Document:

Exhibit 10.14

 

Execution Copy

 

CREDIT AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”), dated as of August 27, 2014 (the “Closing Date”) by and among MIDCAP FINANCIAL SBIC, LP, a Delaware limited partnership (“MidCap”), as administrative agent (“Agent”), the Lenders listed on the Credit Facility Schedule attached hereto and otherwise party hereto from time to time, including, without limitation, SQUARE 1 BANK, a North Carolina banking corporation (“Square 1”) and MidCap (each a “Lender”, and collectively the “Lenders”), and CATABASIS PHARMACEUTICALS, INC., a Delaware corporation and the other entities shown as signatories hereto or that may join this Agreement pursuant to its terms as a Borrower (collectively in the singular, “Borrower”), provides the terms on which Lenders agree to lend to Borrower and Borrower shall repay Lenders.  The parties agree as follows:

 

1              ACCOUNTING AND OTHER TERMS

 

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 15.  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 headings numbered without a decimal point are herein referred to as “Articles,” and all paragraphs numbered with a decimal point (and all subparagraphs or subsections thereof) are herein referred to as “Sections.”

 

2              CREDIT FACILITIES AND TERMS

 

2.1          Promise to Pay.  Borrower hereby unconditionally promises to pay to each Lender in accordance with each Lender’s respective Pro Rata Share of each Credit Facility, the outstanding principal amount of all Credit Extensions made by the Lenders under such Credit Facility and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

 

2.2          Credit Facilities.  Subject to the terms and conditions hereof, each Lender, severally, but not jointly, agrees to make available to Borrower Credit Extensions in respect of each Credit Facility set forth opposite such Lender’s name on the Credit Facility Schedule, in each case not to exceed such Lender’s commitment as identified on the Credit Facility Schedule (such commitment of each Lender, as it may be amended to reflect assignments made in accordance with this Agreement or terminated or reduced in accordance with this Agreement, its “Applicable Commitment”, and the aggregate of all such commitments, the “Applicable Commitments”).

 

2.3          Term Credit Facilities.

 

(a)           Nature of Credit Facility; Credit Extension Requests.  For any Credit Facility identified on the Credit Facility Schedule as a term facility (a “Term Credit Facility”), Credit Extensions in respect of a Term Credit Facility may be requested by Borrower during the Draw Period for such Term Credit Facility.  For any Credit Extension requested under a Term Credit Facility other than on the Closing Date, Agent must receive the completed Credit Extension Form by 12:00 noon (New York time) fifteen (15) Business Days prior to the date of the Credit Extension is to be funded.   To the extent any Term Credit Facility proceeds are repaid for any reason, whether voluntarily or involuntarily (including repayments from insurance or condemnation proceeds), Agent and Lenders shall have no obligation to re-advance such sums to Borrower.

 

(b)           Principal Payments.  Principal payable on account of a Term Credit Facility shall be payable by Borrower to each Lender in accordance with each Lender’s respective Pro Rata Share immediately upon the earliest of (i) the date(s) set forth in the Amortization Schedule for such Term Credit Facility, or (ii) the Maturity Date. Except as this Agreement may specifically provide otherwise, all prepayments of Credit Extensions under Term Credit Facilities shall be applied by Agent to the applicable Term Credit Facility in inverse order of maturity.  The monthly payments required under the Amortization Schedule shall continue in the same amount (for so long as the applicable Term Credit Facility shall

 

1

 

remain outstanding) notwithstanding any partial prepayment, whether mandatory or optional, of the applicable Term Credit Facility.

 

(c)           Mandatory Prepayment.  If a Term Credit Facility is accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Agent, for payment 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 Credit Facility and all other Obligations, plus accrued and unpaid interest thereon, (ii) any fees payable under the Fee Letters by reason of such prepayment, (iii) the Applicable Prepayment Fee as specified in the Credit Facility Schedule for the Credit Facility being prepaid, and (iv) all other sums that shall have become due and payable, including Protective Advances.  Additionally, at the election of Agent (or at the direction of the Required Lenders), Borrower shall prepay the Term Credit Facilities (to be allocated pro rata among the outstanding Credit Extensions under all Term Credit Facilities) in the following amounts:  (A) on the date on which any Credit Party (or Agent as loss payee or assignee) receives any casualty proceeds in excess of Five Hundred Thousand Dollars ($500,000) for real or personal property, in respect of assets upon which Agent maintained a Lien, an amount equal to one hundred percent (100%) of such proceeds (net of out-of-pocket expenses and, in the case of personal property, repayment of any permitted purchase money debt or permitted capital lease encumbering the personal property that suffered such casualty), or such lesser portion of such proceeds as Agent shall elect to apply to the Obligations; and (B) upon receipt by any Credit Party of the proceeds of any asset disposition of personal property not made in the Ordinary Course of Business (other than transfers permitted by Section 7.1) an amount equal to one hundred percent (100%) of the net cash proceeds of such asset disposition (net of out-of-pocket fees and expenses and repayment of any permitted purchase money debt or permitted capital lease encumbering such asset), or such lesser portion as Agent shall elect to apply to the Obligations.  Notwithstanding the foregoing, (a) so long as no Default or Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to $500,000 in the aggregate with respect to any property loss in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (x) shall be of equal or like value as the replaced or repaired Collateral and (y) shall be deemed Collateral in which Agent and Lenders have been granted a first priority security interest, and (b) after the occurrence and during the continuance of a Default or Event of Default, all proceeds payable under such casualty policy shall, at the option of Agent (or at the direction of the Required Lenders), be payable to Agent, for the ratable benefit of the Lenders, on account of the Obligations.

 

(d)           Permitted Prepayment.   Except as provided below, Borrower shall have no right to prepay the Credit Extensions made in respect of a Term Credit Facility.  After the Closed Period, if any, for the applicable Term Credit Facility as specified in the Credit Facility Schedule, Borrower shall have the option to prepay the Prepayable Amount (as defined below) of a Term Credit Facility advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Agent of its election to prepay the Prepayable Amount at least fifteen (15) days prior to such prepayment, and (ii) pays to Agent, for payment to each Lender in accordance with its respective Pro Rata Share, on the date of such prepayment, an amount equal to the sum of (A) the Prepayable Amount plus accrued interest thereon, (B) any fees payable under the Fee Letters by reason of such prepayment, (C) the Applicable Prepayment Fee as specified in the Credit Facility Schedule for the Credit Facility being prepaid, and (D) all Protective Advances.  The term “Prepayable Amount” means all or any portion, as selected by Borrower, of the Credit Extensions under the applicable Term Credit Facility.

 

2.4          Reserved.

 

2.5          Reserved.

 

2.6          Interest and Payments; Administration.

 

(a)           Interest; Computation of Interest.  Each Credit Extension shall bear interest on the outstanding principal amount thereof from the date when made until paid in full at a rate per annum equal to the Applicable Interest Rate.  Each Lender may, upon the failure of Borrower to pay any fees or interest as required herein, capitalize such interest and fees and begin to accrue interest thereon until paid in full, which such interest shall be at a rate per annum equal to the Applicable Interest Rate unless and until the Default Rate shall otherwise apply.  All other Obligations shall bear interest on the outstanding amount thereof from the date they first become payable by Borrower under the Financing Documents until paid in full at a rate per annum equal to the Applicable Interest Rate unless and until the Default Rate shall otherwise apply.  Interest on the Credit Extensions and all fees payable under the Financing Documents shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which such interest accrues.  In computing interest on any Credit Extension or other advance, the date of the making of such Credit Extension or advance shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension or advance is repaid on the same day

 

2

 

on which it is made, such day shall be included in computing interest on such Credit Extension or advance.  Agent shall determine (which determination shall, absent manifest error in calculation, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Credit Extensions.

 

(b)           Default Rate. Upon the election of Agent following the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five hundred basis points (5.00%) above the rate that is otherwise applicable thereto (the “Default Rate”).  Payment or acceptance of the increased interest rate provided in this subsection 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 Agent or Lenders.

 

(c)           Payments Generally.  Except as otherwise provided in this Section 2.6(c), all payments in respect of the Obligations shall be made to Agent for the account of the applicable Lenders in accordance with their Pro Rata Share.  Payments of principal and interest in respect of any Credit Facility identified on the Credit Facility Schedule as “Term” shall be made to each applicable Lender.  All Obligations are payable upon demand of Agent in the absence of any other due date specified herein.  All fees payable under the Financing Documents shall be deemed non-refundable as of the date paid.  Any payment required to be made to Agent or a Lender under this Agreement may be made by debit or automated clearing house payment initiated by Agent or such Lender from any of Borrower’s deposit accounts, including the Designated Funding Account, and Borrower hereby authorizes Agent and each Lender to debit any such accounts for any amounts Borrower owes hereunder when due.  Without limiting the foregoing, Borrower shall tender to Agent and Lenders any authorization forms as Agent or any Lender may reasonably require to implement such debit or automated clearing house payment.  These debits or automated clearing house payments shall not constitute a set-off. Payments of principal and/or interest received after 12:00 noon New York 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 under any Financing Document shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.  The balance of the Obligations, as recorded in Agent’s books and records at any time, shall be conclusive and binding evidence of the amounts due and owing to Agent and Lenders by each Borrower absent manifest error; provided, however, that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower’s duty to pay all amounts owing hereunder or under any Financing Document.  Agent shall endeavor to provide Borrower with a monthly statement regarding the Credit Extensions (but neither Agent nor any Lender shall have any liability if Agent shall fail to provide any such statement).  Unless Borrower notifies Agent of any objection to any such statement (specifically describing the basis for such objection) within ninety (90) days after the date of receipt thereof, it shall be deemed final, binding and conclusive upon Borrower in all respects as to all matters reflected therein.

 

(d)           Interest Payments; Maturity Date.  Commencing on the first (1st) Payment Date following the funding of a Credit Extension, and continuing on the Payment Date of each successive month thereafter through and including the Maturity Date, Borrower shall make monthly payments of interest, in arrears, calculated as set forth in this Section 2.6.  All unpaid principal and accrued interest is due and payable in full on the Maturity Date or any earlier date specified herein.  If the Obligations are not paid in full on or before the Maturity Date, all interest thereafter accruing shall be payable immediately upon accrual.

 

(e)           Fees.  Borrower shall pay, as and when due and payable under the terms of the Fee Letters, to Agent and each Lender, for their own accounts and not for the benefit of any other Lenders, the fees set forth in the Fee Letters.

 

(f)            Protective Advances.  Borrower shall pay to Agent for the account of Lenders all Protective Advances (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement, the Warrants and the other Financing Documents) when due under any Financing Document (and in the absence of any other due date specified herein, such Protective Advances shall be due upon demand).

 

(g)           Maximum Lawful Rate.  In no event shall the interest charged hereunder with respect to the Obligations exceed the maximum amount permitted under the Laws of the State of Maryland.  Notwithstanding anything to the contrary in any Financing Document, if at any time the rate of interest payable hereunder (the “Stated Rate”) would exceed the highest rate of interest permitted under any applicable Law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate,

 

3

 

Borrower shall, to the extent permitted by Law, continue to pay interest at the Maximum Lawful Rate until such time as the total interest received is equal to the total interest which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate payable.  Thereafter, the interest rate payable shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply.  In no event shall the total interest received by any Lender exceed the amount which it could lawfully have received, had the interest been calculated for the full term hereof at the Maximum Lawful Rate.  If, notwithstanding the prior sentence, any Lender has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance of such Lender’s Credit Extensions or to other amounts (other than interest) payable hereunder, and if no such Credit Extensions or other amounts are then outstanding, such excess or part thereof remaining shall be paid to Borrower.  In computing interest payable with reference to the Maximum Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.

 

(h)           Taxes; Additional Costs.

 

(i)            All payments of principal and interest on the Obligations and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp, documentary, payroll, employment, property or franchise taxes and other taxes, fees, duties, levies, assessments, withholdings or other charges of any nature whatsoever (including interest and penalties thereon) imposed by any taxing authority, excluding taxes imposed on or measured by Agent’s or any Lender’s net income, franchise taxes, and branch profits taxes, in each case, imposed by the jurisdictions under which Agent or such Lender is organized or conducts business (other than solely as the result of entering into any of the Financing Documents or taking any action thereunder) (all non-excluded items being called “Taxes”).  If any withholding or deduction from any payment to be made by any Borrower hereunder is required in respect of any Taxes pursuant to any applicable Law, then Borrower will: (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to Agent an official receipt or other documentation satisfactory to Agent (or Borrower, as the case may be) evidencing such payment to such authority; and (iii) pay to Agent for the account of Agent and Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by Agent and each Lender will equal the full amount Agent and such Lender would have received had no such withholding or deduction for Taxes been required.  If any Taxes are directly asserted against Agent or any Lender with respect to any payment received by Agent or such Lender hereunder, Agent or such Lender may timely pay such Taxes and Borrower will promptly pay such additional amounts (including any penalty, interest or expense) as is necessary in order that the net amount received by such Person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Person would have received had such Taxes not been asserted so long as such amounts have accrued on or after the day which is two hundred seventy (270) days prior to the date on which Agent or such Lender first made written demand therefor.

 

(ii)           If any Borrower fails to pay under this subsection (h) any Taxes when due to the appropriate taxing authority or fails to remit to Agent, for the account of Agent and the respective Lenders, the required receipts or other required documentary evidence, Borrower shall indemnify Agent and Lenders for any incremental Taxes, interest or penalties that may become payable by Agent or any Lender as a result of any such failure.

 

(iii)          Each Lender that is organized under the laws of a jurisdiction other than the United States, a state thereof, or the District of Columbia (such Lender a “Foreign Lender”) shall execute and deliver to each of Borrower and Agent, on or prior to the date on which such Lender becomes a party hereto or purports to become an assignee of an interest as a Lender under this Agreement (and from time to time thereafter as required by applicable law or upon the reasonable request of Borrower or Agent), one or more (as Borrower or Agent may reasonably request) United States Internal Revenue Service Forms W-8ECI, W-8BEN, W-8BEN-E, W-8IMY (as applicable) and other applicable forms, certificates or documents prescribed by the United States Internal Revenue Service or reasonably requested by Borrower or Agent certifying as to such Lender’s entitlement to a complete exemption from withholding or deduction of Taxes.  Borrower shall not be required to pay additional amounts to any Lender pursuant to this subsection (h) with respect to United States withholding and income Taxes to the extent that the obligation to pay such additional amounts would not have arisen but for the failure of such Lender to comply with this paragraph other than a failure due to such Lender being unable to comply with this paragraph as a result of a change in law.

 

(iv)          Each Lender that is not a Foreign Lender shall execute and deliver to each of Borrower and Agent, on or prior to the date on which such Lender becomes a party hereto or purports to become an assignee of an interest

 

4

 

as a Lender under this Agreement (and from time to time thereafter as required by applicable law or upon the reasonable request of Borrower or Agent), one or more (as Borrower or Agent may reasonably request) United States Internal Revenue Service Forms W-9 and other applicable forms, certificates or documents prescribed by the United States Internal Revenue Service or reasonably requested by Borrower or Agent certifying as to such Lender’s entitlement to a complete exemption from withholding or deduction of Taxes.  Borrower shall not be required to pay additional amounts to any Lender pursuant to this subsection (h) with respect to United States withholding and income Taxes to the extent that the obligation to pay such additional amounts would not have arisen but for the failure of such Lender to comply with this paragraph, other than a failure due to such Lender being unable to comply with this paragraph as a result of a change in law.

 

(v)           If a payment made to a Lender under any Financing Document would be subject to United States federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall deliver to Borrower and Agent at the time or times prescribed by law and at such time or times reasonably requested by Borrower or Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by Borrower or Agent as may be necessary for Borrower and Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  For purposes of the preceding sentence, “FATCA” shall include any amendments made to FATCA after the date of this Agreement. Borrower shall not be required to pay additional amounts to any Lender pursuant to this subsection (h) with respect to United States withholding taxes imposed by FATCA.

