVELOPING COUNTRY(IES) at reasonably affordable prices. For the avoidance of doubt, M.I.T.’s rights under this Section 2.5(c) are its sole and exclusive remedy for any failure by COMPANY to fulfill its obligations under Section 2.5(b).

 

2.6                               Sublicenses. COMPANY shall have the right to grant sublicenses of its rights under Section 2.1 only during the EXCLUSIVE PERIOD. Such sublicenses may extend past the expiration date of the EXCLUSIVE PERIOD, but any exclusivity of such sublicense shall expire upon the expiration of the EXCLUSIVE PERIOD. COMPANY shall incorporate terms and conditions into its sublicense agreements sufficient to enable COMPANY to comply with this Agreement. Such terms shall include, without limitation, [***] provisions. COMPANY shall also include provisions in all sublicenses to provide that in the event that SUBLICENSEE brings a PATENT CHALLENGE against M.I.T. or assists another party in bringing a PATENT CHALLENGE against M.I.T. (except as required under a court order or subpoena) then COMPANY may terminate the sublicense within [***] days. COMPANY shall promptly furnish M.I.T. with a fully signed photocopy of any sublicense agreement. Upon termination of this Agreement for any reason, any SUBLICENSEE not then in default shall have the right to seek a license from M.I.T. M.I.T. agrees to negotiate such licenses in good faith under reasonable terms and conditions.

 

2.7                               U.S. Manufacturing. COMPANY agrees that any LICENSED PRODUCTS used or sold in the United States will be manufactured substantially in the United States to the extent required by applicable laws and/or regulations.

 

2.8                               Retained Rights.

 

(a)                                   M.I.T., BRIGHAM, HARVARD, CMCC and INSTITUTE. M.I.T., BRIGHAM, HARVARD, CMCC and INSTITUTE retain the right on behalf of themselves and all other non-profit research institutes to practice under the PATENT RIGHTS for research, teaching, and educational purposes.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

 

15

 

(b)                                   Federal Government. COMPANY acknowledges that the U.S. federal government retains a royalty-free, non-exclusive, non-transferable license to practice any government-funded invention claimed in any PATENT RIGHTS as set forth in 35 U.S.C. §§ 201-211, and the regulations promulgated thereunder, as amended, or any successor statutes or regulations.

 

(c)                                    University of Santiago De Compostela. University of Santiago De Compostela retains a perpetual non-exclusive right to practice the PATENT RIGHTS for M.I.T. Case No. [***] for the purpose of conducting work in connection with its grant “[***]” (principal investigator [***]).

 

(d)                                   DuPont. DuPont retains a perpetual non-exclusive right to practice the intellectual property associated with case M.I.T. Case No. [***] by [***], Omid C. Farokhzad, [***] and Robert S. Langer. M.I.T interprets its agreement with DuPont to provide that DuPont may not sublicense such right or assign such right without M.I.T.’s consent, and M.I.T. shall not provide any such consent without the prior approval of COMPANY.

 

2.9                               No Additional Rights. Subject to Sections 2.2 and 2.3, nothing in this Agreement shall be construed to confer any rights upon COMPANY by implication, estoppel, or otherwise as to any technology or patent rights of M.I.T. or any other entity other than the PATENT RIGHTS, regardless of whether such technology or patent rights shall be dominant or subordinate to any PATENT RIGHTS.

 

3. COMPANY DILIGENCE OBLIGATIONS.

 

3.1                               Diligence Requirements. COMPANY shall use diligent efforts, or shall cause its AFFILIATES and SUBLICENSEES to use diligent efforts, to develop one or more LICENSED PRODUCTS or LICENSED PROCESSES and to introduce one or more LICENSED PRODUCTS or LICENSED PROCESSES into the commercial market; thereafter, COMPANY or its AFFILIATES or SUBLICENSEES shall make LICENSED PRODUCTS or LICENSED PROCESSES reasonably available to the public. Specifically, COMPANY or AFFILIATE or SUBLICENSEE shall fulfill the following obligations:

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

16

 

(a)            Within [***] months after the EFFECTIVE DATE, COMPANY shall furnish M.I.T. with a written research and development plan describing [***].

 

(b)            Within [***] days after the end of each calendar year, COMPANY shall furnish M.I.T. with a written report (consistent with Section 5.1(a)) on the progress of its efforts during the immediately preceding calendar year to develop and commercialize LICENSED PRODUCTS or LICENSED PROCESSES. The report shall also contain a [***].

 

(c)            COMPANY or an AFFILIATE or SUBLICENSEE shall develop a prototype LICENSED PRODUCT and test such prototype in an animal model within [***] years after the EFFECTIVE DATE.

 

(d)            COMPANY or an AFFILIATE shall permit an in-plant inspection by M.I.T. on or after [***], and thereafter permit in-plant inspections by M.I.T. at regular intervals with at least [***] months between each such inspection; provided, however, that M.I.T. shall provide reasonable advance notice before each such inspection.

 

(e)            In the aggregate, COMPANY shall raise at least [***] dollars ($[***]) by [***] from the sale of Company’s equity securities for its own account.

 

(f)            In the aggregate, COMPANY shall raise at least [***] dollars ($[***]) by [***] from a combination of one or more of the following: (i) the sale of Company’s equity securities for its own account, (ii) research and development funds, license fees and/or other payments from corporate partners or SUBLICENSEES, and (iii) grants from government and non-government sources.

 

(g)            COMPANY or an AFFILIATE or SUBLICENSEE collectively shall expend at least the amounts set forth in the table below on research, development or commercialization of LICENSED PRODUCTS and/or LICENSED PROCESSES in each calendar year (pro-rated for partial years) beginning in 2008 and ending with [***].

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

17

 

	
2008
    	
 
    	
$
    	
[***]
    	
 
    
	
2009
    	
 
    	
$
    	
[***]
    	
 
    
	
2010 and 2011
    	
 
    	
$
    	
[***]
    	
 
    
	
2012 and every year thereafter
    	
 
    	
$
    	
[***]
    	
 
    

 

 

(h)            By the [***] anniversary of the EFFECTIVE DATE, COMPANY or an AFFILIATE or SUBLICENSEE shall [***] for a LICENSED PRODUCT.

 

(i)             By the [***] anniversary of the EFFECTIVE DATE, COMPANY or an AFFILIATE or SUBLICENSEE shall [***] for a LICENSED PRODUCT.

 

(j)             By the [***] anniversary of the EFFECTIVE DATE, COMPANY or an AFFILIATE or SUBLICENSEE shall [***] for a LICENSED PRODUCT.

 

(k)            By the [***] anniversary of the EFFECTIVE DATE, COMPANY or an AFFILIATE or SUBLICENSEE shall [***].

 

(l)

 

(i)             If, at any time after [***] years from the EFFECTIVE DATE, M.I.T. or COMPANY or an AFFILIATE receives a bona fide request from a capable third party seeking a license under certain PATENT RIGHTS, or seeking a license for patent rights not licensed to COMPANY or an AFFILIATE but owned by M.I.T. and dominated by certain PATENT RIGHTS, to develop and commercialize a LICENSED PRODUCT, and COMPANY or an AFFILIATE has not either (i) [***], or (ii) [***], then the party receiving such inquiry will notify the other party (a “Patent Rights Inquiry Notice”), setting forth the type of LICENSED PRODUCT desired, the specific PATENT RIGHTS desired, the name and contact information of the third party, and any other pertinent information.

 

(ii)            Within [***] months after the date of a Patent Rights Inquiry Notice, COMPANY or an AFFILIATE or SUBLICENSEE shall: (I) [***]; (II) [***]; or (III) [***]. If COMPANY does not perform any of the foregoing three actions within [***] months after the date of a Patent Rights Inquiry Notice, then at its sole discretion, may grant a license to

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

18

 

such third party, and upon the effective date of such license, all of COMPANY’S and AFFILIATES’s rights to such PATENT RIGHTS shall be terminated. The removal of PATENT RIGHTS from this Agreement pursuant to this Section will not affect the remaining terms of this Agreement. For the avoidance of doubt, M.I.T.’s rights under this Section 3.1(1)(ii) are its sole and exclusive remedy for any failure by COMPANY to fulfill its obligations under Section 3.1(1)(ii).