 

(vi)          If any Lender shall determine in its commercially reasonable judgment that the adoption or taking effect of, or any change in, any applicable Law regarding capital adequacy, in each instance, after the Closing Date, or any change after the Closing Date in the interpretation, administration or application thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or application thereof, or the compliance by any Lender or any Person controlling such Lender with any request, guideline or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency adopted or otherwise taking effect after the Closing Date, has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such adoption, taking effect, change, interpretation, administration, application or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) then from time to time, upon written demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrower shall promptly pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction, so long as such amounts have accrued on or after the day which is two hundred seventy (270) days prior to the date on which such Lender first made demand therefor; provided, however, that notwithstanding anything in this Agreement to the contrary, (A) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (B) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued.

 

(vii)         If any Lender requires compensation under this subsection (h), or requires any Borrower to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to this subsection (h), then, upon the written request of Borrower, such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Credit Extensions hereunder or to assign its rights and obligations hereunder (subject to the terms of this Agreement) to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (A) would eliminate or materially reduce amounts payable pursuant to any such subsection, as the case may be, in the future, and (B) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender (as determined in its sole discretion).  Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

5

 

(i)            Administrative Fees and Charges.

 

(i)            Borrower shall pay to Agent, for its own account and not for the benefit of any other Lenders, all reasonable fees and expenses in connection with audits and inspections of the books and records of the Credit Parties, audits, valuations or appraisals of the Collateral, audits of Borrower’s compliance with applicable Laws and such other matters as Agent shall deem appropriate, which shall be due and payable on the first Business Day of the month following the date of issuance by Agent of a written request for payment thereof to any Borrower; provided, that, as long as no Default has occurred within the preceding twelve (12) months, Agent shall be entitled to such reimbursement for no more than one audit, valuation, appraisal and inspection per calendar year.

 

(ii)           If payments of principal or interest due on the Obligations, or any other amounts due hereunder or under the other Financing Documents, are not timely made and remain overdue for a period of five (5) days, Borrower, without notice or demand by Agent, promptly shall pay to Agent, for its own account and not for the benefit of any other Lenders, as additional compensation to Agent in administering the Obligations, an amount equal to five percent (5.0%) of each delinquent payment.

 

2.7          Secured Promissory Notes.  At the election of any Lender made as to each Credit Facility for which it has made Credit Extensions, each Credit Facility shall be evidenced by one or more secured promissory notes in form and substance reasonably satisfactory to Agent and Lenders (each a “Secured Promissory Note”).  Upon receipt of an affidavit of an officer of and reasonable and customary indemnification by 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.

 

3              CONDITIONS OF CREDIT EXTENSIONS

 

3.1          Conditions Precedent to Initial Credit Extension.  Each Lender’s obligation to make the initial advance in respect of a Credit Facility is subject to the condition precedent that Agent shall consent to or shall have received, in form and substance satisfactory to Agent, such documents, and completion of such other matters, as Agent may reasonably deem necessary or appropriate, including, without limitation, all items listed on the Closing Deliveries Schedule attached hereto.

 

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)           satisfaction of all Applicable Funding Conditions for the applicable Credit Extension as set forth in the Credit Facility Schedule, each in form and substance reasonably satisfactory to Agent and each Lender;

 

(b)           timely receipt by the Agent and each Lender of an executed Credit Extension Form in the form attached hereto;

 

(c)           (i)            for Credit Extensions made on the Closing Date, the representations and warranties in Article 5 and elsewhere in the Financing Documents shall be true, correct and complete in all respects on the Closing Date; provided, however, that those representations and warranties expressly referring to a specific date shall be true, correct and complete in all respects as of such date; and

 

(ii)           for Credit Extensions made after the Closing Date, if any, the representations and warranties in Article 5 and elsewhere in the Financing Documents shall be true, correct and complete in all material respects on the date of the Credit Extension 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.  Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Article 5 and elsewhere in the Financing Documents remain 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;

 

6

 

(d)           no Default or Event of Default shall have occurred and be continuing or result from the Credit Extension;

 

(e)           Agent shall be satisfied with the results of any searches conducted under Section 3.5;

 

(f)            receipt by Agent of such evidence as Agent shall reasonably request to confirm that the deliveries made in Section 3.1 remain current, accurate and in full force and effect, or if not, updates thereto, each in form and substance reasonably satisfactory to Agent (and, in each case, except items where the Closing Deliveries Schedule specifically states that such items are “(Required for initial Credit Extension)”); and

 

(g)           as determined in such Lender’s reasonable discretion, there has not been any Material Adverse Change or any material adverse deviation by Borrower from the most recent board approved financial plan of Borrower provided to Agent and Lenders pursuant to Section 6.2(a)(iii).

 

3.3          Method of Borrowing.  Each Credit Extension in respect of each Credit Facility shall be in an amount at least equal to the applicable Minimum Credit Extension Amount for such Credit Facility as set forth in the Credit Facility Schedule or such lesser amount as shall remain undisbursed under the Applicable Commitments for such Credit Facility.  The date of funding for any requested Credit Extension shall be a Business Day.  To obtain a Credit Extension, Borrower shall deliver to Agent a completed Credit Extension Form executed by a Responsible Officer.  Agent may rely on any notice given by a person whom Agent reasonably believes is a Responsible Officer or designee thereof. Agent and Lenders shall have no duty to verify the authenticity of any such notice.

 

3.4          Funding of Credit Facilities.  Upon the terms and subject to the conditions set forth herein, each Lender, severally and not jointly, shall make available to Agent its Pro Rata Share of the requested Credit Extension, in lawful money of the United States of America in immediately available funds, prior to 11:00 a.m. (New York time) on the specified date for the Credit Extension.  Agent shall, unless it shall have determined that one of the conditions set forth in Section 3.1 or 3.2, as applicable, has not been satisfied, by 2:00 p.m. (New York time) on such day, credit the amounts received by it in like funds to Borrower by wire transfer to the Designated Funding Account (or to the account of Borrower in respect of the Obligations, if the Credit Extension is being made to pay an Obligation of Borrower). A Credit Extension made prior to the satisfaction of any conditions set forth in Section 3.1 or 3.2 shall not constitute a waiver by Agent or Lenders of Borrower’s obligation to satisfy such conditions, and any such Credit Extension made in the absence of such satisfaction shall be made in Agent’s discretion.

 

3.5          Searches.  Before the Closing Date, and thereafter (as and when determined by Agent in its reasonable discretion), Agent shall have the right to perform, all at Borrower’s expense, the searches described in clauses (a), (b), and (c) below against Borrower and any other Credit Party, the results of which are to be consistent with Borrower’s representations and warranties under this Agreement and the reasonably satisfactory results of which shall be a condition precedent to all Credit Extensions requested by Borrower:  (a) title investigations, UCC searches and fixture filings searches; (b) judgment, pending litigation, federal tax lien, personal property tax lien, and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above; and (c) searches of applicable corporate, limited liability company, partnership and related records to confirm the continued existence, organization and good standing of the applicable Person and the exact legal name under which such Person is organized.

 

4              CREATION OF SECURITY INTEREST

 

4.1          Grant of Security Interest.  Borrower hereby grants 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 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 may have priority by operation of applicable Law or by the terms of a written intercreditor or subordination agreement entered into by Agent.

 

7

 

4.2          Representations and Covenants.

 

(a)           As of the Closing Date, Borrower has no ownership interest in any Chattel Paper, letter of credit rights, commercial tort claims, Instruments, documents or investment property (other than cash equivalents on deposit in a Collateral Account subject to a Control Agreement (to the extent required under Section 6.6) and equity interests in any Subsidiaries of Borrower disclosed on the Disclosure Schedule attached hereto).

 

(b)           Borrower shall deliver to Agent all tangible Chattel Paper and all Instruments and documents owned by any Borrower and constituting part of the Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent.  Borrower shall provide Agent with “control” (as in the Code) of all electronic Chattel Paper owned by any Borrower and constituting part of the Collateral by having Agent identified as the assignee on the records pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of control set forth in the UCC.  Borrower also shall deliver to Agent all security agreements securing any such Chattel Paper and securing any such Instruments.  Borrower will mark conspicuously all such Chattel Paper and all such Instruments and Documents with a legend, in form and substance satisfactory to Agent, indicating that such Chattel Paper and such Instruments and Documents are subject to the security interests and Liens in favor of Agent created pursuant to this Agreement and the Financing Documents.

 

(c)           Borrower shall deliver to Agent all letters of credit on which any Borrower is the beneficiary and which give rise to letter of credit rights owned by such Borrower which constitute part of the Collateral in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent.  Borrower shall take any and all actions as may be necessary or desirable, or that Agent may request, from time to time, to cause Agent to obtain exclusive “control” (as defined in the Code) of any such letter of credit rights in a manner acceptable to Agent.

 

(d)           Borrower shall promptly advise Agent upon any Borrower becoming aware that it has any interests in any commercial tort claim that constitutes part of the Collateral, which such notice shall include descriptions of the events and circumstances giving rise to such commercial tort claim and the dates such events and circumstances occurred, the potential defendants with respect such commercial tort claim and any court proceedings that have been instituted with respect to such commercial tort claims, and Borrower shall, with respect to any such commercial tort claim, execute and deliver to Agent such documents as Agent shall request to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to any such commercial tort claim.

 

(e)           Except for Inventory in an aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000), no Inventory or other Collateral shall at any time be in the possession or control of any warehouse, consignee, bailee or any of Borrower’s agents or processors without prior written notice to Agent and the receipt by Agent, prior to the commencement of such possession or control, of warehouse receipts, consignment agreements or bailee lien waivers (as applicable) in form and substance reasonably satisfactory to Agent, reflecting that  Borrower has notified any such warehouse, consignee, bailee, agent or processor of the security interests and Liens in favor of Agent created pursuant to this Agreement and the Financing Documents, and has instructed such Person to hold all such Collateral for Agent’s account subject to Agent’s instructions and including an acknowledgement from such Person that such Person holds the Collateral for Agent’s benefit, and any other waivers and agreements reasonably requested by the Agent.

 

(f)            Upon request of Agent, Borrower shall promptly deliver to Agent any and all certificates of title, applications for title or similar evidence of ownership of all such tangible personal property and shall cause Agent to be named as lienholder on any such certificate of title or other evidence of ownership.  Borrower shall not permit any such tangible personal property to become fixtures to real estate unless such real estate is subject to a Lien in favor of Agent.

 

(g)           Each Borrower hereby authorizes Agent to file without the signature of such Borrower one or more UCC financing statements relating to its Liens on all or any part of the Collateral, which financing statements may list Agent as the “secured party” and such Borrower as the “debtor” and which describe and indicate the collateral covered thereby as all or any part of the Collateral under the Financing Documents in such jurisdictions as Agent from time to time determines are appropriate, and to file without the signature of such Borrower any continuations of or corrective amendments to any such financing statements, in any such case in order for Agent to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to the Collateral.  Each Borrower also ratifies its authorization for Agent to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.  Any financing statement may include a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Agent and the Lenders under the UCC.

 

8

 

(h)           As of the Closing Date, no Borrower holds, and after the Closing Date Borrower shall promptly notify Agent in writing upon creation or acquisition by any Borrower of, any Collateral which constitutes a claim against any Governmental Authority, including, without limitation, the federal government of the United States or any instrumentality or agency thereof, the assignment of which claim is restricted by any applicable Law, including, without limitation, the federal Assignment of Claims Act and any other comparable Law.  Upon the request of Agent, Borrower shall take such steps as may be necessary or desirable, or that Agent may request, to comply with any such applicable Law.

 

(i)            Borrower shall furnish to Agent from time to time any statements and schedules further identifying or describing the Collateral and any other information, reports or evidence concerning the Collateral as Agent may reasonably request from time to time.

 

5              REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as follows on the Closing Date and the date of each Credit Extension:

 

5.1          Due Organization, Authorization: Power and Authority.

 

(a)           Each Credit Party and each Subsidiary of any Credit Party is duly existing and in good standing, as a Registered Organization in its respective jurisdiction of formation.  Each Credit Party and each Subsidiary of any Credit Party is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business 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.  The Financing Documents have been duly authorized, executed and delivered by each Credit Party and constitute legal, valid and binding agreements enforceable in accordance with their terms.  The execution, delivery and performance by each Credit Party of each Financing Document executed or to be executed by it is in each case within such Credit Party’s powers.

 

(b)           The execution, delivery and performance by each Credit Party of the Financing Documents to which it is a party do not (i) conflict with any of such Credit Party’s organizational documents; (ii) contravene, conflict with, constitute a default under or violate any Law; (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which such Credit Party or any of its property or assets may be bound or affected; (iv) require any action by, filing, registration, or qualification with, or Required Permit from, any Governmental Authority (except such Required Permits which have already been obtained and are in full force and effect); or (v) constitute a default under or conflict with any Material Agreement.  No Credit Party is in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a Material Adverse Change.

 

5.2          Litigation.  Except as disclosed on the Disclosure Schedule or, after the Closing Date, pursuant to Section 6.7, there are no actions, suits, proceedings or, to the knowledge of any Credit Party, investigations pending or, to the knowledge of the Responsible Officers, threatened in writing by or against any Credit Party or any Subsidiary of any Credit Party which involves the reasonable possibility of any judgment or liability of more than Two Hundred Fifty Thousand Dollars ($250,000.00) or that could reasonably be expected to result in a Material Adverse Change, or which questions the validity of the Financing Documents, or the other documents required thereby or any action to be taken pursuant to any of the foregoing.

 

5.3          No Material Deterioration in Financial Condition; Financial Statements.

 

(a)           There has been no material adverse deterioration in the consolidated financial condition of any Credit Party from the most recent financial statements submitted to Agent or any Lender; provided, however, the parties agree that losses and reductions in cash that are consistent, in the reasonable discretion of the Agent and the Required Lenders, with the Borrower’s financial plan, as updated from time to time, and provided to Agent shall not, on its own, constitute a material deterioration in Borrower’s consolidated financial position. There has been no material adverse deviation from the most recent annual board approved financial plan and projections of Borrower, as updated from time to time and delivered to Agent and Lenders.

 

9

 

(b)           All financial statements for the Credit Parties, delivered to Agent or any Lender fairly present, in conformity with GAAP, in all material respects the consolidated financial condition and consolidated results of operations of such Credit Party, except for the absence of footnotes and subject to year-end adjustment, in the case of unaudited financial statements.

 

5.4          Solvency.  The fair salable value of each Credit Party’s assets (including goodwill minus disposition cost(s) exceeds the fair value of its liabilities.  After giving effect to the transactions described in this Agreement, (a) no Credit Party is left with unreasonably small capital in relation to its business as presently conducted, and (b) each Credit Party is able to pay its debts (including trade debts) as they mature.

 

5.5          Subsidiaries; Investments.  Borrower and its Subsidiaries do not own any stock, partnership interest or other equity securities, except for Permitted Investments.

 

5.6          Tax Returns and Payments; Pension Contributions.  Each Credit Party and any Subsidiary of any Credit Party has timely filed all required tax returns and reports (or extensions thereof), and each Credit Party and any Subsidiary of any Credit Party has timely paid all foreign, federal, state (other than sales and use taxes) and material local and material sales and use taxes, assessments, deposits and contributions owed by such Credit Party or Subsidiary of a Credit Party, as applicable (for purposes hereof, “material” shall include any taxes, assessments, deposits and contributions in excess of $25,000).  Borrower may defer payment of any contested taxes, provided, however, that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Agent in writing of the commencement of, and any material developments in, the proceedings, (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 (except for a Permitted Lien) and (d) makes appropriate reserves on its financial statements in conformity with GAAP.  Borrower is unaware of any claims or adjustments proposed for any of prior tax years of any Credit Party or any Subsidiary of any Credit Party which could reasonably be expected to result in additional taxes becoming due and payable by such Credit Party.  Each Credit Party and any Subsidiary of any Credit Party has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and no Credit Party or any Subsidiary of any Credit Party has withdrawn from participation in, or has 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 such Credit Party or Subsidiary, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.

 

5.7          Disclosure Schedule.  All information set forth in the Disclosure Schedule is true, accurate and complete as of the date hereof.  All information set forth in the Perfection Certificate is true, accurate and complete as of the date hereof.