 

In the event that M.I.T. determines that COMPANY (or an AFFILIATE or SUBLICENSEE) has failed to fulfill any of its obligations under this Section 3.1 (excluding 3.1(1)(B)), then M.I.T. may treat such failure as a material breach in accordance with Section 12.4(b).

 

Notwithstanding the foregoing, in the event that COMPANY anticipates a failure to meet an obligation set forth in Sections 3.1(h), (i), (j) or (k), or one of diligence obligations contemplated by Sections 2.5(b)(iii) or 3.1(1)(B), will occur, COMPANY will promptly advise M.I.T. in writing, and representatives of each party will meet to review the reasons for anticipated failure (taking into account delays beyond the reasonable control of the COMPANY, including action, inaction or delay by the FDA or any comparable regulatory agency) and discuss in good faith a potential revision to the diligence schedule. COMPANY and M.I.T. will enter into a written amendment to this Agreement with respect to any mutually agreed upon change(s) to the relevant obligation.

 

4. ROYALTIES AND PAYMENT TERMS.

 

4.1          Consideration for Grant of Rights.

 

(a)            License Issue Fee and Patent Cost Reimbursement. COMPANY shall pay to M.I.T. on the EFFECTIVE DATE a license issue fee of [***] dollars ($[***]), and, in accordance with Section 6.4, shall reimburse M.I.T. for its actual expenses incurred as of the EFFECTIVE DATE in connection with obtaining the PATENT RIGHTS. These payments are nonrefundable.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

19

 

(b)            License Maintenance Fees. COMPANY shall pay to M.I.T. the following license maintenance fees on the dates set forth below:

 

	
January 1,   2009
    	
 
    	
$
    	
[***
    	
]
    
	
January 1,   2010
    	
 
    	
$
    	
[***
    	
]
    
	
January 1,   2011
    	
 
    	
$
    	
[***
    	
]
    
	
January 1,   2012
    	
 
    	
$
    	
[***
    	
]
    
	
January 1,   2013
    	
 
    	
$
    	
[***
    	
]
    
	
January 1,   2014
    	
 
    	
$
    	
[***
    	
]
    
	
Each   January 1st thereafter, until [***]
    	
 
    	
$
    	
[***
    	
]
    
	
Each   January 1st after [***]
    	
 
    	
$
    	
[***
    	
]
    

 

This annual license maintenance fee is nonrefundable; however, the license maintenance fee may be credited to running royalties subsequently due on NET SALES earned during the same calendar year, if any. License maintenance fees paid in excess of running royalties due in such calendar year shall not be creditable to amounts due for future years.

 

(c)            Running Royalties. COMPANY shall pay to M.I.T. a running royalty of [***] percent ([***]%) of NET SALES by COMPANY, AFFILIATES and SUBLICENSEES. Running royalties shall be payable for each REPORTING PERIOD and shall be due to M.I.T. within [***] days of the end of each REPORTING PERIOD.

 

(d)            Milestone Payments.

 

(i)             COMPANY shall pay to M.I.T. the following amounts upon the first achievement of the following milestones, whether by COMPANY or any of its AFFILIATES or SUBLICENSEES:

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

20

 

	
Milestone Event
    	
 
    	
Payment
    	
 
    
	
[***]
    	
 
    	
$
    	
[***]
    	
 
    
	
[***]
    	
 
    	
$
    	
[***]
    	
 
    
	
[***]
    	
 
    	
$
    	
[***]
    	
 
    
	
[***]
    	
 
    	
$
    	
[***]
    	
 
    

 

COMPANY shall make such non-refundable, non-creditable milestone payments within [***] days after achievement of each of the milestones. For clarity, each of the milestones set forth above shall be payable only once.

 

(ii)            The milestone events set forth in Section 4.1(d)(i) above are intended to be successive. In the event that any [***] is combined with a [***] (i.e., a [***]), the milestone payment for the [***] and the milestone payment for the [***] both shall be due upon the [***]. In addition and notwithstanding the foregoing, if any milestone is reached without achieving a preceding milestone, then the amount which would have been payable on achievement of the preceding milestone shall be payable upon achievement of the next successive milestone. COMPANY shall notify M.I.T. within [***] days after the achievement of any of the above milestones by COMPANY or any of its AFFILIATES or SUBLICENSEES.

 

(e)            Sharing of SUBLICENSE INCOME. COMPANY shall pay M.I.T. a percentage of all SUBLICENSE INCOME received by COMPANY or AFFILIATES (excluding running royalties on NET SALES of SUBLICENSEES) based on the date of execution of the sublicense agreement, as set forth below.

 

	
Date of execution of sublicense:
    	
 
    	
Percentage
    	
 
    
	
[***]
    	
 
    	
[***]
    	
%
    
	
[***]
    	
 
    	
[***]
    	
%
    
	
[***]
    	
 
    	
[***]
    	
%
    
	
[***]
    	
 
    	
[***]
    	
%
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

21

 

Such amount shall be payable for each REPORTING PERIOD and shall be due to M.I.T. within [***] days of the end of each REPORTING PERIOD.

 

(f)            Sharing of CORPORATE PARTNER INCOME. COMPANY shall pay M.I.T. a total of [***] percent ([***]%) of all CORPORATE PARTNER INCOME received by COMPANY or any of its AFFILIATES. Such amount shall be payable for each REPORTING PERIOD and shall be due to M.I.T. within [***] days of the end of each REPORTING PERIOD.

 

(g)            Consequences of a PATENT CHALLENGE. In the event that (i) COMPANY or any of its AFFILIATES brings a PATENT CHALLENGE against M.I.T. (and/or BRIGHAM, HARVARD, CMCC or INSTITUTE), or (ii) COMPANY or any of its AFFILIATES assists another party in bringing a PATENT CHALLENGE against M.I.T. (and/or BRIGHAM, HARVARD, CMCC or INSTITUTE) (except as required under a court order or subpoena), and (iii) M.I.T. does not choose to exercise its rights to terminate this Agreement pursuant to Section 12.5, then, in the event that such a PATENT CHALLENGE is successful, COMPANY will have no right to recoup any royalties paid during the period of challenge. In the event that a PATENT CHALLENGE is unsuccessful, COMPANY shall reimburse M.I.T. (and/or BRIGHAM, HARVARD, CMCC or INSTITUTE) for all reasonable legal fees and expenses incurred in its defense against the PATENT CHALLENGE.

 

(h)            No Multiple Royalties. If the manufacture, use, lease, or sale of any LICENSED PRODUCT or the performance of any LICENSED PROCESS is covered by more than one of the PATENT RIGHTS, multiple royalties shall not be due.

 

(i)             Equity.

 

(i)             Initial Grant. COMPANY shall issue a total of [***] shares (the “Shares”) of Common Stock of COMPANY, $0.0001 par value per share (“Common Stock”), to M.I.T. and those persons as M.I.T. shall direct (the “M.I.T. Holders”), BRIGHAM, HARVARD, INSTITUTE and CMCC, in the amounts as M.I.T. shall direct, such information to be provided within thirty (30) days of the EFFECTIVE DATE; provided, however, that each of M.I.T.,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

22

 

BRIGHAM, HARVARD, INSTITUTE, CMCC and each M.I.T. Holder (collectively, the “Shareholders” and individually, each a “Shareholder”), shall execute (I) an investment letter in a form mutually agreeable to M.I.T. and COMPANY; and (II) a First Amendment to Right of First Refusal and Co-Sale Agreement in the form attached hereto as Exhibit C (the “ROFR and Co-Sale Agreement”). Such issuance shall be recorded on the Stock Transfer Ledger of COMPANY on the EFFECTIVE DATE and, subject to the conditions in the proviso above, the Shares shall be delivered to each Shareholder within thirty (30) days after the EFFECTIVE DATE. COMPANY agrees that the joinder agreement that binds BRIGHAM to the ROFR and Co-Sale Agreement shall provide that BRIGHAM shall not be bound by Section 7 (Co-Sale) thereof.

 

COMPANY represents to M.I.T. that, as of the EFFECTIVE DATE, the aggregate number of Shares equals [***] percent ([***]%) of the COMPANY’S issued and outstanding Common Stock calculated on a “Fully Diluted Basis.” For purposes of this Section (i), “Fully Diluted Basis” shall mean that the total number of issued and outstanding shares of COMPANY’S Common Stock shall be calculated to include conversion of all issued and outstanding securities then convertible into common stock, the exercise of all then outstanding options and warrants to purchase shares of common stock, whether or not then exercisable, and shall assume the issuance or grant of all securities reserved for issuance pursuant to any COMPANY stock or stock option plan in effect on the date of the calculation.

 

(ii)            Anti-Dilution Protection. COMPANY shall issue additional shares of Common Stock to each Shareholder pro rata, such that their ownership (collectively) of outstanding Common Stock shall not fall below [***] percent ([***]%) on a Fully Diluted Basis, as calculated after giving effect to the anti-dilutive issuance. Such issuances shall continue until COMPANY shall have received, since the date of its incorporation, a total of [***] Dollars ($[***]) in cash in exchange for COMPANY’S capital stock (the “Funding Threshold”). Thereafter, no additional shares shall be due to any Shareholder pursuant to this Section.

 

(iii)           Participation in Future Private Equity Offerings. On the EFFECTIVE DATE, the COMPANY shall amend its Investors’ Rights Agreement to add

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

23

 

M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC (but not M.I.T. Holders) as a “Purchaser” for purposes of Section 2 thereof (Participation Rights) with respect to offerings of New Securities (as defined therein) after the date of the Funding Threshold. An amendment to the Investors’ Rights Agreement is attached hereto as Exhibit D (the “Investors’ Rights Agreement”). M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC shall agree to be bound by the terms and conditions of the Investors’ Rights Agreement, as amended, insofar as they relate to Section 2 thereof. The Participation Rights granted to M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC pursuant to the Investors’ Rights Agreement shall terminate in accordance with Section 2 of the Investors’ Rights Agreement.

 

(iv)           Adjustments for Certain Dilutive Financings. After the date of the Funding Threshold (the “Funding Threshold Date”), if COMPANY issues shares of Common Stock, or any equity security exercisable for or convertible into Common Stock, such that the price per share of COMPANY’S Common Stock is less than the Institution Share Price (as defined below) (a “Dilutive Issuance”), then immediately following such Dilutive Issuance, COMPANY shall issue to M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC, pro rata based on their shares then outstanding, shares of Common Stock such that the Institution Share Number (as defined below) equals the product obtained by multiplying the Institution Share Number in effect immediately before the Dilutive Issuance by the Adjustment Fraction defined below. The Institution Share Price in effect immediately after the Dilutive Issuance shall be adjusted to equal the result obtained by dividing the Institution Share Price in effect immediately before the Dilutive Issuance by the Adjustment Fraction defined below.

 

	
The Adjustment Fraction   equals:
    	
 
    	
(A + C)
    
	
 
    	
 
    	
(A + B)
    

 

where:

 

A = the number of shares of Common Stock issued and outstanding on a Fully Diluted Basis immediately prior to the Dilutive Issuance

 

B = the number of shares of Common Stock that could be purchased at the Institution Share Price immediately prior to the Dilutive Issuance using the aggregate consideration received by COMPANY in connection with the Dilutive Issuance

 

24

 

C = the number of shares of Common Stock or of a security exercisable for or convertible into Common Stock issued, on a Fully Diluted Basis, pursuant to the Dilutive Issuance

 

In addition, the following definitions shall apply to this Section 4.1(i)(iv):

 

“Institution Share Number” shall mean the cumulative number of shares of COMPANY’S Common Stock that M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC own on the date of the Dilutive Issuance, as adjusted from time to time pursuant to this Section.  Notwithstanding the foregoing, any shares of Common Stock acquired by M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC pursuant to Section 4.1 (i)(iii) shall not be included in the Institution Share Number.

 

“Institution Share Price” shall mean the value per share of the shares of Common Stock included in the Institution Share Number, as adjusted from time to time pursuant to this Section. For purposes of this Section, the initial Institution Share Price to be used in an adjustment resulting from the first Dilutive Issuance to occur after the Funding Threshold Date shall be the Fair Market Value per share of the Common Stock of COMPANY effective on the Funding Threshold Date.

 

All rights granted to M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC pursuant to this Section 4.1 (i)(iv) shall terminate immediately prior to a firm commitment for an underwritten public offering of Common Stock resulting in gross proceeds to COMPANY of at least $10 million.

 

The rights granted to M.I.T. pursuant to this Section 4.1(i)(iv) shall not apply to the following equity securities: (1) shares of preferred stock or the shares of Common Stock issuable upon the conversion of preferred stock; (2) shares of Common Stock designated by vote of the Board of Directors of the COMPANY, or options to purchase such shares, that are issued or granted to directors, employees or consultants of the COMPANY; (3) securities issued as a result of any stock split, stock dividend, or reclassification of Common Stock, distributable on a pro rata basis to all holders of Common Stock; (4) securities reissued to employees or consultants of the COMPANY following the COMPANY’S acquisition of such securities pursuant to restricted stock arrangements with individuals who have terminated their relationship with the COMPANY or shares subject to options which are not exercised; and (5) securities

 

25

 

issued to M.I.T., BRIGHAM, HARVARD, INSTITUTE, CMCC and the M.I.T. Holders pursuant to this Agreement.

 

(v)            “Piggy-Back” Registration Rights. On the EFFECTIVE DATE, COMPANY shall amend its Investors’ Rights Agreement to add BRIGHAM and M.I.T. (but not M.I.T. Holders, HARVARD, INSTITUTE and CMCC) as a “Holder” for purposes of Section 3.3 thereof (Piggy-Back Registration Rights). This amendment is set forth in the Investors’ Rights Agreement attached hereto as Exhibit D. BRIGHAM and M.I.T. shall agree to be bound by the terms and conditions of the Investors’ Rights Agreement, as amended, insofar as they relate to Section 3.3 thereof The Piggy-Back Registration Rights granted to BRIGHAM and M.I.T. pursuant to the Investors’ Rights Agreement shall terminate in accordance with Section 3.13 thereof.

 

4.2          Payments.

 

(a)            Method of Payment. All payments under this Agreement should be made payable to “Massachusetts Institute of Technology” and sent to the address identified in Section 15.1. Each payment should reference this Agreement and identify the obligation under this Agreement that the payment satisfies.

 

(b)            Payments in U.S. Dollars. All payments due under this Agreement shall be drawn on a United States bank and shall be payable in United States dollars. Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States (as reported in the Wall Street Journal) on the last working day of the calendar quarter of the applicable REPORTING PERIOD. Such payments shall be without deduction of exchange, collection, or other charges, and, specifically, without deduction of withholding or similar taxes or other government imposed fees or taxes, except as permitted in the definition of NET SALES.

 

(c)            Late Payments. Any payments by COMPANY that are not paid on or before the date such payments are due under this Agreement shall bear interest, to the extent

 

26

 

permitted by law, at [***] the Prime Rate of interest as reported in the Wall Street Journal on the date payment is due.

 

5. REPORTS AND RECORDS.

 

5.1          Frequency of Reports.

 

(a)            Before First Commercial Sale. Prior to the first commercial sale of any LICENSED PRODUCT or first commercial performance of any LICENSED PROCESS, COMPANY shall deliver reports to M.I.T. annually, within [***] days of the end of each calendar year, containing information concerning the immediately preceding calendar year, as further described in Section 5.2.

 

(b)            Upon First Commercial Sale of a LICENSED PRODUCT or Commercial Performance of a LICENSED PROCESS. COMPANY shall report to M.I.T. the date of first commercial sale of a LICENSED PRODUCT and the date of first commercial performance of a LICENSED PROCESS within [***] days of occurrence in each country.

 

(c)            After First Commercial Sale. After the first commercial sale of a LICENSED PRODUCT or first commercial performance of a LICENSED PROCESS, COMPANY shall deliver reports to M.I.T. within [***] days of the end of each REPORTING PERIOD, containing information concerning the immediately preceding REPORTING PERIOD, as further described in Section 5.2.