 

6              AFFIRMATIVE COVENANTS

 

Borrower covenants and agrees as follows:

 

6.1          Organization and Existence; Government Compliance.

 

(a)           Each Credit Party and any Subsidiary of any Credit Party shall maintain its legal existence and good standing in its respective jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Change.  If a Credit Party is not now a Registered Organization but later becomes one, Borrower shall promptly notify Agent of such occurrence and provide Agent with such Credit Party’s organizational identification number.

 

(b)           Each Credit Party and any Subsidiary of any Credit Party shall comply with all Laws, ordinances and regulations to which it or its business locations is subject, the noncompliance with which could reasonably be expected to result in a Material Adverse Change.  Each Credit Party and any Subsidiary of any Credit Party shall obtain and keep in full force and effect and comply with all of the Required Permits, except where failure to have or maintain compliance with or effectiveness of such Required Permit could not reasonably be expected to result in a Material Adverse Change.  Each Credit Party and any Subsidiary of any Credit Party shall promptly provide copies of any such obtained Required Permits to Agent. Borrower shall notify Agent within three (3) Business Days (but in any event prior to Borrower submitting any requests for

 

10

 

Credit Extensions) of the occurrence of any facts, events or circumstances known to a Borrower, whether threatened, existing or pending, that could reasonably be expected to cause any Required Permit to become materially limited or suspended or revoked.

 

6.2          Financial Statements, Reports, Certificates.

 

(a)           Each Credit Party shall deliver to Agent and each Lender: (i) (A)(1) prior to a Qualifying IPO and (2) following a Qualifying IPO for any month when Borrower does not at all times have a Cash/Debt Ratio of 2.00 to 1.00 or greater, as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and, in the event of the creation and joinder, as applicable, of any additional Borrowers or Subsidiaries in accordance with this Agreement, consolidating balance sheet, income statement and cash flow statement covering such Credit Party’s consolidated operations for such month certified by a Responsible Officer and in a form acceptable to Agent and each Lender, or (B) following a Qualifying IPO, but only so long as and at all times during such quarter Borrower has a Cash/Debt Ratio of 2.00 to 1.00 or greater, as soon as available, but no later than (i) forty-five (45) days after the last day of each quarter, a company prepared consolidated and, in the event of the creation and joinder, as applicable, of any additional Borrowers or Subsidiaries in accordance with this Agreement, consolidating balance sheet, income statement and cash flow statement covering such Credit Party’s consolidated operations for such quarter certified by a Responsible Officer and (2) thirty (30) days after the last day of each month during such quarter (not including any month which is also the end of a quarter (i.e. the months ending March 31, June 30, September 30 and December 31 of each year)), a summary of Borrower’s cash and cash equivalents, in the case of clauses (1) and (2), in a form acceptable to Agent and each Lender; (ii) (x) on or before September 30, 2014 for the fiscal year ended December 31, 2013, and (y) for each fiscal year thereafter, as soon as available, but no later than one hundred eighty (180) days after the last day of a Credit Party’s fiscal year, audited consolidated and consolidating financial statements prepared under GAAP, consistently applied, together with an unqualified opinion (except that such opinion may be qualified with a going concern statement based solely as a result of recurring losses and net capital deficiencies of the Borrower) on the financial statements from an independent certified public accounting firm acceptable to Agent and each Lender in its reasonable discretion; (iii) as soon as available but no later than the earlier of ninety (90) days after the last day of such Credit Party’s fiscal year and five (5) days following approval by such Credit Party’s governing board, and as amended and/or updated, such Credit Party’s financial plan and projections for current fiscal year; (iv) within five (5) Business Days of delivery, copies of all statements, reports and notices made available to all of such Credit Party’s security holders or to any holders of Subordinated Debt; (v) in the event that such Credit Party is or 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 (“SEC”) or a link thereto on such Credit Party’s or another website on the Internet; (vi) budgets, sales projections, operating plans and other financial information reasonably requested by Agent or any Lender; (vii) 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 a Credit Party, which statements may be provided to Agent and each Lender by Borrower or directly from the applicable institution(s); (viii) upon request by Agent or any Lender, an update, in form and detail reasonably satisfactory to Agent or such Lender, with respect to Borrower’s clinical milestones; and (ix) such additional information, reports or statements regarding the Credit Parties, any Required Permits, or their respective businesses, contractors and subcontractors as Agent or any Lender may from time to time reasonably request.

 

(b)           on a monthly basis, Borrower shall deliver to Agent and each Lender, together with the monthly or quarterly financial statements and/or monthly cash summaries, as applicable in accordance with Section 6.2(a) above, a duly completed Compliance Certificate signed by a Responsible Officer.

 

(c)           Borrower shall cause each Credit Party to keep proper books of record and account in accordance with GAAP in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities.  Upon prior written notice and during business hours (which such limitations shall not apply if a Default or Event of Default has occurred), Borrower shall allow, and cause each Credit Party to allow, Agent and Lenders to visit and inspect any properties of a Credit Party, to examine and make abstracts or copies from any Credit Party’s books, to conduct a collateral audit and analysis of its operations and the Collateral to verify the amount and age of the accounts, the identity and credit of the respective account debtors, to review the billing practices of the Credit Party and to discuss its respective affairs, finances and accounts with their respective officers, employees and independent public accountants as often as may reasonably be desired.  Borrower shall reimburse Agent and each Lender for all reasonable costs and expenses associated with such visits and inspections; provided, however, that Borrower shall be required to reimburse Agent and each Lender for

 

11

 

such costs and expenses for no more than one (1) such visit and inspection per twelve (12) month period unless a Default or Event of Default has occurred during such period.

 

(d)           Borrower shall, and shall cause each Credit Party to, deliver to Agent and each Lender, within ten (10) Business 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 Required Permits material to Borrower’s business or otherwise on the operations of Borrower or any of its Subsidiaries.

 

6.3          Maintenance of Property.  Borrower shall cause all equipment and other tangible personal property other than Inventory to be maintained and preserved in the same condition, repair and in working order as of the date hereof, ordinary wear and tear excepted, and shall promptly make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end.  Borrower shall cause each Credit Party to keep all Inventory in good and marketable condition, free from material defects.  Returns and allowances between a Credit Party and its Account Debtors shall follow the Credit Party’s customary practices as they exist at the Closing Date.  Borrower shall promptly notify Agent of all returns, recoveries, written disputes and written claims that involve more than Two Hundred Fifty Thousand Dollars ($250,000) of Inventory collectively among all Credit Parties.

 

6.4          Taxes; Pensions.  Borrower shall timely file and cause each Credit Party and any Subsidiary of any Credit Party to timely file, all required tax returns and reports (or proper extensions permitted in accordance with applicable law) and timely pay, and cause each Credit Party and any Subsidiary of any Credit Party to timely pay, all foreign, federal, state (other than sales and use taxes), and material local and material state taxes, assessments, deposits and contributions owed (for purposes hereof, “material” shall include taxes, assessments deposits and contributions in excess of $25,000), and shall deliver to Agent, on demand, appropriate certificates attesting to such payments.  Borrower shall pay, and cause each Credit Party and any Subsidiary of any Credit Party to pay, all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.  Notwithstanding the foregoing, a Credit Party may defer payment of any contested taxes, provided, however, that such Credit Party (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Agent in writing of the commencement of, and any material development in, the proceedings, (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 (except for a Permitted Lien) and (d) makes appropriate reserves to its financial statements in conformity with GAAP.

 

6.5          Insurance.  Borrower shall, and shall cause each Credit Party and each Subsidiary of any Credit Party to, keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Agent may reasonably request.  Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Agent and the Required Lenders.  All property policies shall have a lender’s loss payable endorsement showing Agent as sole lender’s loss payee and waive subrogation against Agent, and all liability policies shall show, or have endorsements showing, Agent as an additional insured.  No other loss payees may be shown on the policies unless Agent shall otherwise consent in writing (provided, that Agent’s consent to additional loss payees resulting from capital lease or equipment finance transactions and/or real estate leases, in each case permitted pursuant to this Agreement, shall not be unreasonably withheld).  If required by Agent, all policies (or the loss payable and additional insured endorsements) shall provide that the insurer shall endeavor to give Agent at least thirty (30) days’ notice before canceling, amending, or declining to renew its policy (except for ten (10) days’ notice for non-payment).  At Agent’s request, Borrower shall deliver certified copies of all such Credit Party insurance policies and evidence of all premium payments.  If any Credit Party 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 and Agent, Agent may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Agent deems prudent.

 

6.6          Collateral Accounts.  Borrower shall, and shall cause each Credit Party to, provide Agent five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution.  In addition, for each Collateral Account that any Credit Party at any time maintains, Borrower shall, and shall cause each Credit Party to, cause the applicable bank or financial institution at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Agent’s Lien in such Collateral Account in accordance with the terms hereunder, which Control Agreement may not be terminated without prior written consent of Agent.  The provisions of the previous sentence shall not apply to (i) Deposit Accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of a Credit Party’s employees and identified to Agent by Borrower as such; provided, however, that at all times Borrower shall maintain one or more

 

12

 

separate Deposit Accounts to hold any and all amounts to be used for payroll, payroll taxes and other employee wage and benefit payments, and shall not commingle any monies allocated for such purposes with funds in any other Deposit Account, (ii) the Lease Letter of Credit, and (iii) the LC Collateral Account.  Borrower shall, and shall cause each Credit Party to, as of the Closing Date, maintain all its Deposit Accounts, primary Securities Accounts and other transaction accounts with Square 1 and its Affiliates, or, in the case of Securities Accounts, with other depository institutions constituting securities intermediaries where Square 1 or its Affiliates are providing investment advisory services with respect to the assets held in such Securities Accounts; provided, that, subject to the conditions set forth in, and for so long as permitted pursuant to the terms of paragraph 1 of, the Post-Closing Obligations Schedule attached hereto, Borrower shall be permitted to maintain, and shall not be required to obtain a Control Agreement with respect to, the Designated SVB Deposit Account and the Designated SVB Securities Account.

 

6.7          Notices of Material Agreements, Litigation and Defaults; Cooperation in Litigation.  Promptly (and in any event within four (4) Business Days), (a) 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 or (b) upon the execution and delivery of any Material Agreement and each material amendment, consent, waiver or other modification, and each notice of termination or default or similar notice delivered to or by a Credit Party in connection with any Material Agreement, or (c) upon Borrower becoming aware of any pending or written threat of action, suit, proceeding or investigation by or against Borrower or any Credit Party which involves the reasonable possibility of any judgment or liability of more than Two Hundred Fifty Thousand Dollars ($250,000) or that could be reasonably expected to result in a Material Adverse Change, or which questions the validity of any of the Financing Documents, or the other documents required thereby or any action to be taken pursuant to any of the foregoing, Borrower shall give written notice to Agent and each Lender of such occurrence, and such further information (including copies of such documentation) as Agent or any Lender shall reasonably request. From the date hereof and continuing through the termination of this Agreement, Borrower shall, and shall cause each Credit Party to, make available to Agent and each Lender, without expense to Agent or any Lender, each Credit Party’s officers, employees and agents and books, to the extent that Agent or any Lender may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Agent or any Lender with respect to any Collateral or relating to a Credit Party.

 

6.8          Creation/Acquisition of Subsidiaries.  In the event Borrower or any Subsidiary creates or, to the extent permitted hereunder, acquires any Subsidiary, Borrower and such Subsidiary shall promptly (and in any event within five (5) Business Days of such creation or acquisition) notify Agent of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Agent or the Required Lenders to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligations of Borrower under the Financing 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 shall grant and pledge to Agent, for the ratable benefit of the Lenders, a perfected security interest in the stock, units or other evidence of ownership of each Subsidiary (the foregoing collectively, the “Joinder Requirements”); provided, that Borrower shall not be permitted to make any Investment in such Subsidiary until such time as Borrower has satisfied the Joinder Requirements.

 

6.9          Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely for (a) transaction fees incurred in connection with the Financing Documents, (b) for working capital needs of Borrower and its Subsidiaries, and (c) any other Permitted Purpose specified in the Credit Facility Schedule for such Credit Facility.  No portion of the proceeds of the Credit Extensions will be used for family, personal, agricultural or household use.

 

6.10        Hazardous Materials; Remediation.

 

(a)           If any release or disposal of Hazardous Materials shall occur or shall have occurred on any real property or any other assets of any Borrower or any other Credit Party, such Borrower will cause, or direct the applicable Credit Party to cause, the prompt containment and removal of such Hazardous Materials and the remediation of such real property or other assets as is necessary to comply with all Laws and to preserve the value of such real property or other assets.  Without limiting the generality of the foregoing, each Borrower shall, and shall cause each other Credit Party to, comply with each Law requiring the performance at any real property by any Borrower or any other Credit Party of activities in response to the release or threatened release of a Hazardous Material.

 

(b)           Borrower will provide Agent within thirty (30) days after written  demand therefor with a bond, letter of credit or similar financial assurance evidencing to the reasonable satisfaction of Agent that sufficient funds are

 

13

 

available to pay the cost of removing, treating and disposing of any Hazardous Materials or Hazardous Materials Contamination and discharging any assessment which may be established on any property as a result thereof, such demand to be made, if at all, upon Agent’s determination that the failure to remove, treat or dispose of any Hazardous Materials or Hazardous Materials Contamination, or the failure to discharge any such assessment could reasonably be expected to have a Material Adverse Change.

 

(c)           If there is any conflict between this Section 6.10 and any environmental indemnity agreement which is a Financing Document, the environmental indemnity agreement shall govern and control.

 

6.11        Power of Attorney.  Each of the officers of Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for each Borrower (without requiring any of them to act as such) with full power of substitution to do the following:  (a) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral (in each case, so long as no Default or Event of Default has occurred and is continuing, other than Permitted Liens), or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (b) so long as Agent has provided not less than three (3) Business Days’ prior written notice to Borrower to perform the same and Borrower has failed to take such action, (i) execute in the name of any Person comprising Borrower any schedules, assignments, instruments, documents, and statements that Borrower is obligated to give Agent under this Agreement or that Agent or any Lender deems necessary to perfect or better perfect Agent’s security interest or Lien in any Collateral, (ii) do such other and further acts and deeds in the name of Borrower that Agent may deem necessary or desirable to enforce, protect or preserve any Collateral or its rights therein, including, but not limited to, to sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; and (iii) after the occurrence and during the continuance of an Event of Default, (A) endorse the name of any Borrower upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to Borrower; (B) make, settle, and adjust all claims under Borrower’s insurance policies; (C) take any action any Credit Party is required to take under this Agreement or any other Financing Document; (D) transfer the Collateral into the name of Agent or a third party as the Code permits; (E) exercise any rights and remedies described in this Agreement or the other Financing Documents; and (F) do such other and further acts and deeds in the name of Borrower that Agent may deem necessary or desirable to enforce its rights with regard to any Collateral.

 

6.12        Further Assurances.  Borrower shall, and shall cause each Credit Party to, promptly execute any further instruments and take further action as Agent reasonably requests to perfect or better perfect or continue Agent’s Lien in the Collateral or to effect the purposes of this Agreement or any other Financing Document.

 

6.13        Post-Closing Obligations.  Borrower shall, and shall cause each Credit Party to, complete each of the post-closing obligations and/or deliver to Agent each of the documents, instruments, agreements and information listed on the Post-Closing Obligations Schedule attached hereto, on or before the date set forth for each such item thereon (as may be extended by the Agent in writing in its sole discretion), each of which shall be completed or provided in form and substance satisfactory to Agent and Lenders.

 

6.14        Disclosure Schedule.  Borrower shall, together with delivery of each Schedule Update Compliance Certificate, to the extent any information in the Disclosure Schedule has become outdated, inaccurate, incomplete or misleading, deliver to Agent a proposed update to the Disclosure Schedule correcting all outdated, inaccurate, incomplete or misleading information.  With respect to any proposed updates to the Disclosure Schedule involving Permitted Liens, Permitted Indebtedness or Permitted Investments, Agent will replace the Disclosure Schedule attached hereto with such proposed update only if such updated information is consistent with the definitions of and limitations herein pertaining to Permitted Liens, Permitted Indebtedness or Permitted Investments.  With respect to any proposed updates to the Disclosure Schedule involving other matters, Agent will replace the applicable portion of the Disclosure Schedule attached hereto with such proposed update upon Agent’s approval thereof.