 

5.2          Content of Reports and Payments. Each report delivered by COMPANY to M.I.T. shall contain at least the following information for the immediately preceding REPORTING PERIOD:

 

(a)            the number of LICENSED PRODUCTS sold, leased or distributed by COMPANY, its AFFILIATES and SUBLICENSEES to independent third parties in each country, and, if applicable, the number of LICENSED PRODUCTS used by COMPANY, its AFFILIATES and SUBLICENSEES in the provision of services in each country;

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

27

 

(b)            a description of LICENSED PROCESSES performed by COMPANY, its AFFILIATES and SUBLICENSEES in each country as may be pertinent to a royalty accounting hereunder;

 

(c)            the gross price charged by COMPANY, its AFFILIATES and SUBLICENSEES for each LICENSED PRODUCT and, if applicable, the gross price charged for each LICENSED PRODUCT used to provide services in each country; and the gross price charged for each LICENSED PROCESS performed by COMPANY, its AFFILIATES and SUBLICENSEES in each country;

 

(d)            calculation of NET SALES for the applicable REPORTING PERIOD in each country, including a listing of applicable deductions;

 

(e)            total royalty payable on NET SALES in U.S. dollars, together with the exchange rates used for conversion;

 

(f)            the amount of SUBLICENSE INCOME received by COMPANY from each SUBLICENSEE and the amount due to M.I.T. from such SUBLICENSE INCOME, including an itemized breakdown of the sources of income comprising the SUBLICENSE INCOME;

 

(g)            the amount of CORPORATE PARTNER INCOME received by COMPANY from each paying entity and the amount due to M.I.T. from such CORPORATE PARTNER INCOME, including an itemized breakdown of the sources of income comprising the CORPORATE PARTNER INCOME; and

 

(h)            the number of sublicenses entered into for the PATENT RIGHTS, LICENSED PRODUCTS and/or LICENSED PROCESSES.

 

If no amounts are due to M.I.T. for any REPORTING PERIOD, the report shall so state.

 

28

 

5.3          Financial Statements.

 

(a)            On or before the [***] day following the close of COMPANY’S fiscal year, COMPANY shall provide M.I.T. with COMPANY’S financial statements for the preceding fiscal year including, at a minimum, a balance sheet and an income statement, certified by COMPANY’S treasurer or chief financial officer or by an independent auditor.

 

(b)            On the EFFECTIVE DATE, the COMPANY shall amend its Investors’ Rights Agreement to add BRIGHAM as a “Purchaser” for purposes of Section 1.1 thereof (Financial Statements). This amendment is set forth in the Investors’ Rights Agreement attached hereto as Exhibit D. BRIGHAM shall agree to be bound by the terms and conditions of the Investors’ Rights Agreement insofar as they relate to Section 1 thereof. The information rights granted to BRIGHAM pursuant to the Investors’ Rights Agreement shall terminate in accordance with Section 1.6 thereof

 

5.4          Records. COMPANY shall maintain, and shall cause its AFFILIATES and SUBLICENSEES to maintain, complete and accurate records relating to the rights and obligations under this Agreement and any amounts payable to M.I.T. in relation to this Agreement, which records shall contain sufficient information to permit M.I.T. to confirm the accuracy of any reports delivered to M.I.T. and compliance in other respects with this Agreement. The relevant party shall retain such records for at least [***] years following the end of the calendar year to which they pertain, during which time M.I.T., or M.I.T.’s appointed agents, shall have the right, at M.I.T.’s expense, to inspect such records during normal business hours, upon at least [***] business days prior notice, to verify any reports and payments made or compliance in other respects under this Agreement. In the event that any audit performed under this Section reveals an underpayment in excess of [***] percent ([***]%), COMPANY shall bear the full cost of such audit and shall remit any amounts due to M.I.T. within [***] days of receiving notice thereof from M.I.T.

 

5.5          Board Meeting Updates. COMPANY agrees to meet or speak with a representative of BRIGHAM’s Office of Corporate Sponsored Research and Licensing within

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

29

 

[***] of each meeting of COMPANY’S Board of Directors to provide an update to such representative.

 

6. PATENT PROSECUTION.

 

6.1          Responsibility for PATENT RIGHTS. M.I.T. shall prepare, file, prosecute, and maintain all of the PATENT RIGHTS. COMPANY shall have reasonable opportunities to advise M.I.T. and shall cooperate with M.I.T. in such filing, prosecution and maintenance. Without limiting the generality of the foregoing, M.I.T. shall provide COMPANY with copies of all patent applications and other related material submissions and correspondence with any patent authorities relating to the PATENT RIGHTS and shall provide COMPANY a reasonable period of time to review and comment on such materials (assuming M.I.T. has itself received such documents in time to provide such reasonable notice). M.I.T. shall accept and effect any comments from COMPANY relating to the PATENT RIGHTS for M.I.T. Case Nos. [***] (collectively, the “Specified Patent Rights”) unless M.I.T. determines, in its sole discretion, that the acceptance of such comments would materially impair the rights of M.I.T. or any other licensee. M.I.T. shall give good faith consideration to and effect any comments from COMPANY relating to the PATENT RIGHTS for cases other than the Specified Patent Rights, to the extent feasible, unless M.I.T. determines, in its sole discretion, that the acceptance of such comments would impair the rights of M.I.T. or any other licensee. In the event COMPANY desires to discontinue its support of any patent or patent application within the PATENT RIGHTS, COMPANY shall provide M.I.T. with at least [***] days prior written notice of such intended discontinuance of support. In such event, (i) any such patent or patent application shall be removed from the definition of PATENT RIGHTS under this Agreement, (ii) the licenses granted to COMPANY and its AFFILIATES as to such rights shall terminate, and (iii) COMPANY shall have further obligation with respect to such rights pursuant to Section 6.3.

 

6.2          International (non-United States) Filings. Appendix B is a list of countries in which patent applications corresponding to the United States patent applications listed in Appendix A shall be filed, prosecuted, and maintained. Appendix B may be amended by mutual agreement of COMPANY and M.I.T.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

30

 

6.3          Payment of Expenses Incurred After the EFFECTIVE DATE. Payment of all reasonable fees and costs, including attorneys’ fees, relating to the filing, prosecution and maintenance of the PATENT RIGHTS and incurred after EFFECTIVE DATE shall be the responsibility of COMPANY and other commercial licensees of any of such PATENT RIGHTS as they may exist from time to time (as used herein a “commercial licensee” shall mean a for-profit entity that has been granted a license under the applicable PATENT RIGHTS to develop and sell products). When there are additional commercial licensees of the PATENT RIGHTS, COMPANY shall be responsible for a pro rata share of all such patent related fees and costs for the applicable PATENT RIGHTS. As commercial licensees are added over time, COMPANY’S pro rata share will decrease on a going forward basis only. No credits shall be allowed for payments made by COMPANY prior to each new commercial licensee. COMPANY shall reimburse M.I.T. for all amounts due pursuant to this Section within [***] days after invoicing. Late payments shall accrue interest pursuant to Section 4.2(c). In all instances, M.I.T. shall pay the fees prescribed for large entities to the United States Patent and Trademark Office.

 

6.4          Payment of Expensed Incurred Before the EFFECTIVE DATE. Payment of all reasonable fees and costs, including attorneys’ fees, relating to the filing, prosecution and maintenance of the PATENT RIGHTS not yet reimbursed, or obligated to be reimbursed, by third parties and incurred prior to the EFFECTIVE DATE shall be the responsibility of COMPANY.  As of November 6, 2008, M.I.T. has incurred approximately $[***] for such patent-related fees and costs. COMPANY shall reimburse all amounts due pursuant to this Section within [***] days of invoicing. Late payments shall accrue interest pursuant to Section 4.2(c). In all instances, M.I.T. shall pay the fees prescribed for large entities to the United States Patent and Trademark Office.

 

7. INFRINGEMENT.

 

7.1          Notification of Infringement. Each party agrees to provide written notice to the other party promptly after becoming aware of any infringement of the PATENT RIGHTS.

 

7.2          Right to Prosecute Infringements.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

31

 

(a)            COMPANY Right to Prosecute. So long as COMPANY remains the exclusive licensee of the PATENT RIGHTS in the FIELD in the TERRITORY, COMPANY, to the extent permitted by law, shall have the right, under its own control and at its own expense, to prosecute any third party infringement of the PATENT RIGHTS in the FIELD in the TERRITORY, subject to Sections 7.4 and 7.5. If required by law, M.I.T., BRIGHAM, HARVARD or INSTITUTE shall permit any action under this Section to be brought in its name, including being joined as a party-plaintiff provided that COMPANY shall hold M.I.T., BRIGHAM, HARVARD and INSTITUTE harmless from, and indemnify M.I.T., BRIGHAM, HARVARD and INSTITUTE against, any costs, expenses, or liability that M.I.T., BRIGHAM, HARVARD or INSTITUTE incurs in connection with such action. For clarification, COMPANY’S right to prosecute infringements under this Section specifically excludes M.I.T. Case No. [***] which is non-exclusively licensed under this Agreement.

 

Prior to commencing any such action, COMPANY shall consult with M.I.T. and shall consider the views of M.I.T. regarding the advisability of the proposed action and its effect on other licensees of the PATENT RIGHTS and on the public interest, and the parties shall agree on the best course of action taking into account the foregoing factors. COMPANY shall not enter into any settlement, consent judgment, or other voluntary final disposition of any infringement action under this Section without the prior written consent of M.I.T. (subject to concurrence of BRIGHAM, HARVARD, and/or INSTITUTE, as applicable).

 

(b)            M.I.T. Right to Prosecute. In the event that COMPANY is unsuccessful in persuading the alleged infringer to desist or fails to have initiated an infringement action within a reasonable time after COMPANY first becomes aware of the basis for such action, M.I.T. shall have the right, at its sole discretion, to prosecute such infringement under its sole control and at its sole expense, and any recovery obtained shall belong to M.I.T. M.I.T. shall provide written notice to COMPANY that M.I.T. intends to exercise its rights under this Section.

 

7.3          Declaratory Judgment Actions. In the event that a declaratory judgment action is brought against M.I.T. or COMPANY by a third party alleging invalidity, unpatentability, unenforceability, or non-infringement of the PATENT RIGHTS, M.I.T., at its option, shall have

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

32

 

the right within [***] days after commencement of such action to take over the sole defense of the action at its own expense. If M.I.T. does not exercise this right, and assuming that COMPANY is the sole licensee of the PATENT RIGHTS, COMPANY may take over the sole defense of the action at COMPANY’S sole expense, subject to Sections 7.4 and 7.5.

 

7.4          Offsets. COMPANY may offset a total of [***] percent ([***]%) of any expenses incurred under Sections 7.2 and 7.3 against any payments due to M.I.T. under Article 4 (excluding equity granted under Section 4.1(i)), provided that in no event shall such payments under Article 4, when aggregated with any other offsets and credits allowed under this Agreement, be reduced by more than [***] percent ([***]%) in any REPORTING PERIOD, it being understood that any expenses which COMPANY is prevented by the foregoing proviso from offsetting in any REPORTING PERIOD may be carried forward and offset in one or more subsequent REPORTING PERIODS (applying the foregoing proviso, including the cap, in each subsequent REPORTING PERIOD).

 

7.5          Recovery. Any recovery obtained in an action brought by COMPANY under Sections 7.2 or 7.3 shall be distributed as follows: (i) each party shall be reimbursed for any expenses incurred in the action (including the amount of any royalty or other payments withheld from M.I.T. as described in Section 7.4), (ii) as to ordinary damages, COMPANY shall receive an amount equal to its lost profits or a reasonable royalty on the infringing sales, or whichever measure of damages the court shall have applied, and COMPANY shall pay to M.I.T. based upon such amount a reasonable approximation of the royalties and other amounts that COMPANY would have paid to M.I.T. if COMPANY had sold the infringing products, processes and services rather than the infringer, and (iii) as to special or punitive damages, the parties shall share equally in any award.

 

7.6          Cooperation. Each party agrees to cooperate in any action under this Article which is controlled by the other party, provided that the controlling party reimburses the cooperating party promptly for any costs and expenses incurred by the cooperating party in connection with providing such assistance.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

33

 

7.7          Right to Sublicense. So long as COMPANY remains the exclusive licensee of the PATENT RIGHTS in the FIELD in the TERRITORY, COMPANY shall have the sole right to sublicense any alleged infringer in the FIELD in the TERRITORY for future use of the PATENT RIGHTS in accordance with the terms and conditions of this Agreement relating to sublicenses. Any revenues to COMPANY pursuant to such sublicense shall be treated as set forth in Article 4.

 

8. INDEMNIFICATION AND INSURANCE

 

8.1          Indemnification.

 

(a)            Indemnity. COMPANY shall indemnify, defend, and hold harmless M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC (collectively, the “Institutions”), the AFFILIATES of the Institutions, and the respective directors, trustees, officers, faculty, students, employees, and agents and their respective successors, heirs and assigns of any of the foregoing (the “Indemnitees”), against any liability, damage, loss, or expense (including reasonable attorneys fees and expenses) (collectively, “Losses”) incurred by or imposed upon any of the Indemnitees in connection with any third-party claims, suits, investigations, actions, demands or judgments arising out of (i) any theory of liability (including without limitation actions in the form of tort, warranty, or strict liability and regardless of whether such action has any factual basis) concerning any product, process, or service that is made, used, sold, imported, or performed pursuant to any right or license granted under this Agreement, or (ii) arising out of or related to the exercise of any rights granted to COMPANY under this Agreement or any breach of this Agreement by COMPANY; provided, however, that COMPANY shall have no obligation pursuant to the foregoing with respect to any Losses to the extent that they directly result from the gross negligence or willful misconduct of any Indemnitee.

 

(b)            Procedures. The Indemnitees agree to provide COMPANY with prompt written notice of any claim, suit, action, demand, or judgment for which indemnification is sought under this Agreement. COMPANY agrees, at its own expense, to provide attorneys reasonably acceptable to M.I.T. to defend against any such claim, whether or not such claims are rightfully brought. The Indemnitees shall extend reasonable cooperation to COMPANY in such defense and will permit COMPANY to conduct and control such defense and the disposition of

 

34

 

such claim, suit, or action (including all decisions relative to litigation, appeal, and settlement); provided, however, that any Indemnitee shall have the right to retain its own counsel, at the expense of COMPANY, if representation of such Indemnitee by the counsel retained by COMPANY would be inappropriate because of actual or potential differences in the interests of such Indemnitee and any other party represented by such counsel. COMPANY agrees to keep M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC (as applicable) informed of the progress in the defense and disposition of such claim and to consult with M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC (as applicable) with regard to any proposed settlement.

 

Notwithstanding anything to the contrary in this Agreement, COMPANY shall not enter into any settlement, consent judgment, or other voluntary final disposition of any claim that has a material adverse effect on the rights of any Indemnitee(s) hereunder or admits any wrongdoing or fault by any Indemnitee(s) or imposes on any Indemnitee(s) any payment or other liability, without the prior written consent of such Indemnitee(s).

 

8.2          Insurance. Commencing at the earlier of (1) the six (6) month anniversary of the EFFECTIVE DATE, or (2) the date upon which COMPANY or an AFFILIATE or SUBLICENSEE commences research and development activities related to LICENSED PRODUCTS or LICENSED PROCESSES, COMPANY shall, at its sole cost and expense, obtain and carry in full force and effect commercial general liability insurance, including product liability insurance (subject to clause (iii) below) and errors and omissions insurance (subject to clause (iv) below) which shall protect COMPANY and Indemnitees with respect to events covered by Section 8.1(a) above. Such insurance (i) shall be issued by an insurer licensed to practice in the Commonwealth of Massachusetts or an insurer pre-approved bysuch approval not to be unreasonably withheld, (ii) shall list M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC as additional insureds thereunder, (iii) shall include product liability coverage and broad form contractual liability coverage at any time during which COMPANY, or any AFFILIATE or SUBLICENSEE is making, using or selling a LICENSED PRODUCT or performing a LICENSED PROCESS, including conducting clinical trials or obtaining any required regulatory approvals, (iv) shall include errors and omissions insurance at any time during which COMPANY or any AFFILIATE or SUBLICENSEE is performing a service for a third party (including without limitation manufacturing or assembling), has entered negotiations toward a sublicense or CORPORATE PARTNER agreement, or has such an agreement in force, and/or is