 

6.15        Replacement Warrants.  Promptly (and in any event within five (5) Business Days) after Agent’s request, Borrower shall deliver the following:

 

(a)           In the event that, on or before November 30, 2014, Borrower authorizes and issues, or obligates itself to issue, shares of any additional class or series of Preferred Stock other than any such class or series that ranks junior to the Series B Preferred Stock of Borrower with respect to the distribution of assets on the liquidation, dissolution or winding up of Borrower or a Deemed Liquidation Event (as defined in the Second Amended and Restated Certificate of Incorporation of Borrower filed with the Secretary of State for the State of Delaware on October 31, 2013), the payment of dividends and

 

14

 

rights of redemption (such additional class or series, the “Senior Preferred Stock”), Borrower shall provide Agent and each Lender with written notice of such authorization and issuance or obligation, which notice shall describe in reasonable detail the terms, rights, preferences and priorities of such additional class or series (“Notice of Issuance of Senior Preferred Stock”).  Within five (5) Business Days after Agent or any Lender delivers written notice to Borrower that Agent or any one or more Lenders elect to exchange their Warrants — Tranche 1 for Replacement Warrants — Tranche 1, Borrower shall issue and deliver to Agent and the Lenders the Replacement Warrants — Tranche 1, together with evidence reasonably satisfactory to Agent that the Replacement Warrants — Tranche 1 and the related shares have been duly authorized and issued by all necessary corporate and shareholder action of Borrower, and the Warrants — Tranche 1, which Agent and Lenders have elected to exchange hereunder, shall be cancelled and returned to the Borrower.

 

(b)           In the event that (i) Tranche 2 is advanced before November 30, 2014 but prior to the authorization and issuance by the Borrower of (or Borrower obligating itself to issue) Senior Preferred Stock, and (ii) Borrower issues (or obligates itself to issue) Senior Preferred Stock on or before November 30, 2014, Borrower shall provide Agent and each Lender with a Notice of Issuance of Senior Preferred Stock.  Within five (5) Business Days after Agent or any Lender delivers written notice to Borrower that Agent or any one or more Lenders elect to exchange their Warrants — Tranche 2 for Replacement Warrants — Tranche 2, Borrower shall issue and deliver to Agent and the Lenders the Replacement Warrants — Tranche 2, together with evidence reasonably satisfactory to Agent that the Replacement Warrants — Tranche 2 and the related shares have been duly authorized and issued by all necessary corporate and shareholder action of Borrower, and the Warrants — Tranche 2, which Agent and Lenders have elected to exchange hereunder, shall be cancelled and returned to the Borrower.

 

7              NEGATIVE COVENANTS

 

Borrower shall not do, nor shall it permit any Credit Party to do, any of the following without the prior written consent of Agent:

 

7.1          Dispositions.  Convey, sell, abandon, lease, license, transfer, assign or otherwise dispose of (collectively, “Transfer”) all or any part of its business or property, except for (a) sales, transfers or dispositions of Inventory in the Ordinary Course of Business; or (b) sales or abandonment of worn-out or obsolete Equipment; (c) to the extent that it would constitute a Transfer, any Permitted Lien; (d) any Permitted License; and (e) an abandonment of Intellectual Property or Material Intangible Property that would be permitted pursuant to clause (C) of the IP Protection Provision (as defined in Section 8.1(d)(i)).

 

7.2          Changes in Business, Management, Ownership or Business Locations.  (a) Engage in any business other than the businesses currently engaged in by Borrower or such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; (c) enter into any transaction or series of related transactions which would result in a Change in Control unless the agreement governing such transaction provides, as a condition precedent to the consummation of such transaction, for either (x) the indefeasible payment in full in cash of all Obligations or (y) the consent of Agent and Lenders; (d) add any new offices or leased business locations, or enter into any new leases with respect to existing offices or business locations (unless such new or existing offices or business locations contain less than One Hundred Thousand Dollars ($100,000) in Borrower’s assets or property and do not contain any of Borrower’s Books) without first delivering a fully-executed Access Agreement to Agent (provided, that, Borrower shall not be required to obtain an Access Agreement with respect to Collateral consisting of laptops, mobile phones and similar items in the possession of an employee or consultant (provided, that, copies of any Books of any Credit Party stored on such items are also stored in a location subject to an Access Agreement and readily available to such Credit Party and Agent); (e) change its jurisdiction of organization; (f) change its organizational structure or type; (g) change its legal name without the prior written consent of the Agent and the Required Lenders (which consent shall not be unreasonably withheld);  (h) change any organizational number (if any) assigned by its jurisdiction of organization; (i) relocate its chief executive office without 30 days prior written notification to Agent; or (j) suffer the resignation of one or more directors from its board of directors in anticipation of the Borrower’s insolvency.

 

7.3          Mergers or Acquisitions.  Merge or consolidate with any other Person, or acquire all or substantially all of the capital stock or property of another Person; provided, however, that a Subsidiary of Borrower may merge or consolidate into another Subsidiary that is a Borrower or a Guarantor that has granted a security interest in favor of Agent in or upon such Guarantor’s Collateral, so long as (a) Borrower has provided Agent with prior written notice of such transaction, (b) a Person already comprising the Borrower shall be the surviving legal entity, (c) Borrower’s tangible net worth is not thereby reduced,

 

15

 

(d) no Event of Default has occurred and is continuing prior thereto or arises as a result therefrom, and (e) Borrower shall be in compliance with the covenants set forth in this Agreement both before and after giving effect to such transaction.

 

7.4          Indebtedness.  Create, incur, assume, or be liable for any Indebtedness other than Permitted Indebtedness.

 

7.5          Encumbrance.  (a) Create, incur, allow, or suffer any Lien on any of its property, except for Permitted Liens, (b) permit any Collateral to fail to be subject to the first priority security interest granted herein except for Permitted Liens that may have priority by operation of applicable Law or by the terms of a written intercreditor or subordination agreement entered into by Agent, or (c) enter into any agreement, document, instrument or other arrangement (except with or in favor of Agent) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s Collateral or Intellectual Property, except for negative pledges in connection with capital lease or equipment financing transactions permitted pursuant to the definition of “Permitted Liens” herein (so long as such negative pledges are limited to the specific equipment being leased or financed and permit Agent’s and any Lender’s Liens hereunder or under any Loan Documents) and except for customary restrictions on assignment without consent in license agreements to the extent such restrictions are rendered unenforceable pursuant to the Code.

 

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

 

7.7          Distributions; Investments; Margin Stock.  (a) Pay any dividends (other than dividends payable solely in common stock) or make any distribution or payment with respect to or redeem, retire or purchase or repurchase any of its equity interests (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements or similar plans in an aggregate amount not to exceed $250,000 in any fiscal year, as long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase), or (b) directly or indirectly make any Investment (including, without limitation, any additional Investment in any Subsidiary) other than Permitted Investments.  Without limiting the foregoing, Borrower shall not, and shall not permit any of its Subsidiaries to, purchase or carry Margin Stock.

 

7.8          Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of any Credit Party, except for (a) transactions that are in the Ordinary Course of Business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person, (b) transactions with Subsidiaries that are designated as a Borrower hereunder and that are not otherwise prohibited by Article 7 of this Agreement, (c) transactions permitted by Sections 7.7 or 7.9 of this Agreement and (d) Bona Fide Preferred Equity Transactions.

 

7.9          Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except to the extent expressly permitted to be made pursuant to the terms of the Subordination Agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt other than as may be expressly permitted pursuant to the terms of any applicable Subordination Agreement to which such Subordinated Debt is subject.

 

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 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; 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, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.

 

7.11        Amendments to Organization Documents and Material Agreements.  Amend, modify or waive any provision of (a) any Material Agreement in a manner that is materially adverse to Borrower, materially adverse to the rights of Agent or any Lender, that pertains to rights to assign or grant a security interest in such Material Agreement, or in a manner that could reasonably be expected to result in a Material Adverse Change, or (b) any of its organizational documents

 

16

 

(other than (i) a change in registered agents, (ii) changes made solely in connection with a Bona Fide Preferred Equity Transaction, or (iii) a change that could not reasonably be expected to materially and adversely affect the rights of Agent or Lenders hereunder, but, for the avoidance of doubt, under no circumstances a change of its name (except to the extent that Agent and the Required Lenders have provided their consent in accordance with Section 7.2(g)), type of organization or jurisdiction of organization), in each case, without the prior written consent of Agent.  Borrower shall provide to Agent copies of all amendments, waivers and modifications of any Material Agreement or organizational documents.

 

7.12        Compliance with Anti-Terrorism Laws.  Directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists.  Borrower shall immediately notify Agent if Borrower has knowledge that Borrower or any Subsidiary or Affiliate 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.  Borrower will not, nor will Borrower permit any Subsidiary or 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, 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. Agent hereby notifies Borrower that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s policies and practices, Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and its principals, which information includes the name and address of Borrower and its principals and such other information that will allow Agent to identify such party in accordance with Anti-Terrorism Laws.

 

8              LIFE SCIENCES PROVISIONS ; SBIC RELATED PROVISIONS

 

8.1          Life Sciences Covenants.

 

(a)           As used in this Agreement, the following terms have the following meanings:

 

“DEA” means the Drug Enforcement Administration of the United States of America, and any successor agency thereof.

 

“Drug Application” means a new drug application, an abbreviated drug application, or a product license application for any Product, as appropriate, as those terms are defined in the FDCA.

 

“FDA” means the Food and Drug Administration of the United States of America, or any successor entity thereto.

 

“FDCA” means the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq., and all regulations promulgated thereunder.

 

“Material Intangible Property” means all of Borrower’s Intellectual Property and license or sublicense agreements or other agreements with respect to rights in Intellectual Property that are material to the condition (financial or other), business or operations of Borrower.

 

“Permitted License” means (a) any non-exclusive license of patent rights of Borrower or its Subsidiaries granted to third parties in the Ordinary Course of Business, (b) any exclusive license of patent rights of Borrower or its Subsidiaries exclusive solely as to discrete geographical areas outside of the United States and (c) an exclusive license of patent rights of Borrower or its Subsidiaries solely in connection with a research and collaboration agreement with respect to the CAT-2054 Product so long as (1) Borrower has at least two (2) other Products (for which Borrower has retained all United States Product rights) in clinical development and (2)  Borrower shall have provided Agent and Lenders with fifteen (15) Business Days prior written notice of such transaction, accompanied by a reasonable description of the same and final or substantially final documentation with respect thereto, and in each of (a), (b) and (c) is an arm’s length transaction for fair value consideration and does not result in a legal transfer of title of the licensed property.

 

17

 

“Products” means any products manufactured, sold, developed, tested or marketed by any Borrower or any of its Subsidiaries, including without limitation, those products set forth on the Products Schedule (as updated from time to time in accordance with Section 8.1(d)); provided, however, that if Borrower shall fail to comply with the obligations under Section 8.1(d) to give notice to Agent and update the Products Schedule prior to manufacturing, selling, developing, testing or marketing any new Product, any such improperly undisclosed Product shall be deemed to be included in this definition.

 

“Registered Intellectual Property” means any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing.

 

(b)           [Reserved].

 

(c)           Borrower represents and warrants as follows at all times unless expressly provided below:

 

(i)            Intellectual Property and License Agreements.  A list of all of Intellectual Property of each Credit Party and all license agreements, sublicenses, or other rights of any Credit Party to use Intellectual Property (including all in-bound license agreements and Permitted Licenses, but excluding over-the-counter software that is commercially available to the public), as of the Closing Date and, as updated pursuant to Section 8.1(d), is set forth on the Intangible Property Schedule, which indicates, for each item of property: (A) the name of the Credit Party owning such Intellectual Property or licensee to such license agreement; (B) the Credit Party’s identifier for such property (i.e., name of patent, license, etc.), (C) whether such property is Intellectual Property (or application therefor) owned by a Credit Party or is property to which a Credit Party has rights pursuant to a license agreement, and (D) the expiration date of such Intellectual Property or license agreement.  In the case of any Material Intangible Property that is a license agreement, the Intangible Property Schedule further indicates, for each: (1) the name and address of the licensor, (2) the name and date of the agreement pursuant to which such item of Material Intangible Property is licensed, (3) whether or not such license agreement grants an exclusive license to a Credit Party, and (4) whether there are any purported restrictions in such license agreement as to the ability of a Credit Party to grant a security interest in and/or to transfer any of its rights as a licensee under such license agreement.  Except for Permitted Licenses noted on the Intangible Property Schedule, each Credit Party is the sole owner of its Intellectual Property, free and clear of any Liens.  Each Patent is valid and enforceable and no part of the Material Intangible Property has been judged invalid or unenforceable, in whole or in part, and to the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party.

 

(ii)           Regulatory Status.

 

(A)          All Products and all Required Permits are listed on the Products Schedule and Required Permits Schedule (as updated from time to time pursuant to Section 8.1(d)), and Borrower has delivered to Agent a copy of all Required Permits requested by Agent as of the date hereof or to the extent requested by Agent pursuant to Section 8.1(d).

 

(B)          With respect to any Product being tested or manufactured, Borrower and its Subsidiaries have received, and such Product is the subject of, all Required Permits needed in connection with the testing or manufacture of such Product as such testing or manufacturing is currently being conducted by or on behalf of Borrower, and Borrower and its Subsidiaries have not received any notice from any applicable Governmental Authority, specifically including the FDA, that such Governmental Authority is conducting an investigation or review of (1) Borrower’s or such Subsidiary’s manufacturing facilities and processes for such Product which have disclosed any material deficiencies or material violations of Laws and/or the Required Permits related to the manufacture of such Product, or (2) any such Required Permit or that any such Required Permit has been revoked or withdrawn, nor has any such Governmental Authority issued any order or recommendation stating that the development, testing and/or manufacturing of such Product should cease and, in the case of this clause (2), such review, revocation, withdrawal, order or recommendation would reasonably be expected to result in a Material Adverse Change.

 

(C)          With respect to any Product marketed or sold by Borrower or its Subsidiaries, Borrower and its Subsidiaries have received, and such Product is the subject of, all Required Permits needed in connection with the marketing and sales of such Product as currently being marketed or sold by Borrower or its Subsidiaries.  Borrower and its Subsidiaries have not received any notice from any applicable Governmental Authority, specifically including the FDA, (i) that such Governmental Authority is conducting an investigation or review of any such Required Permit which have

 

18

 

disclosed any material deficiencies or material violations of Laws and/or the Required Permits related to the marketing or sale of of such Product or (ii) that any such Required Permit has been revoked or withdrawn, and such revocation or withdrawal would reasonably be expected to result in a Material Adverse Change.  No Governmental Authority has issued any order or recommendation stating that such marketing or sales of such Product cease or that such Product be withdrawn from the marketplace.

 

(D)          (i) there have been no adverse clinical test results which have or could reasonably be expected to result in a Material Adverse Change, and (ii) there have been no Product recalls or voluntary Product withdrawals from any market (other than specific and discrete batches or lots not made in conjunction with a larger recall).

 

(E)           Borrower and its Subsidiaries have not experienced any significant failures in its manufacturing of any Product such that the amount of such Product successfully manufactured by Borrower or its Subsidiaries in accordance with all specifications thereof and the required payments related thereto in any month shall decrease significantly with respect to the quantities of such Product produced in the prior month, in each case which have or could reasonably be expected to result in a Material Adverse Change.