 

35

 

otherwise liable to errors and omissions claims, and (v) shall require [***] ([***]) days written notice to be given to M.I.T. prior to any cancellation, non-renewal, or material change thereof. The limits of such insurance shall not be less than [***] Dollars ($[***]) per occurrence with an aggregate of [***] Dollars ($[***]) for bodily injury including death; [***] Dollars ($[***]) per occurrence with an aggregate of [***] Dollars ($[***]) for property damage; and [***] Dollars ($[***]) per occurrence with an aggregate of [***] Dollars ($[***]) for errors and omissions. In the alternative, COMPANY may self-insure subject to prior approval of M.I.T and the Risk Management Foundation. The minimum amounts of insurance coverage required under this Section 8.2 shall not be construed to create a limit of COMPANY’S liability with respect to its indemnification under Section 8.1 of this Agreement. COMPANY shall provide M.I.T. with Certificates of Insurance evidencing compliance with this Section. COMPANY shall continue to maintain such insurance or self-insurance after the expiration or termination of this Agreement during any period in which COMPANY or any AFFILIATE or SUBLICENSEE continues (i) to make, use, or sell a product that was a LICENSED PRODUCT under this Agreement or (ii) to perform a service that was a LICENSED PROCESS under this Agreement, and thereafter for a period of [***] years. If there is a cancellation, non-renewal, or material change in insurance, and COMPANY does not obtain replacement insurance providing comparable coverage prior to the expiration of the [***] ([***]) day notice period described above, M.I.T. shall have the right to terminate this Agreement effective at the end of such [***] ([***]) day period without notice or any additional waiting periods. For clarity, this termination clause applies to any material changes in the following terms: (i) Commercial general liability insurance in amounts not less than $[***] per incident and $[***] annual aggregate; (ii) the naming of Indemnitees as additional insureds; and (iii) product liability coverage and broad form contractual liability coverage for the company’s indemnification under Section 8.1 of this Agreement.

 

9. NO REPRESENTATIONS OR WARRANTIES

 

M.I.T. hereby represents and warrants to COMPANY as of the EFFECTIVE DATE that, subject to Section 2.8, to its knowledge (i) it has the authority to grant the licenses as granted herein; (ii) it has not granted to any third party any rights under the PATENT RIGHTS that

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

36

 

would conflict with this Agreement; and (iii) it has not granted to any for-profit third party any rights under the MIT/BRIGHAM/HARVARD Invention Disclosures. M.I.T.’s total liability under the representations and warranties of this Agreement shall be limited to an amount equal to the total sum that has been paid by COMPANY to M.I.T. under the provisions of Article 4 of this Agreement and any payments that have been made by COMPANY to M.I.T. for the expenses described in Section 6.3.

 

EXCEPT AS MAY OTHERWISE BE EXPRESSLY SET FORTH IN THIS AGREEMENT, M.I.T., BRIGHAM, HARVARD, INSTITUTE AND CMCC MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND CONCERNING THE PATENT RIGHTS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, VALIDITY OF PATENT RIGHTS CLAIMS, WHETHER ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. Specifically, and not to limit the foregoing, M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC make no warranty or representation (i) regarding the validity or scope of the PATENT RIGHTS, and (ii) that the exploitation of the PATENT RIGHTS or any LICENSED PRODUCT or LICENSED PROCESS will not infringe any patents or other intellectual property rights of M.I.T., BRIGHAM, HARVARD, INSTITUTE or CMCC or of a third party.

 

EXCEPT FOR COMPANY’S LIABILITY UNDER SECTION 8.1, IN NO EVENT SHALL ANY PARTY, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGES OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER SUCH PARTY SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.

 

10. ASSIGNMENT.

 

This Agreement is personal to COMPANY and no rights or obligations may be assigned by COMPANY without the prior written consent of M.I.T. Notwithstanding the foregoing, at any

 

37

 

time after which COMPANY has raised at least [***] Dollars ($[***]) from the sale of COMPANY’S equity securities for its own account, COMPANY may assign its rights and obligations under this Agreement, without M.I.T.’s consent, to a successor in connection with the merger, consolidation, or sale of all or substantially all of its assets or that portion of its business to which this Agreement relates; provided, however, that (i) COMPANY shall deliver written notice to M.I.T. within [***] days of any such proposed assignment, such notice to include the assignee’s contact information, (ii) this Agreement shall immediately terminate if the assignee fails to agree in writing to M.I.T. to be bound by the terms and conditions of this Agreement on or before the effective date of such assignment, and (iii) COMPANY and its AFFILIATES are not in default of any of their obligations under this Agreement at the time of such proposed assignment.

 

11. GENERAL COMPLIANCE WITH LAWS

 

11.1        Compliance with Laws. COMPANY shall use reasonable commercial efforts to comply with all commercially material local, state, federal, and international laws and regulations relating to the development, manufacture, use, and sale of LICENSED PRODUCTS and LICENSED PROCESSES.

 

11.2        Export Control. COMPANY and its AFFILIATES and SUBLICENSEES shall comply with all United States laws and regulations controlling the export of certain commodities and technical data, including without limitation all Export Administration Regulations of the United States Department of Commerce. Among other things, these laws and regulations prohibit or require a license for the export of certain types of commodities and technical data to specified countries. COMPANY hereby gives written assurance that it will comply with, and will cause its AFFILIATES and SUBLICENSEES to comply with, all United States export control laws and regulations, that it bears sole responsibility for any violation of such laws and regulations by itself or its AFFILIATES or SUBLICENSEES, and that it will indemnify, defend, and hold M.I.T., BRIGHAM, HARVARD, INSTITUTE and CMCC harmless (in accordance with Section 8.1) for the consequences of any such violation.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

38

 

11.3        Non-Use of M.I.T., BRIGHAM. HARVARD. INSTITUTE and CMCC Names. COMPANY and its AFFILIATES and SUBLICENSEES shall not use the name of “Massachusetts Institute of Technology,” “Lincoln Laboratory,” “Brigham and Women’s Hospital,” “Harvard University,” ‘The Immune Disease Institute,” “Children’s Hospital Boston” or any variation, adaptation, or abbreviation thereof, or of any of its trustees, officers, faculty, students, employees, or agents (collectively, “Associates,” or an individual related to a particular institution, an “Associate”), or any trademark owned by M.I.T., BRIGHAM, HARVARD, INSTITUTE or CMCC, or any terms of this Agreement in any promotional material or other public announcement or disclosure without the prior written consent of the applicable party, or in the case of the name of a BRIGHAM Associate, the written consent of such BRIGHAM Associate, which consent any party may withhold in its sole discretion. The foregoing notwithstanding, without the consent of M.I.T., BRIGHAM, HARVARD, INSTITUTE or CMCC, COMPANY may (i) make factual statements publicly during the term of this Agreement that COMPANY has a license from M.I.T., BRIGHAM, HARVARD, INSTITUTE and/or CMCC, as applicable, under one or more of the patents and/or patent applications comprising the PATENT RIGHTS; (ii) make factual statements publicly that one of its founders, Robert S. Langer, is a professor at M.I.T., and (iii) make disclosures or statements required by law.

 

11.4        Marking of LICENSED PRODUCTS. To the extent commercially feasible and consistent with prevailing business practices, COMPANY shall mark, and shall cause its AFFILIATES and SUBLICENSEES to mark, all LICENSED PRODUCTS that are manufactured or sold under this Agreement with the number of each issued patent under the PATENT RIGHTS that applies to such LICENSED PRODUCT.

 

12. TERMINATION

 

12.1        Voluntary Termination by COMPANY. COMPANY shall have the right to terminate this Agreement, for any reason, (i) upon at least six (6) months prior written notice to M.I.T., such notice to state the date at least six (6) months in the future upon which termination is to be effective, and (ii) upon payment of all amounts due to M.I.T. through such termination effective date.

 

39

 

12.2        Cessation of Business. If COMPANY ceases to carry on its business related to this Agreement, M.I.T. shall have the right to terminate this Agreement immediately upon written notice to COMPANY.