 

(d)           Borrower covenants and agrees as follows:

 

(i)              Borrower shall own, or be licensed to use or otherwise have the right to use, all Material Intangible Property.  All Material Intangible Property of Borrower is and shall be fully protected and/or duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances, except where the failure to do so would not reasonably be expected to result in a Material Adverse Change.  Borrower shall not become a party to, nor become bound by, any material license or other material agreement with respect to which Borrower is the licensee that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or other property.  Borrower shall at all times conduct its business without infringement of any Intellectual Property rights of others.  To the extent Borrower determines, in the exercise of its reasonable business judgment, that it is prudent to do so, Borrower shall: (A) protect, defend and maintain the validity and enforceability of its Material Intangible Property; (B) promptly advise Agent in writing of material infringements of its Material Intangible Property; and (C) not allow any of Borrower’s Intellectual Property to be abandoned, invalidated, forfeited or dedicated to the public or to become unenforceable (provided, that, any abandonment, invalidation, forfeiture, dedication to the public or rendering as unenforceable of Material Intangible Property shall not be permitted without the Agent’s prior written consent) (this sentence being referred to as the “IP Protection Provision”).  If Borrower (1) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (2) applies for any patent or the registration of any trademark or servicemark, then Borrower shall, together with the delivery of the each Schedule Update Compliance Certificate, provide an updated Intangible Property Schedule to Agent and Lenders in accordance with Section 8.1(d)(iii) and shall execute such documents and take such other actions as Agent shall reasonably request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Agent, for the ratable benefit of Lenders, in the IP Proceeds (as defined in Exhibit A) pertaining thereto.  Upon request of Agent, Borrower shall provide to Agent, copies (with redactions for confidential information related to patent processes and other similar information; provided, that, upon request, Agent shall be permitted to view such redacted information at Borrower’s offices) of any or all applications that it files for patents or for the registration of trademarks, servicemarks, copyrights or mask works.

 

(ii)             In connection with the development, testing, manufacture, marketing or sale of each and any Product by a Credit Party, such Credit Party shall comply fully and completely in all respects with all Required Permits at all times issued by any Governmental Authority the noncompliance with which could reasonably be expected to have a Material Adverse Change, specifically including the FDA, with respect to such development, testing, manufacture, marketing or sales of such Product by such Credit Party as such activities are at any such time being conducted by such Credit Party.

 

(iii)            Borrower shall provide to Agent, together with delivery of each Schedule Update Compliance Certificate, an updated Intangible Property Schedule reflecting (A) acquisition and/or development of any new Registered Intellectual Property, (B) entering or becoming bound by any additional license or sublicense agreement or other agreement with respect to rights in Intellectual Property (other than over-the-counter software that is commercially available to the public), and (C) any other material change in Borrower’s Material Intangible Property from that listed on the Intangible Property Schedule.  Borrower shall use commercially reasonable efforts at Agent’s request to obtain the consent

 

19

 

of, or waiver by, any person whose consent or waiver is necessary for (x) all licenses or agreements to be deemed “Collateral” and for Agent to have a security interest in it that might otherwise be restricted or prohibited by Law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (y) Agent to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Agent’s rights and remedies under this Agreement and the other Financing Documents.

 

(iv)          If, after the Closing Date, Borrower determines to manufacture, sell, develop, test or market any new Product, Borrower shall give prompt (and in any event within 15 days of such determination) written notice to Agent of such determination (which shall include a brief description of such Product, plus a list of all Required Permits relating to such new Product (and a copy of such Required Permits if requested by Agent) and/or Borrower’s manufacture, sale, development, testing or marketing thereof issued or outstanding as of the date of such notice) and, then, together with the next Schedule Update Compliance Certificate deliver an updated Intangible Property Schedule, Products Schedule and Required Permits Schedule reflecting all appropriate changes to such schedules.  If Borrower shall at any time obtain any new or additional Required Permits from the FDA, DEA, or parallel state or local authorities, or foreign counterparts of the FDA, DEA, or parallel state or local authorities, with respect to any Product which has previously been disclosed to Agent, Borrower shall, together with the next Schedule Update Compliance Certificate, deliver an updated Required Permits Schedule reflecting such new or additional Required Permits, or any other change in such Required Permits Schedule.  Upon request, Borrower shall provide Agent with copies of any of its Required Permits.

 

(e)           In addition to the events listed in Article 10, any one of the following shall also constitute an Event of Default under this Agreement:  (i) the institution of any proceeding by FDA or similar Governmental Authority to order the withdrawal of any Product or Product category from the market or to enjoin Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries from manufacturing, marketing, selling or distributing any Product or Product category, (ii) the institution of any action or proceeding by any DEA, FDA, or any other Governmental Authority to revoke, suspend, reject, withdraw, limit, or restrict any Required Permit held by Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries, which, in each case, could reasonably be expected to result in Material Adverse Change,  (iii) the commencement of any enforcement action against Borrower, its Subsidiaries or any representative of Borrower or its Subsidiaries (with respect to the business of Borrower or its Subsidiaries) by DEA, FDA, or any other Governmental Authority, (iv) the recall of any Products from the market, the voluntary withdrawal of any Products from the market, or actions to discontinue the sale of any Products, or (v) the occurrence of adverse test results in connection with a Product, which could reasonably be expected to result in Material Adverse Change.

 

8.2          SBIC Related Provisions.

 

(a)           SBIC Acknowledgement.  Borrower acknowledges that Agent, and any Lender with the word “SBIC” in its name, is a Federal licensee under the Small Business Investment Act of 1958, as amended (“SBA Act”).  The term “SBA” as used herein means the U.S. Small Business Administration.

 

(b)           As a condition to any Credit Extension, Borrower shall, upon request of Agent or any Lender, complete and deliver to Agent and such Lender SBA Forms 480, 652 and 1031, the SBA Economic Impact Assessment.  Any information provided by the Borrower to Agent or any Lender on each such form is and will be true, accurate and complete in all material respects.

 

(c)           Within forty-five (45) days after the end of each fiscal year of Borrower, and at such other times as Agent or any Lender may reasonably request to the extent related to SBA regulations, Borrower shall provide to Agent and such Lender such forms and financial and other information with respect to any business or financial condition of Borrower or any of its Subsidiaries required by the SBA, including, but not limited to (i) forms and information with respect to Agent’s or any Lender’s reporting requirements under SBA Form 468, (ii) information regarding the full-time equivalent jobs created or retained in connection with any Lender’s investment in Borrower, the impact of the financing on Borrower’s business in terms of revenues and profits and on taxes paid by Borrower and its employees, and (iii) a list of holders of the Obligations. Agent and/or Lenders shall provide Borrower with or provide reasonable assistance to Borrower in obtaining any applicable forms that may be required to be delivered by the Borrower in accordance with this Section 8.2(c).

 

(d)           Upon request of Agent or any Lender, the Borrower shall promptly (and in any event within twenty (20) days of such request) furnish to Agent and such Lender all information as Agent or any Lender may reasonably request, to the extent reasonably available to the Borrower, in order for Agent or any Lender to comply with the requirements

 

20

 

of 13 C.F.R. Section 107.620 or to prepare or file SBA Form 468 and any other information requested or required by the SBA or any other similar Governmental Authority asserting jurisdiction over Agent or such Lender.  Each Borrower shall afford to Agent and such Lender and examiners of the SBA reasonable access, during normal business hours and with prior reasonable notice, to the books, records and properties of such Borrower for the purpose of verifying the certifications made in accordance with 13 C.F.R. Section 107.610 and for all other purposes required by the SBA.

 

(e)                                  No Borrower presently engages in, and it will not hereafter engage in, any activities, and no Borrower will use directly or indirectly, the proceeds from the Credit Extensions made on the Closing Date or otherwise pursuant to the Financing Documents, for any purpose for which a small business investment company is prohibited from using funds by the SBA Act and the regulations thereunder, including 13 C.F.R. Section 107.720.  For a period of twelve (12) months following the Closing Date, no Borrower shall knowingly cause the nature of its business activity to change if such change would render such Borrower ineligible for financing pursuant to 13 C.F.R. Section 107.720.  So long as any Obligations are owing to Agent or any Lender under the Financing Documents, the Borrower will at all times comply with all non-discrimination requirements applicable to the Borrower under federal law.

 

9                                         RESERVED

 

10                                  EVENTS OF DEFAULT

 

10.1                        Events of Default. The occurrence of any of the following conditions and/or events, whether voluntary or involuntary, by operation of law or otherwise, shall constitute an “Event of Default” and Credit Parties shall thereupon be in default under this Agreement and each of the other Financing Documents:

 

(a)                                 Borrower fails to (i) make any payment of principal or interest on any Credit Extension on its due date, or (ii) 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 10.2 hereof);

 

(b)                                 Any Credit Party defaults in the performance of or compliance with any term contained in this Agreement or in any other Financing Document (other than occurrences described in other provisions of this Section 10.1 for which a different grace or cure period is specified or for which no grace or cure period is specified and thereby constitute immediate Events of Default) and such default is not remedied by the Credit Party or waived by Agent within ten (10) days after the earlier of (i) the date of receipt by any Borrower of notice from Agent or Required Lenders of such default, or (ii) the date an officer of such Credit Party becomes aware, or through the exercise of reasonable diligence should have become aware, of such default;

 

(c)                                  Any Credit Party defaults in the performance of or compliance with any term contained in Section 6.2, 6.4, 6.5, 6.6, 6.8, 6.10 or 6.15 or Article 7 or Article 8;

 

(d)                                 Any representation, warranty, certification or statement made by any Credit Party, or any other Person acting for or on behalf of a Credit Party (i) in any Financing Document or in any certificate, financial statement or other document delivered pursuant to any Financing Document or (ii) to induce Agent and/or Lenders to enter into this Agreement or any Financing Document is incorrect in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) when made (or deemed made);

 

(e)                                  (i) any Credit Party defaults under or breaches any Material Agreement (after any applicable grace period contained therein), or a Material Agreement shall be terminated by a third party or parties party thereto prior to the expiration thereof, or there is a loss of a material right of a Credit Party under any Material Agreement to which it is a party, in each case which could reasonably be expected to result in a Material Adverse Change, (ii) (A) any Credit Party fails to make (after any applicable grace period) any payment when due (whether due because of scheduled maturity, required prepayment provisions, acceleration, demand or otherwise) on any Indebtedness (other than the Obligations) of such Credit Party or such Subsidiary having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than Two Hundred Fifty Thousand Dollars ($250,000) (“Material Indebtedness”), (B) any other event shall occur or condition shall exist (after the expiration of all applicable grace periods) under any contractual obligation relating to any such Material Indebtedness, if

 

21

 

the effect of such event or condition is to accelerate, or to permit the acceleration of (without regard to any subordination terms with respect thereto), the maturity of such Material Indebtedness or (C) any such Material Indebtedness shall become or be declared to be due and payable, or be required to be prepaid, redeemed, defeased or repurchased (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof, (iii) any Credit Party defaults (beyond any applicable grace period) under any obligation for payments due under, or any other obligation which permits a landlord to terminate, any real estate lease agreement for its principal place of business and any other location where its Books are located (but not such other location to the extent such Books are also available at its principal place of business), (iv) the occurrence of any breach or default under any terms or provisions of any Subordinated Debt Document or under any agreement subordinating the Subordinated Debt to all or any portion of the Obligations, or the occurrence of any event requiring the prepayment of any Subordinated Debt (except as expressly permitted pursuant to, and in accordance with, the terms set forth in the applicable subordination agreement), or the delivery of any notice with respect to any Subordinated Debt or pursuant to any Subordination Agreement that triggers the start of any standstill or similar period under any Subordination Agreement, or (v) any Borrower makes any payment on account of any Indebtedness that has been subordinated to any of the Obligations, other than payments specifically permitted by the terms of such subordination;

 

(f)                                   (i) any Credit Party shall generally not pay its debts as such debts become due, shall admit in writing its inability to pay its debts generally, shall become insolvent, shall make a general assignment for the benefit of creditors, or shall cease doing business as a going concern, (ii) any proceeding shall be instituted by or against any Credit Party seeking to adjudicate it a bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, composition of it or its debts or any similar order, in each case under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the entry of an order for relief or the appointment of a custodian, receiver, trustee, conservator, liquidating agent, liquidator, other similar official or other official with similar powers, in each case for it or for any substantial part of its property and, in the case of any such proceedings instituted against (but not by or with the consent of) such Credit Party, either such proceedings shall remain undismissed or unstayed for a period of forty-five (45) days or more or any action sought in such proceedings shall occur or (iii) any Credit Party shall take any corporate or similar action or any other action to authorize any action described in clause (i) or (ii) above;

 

(g)                                  (i) The service of process seeking to attach, execute or levy upon, seize or confiscate any Collateral Account, any Intellectual Property, or any funds of any Credit Party on deposit with Agent, any Lender or any Affiliate of Agent or any Lender, or (ii) a notice of lien, levy, or assessment is filed against any assets of a Credit Party by any government agency, and the same under subclauses (i) and (ii) hereof are not discharged or stayed (whether through the posting of a bond or otherwise) prior to the earlier to occur of ten (10) days after the occurrence thereof or such action becoming effective;

 

(h)                                 (i) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business, (ii) the institution by any Governmental Authority of criminal proceedings against any Credit Party, or (iii) one or more judgments or orders for the payment of money (not paid or fully covered by insurance) aggregating in excess of $250,000 shall be rendered against any or all Credit Parties and either (A) enforcement proceedings shall have been commenced by any creditor upon any such judgments or orders, or (B) there shall be any period of ten (10) consecutive days during which a stay of enforcement of any such judgments or orders, by reason of a pending appeal, bond or otherwise, shall not be in effect;

 

(i)                                     any Lien created by any of the Financing Documents shall at any time fail to constitute a valid and perfected Lien on all of the Collateral purported to be encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or any Credit Party shall so assert; any provision of any Financing Document shall fail to be valid and binding on, or enforceable against, a Credit Party, or any Credit Party shall so assert;

 

(j)                                    A Change in Control occurs or any Credit Party or direct or indirect equity owner in a Credit Party, with the power and authority to bind such Credit Party or to consummate such Change in Control, shall enter into agreement which contemplates a Change in Control unless such agreement provides, as a condition precedent to the consummation of such agreement, for either (x) the indefeasible payment in full in cash of all Obligations or (y) the consent of Agent and Lenders;

 

(k)                                 Any Required Permit shall have been (i) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the Ordinary Course of Business for a full term, or (ii) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Required Permit or that could

 

22

 

result in the Governmental Authority taking any of the actions described in clause (i) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (A) has, or would reasonably be expected to have, a Material Adverse Change, or (B) adversely affects the legal qualifications of any Credit Party to hold such Required Permit in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal would reasonably be expected to result in a Material Adverse Change;

 

(l)                                     If any Borrower is or becomes an entity whose equity is registered with the SEC, and/or is publicly traded on and/or listed by a public securities exchange, such Borrower’s equity fails to remain registered with the SEC, and/or such equity fails to remain publicly traded on and listed by a public securities exchange; or

 

(m)                             The occurrence of any fact, event or circumstance that could reasonably be expected to result in a Material Adverse Change.

 

All cure periods provided for in this Section 10.1 shall run concurrently with any cure period provided for in any applicable Financing Documents under which the default occurred.

 

10.2                        Rights and Remedies.

 

(a)                                 Upon the occurrence and during the continuance of an Event of Default, Agent may, and at the written direction of the 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 any Borrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 10.1(f) occurs all Obligations shall be immediately due and payable without any action by Agent or the Lenders), or (iii) by notice to any 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 any Credit Party and Agent and/or the Lenders (but if an Event of Default described in Section 10.1(f) 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 Agent and/or the Lenders shall be immediately terminated without any action by Agent or the Lenders).

 

(b)                                 Without limiting the rights of Agent and Lenders set forth in Section 10.2(a) above, upon the occurrence and during the continuance of an Event of Default, Agent may, and at the written direction of the Required Lenders shall, without notice or demand, do any or all of the following:

 

(i)                                     with or without legal process, enter any premises where the Collateral may be and take possession of and remove the Collateral from the premises or store it on the premises, and foreclose upon and/or sell, lease or liquidate, the Collateral, in whole or in part;

 

(ii)                                  apply to the Obligations (A) any balances and deposits of any Credit Party that Agent or any Lender or any Affiliate of Agent or a Lender holds or controls, or (B) any amount held or controlled by Agent or any Lender or any Affiliate of Agent or a Lender owing to or for the credit or the account of any Credit Party;

 

(iii)                               settle, compromise or adjust and grant releases with respect to disputes and claims directly with Account Debtors for amounts on terms and in any order that Agent considers advisable, notify any Person owing any Credit Party money of Agent’s security interest in such funds, and verify the amount of such Account;

 

(iv)                              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 Agent requests and make it available as Agent designates.  Agent may also render any or all of the Collateral unusable at a Credit Party’s premises and may dispose of such Collateral on such premises without liability for rent or costs. Borrower grants Agent a license to enter and occupy any of its premises, without charge, to exercise any of Agent’s rights or remedies;

 

(v)                                 pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred;

 

(vi)                              ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for

 

23

 

sale, the Collateral.  Agent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s 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 including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof) and, in connection with Agent’s exercise of its rights under this Article 10, Borrower’s rights under all licenses and all franchise agreements shall be deemed to inure to Agent for the benefit of the Lenders;

 

(vii)                           place a “hold” on any account maintained with Agent or the Lenders or any Affiliate of Agent or a Lender 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;

 

(viii)                        demand and receive possession of the Books of Borrower and the other Credit Parties; and

 

(ix)                              exercise all other rights and remedies available to Agent under the Financing Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

 

10.3                        Notices.  Any notice that Agent is required to give to a Credit Party under the UCC of the time and place of any public sale or the time after which any private sale or other intended disposition of the Collateral is to be made shall be deemed to constitute reasonable notice if such notice is given in accordance with this Agreement at least ten (10) days prior to such action.

 

10.4                        Protective Payments.  If any Credit Party fails to pay or perform any covenant or obligation under this Agreement or any other Financing Document, Agent may pay or perform such covenant or obligation, and all amounts so paid by Agent are Protective Advances and immediately due and payable, bearing interest at the then highest applicable rate for the Credit Facilities hereunder, and secured by the Collateral.  No such payments or performance by Agent shall be construed as an agreement to make similar payments or performance in the future or constitute Agent’s waiver of any Event of Default.

 

10.5                        Liability for Collateral No Waiver; Remedies Cumulative.  So long as Agent and the Lenders comply with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Agent and the Lenders, 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.  Agent’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Financing Document shall not waive, affect, or diminish any right of Agent thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by Agent and then is only effective for the specific instance and purpose for which it is given.  Agent’s rights and remedies under this Agreement and the other Financing Documents are cumulative.  Agent has all rights and remedies provided under the Code, by Law, or in equity.  Agent’s exercise of one right or remedy is not an election, and Agent’s waiver of any Event of Default is not a continuing waiver.  Agent’s delay in exercising any remedy is not a waiver, election, or acquiescence.

 

10.6                        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, (i) Borrower, for itself and the other Credit Parties, irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Agent from or on behalf of Borrower of all or any part of the Obligations, and, as between Borrower and the Credit Parties on the one hand and Agent and Lenders on the other, 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 Agent may deem advisable notwithstanding any previous application by Agent, and (ii) unless the Agent and the Lenders shall agree otherwise, the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to the Protective Advances; 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 the Credit Parties owing to Agent or any Lender under the Financing Documents.  Borrower shall remain fully liable for any deficiency.  Any balance remaining shall be delivered

 

24

 

to Borrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct.  Unless the Agent and the Lenders shall agree otherwise, 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.

 

10.7                        Waivers.

 

(a)                                 Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Borrower waives:  (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Financing Documents and hereby ratifies and confirms whatever Agent or Lenders may do in this regard; (ii) all rights to notice and a hearing prior to Agent’s or any Lender’s entry upon the premises of a Borrower, the taking possession or control of, or to Agent’s or any Lender’s replevy, attachment or levy upon, any Collateral or any bond or security which might be required by any court prior to allowing Agent or any Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption Laws.  Each Borrower acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the other Financing Documents and the transactions evidenced hereby and thereby.

 

(b)                                 Each Borrower for itself and all its successors and assigns, (i) agrees that its liability shall not be in any manner affected by any indulgence, extension of time, renewal, waiver, or modification granted or consented to by Agent or any Lender; (ii) consents to any indulgences and all extensions of time, renewals, waivers, or modifications that may be granted by Agent or any Lender with respect to the payment or other provisions of the Financing Documents, and to any substitution, exchange or release of the Collateral, or any part thereof, with or without substitution, and agrees to the addition or release of any Borrower, endorsers, guarantors, or sureties, or whether primarily or secondarily liable, without notice to any other Borrower and without affecting its liability hereunder; (iii) agrees that its liability shall be unconditional and without regard to the liability of any other Borrower, Agent or any Lender for any tax on the indebtedness; and (iv) to the fullest extent permitted by law, expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing.

 

(c)                                  To the extent that Agent or any Lender may have acquiesced in any noncompliance with any requirements or conditions precedent to the closing of the Credit Facilities or to any subsequent disbursement of Credit Extensions, such acquiescence shall not be deemed to constitute a waiver by Agent or any Lender of such requirements with respect to any future Credit Extensions and Agent may at any time after such acquiescence require Borrower to comply with all such requirements.  Any forbearance by Agent or a Lender in exercising any right or remedy under any of the Financing Documents, or otherwise afforded by applicable law, including any failure to accelerate the maturity date of the Credit Facilities, shall not be a waiver of or preclude the exercise of any right or remedy nor shall it serve as a novation of the Financing Documents or as a reinstatement of the Obligations or a waiver of such right of acceleration or the right to insist upon strict compliance of the terms of the Financing Documents.  Agent’s or any Lender’s acceptance of payment of any sum secured by any of the Financing Documents after the due date of such payment shall not be a waiver of Agent’s and such Lender’s right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment.  The procurement of insurance or the payment of taxes or other Liens or charges by Agent as the result of an Event of Default shall not be a waiver of Agent’s right to accelerate the maturity of the Obligations, nor shall Agent’s receipt of any condemnation awards, insurance proceeds, or damages under this Agreement operate to cure or waive any Credit Party’s default in payment of sums secured by any of the Financing Documents.

 

(d)                                 Without limiting the generality of anything contained in this Agreement or the other Financing Documents, each Borrower agrees that if an Event of Default is continuing (i) Agent and Lenders shall not be subject to any “one action” or “election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges provided to Agent or Lenders shall remain in full force and effect until Agent or Lenders have exhausted all remedies against the Collateral and any other properties owned by Borrower and the Financing Documents and other security instruments or agreements securing the Obligations have been foreclosed, sold and/or otherwise realized upon in satisfaction of Borrower’s obligations under the Financing Documents.

 

(e)                                  Neither Agent nor any Lender shall be under any obligation to marshal any assets in payment of any or all of the Obligations.  Nothing contained herein or in any other Financing Document shall be construed as requiring

 

25

 

Agent or any Lender to resort to any part of the Collateral for the satisfaction of any of Borrower’s obligations under the Financing Documents in preference or priority to any other Collateral, and Agent may seek satisfaction out of all of the Collateral or any part thereof, in its absolute discretion in respect of Borrower’s obligations under the Financing Documents.  To the fullest extent permitted by law, each Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any or all of the Collateral any equitable right otherwise available to any Credit Party which would require the separate sale of any of the Collateral or require Agent or Lenders to exhaust their remedies against any part of the Collateral before proceeding against any other part of the Collateral; and further in the event of such foreclosure each Borrower does hereby expressly consent to and authorize, at the option of Agent, the foreclosure and sale either separately or together of each part of the Collateral.

 

10.8                        Injunctive Relief.  The parties acknowledge and agree that, in the event of a breach or threatened breach of any Credit Party’s obligations under any Financing Documents, Agent and Lenders may have no adequate remedy in money damages and, accordingly, shall be entitled to an injunction (including, without limitation, a temporary restraining order, preliminary injunction, writ of attachment, or order compelling an audit) against such breach or threatened breach, including, without limitation, maintaining any cash management and collection procedure described herein.  However, no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against any other legal or equitable remedies in the event of a breach or threatened breach of any provision of this Agreement.  Each Credit Party waives, to the fullest extent permitted by law, the requirement of the posting of any bond in connection with such injunctive relief.  By joining in the Financing Documents as a Credit Party, each Credit Party specifically joins in this Section 10.8 as if this Section 10.8 were a part of each Financing Document executed by such Credit Party.

 

11                                  NOTICES

 

All notices, consents, requests, approvals, demands, or other communications (collectively, “Communication”) by any party to this Agreement or any other Financing 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 electronic mail (if an email address is specified herein) or 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 Agent, Lender or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Article 11.

 

If to Borrower:

 

Catabasis Pharmaceuticals, Inc.

One Kendall Square, Suite B14202

Cambridge, MA 02139

Attention: Chief Financial Officer, Ian Sanderson

Fax: (617) 273-2637

E-Mail: isanderson@catabasis.com

 

with a copy to:

 

WilmerHale

60 State Street

Boston, MA 02109 USA

Attention: Jamie N. Class

Fax: (617) 526-5000

E-Mail: jamie.class@wilmerhale.com

 

If to Agent:

 

MidCap Financial SBIC, LP

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

 

26

 

Attention:  Portfolio Management- Life Sciences

Fax:  (301) 941-1450

E-Mail: lviera@midcapfinancial.com

 

with a copy to:

 

MC Serviceco, LLC

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attention:  General Counsel

Fax:  (301) 941-1450

E-Mail: legalnotices@midcapfinancial.com

 

If to any Lender: at the address set forth in the signature pages to this Agreement or provided in connection with any assignment hereunder for such Lender.

 

12                                  CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

12.1                        THIS AGREEMENT, EACH SECURED PROMISSORY NOTE AND EACH OTHER FINANCING DOCUMENT, AND THE RIGHTS, REMEDIES AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT OR SUCH FINANCING DOCUMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES AND ALL OTHER MATTERS RELATING HERETO, THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS.  NOTWITHSTANDING THE FOREGOING, AGENT AND LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH AGENT AND LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF SECTION 12.1) DEEM NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE AGENT’S AND LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY. 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 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 ARTICLE 11 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. MAIL, PROPER POSTAGE PREPAID.

 

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

 

12.3                        Borrower, Agent and each Lender agree that each Credit Extension (including those made on the Closing Date) shall be deemed to be made in, and the transactions contemplated hereunder and in any other Financing Document shall be deemed to have been performed in, the State of Maryland.

 

27

 

13                                  GENERAL PROVISIONS

 

13.1                        Successors and Assigns.

 

(a)                                 This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  Borrower may not assign this Agreement or any rights or obligations under it without Agent’s prior written consent (which may be granted or withheld in Agent’s discretion).  Any Lender may at any time assign to one or more Eligible Assignees all or any portion of such Lender’s Applicable Commitment and/or Credit Extensions, together with all related obligations of such Lender hereunder.  Borrower and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Agent shall have received and accepted an effective assignment agreement in form and substance acceptable to Agent, executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Agent reasonably shall require.  Notwithstanding anything set forth in this Agreement to the contrary, any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. If requested by Agent, Borrower agrees to (i) execute any documents reasonably required to effectuate and acknowledge each assignment of an Applicable Commitment or Credit Extension to an assignee hereunder, (ii) make Borrower’s management available to meet with Agent and prospective participants and assignees of Applicable Commitments or Credit Extensions at any reasonable time and upon reasonable prior notice to the Borrower and (iii) assist Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any prospective participant or assignee of an Applicable Commitment or Credit Extension reasonably may request.

 

(b)                                 From and after the date on which the conditions described above have been met, (i) such Eligible Assignee shall be deemed automatically to have become a party hereto and, to the extent of the interests assigned to such Eligible Assignee pursuant to such assignment agreement, shall have the rights and obligations of a Lender hereunder, and (ii) the assigning Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment agreement, shall be released from its rights and obligations hereunder (other than those that survive termination).  Upon the request of the Eligible Assignee (and, as applicable, the assigning Lender) pursuant to an effective assignment agreement, each Borrower shall execute and deliver to Agent for delivery to the Eligible Assignee (and, as applicable, the assigning Lender) secured notes in the aggregate principal amount of the Eligible Assignee’s Credit Extensions or Applicable Commitments (and, as applicable, secured promissory notes in the principal amount of that portion of the principal amount of the Credit Extensions or Applicable Commitments retained by the assigning Lender).

 

(c)                                  Agent, acting solely for this purpose as an agent of Borrower, shall maintain at its offices located in Bethesda, Maryland a copy of each assignment agreement delivered to it and a register for the recordation of the names and addresses of each Lender, and the commitments of, and principal amount (and stated interest) of the Credit Extensions owing to, such Lender pursuant to the terms hereof (the “Register”). The entries in such Register shall be conclusive, absent manifest error, and Borrower, Agent and Lenders may treat each Person whose name is recorded therein pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such Register shall be available for inspection by Borrower and any Lender, at any reasonable time upon reasonable prior notice to Agent. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Obligations (each, a “Participant Register”). The entries in the Participant Registers shall be conclusive, absent manifest error. Each Participant Register shall be available for inspection by Borrower and the Agent at any reasonable time upon reasonable prior notice to the applicable Lender; provided, that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person (including Borrower) except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.

 

(d)                                 Notwithstanding anything to the contrary contained in this Agreement, the Credit Extensions (including any Secured Promissory Notes evidencing such Credit Extensions) are registered obligations, the right, title and interest of the Lenders and their assignees in and to such Credit Extensions shall be transferable only upon notation of such transfer in the Register and no assignment thereof shall be effective until recorded therein.  This Agreement shall be construed so that the Credit Extensions are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Internal Revenue Code and Section 5f.103-1(c) of the United States Treasury Regulations.

 

28

 

13.2                        Indemnification.

 

(a)                                 Borrower hereby agrees to promptly pay (i) all costs and expenses of Agent (including, without limitation, the reasonable fees, costs and expenses of counsel to, and independent appraisers and consultants retained by Agent) in connection with the examination, review, due diligence investigation, documentation, negotiation, and closing of the transactions contemplated by the Financing Documents, in connection with any assignment by a Lender of any portion of its Applicable Commitment and/or Credit Extensions, in connection with the performance by Agent of its rights and remedies under the Financing Documents and in connection with the continued administration of the Financing Documents including (A) any amendments, modifications, consents and waivers to and/or under any and all Financing Documents, and (B) any periodic public record searches conducted by or at the request of Agent (including, without limitation, title investigations, UCC searches, fixture filing searches, judgment, pending litigation and tax lien searches and searches of applicable corporate, limited liability, partnership and related records concerning the continued existence, organization and good standing of certain Persons); (ii) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with the creation, perfection and maintenance of Liens pursuant to the Financing Documents; (iii) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with (A) protecting, storing, insuring, handling, maintaining or selling any Collateral, (B) any litigation, dispute, suit or proceeding relating to any Financing Document, and (C) any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all of the Financing Documents; (iv) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with Agent’s reservation of funds in anticipation of the funding of the Credit Extensions to be made hereunder; and (v) all costs and expenses incurred by Agent or Lenders in connection with any litigation, dispute, suit or proceeding relating to any Financing Document and in connection with any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all Financing Documents, whether or not Agent or Lenders are a party thereto.

 

(b)                                 Borrower hereby agrees to indemnify, pay and hold harmless Agent and Lenders and the officers, directors, employees, trustees, agents, investment advisors, collateral managers, servicers, and counsel of Agent and Lenders (collectively called the “Indemnitees”) 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 Indemnitee) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnitee shall be designated a party thereto and including any such proceeding initiated by or on behalf of a Credit Party, 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 Agent or Lenders) asserting any right to payment for the transactions contemplated hereby, which may be imposed on, incurred by or asserted against such Indemnitee as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the Credit Facilities, except that Borrower shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or willful misconduct of such Indemnitee, as determined by a final non-appealable judgment of a court of competent jurisdiction.  To the extent that the undertaking set forth in the immediately preceding sentence may be unenforceable, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable Law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Financing Documents or the transactions contemplated hereby or thereby.

 

(c)                                  Notwithstanding any contrary provision in this Agreement, the obligations of Borrower under this Section 13.2 shall survive the payment in full of the Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT PARTY OR TO ANY OTHER PARTY TO ANY FINANCING DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

13.3                        Time of Essence.  Time is of the essence for the payment and performance of the Obligations in this Agreement.

 

29

 

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

 

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

 

13.6                        Integration.  This Agreement and the Financing 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 Financing Documents merge into this Agreement and the Financing Documents.