 

12.3        Termination by M.I.T. M.I.T. shall terminate this Agreement immediately upon written notice with no further obligation or opportunity to cure if COMPANY fails to maintain the insurance required by Section 8.2, or if COMPANY shall become insolvent, shall make an assignment for the benefit of creditors, or shall file a petition in bankruptcy.

 

12.4        Termination for Default.

 

(a)            Nonpayment. In the event COMPANY fails to pay any amounts due and payable to M.I.T. hereunder, and fails to make such payments within thirty (30) days after receiving written notice of such failure, M.I.T. may terminate this Agreement immediately upon written notice to COMPANY.

 

(b)            Material Breach. In the event COMPANY commits a material breach of its obligations under this Agreement, except for breach as described in Section 12.4(a), and fails to cure that breach within sixty (60) days after receiving written notice thereof, M.I.T. may terminate this Agreement immediately upon written notice to COMPANY.

 

12.5        Termination as a Consequence of PATENT CHALLENGE.

 

(a)            By COMPANY. If COMPANY or any of its AFFILATES brings a PATENT CHALLENGE against M.I.T., or assists others in bringing a PATENT CHALLENGE against M.I.T. (except as required under a court order or subpoena), then M.I.T. may immediately terminate this Agreement and/or the license granted hereunder.

 

(b)            By SUBLICENSEE. If a SUBLICENSEE brings a PATENT CHALLLENGE or assists another party in bringing a PATENT CHALLENGE (except as required under a court order or subpoena), then M.I.T. may send a written demand to COMPANY to terminate such sublicense. If COMPANY fails to so terminate such sublicense within forty-five (45) days after M.I.T.’s demand, M.I.T. may immediately terminate this Agreement and/or the license granted hereunder.

 

40

 

12.6        Effect of Termination.

 

(a)            Survival. The following provisions shall survive the expiration or termination of this Agreement: Articles 1, 8, 9, 13,14 and 15, and Sections 4.1 (i), 5.2 (obligation to provide final report and payment), 5.4,11.1, 11.2 and 12.6.

 

(b)            Inventory. Upon the early termination of this Agreement, COMPANY and its AFFILIATES and SUBLICENSEES may complete and sell any work-in-progress and inventory of LICENSED PRODUCTS that exist as of the effective date of termination, provided that (i) COMPANY pays M.I.T. the applicable running royalty or other amounts due on such sales of LICENSED PRODUCTS in accordance with the terms and conditions of this Agreement, and (ii) COMPANY and its AFFILIATES and SUBLICENSEES shall complete and sell all work-in-progress and inventory of LICENSED PRODUCTS within [***] months after the effective date of termination.

 

(c)            Pre-termination Obligations. In no event shall termination of this Agreement release COMPANY, AFFILIATES, or SUBLICENSEES from the obligation to pay any amounts that became due on or before the effective date of termination.

 

13. DISPUTE RESOLUTION.

 

13.1        Mandatory Procedures. The parties agree that any dispute arising out of or relating to this Agreement shall be resolved solely by means of the procedures set forth in this Article, and that such procedures constitute legally binding obligations that are an essential provision of this Agreement. If either party fails to observe the procedures of this Article, as may be modified by their written agreement, the other party may bring an action for specific performance of these procedures in any court of competent jurisdiction.

 

13.2        Equitable Remedies. Although the procedures specified in this Article are the sole and exclusive procedures for the resolution of disputes arising out of or relating to this Agreement, either party may seek a preliminary injunction or other provisional equitable relief if,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

41

 

in its reasonable judgment, such action is necessary to avoid irreparable harm to itself or to preserve its rights under this Agreement.

 

13.3        Dispute Resolution Procedures.

 

(a)            Mediation. In the event any dispute arising out of or relating to this Agreement remains unresolved within [***] days from the date the affected party informed the other party of such dispute, either party may initiate mediation upon written notice to the other party (“Notice Date”), whereupon both parties shall be obligated to engage in a mediation proceeding under the then current Center for Public Resources (“CPR”) Model Procedure for Mediation of Business Disputes (http://www.cpradr.org), except that specific provisions of this Article shall override inconsistent provisions of the CPR Model Procedure. The mediator will be selected from the CPR Panels of Neutrals. If the parties cannot agree upon the selection of a mediator within [***] business days after the Notice Date, then upon the request of either party, the CPR shall appoint the mediator. The parties shall attempt to resolve the dispute through mediation until the first of the following occurs: (i) the parties reach a written settlement; (ii) the mediator notifies the parties in writing that they have reached an impasse; (iii) the parties agree in writing that they have reached an impasse; or (iv) the parties have not reached a settlement within [***] days after the Notice Date.

 

(b)            Trial. If the parties fail to resolve the dispute through mediation, or if neither party elects to initiate mediation, each party shall have the right to pursue any other remedies legally available to resolve the dispute.

 

13.4        Performance to Continue. Each party shall continue to perform its undisputed obligations under this Agreement pending final resolution of any dispute arising out of or relating to this Agreement; provided, however, that a party may suspend performance of its undisputed obligations during any period in which the other party fails or refuses to perform its undisputed obligations. Nothing in this Article is intended to relieve COMPANY from its obligation to make undisputed payments pursuant to Articles 4 and 6 of this Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

42

 

13.5        Statute of Limitations. The parties agree that all applicable statutes of limitation and time-based defenses (such as estoppel and laches) shall be tolled while the procedures set forth in Sections 13.3(a) are pending. The parties shall cooperate in taking any actions necessary to achieve this result.

 

14. CONFIDENTIAL INFORMATION

 

14.1        Designation. CONFIDENTIAL INFORMATION that is disclosed in writing shall be marked with a legend indicating its confidential status (such as “Confidential” or “Proprietary”). CONFIDENTIAL INFORMATION that is disclosed orally or visually shall be documented in a written notice prepared by the Disclosing Party and delivered to the Receiving Party within [***] days after the date of disclosure; such notice shall summarize the CONFIDENTIAL INFORMATION disclosed to the Receiving Party and reference the time and place of disclosure.

 

14.2        Obligations. For a period of [***] years after disclosure of any portion of CONFIDENTIAL INFORMATION, the Receiving Party shall (i) maintain such CONFIDENTIAL INFORMATION in strict confidence and shall not, without the consent of the Disclosing Party, disclose CONFIDENTIAL INFORMATION to third parties, except that the Receiving Party may disclose or permit the disclosure of any CONFIDENTIAL INFORMATION to its directors, officers, employees, consultants, and advisors who are obligated to maintain the confidential nature of such CONFIDENTIAL INFORMATION and who need to know such CONFIDENTIAL INFORMATION for the purposes of this Agreement; (ii) use such CONFIDENTIAL INFORMATION solely for the purposes of this Agreement; and (iii) allow its trustees or directors, officers, employees, consultants, and advisors to reproduce the CONFIDENTIAL INFORMATION only to the extent necessary for the purposes of this Agreement, with all such reproductions being considered CONFIDENTIAL INFORMATION.  The Receiving Party shall be responsible for any unauthorized disclosure or use of CONFIDENTIAL INFORMATION by its trustees or directors, officers, employees, consultants and advisors.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

43

 

14.3        Exceptions. The obligations of the Receiving Party under Section 14.2 above shall not apply to the extent that the Receiving Party can demonstrate by competent evidence that certain CONFIDENTIAL INFORMATION (i) was in the public domain prior to the time of its disclosure under this Agreement; (ii) entered the public domain after the time of its disclosure under this Agreement through means other than an unauthorized disclosure resulting from an act or omission by the Receiving Party; (iii) was independently developed or discovered by the Receiving Party without use of the CONFIDENTIAL INFORMATION; (iv) is or was disclosed to the Receiving Party at any time, whether prior to or after the time of its disclosure under this Agreement, by a third party having no fiduciary relationship with the Disclosing Party and having no obligation of confidentiality with respect to such CONFIDENTIAL INFORMATION; or (v) is required to be disclosed to comply with applicable laws or regulations, or with a court or administrative order, provided that the Disclosing Party receives reasonable prior written notice of such disclosure.