 

13.7                        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. Delivery of an executed signature page of this Agreement by facsimile transmission or electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.

 

13.8                        Survival.  All covenants, representations and warranties made in this Agreement continue in full force 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. Notwithstanding the foregoing, the obligations of Borrower under Section 6.15 shall survive the termination of this Agreement and satisfaction of the Obligations.  The obligation of Borrower in Section 13.2 to indemnify each Lender and Agent shall survive until the statute of limitations with respect to such claim or cause of action shall have run.  All powers of attorney and appointments of Agent or any Lender as Borrower’s attorney in fact hereunder, and all of Agent’s and Lenders’ rights and powers in respect thereof, are coupled with an interest, are irrevocable until 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 fully repaid and performed and Agent’s and the Lenders’ obligation to provide Credit Extensions terminates.

 

13.9                        Confidentiality.  In handling any confidential information of Borrower, each of the Lenders and Agent shall use all reasonable efforts to maintain the confidentiality of information obtained by it pursuant to any Financing Document and designated in writing by any Credit Party as confidential, but disclosure of information may be made: (a) to the Lenders’ and Agent’s Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any interest in the Credit Extensions so long as such Persons are bound by the obligations of confidentiality to Agent or a Lender, as applicable; (c) as required by Law, regulation, subpoena, order or other legal, administrative, governmental or regulatory request; (d) to regulators or as otherwise required in connection with an examination or audit, or to any nationally recognized rating agency; (e) as Agent or any Lender considers appropriate in exercising remedies under the Financing Documents; (f) to financing sources that are advised of the confidential nature of such information and are instructed to keep such information confidential; (g) to third party service providers of the Lenders and/or Agent so long as such service providers are bound to such Lender or Agent by obligations of confidentiality; and (h) in connection with any litigation or other proceeding to which such Lender or Agent or any of their Affiliates is a party or bound, or to the extent necessary to respond to public statements or disclosures by Credit Parties or their Affiliates referring to a Lender or Agent or any of their Affiliates.  Confidential information does not include information that either: (i) is in the public domain or in the Lenders’ and/or Agent’s possession when disclosed to the Lenders and/or Agent, or becomes part of the public domain after disclosure to the Lenders and/or Agent; or (ii) is disclosed to the Lenders and/or Agent by a third party, if the Lenders and/or Agent does not know that the third party is prohibited from disclosing the information.  Agent and/or Lenders may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis, so long as Agent and/or Lenders, as applicable, do not disclose Borrower’s identity or the identity of any Person associated with Borrower unless otherwise permitted by this Agreement.  The provisions of the immediately preceding sentence shall survive the termination of this Agreement. The agreements provided under this Section 13.9 supersede all prior agreements, understanding, representations, warranties, and negotiations between the parties about the subject matter of this Section 13.9.

 

13.10                 Right of Set-off.  Borrower hereby grants to Agent and to each Lender, a lien, security interest and right of set-off as security for all Obligations to 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 Agent or the Lenders or any entity under the control of Agent or the Lenders (including an Agent or Lender 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, Agent or the Lenders may set-off the same or any part thereof and apply the same to any liability or obligation of

 

30

 

Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SET-OFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

13.11                 Publicity.  Subject to the immediately succeeding sentence, Borrower will not directly or indirectly publish, disclose or otherwise use in any public disclosure, advertising material, promotional material, press release or interview, any reference to the name, logo or any trademark of Agent or any Lender or any of their Affiliates or any reference to this Agreement or the financing evidenced hereby, in any case except as required by applicable Law, subpoena or judicial or similar order, in which case Borrower shall endeavor to give Agent prior written notice of such publication or other disclosure.  Each of the Agent, the Lender and Borrower (the “Authorizing Person”) hereby authorizes each other party (the “Publishing Person”) to publish, disclose and otherwise use the name of such Agent, Lender and Borrower, the existence of the financing arrangements referenced under this Agreement, the primary purpose and/or structure of those arrangements, the amount of credit extended under each facility, the title and role of each party to this Agreement, and the total amount of the financing evidenced hereby in any “tombstone”, comparable advertisement or press release which such Publishing Person elects to submit for publication.  In addition, each Lender and Borrower agrees that Agent and each Lender may provide lending industry trade organizations with information necessary and customary for inclusion in league table measurements after the Closing Date (but in all events, without disclosing any confidential information).  With respect to any of the foregoing, such authorization shall be subject to such Publishing Person providing the Authorizing Persons with an opportunity to review and confer with such Publishing Person regarding, and approve, the contents of any such tombstone, advertisement or information, as applicable, prior to its initial submission for publication, but subsequent publications of the same tombstone, advertisement or information shall not require such Publishing Person’s approval.

 

13.12                 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

13.13                 Approvals.  Unless expressly provided herein to the contrary, any approval, consent, waiver or satisfaction of Agent or Lenders with respect to any matter that is the subject of this Agreement or the other Financing Documents may be granted or withheld by Agent and Lenders in their sole and absolute discretion and credit judgment.

 

13.14                 Amendments; Required Lenders; Inter-Lender Matters.

 

(a)                                 No amendment, modification, termination or waiver of any provision of this Agreement or any other Financing Document, no approval or consent thereunder, or any consent to any departure by Borrower therefrom (in each case, other than amendments, waivers, approvals or consents deemed ministerial by Agent), shall in any event be effective unless the same shall be in writing and signed by Borrower, Agent and Required Lenders.  Except as set forth in clause (b) below, all such amendments, modifications, terminations or waivers requiring the consent of the “Lenders” shall require the written consent of Required Lenders.

 

(b)                                 No amendment, modification, termination or waiver of any provision of this Agreement or any other Financing Document shall, unless in writing and signed by Agent and by each Lender directly affected thereby: (i) increase or decrease the Applicable Commitment of any Lender (which shall be deemed to affect all Lenders), (ii) reduce the principal of or rate of interest on any Obligation or the amount of any fees payable hereunder or under any Financing Document, (iii) postpone the date fixed for or waive any payment of principal of or interest on any Credit Extension, or any fees or reimbursement obligation hereunder, (iv) release all or substantially all of the Collateral, or consent to a transfer of any of the Intellectual Property, in each case, except as otherwise expressly permitted in the Financing Documents (which shall be deemed to affect all Lenders), (v) subordinate the lien granted in favor of Agent securing the Obligations (which shall be deemed to affect all Lenders, except as otherwise provided below), (vi) release a Credit Party from, or consent to a Credit Party’s assignment or delegation of, such Credit Party’s obligations hereunder and under the other Financing Documents or any Guarantor from its guaranty of the Obligations (which shall be deemed to affect all Lenders) or (vii) amend, modify, terminate or waive this Section 13.14(b) or the definition of “Required Lenders” or “Pro Rata Share” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender.  For

 

31

 

purposes of the foregoing, no Lender shall be deemed affected by (i) waiver of the imposition of the Default Rate or imposition of the Default Rate to only a portion of the Obligations, (ii) waiver of the accrual of late charges, (iii) waiver of any fees, costs and expenses solely payable to Agent or any other Lender under the Financing Documents (which waiver shall require the consent of the applicable Agent or Lender), (iv) subordination of a lien granted in favor of Agent provided such subordination is limited to equipment being financed by a third party providing Permitted Indebtedness (and related proceeds relating solely to the sale of such equipment).  Notwithstanding any provision in this Section 13.14 to the contrary, no amendment, modification, termination or waiver affecting or modifying the rights or obligations of Agent hereunder shall be effective unless signed by Agent and Required Lenders.

 

(c)                                  Agent shall not grant its written consent to any deviation or departure by Borrower or any Credit Party from the provisions of Article 7 without the prior written consent of the Required Lenders.  Required Lenders shall have the right to direct Agent to take any action described in Section 10.2(b). Upon the occurrence of any Event of Default, Agent shall have the right to exercise any and all remedies referenced in Section 10.2 without the written consent of Required Lenders following the occurrence of an “Exigent Circumstance” (as defined below).  All matters requiring the satisfaction or acceptance of Agent in the definition of Subordinated Debt shall further require the satisfaction and acceptance of each Required Lender.  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.  As used in this Section 13.14(c), “Exigent Circumstance” means any event or circumstance that, in the reasonable judgment of Agent, imminently threatens the ability of 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 after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Agent, could result in a material diminution in value of the Collateral.

 

13.15                 Borrower Liability.  If there is more than one entity comprising Borrower, then (a) any Borrower may, acting singly, request Credit Extensions hereunder, (b) each Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder, (c) each Borrower shall be jointly and severally obligated to pay and perform all obligations under the Financing Documents, including, but not limited to, the obligation to repay all Credit Extensions made hereunder and all other Obligations, regardless of which Borrower actually receives said Credit Extensions, as if each Borrower directly received all Credit Extensions, and (d) each Borrower waives (i) any suretyship defenses available to it under the Code or any other applicable law, and (ii) any right to require the Lenders or Agent to: (A) proceed against any Borrower or any other person; (B) proceed against or exhaust any security; or (C) pursue any other remedy.  The Lenders or Agent may exercise or not exercise any right or remedy they have against any Credit Party or any security (including the right to foreclose by judicial or non-judicial sale) without affecting any other Credit Party’s liability or any Lien against any other Credit Party’s assets.  Notwithstanding any other provision of this Agreement or other related document, until payment in full of the Obligations and termination of the Applicable Commitments, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of the Lenders and Agent under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Credit Party, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by any Credit Party with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by a Credit Party with respect to the Obligations in connection with this Agreement or otherwise.  Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 13.15 shall be null and void.  If any payment is made to a Credit Party in contravention of this Section 13.15, such Credit Party shall hold such payment in trust for the Lenders and Agent and such payment shall be promptly delivered to Agent for application to the Obligations, whether matured or unmatured.

 

13.16                 Reinstatement.  This Agreement shall remain in full force and effect and continue to be effective should any petition or other proceeding be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an assignment for the benefit of any creditor or creditors or should an interim receiver, receiver, receiver and manager or trustee be appointed for all or any significant part of any Credit Party’s assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a fraudulent preference reviewable transaction or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

32

 

13.17.              USA PATRIOT Act Notification.  Agent (for itself and not on behalf of any Lender) and each Lender hereby notifies each Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record certain information and documentation that identifies Borrower, which information includes the name and address of Borrower and such other information that will allow Agent or such Lender, as applicable, to identify Borrower in accordance with the USA PATRIOT Act.

 

13.18                 Warrants.  Notwithstanding anything to the contrary herein, any warrants issued to the Lenders by any Credit Party, the stock issuable thereunder, any equity securities purchased by Lenders, any amounts paid thereunder, any dividends, and any other rights in connection therewith shall not be subject to the terms and conditions of this Agreement and shall not be included as “Obligations” (other than reimbursable fees, costs and expenses associated therewith and reimbursable pursuant to and prior to the termination of, or in connection with the payment in full of the “Obligations” under, this Agreement and the other Loan Documents), provided that the foregoing shall not relieve Borrower of its obligation to issue any Warrant pursuant to the terms of this Agreement.  Nothing in this Agreement shall affect any Lender’s rights under any such warrants (including the Warrants), stock, or other equity securities to administer, manage, transfer, assign, or exercise such warrants, stock, or other equity securities for its own account.

 

14                                  AGENT

 

14.1                        Appointment and Authorization of Agent. Each Lender hereby irrevocably appoints, designates and authorizes Agent to take such action on its behalf under the provisions of this Agreement and each other Financing Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Financing Document, together with such powers as are reasonably incidental thereto. The provisions of this Article 14 are solely for the benefit of Agent and Lenders and none of Credit Parties nor any other Person shall have any rights as a third party beneficiary of any of the provisions hereof.  The duties of Agent shall be mechanical and administrative in nature.  Notwithstanding any provision to the contrary contained elsewhere herein or in any other Financing Document, Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Financing Document or otherwise exist against Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Financing Documents with reference to Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.  Without limiting the generality of the foregoing, Agent shall have the sole and exclusive right and authority (to the exclusion of the Lenders), and is hereby authorized, to (a) act as collateral agent for Agent and each Lender for purposes of the perfection of all liens created by the Financing Documents and all other purposes stated therein, (b) manage, supervise and otherwise deal with the Collateral, (c) take such other action as is necessary or desirable to maintain the perfection and priority of the liens created or purported to be created by the Financing Documents, (d) except as may be otherwise specified in any Financing Document, exercise all remedies given to Agent and the other Lenders with respect to the Collateral, whether under the Financing Documents, applicable law or otherwise and (e) execute any amendment, consent or waiver under the Financing Documents on behalf of any Lender that has consented in writing to such amendment, consent or waiver; provided, however, that Agent hereby appoints, authorizes and directs each Lender to act as collateral sub-agent for Agent and the Lenders for purposes of the perfection of all liens with respect to the Collateral, including any Collateral Account maintained by a Credit Party with, and cash and cash equivalents held by, such Lender, and may further authorize and direct the Lenders to take further actions as collateral sub-agents for purposes of enforcing such liens or otherwise to transfer the Collateral subject thereto to Agent, and each Lender hereby agrees to take such further actions to the extent, and only to the extent, so authorized and directed.

 

14.2                        Successor Agent.

 

(a)                                 Agent may at any time assign its rights, powers, privileges and duties hereunder to (i) another Lender or an Affiliate of Agent or any Lender or any Approved Fund, or (ii) any Person to whom Agent, in its capacity as a Lender, has assigned (or will assign, in conjunction with such assignment of agency rights hereunder) fifty percent (50%) or more of the Credit Extensions or Applicable Commitments then held by Agent (in its capacity as a Lender), in each case without the consent of the Lenders or Borrower.  Following any such assignment, Agent shall give notice to the Lenders and Borrower.  An assignment by Agent pursuant to this subsection (a) shall not be deemed a resignation by Agent for purposes of subsection (b) below.

 

33

 

(b)                                 Without limiting the rights of Agent to designate an assignee pursuant to subsection (a) above, Agent may at any time give notice of its resignation to the Lenders and Borrower.  Upon receipt of any such notice of resignation, Required Lenders shall have the right to appoint a successor Agent.  If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment within ten (10) Business Days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent; provided, however, that if Agent shall notify Borrower and the Lenders that no Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice from Agent that no Person has accepted such appointment and, from and following delivery of such notice, (i) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Financing Documents, and (ii) all payments, communications and determinations provided to be made by, to or through Agent shall instead be made by or to each Lender directly, until such time as Required Lenders appoint a successor Agent as provided for above in this subsection (b).

 

(c)                                  Upon (i) an assignment permitted by subsection (a) above, or (ii) the acceptance of a successor’s appointment as Agent pursuant to subsection (b) above, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder and under the other Financing Documents (if not already discharged therefrom as provided above in this subsection (c)).  The fees payable by Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor.  After the retiring Agent’s resignation hereunder and under the other Financing Documents, the provisions of this Article 14 shall continue in effect for the benefit of such retiring Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting or was continuing to act as Agent.

 

14.3                        Delegation of Duties. Agent may execute any of its duties under this Agreement or any other Financing Document by or through its, or its Affiliates’, agents, employees or attorneys-in-fact and shall be entitled to obtain and rely upon the advice of counsel and other consultants or experts concerning all matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.  Any such Person to whom Agent delegates a duty shall benefit from this Article 14 to the extent provided by Agent.

 

14.4                        Liability of Agent. Except as otherwise provided herein, no “Agent-Related Person” (as defined below) shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Financing Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Credit Party or any officer thereof, contained herein or in any other Financing Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Financing Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Document, or for any failure of any Credit Party or any other party to any Financing Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Financing Document, or to inspect the Collateral, other properties or books or records of any Credit Party or any Affiliate thereof.  The term “Agent-Related Person” means the Agent, together with its Affiliates, and the officers, directors, employees, agents, advisors, auditors and attorneys-in-fact of such Persons; provided, however, that no Agent-Related Person shall be an Affiliate of Borrower.