 

14.4        Ownership and Return. The Receiving Party acknowledges that the Disclosing Party (or any third party entrusting its own information to the Disclosing Party) claims ownership of its CONFIDENTIAL INFORMATION in the possession of the Receiving Party. Upon the expiration or termination of this Agreement, and at the request of the Disclosing Party, the Receiving Party shall return to the Disclosing Party all originals, copies, and summaries of documents, materials, and other tangible manifestations of CONFIDENTIAL INFORMATION in the possession or control of the Receiving Party, except that the Receiving Party may retain one copy of the CONFIDENTIAL INFORMATION in the possession of its legal counsel solely for the purpose of monitoring its obligations under this Agreement.

 

15. MISCELLANEOUS.

 

15.1        Notice. Any notices required or permitted under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be sent by hand, recognized national overnight courier, confirmed facsimile transmission, confirmed electronic mail, or registered or certified mail, postage prepaid, return receipt requested, to the following addresses or facsimile numbers of the parties:

 

If to M.I.T., all matters relating to the license:

 

44

 

Massachusetts Institute of Technology
 Technology Licensing Office, Rm NE25-230
 Five Cambridge Center, Kendall Square
 Cambridge, MA 02142-1493
 Attention: Director
 Tel:          617-253-6966
 Fax:        617-258-6790

 

If to M.I.T., relating to any equity action after the initial issuance of shares:

 

Massachusetts Institute of Technology
 Treasurer’s Office
 238 Main Street
 Cambridge, MA 02142
  [***]

 

Tel:          617-253-5422
 Fax:        617-258-6676

 

If to COMPANY:                                                  Selecta Biosciences, Inc.
 480 Arsenal Street
 Building One
 Watertown, MA 02472
 Attention: President
 Tel:         617-923-1400
 Fax:        617-924-3454

 

All notices under this Agreement shall be deemed effective upon receipt. A party may change its contact information immediately upon written notice to the other party in the manner provided in this Section.

 

15.2        Governing Law/Jurisdiction. This Agreement and all disputes arising out of or related to this Agreement, or the performance, enforcement, breach or termination hereof, and any remedies relating thereto, shall be construed, governed, interpreted and applied in accordance with the laws of the Commonwealth of Massachusetts, U.S.A., without regard to conflict of laws principles, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted. The state and federal courts having jurisdiction over Cambridge, MA, USA, provide the exclusive forum for any PATENT CHALLENGE and/or any court action between the parties

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

45

 

relating to this Agreement. COMPANY submits to the jurisdiction of such courts and waives any claim that such court lacks jurisdiction over COMPANY or its AFFILIATES or constitutes an inconvenient or improper forum.

 

15.3        Force Maieure. Neither party will be responsible for delays resulting from causes beyond the reasonable control of such party, including without limitation fire, explosion, f00d, war, acts of terrorism, strike, or riot, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever such causes are removed.

 

15.4        Amendment and Waiver. This Agreement may be amended, supplemented, or otherwise modified only by means of a written instrument signed by both parties. Any waiver of any rights or failure to act in a specific instance shall relate only to such instance and shall not be construed as an agreement to waive any rights or fail to act in any other instance, whether or not similar.

 

15.5        Severability. In the event that any provision of this Agreement shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect any other provision of this Agreement, and the parties shall negotiate in good faith to modify the Agreement to preserve (to the extent possible) their original intent. If the parties fail to reach a modified agreement within thirty (30) days after the relevant provision is held invalid or unenforceable, then the dispute shall be resolved in accordance with the procedures set forth in Article 13. While the dispute is pending resolution, this Agreement shall be construed as if such provision were deleted by agreement of the parties.

 

15.6        Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns.

 

15.7        Headings. All headings are for convenience only and shall not affect the meaning of any provision of this Agreement.

 

15.8        Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements or understandings between the parties relating to its subject matter.

 

46

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

 

The EFFECTIVE DATE of this Agreement is November 25, 2008.

 

	
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
    	
SELECTA BIOSCIENCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ John H. Turner, Jr.
    	
 
    	
By:
    	
/s/ Robert L. Bratzler
    
	
Name:
    	
John H. Turner, Jr.
    	
 
    	
Name:
    	
Robert L. Bratzler
    
	
Title:
    	
Associate Director — Technology Licensing Office
    	
 
    	
Title:
    	
President
    
	
 
    	
 
    
	
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Claude R. Canizares, Ph.D.
    	
 
    	
 
    
	
Name:
    	
Claude R. Canizares, Ph.D.
    	
 
    
	
Title:
    	
Bruno Rossi Professor of Experimental Physics,
   Vice President for Research, and Associate Provost
    	
 
    
	
 
    	
 
    
						

 

47

 

APPENDIX A

 

List of Patent Applications and Patents

 

I.             United States Patents and Applications

 

[***]

 

II.            International (non-U.S.) Patents and Applications

 

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

48

 

APPENDIX B

 

List of Countries (excluding United States) for which
 PATENT RIGHTS Applications Will Be Filed; Prosecuted and Maintained

 

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

49

 

EXHIBIT A

 

CONFLICT AVOIDANCE STATEMENT

 

	
Name:
    	
Robert S. Langer
    
	
 
    
	
Dept, or Lab:
    	
Dept, of Chemical Engineering
    
	
 
    
	
Company:
    	
Selecta Biosciences, Inc.
    
	
 
    
	
Address:
    	
One Kendall Square, Suite 169
    
	
 
    	
 
    
	
 
    	
Cambridge, MA 02142
    
	
 
    	
 
    
	
Licensed   Technology:
    
				

 

[***]

 

Because of the M.I.T, license granted to the above company and my equity* position and continuing relationship with this company, I acknowledge the potential for a possible conflict of interest between the performance of research at M.I.T. and my contractual or other obligations to this company. Therefore, I will not:

 

1)             use students at M.I.T. for research and development projects for the company;

 

2)             restrict or delay access to information from my M.I.T. research;

 

3)             take direct or indirect research support from the company in order to support my activities at M.I.T.; or

 

4)             employ students at the company, except in accordance with Section 4.5.2, “Faculty and Students,” in the Policies and Procedures Guide.

 

In addition, in order to avoid the appearance of a conflict, I will attempt to differentiate clearly between the intellectual directions of my M.I.T. research and my contributions to the company. To that end, I will expressly inform my department head/laboratory director annually of the general nature of my activities on behalf of the company.

 

	
 
    	
Signed:
    	
/s/ Robert S. Langer
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
11/24/08
    
	
 
    	
 
    	
 
    
	
Approved by:
    	
/s/ Klavs F. Jensen
    	
 
    
	
 
    	
 
    	
 
    
	
Name (print):
    	
Klavs F. Jensen
    	
 
    
	
(Dept. Head or Lab Dir)
    	
 
    

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

50

 

* “Equity” includes stock, options, warrants or other financial instruments convertible into stock, which are directly or indirectly controlled by the inventor.

 

51

 

EXHIBIT B

 

INVENTOR/AUTHOR ACKNOWLEDGMENT
 OF NO EQUITY DISTRIBUTION

Form Version 8/22/01

 

In partial reliance on the undersigned’s execution of this Acknowledgment, M.I.T. has entered into the license agreement to which this Acknowledgment is attached (the “LICENSE”) in which COMPANY received certain licenses to the technology listed below, on some or all of which the undersigned is a listed inventor or author. The undersigned, independently of the LICENSE, has received or will soon acquire equity in Selecta Biosciences. Inc. (“COMPANY”), and, in accordance with M.I.T.’s licensing policies contained in M.I.T.’s Guide to the Ownership, Distribution and Commercial Development of M.I.T. Technology, as that policy may be amended from time to time (specifically §4.2.5 as of this Form Version date), the undersigned, on his/her own behalf and on behalf of his/her heirs and assigns, acknowledges and agrees that he/she has no right to receive any share of equity income received by M.I.T. in consideration for the LICENSE.

 

Technology Licensed as of the EFFECTIVE DATE of the LICENSE:

 

[***]

 

	
Witness:
    	
BD
    	
 
    	
Signed:
    	
/s/ Robert S. Langer
    
	
 
    	
 
    	
 
    
	
 
    	
Print Name:
    	
Robert S. Langer
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
11/24/08
    
							

 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

52

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00258-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00258-of-00352.parquet"}]]