 

14.5                        Reliance by Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower), independent accountants and other experts selected by Agent. Agent shall be fully justified in failing or refusing to take any action under any Financing Document (a) if such action would, in the opinion of Agent, be contrary to law or any Financing Document, (b) if such action would, in the opinion of Agent, expose Agent to any potential liability under any law, statute or regulation or (c) if Agent shall not first have received such advice or concurrence of all Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other

 

34

 

Financing Document in accordance with a request or consent of all Lenders (or Required Lenders where authorized herein) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

 

14.6                        Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default and/or Event of Default, unless Agent shall have received written notice from a Lender or Borrower, describing such default or Event of Default. Agent will notify the Lenders of its receipt of any such notice. While an Event of Default has occurred and is continuing, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as Agent shall deem advisable or in the best interest of the Lenders, including without limitation,  satisfaction of other security interests, liens or encumbrances on the Collateral not permitted under the Financing Documents, payment of taxes on behalf of Borrower or any other Credit Party, payments to landlords, warehouseman, bailees and other Persons in possession of the Collateral and other actions to protect and safeguard the Collateral, and actions with respect to insurance claims for casualty events affecting a Credit Party and/or the Collateral.

 

14.7                        Credit Decision; Disclosure of Information by Agent. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of Borrower or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the business, prospects, operations, property, financial and other condition and creditworthiness of the Credit Parties, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Financing Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by Agent herein, Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any Credit Party which may come into the possession of any Agent-Related Person.

 

14.8                        Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, each Lender shall, severally and pro rata based on its respective Pro Rata Share, indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so), and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities (which shall not include legal expenses of Agent incurred in connection with the closing of the transactions contemplated by this Agreement) incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a judgment by a court of competent jurisdiction to have resulted from such Agent-Related Person’s own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 14.8. Without limitation of the foregoing, each Lender shall, severally and pro rata based on its respective Pro Rata Share, reimburse Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Protective Advances incurred after the closing of the transactions contemplated by this Agreement) incurred by Agent (in its capacity as Agent, and not as a Lender) in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Financing Document, or any document contemplated by or referred to herein, to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrower. The undertaking in this Section 14.8 shall survive the payment in full of the Obligations, the termination of this Agreement and the resignation of Agent.

 

14.9                        Agent in its Individual Capacity.  With respect to its Credit Extensions, MidCap shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not Agent, and the terms “Lender” and “Lenders” include MidCap in its individual capacity. MidCap and its Affiliates may lend money to, invest in, and generally engage in any kind of business with, any Credit Party and any of their Affiliates and any person who may do business with or own securities of any Credit Party or any of their Affiliates, all as if MidCap were not Agent and without any duty to account therefor to Lenders.  MidCap and its Affiliates may accept fees and other consideration from

 

35

 

a Credit Party for services in connection with this Agreement or otherwise without having to account for the same to Lenders.  Each Lender acknowledges the potential conflict of interest between MidCap as a Lender holding disproportionate interests in the Credit Extensions and MidCap as Agent, and expressly consents to, and waives, any claim based upon, such conflict of interest.

 

14.10                 Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Credit Party, Agent (irrespective of whether the principal of any Credit Extension, shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Agent shall have made any demand on such Credit Party) shall be entitled and empowered, by intervention in such proceeding or otherwise:

 

(a)                                 to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Credit Extensions and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and Agent and their respective agents and counsel and all other amounts due the Lenders and Agent allowed in such judicial proceeding); and

 

(b)                                 to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Agent and, in the event that Agent shall consent to the making of such payments directly to the Lenders, to pay to Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agent and its agents and counsel, including Protective Advances.  To the extent that Agent fails timely to do so, each Lender may file a claim relating to such Lender’s claim.

 

14.11                 Collateral and Guaranty Matters. The Lenders irrevocably authorize Agent, at its option and in its discretion, to release (a) any Credit Party and any Lien on any Collateral granted to or held by Agent under any Financing Document upon the date that all Obligations due hereunder have been paid in full in cash and no Applicable Commitments or other obligations of any Lender to provide funds to Borrower under this Agreement remain outstanding, and (b) any Lien on any Collateral that is transferred or to be transferred as part of or in connection with any transfer permitted hereunder or under any other Financing Document. Upon request by Agent at any time, all Lenders will confirm in writing Agent’s authority to release its interest in particular types or items of Collateral pursuant to this Section 14.11.

 

14.12                 Advances; Payments; Non-Funding Lenders.

 

(a)                                 Advances; Payments.  If Agent receives any payment for the account of Lenders on or prior to 11:00 a.m. (New York time) on any Business Day, Agent shall pay to each applicable Lender such Lender’s Pro Rata Share of such payment on such Business Day. If Agent receives any payment for the account of Lenders after 11:00 a.m. (New York time) on any Business Day, Agent shall pay to each applicable Lender such Lender’s Pro Rata Share of such payment on the next Business Day. To the extent that any Lender has failed to fund any Credit Extension (a “Non-Funding Lender”), Agent shall be entitled to set-off the funding short-fall against that Non-Funding Lender’s Pro Rata Share of all payments received from Borrower.

 

(b)                                 Return of Payments.

 

(i)                                     If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from a Credit Party and such related payment is not received by Agent, then Agent will be entitled to recover such amount (including interest accruing on such amount at the Federal Funds Rate for the first Business Day and thereafter, at the rate otherwise applicable to such Obligation) from such Lender on demand without set-off, counterclaim or deduction of any kind.

 

(ii)                                  If Agent determines at any time that any amount received by Agent under this Agreement must be returned to a Credit Party or paid to any other person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Financing Document, Agent will not be required

 

36

 

to distribute any portion thereof to any Lender.  In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to a Credit Party or such other person, without set-off, counterclaim or deduction of any kind.

 

14.13                 Miscellaneous.

 

(a)                                 Neither Agent nor any Lender shall be responsible for the failure of any Non-Funding Lender to make a Credit Extension or make any other advance required hereunder.  The failure of any Non-Funding Lender to make any Credit Extension or any payment required by it hereunder shall not relieve any other Lender (each such other Lender, an “Other Lender”) of its obligations to make the Credit Extension or payment required by it, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make a Credit Extension or make any other payment required hereunder.  Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Financing Document or constitute a “Lender” (or be included in the calculation of “Required Lender” hereunder) for any voting or consent rights under or with respect to any Financing Document.  At Borrower’s request, Agent or a person reasonably acceptable to Agent shall have the right with Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at Agent’s request, sell and assign to Agent or such person, all of the Applicable Commitments and all of the outstanding Credit Extensions of that Non-Funding Lender for an amount equal to the principal balance of the Credit Extensions held by such Non-Funding Lender and all accrued interest and fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed assignment agreement reasonably acceptable to Agent.

 

(b)                                 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 Credit Extension and the ratable distribution of interest, fees and reimbursements paid or made by any Credit Party.  Notwithstanding the foregoing, if this Agreement requires payments of principal and interest to be made directly to the Lenders, 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 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 the Agent (for Agent to redistribute to itself and the Lenders in a manner to ensure the payment to Agent of any sums due Agent hereunder and the ratable repayment of each Lender’s portion of any Credit Extension and the ratable distribution of interest, fees and reimbursements) such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Agent.  If any payment or distribution of any kind or character, whether in cash, properties or securities and whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, shall be received by a Lender in excess of its ratable share, then (i) the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for application to the payments of amounts due on the other Lender’s claims, or, in the case of Collateral, shall hold such Collateral for itself and as agent and bailee for the Agent and other Lenders and (ii) such Lender shall promptly advise the Agent of the receipt of such payment, and, within five (5) Business Days of such receipt and, in the case of payments and distributions, such Lender shall purchase (for cash at face value) from the other Lenders (through the Agent), without recourse, such participations in the Credit Extension made by the other Lenders as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them in accordance with the respective Pro Rata Shares of the Lenders; provided, however, that if all or any portion of such excess payment is thereafter recovered by or on behalf of a Credit Party from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest; provided, further, that the provisions of this Section 14.13(b) shall not be construed to apply to (x) any payment made by a Credit Party pursuant to and in accordance with the express terms of this Agreement or the other Financing Documents, or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Applicable Commitment pursuant to Section 13.1.  Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 14.13(b) may exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.  No documentation other than notices and the like shall be required to implement the terms of this Section 14.13(b).  The Agent shall keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 14.13(b) and shall in each case notify the Lenders following any such purchases.

 

37

 

15                                  DEFINITIONS

 

In addition to any terms defined elsewhere in this Agreement, or in any schedule or exhibit attached hereto, as used in this Agreement, the following terms have the following meanings:

 

“Access Agreement” means a landlord consent, bailee letter or warehouseman’s letter, in form and substance reasonably satisfactory to Agent, in favor of Agent executed by such landlord, bailee or warehouseman, as applicable, for any third party location.

 

“Account” means 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.

 

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

 

“Affiliate” means, with respect to any Person, 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.

 

“Agent” means, MidCap, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders, together with its successors and assigns.

 

“Agreement” has the meaning given it in the preamble of this Agreement.

 

“Anti-Terrorism Laws” means 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.

 

“Applicable Commitment” has the meaning given it in Section 2.2.

 

“Applicable Interest Rate” for each Credit Facility has the meaning specified for that Credit Facility in the Credit Facility Schedule.

 

“Applicable Prepayment Fee”, for each Credit Facility, has the meaning given it in the Credit Facility Schedule for such Credit Facility.

 

“Approved Fund” means any (a) 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 Business, or (b) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (a) and that, with respect to each of the preceding clauses (a) and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

 

“Blocked Person” means: (a) any Person 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” mean the entity(ies) described in the first paragraph of this Agreement and each of their successors and permitted assigns. The term “each Borrower” shall refer to each Person comprising the Borrower if there is more than one such Person, or the sole Borrower if there is only one such Person.  The term “any Borrower” shall refer to any Person comprising the Borrower if there is more than one such Person, or the sole Borrower if there is only one such Person.

 

38

 

“Borrowing Resolutions” means, with respect to any Person, those resolutions, in form and substance satisfactory to Agent, adopted by such Person’s board of directors or other appropriate governing body and delivered by such Person to Agent approving the Financing Documents to which such Person is a party and the transactions contemplated thereby, as well as any other approvals as may be necessary or desired to approve the entering into the Financing Documents or the consummation of the transactions contemplated thereby or in connection therewith.

 

“Bona Fide Preferred Equity Transaction” means a bona fide equity financing, conducted with the principal purpose of raising capital, which new equity shares issued in connection with such equity financing, for the avoidance of doubt, (i) would not constitute Indebtedness, (ii) would not be subject to repurchase or redemption earlier than ninety-one (91) days after the indefeasible payment in full in cash of all Obligations (except, in the case of Catabasis Pharmaceuticals, Inc., in connection with customary liquidation preference rights consistent with Section 2.3.2(b) of Catabasis Pharmaceuticals, Inc.’s Second Amended and Restated Certificate of Incorporation as in effect on the Closing Date), (iii) does not result in changes to the Borrower’s Operating Documents that could reasonably be expected to materially and adversely affect the rights of the Agent and/or Lenders hereunder and (iv) so long as the issuance of such shares would not cause a Change in Control.

 

“Books” means all of books and records of a Person, including ledgers, federal and state tax returns, records regarding the Person’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

 

“Business Day” means any day that is not (a) a Saturday or Sunday or (b) a day on which Agent is closed.

 

“Cash/Debt Ratio” means the ratio of cash plus cash equivalents of Borrower, in each case on deposit in a Collateral Account subject to a Control Agreement, divided by the total consolidated outstanding Indebtedness of the Borrower and its Subsidiaries.

 

“Change in Control” means any event, transaction, or occurrence as a result of which (a) Preferred Investors cease to own and control all of the economic and voting rights associated with ownership of at least fifty-one percent (51%) (or such greater percentage as may be required under the organizational documents to constitute control) of the outstanding securities of all classes of the Borrower on a fully diluted basis (other than by the sale of Borrower’s equity securities in or following an initial public offering; provided that upon the sale of Borrower’s equity securities in an initial public offering, a Change in Control under this clause (a) shall occur when any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Borrower, representing thirty-five percent (35%) or more of the combined voting power of Borrower’s then outstanding securities); (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors or managers of Borrower (together with any new directors or managers whose election by the board of directors or managers of Borrower was approved by a vote of a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; (c) the occurrence of any “change in control” or any term or provisions of similar effect under any Subordinated Debt Document or Borrower’s Operating Documents; (d) Borrower ceases to own and control, directly or indirectly, all of the economic and voting rights associated with the outstanding voting capital stock (or other voting equity interest) of each of its Subsidiaries; or (e) any of the chief executive officer or the chief scientific officer of Borrower as of the date hereof shall cease to be involved in the day to day operations (including research and development) or management of the business of Borrower, and (i) an interim successor of such officer reasonably acceptable to Agent is not appointed within 30 days of such cessation or involvement and (ii) a permanent successor of such officer reasonably acceptable to Agent is not appointed within 120 days of such cessation or involvement.

 

“Closing Date” has the meaning given it in the preamble of this Agreement.

 

“Code” means the Uniform Commercial Code in effect on the date hereof, as the same may, from time to time, be enacted and in effect in the State of Maryland; provided, however, that to the extent that the Code is used to define any term herein or in any Financing 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; and 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, Agent’s

 

39

 

Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of Maryland 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” means all property, now existing or hereafter acquired, mortgaged or pledged to, or purported to be subjected to a Lien in favor of, Agent, for the benefit of Agent and Lenders, pursuant to this Agreement and the other Financing Documents, including, without limitation, all of the property described in Exhibit A hereto.

 

“Collateral Account” means any Deposit Account, Securities Account or Commodity Account.

 

“Commitment Commencement Date” has the meaning given it in the Credit Facility Schedule.

 

“Commitment Termination Date” has the meaning given it in the Credit Facility Schedule.

 

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

 

“Communication” has the meaning given it in Article 11.

 

“Compliance Certificate” means a certificate, duly executed by an authorized officer of Borrower, appropriately completed and substantially in the form of Exhibit B.

 

“Contingent Obligation” means, 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 Person 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 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” means any control agreement, each of which shall be in form and substance reasonably satisfactory to Agent, entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Agent pursuant to which Agent obtains control (within the meaning of the Code) for the benefit of the Lenders over such Deposit Account, Securities Account or Commodity Account.  As of the Closing Date and for so long as no Default or Event of Default has occurred, Agent and Lenders agree that any Control Agreement required hereunder shall permit Borrower to withdraw funds and issue instructions so long as the Agent has not issued a notice of exclusive control or similar instruction to the applicable depository or intermediary.

 

“Credit Extension” means an advance or disbursement of proceeds to or for the account of Borrower in respect of a Credit Facility.

 

“Credit Extension Form” means that certain form attached hereto as Exhibit C, as the same may be from time to time revised by Agent.

 

“Credit Facility” means a credit facility specified on the Credit Facility Schedule.

 

“Credit Party” means any Borrower, any Guarantor under a guarantee of the Obligations or any part thereof, and any other Person (other than Agent, a Lender or a participant of a Lender), whether now existing or hereafter acquired or formed, that becomes obligated as a borrower, guarantor, pledgor or other obligor under any Financing Document, and any

 

40

 

Person whose equity interests or portion thereof have been pledged or hypothecated to Agent under any Financing Document; and “Credit Parties” means all such Persons, collectively.

 

“Default” means any fact, event or circumstance which with notice or passage of time or both, could constitute an Event of Default.

 

“Default Rate” has the meaning given it in Section 2.6(b).

 

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

 

“Designated Funding Account” is Borrower’s Deposit Account, account number 7038067, maintained with Square 1 Bank and over which Agent has been granted control for the ratable benefit of all Lenders.

 

“Designated SVB Deposit Account” means the Borrower’s Deposit Account numbered XXXX621857 located at Silicon Valley Bank.

 

“Designated SVB Securities Account” means the Borrower’s Securities Account numbered XXX-X5982-10 located at Silicon Valley Bank.

 

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

 

“Draw Period” means, for each Credit Facility, the period commencing on the Commitment Commencement Date and ending on the Commitment Termination Date.

 

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by Agent; provided, however, that notwithstanding the foregoing, “Eligible Assignee” shall not include any Credit Party or any Subsidiary of a Credit Party.  Notwithstanding the foregoing, 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 becoming an assignee incident to such forced divestiture.

 

“Environmental Law” means all any law (statutory or common), ordinance, treaty, rule, regulation, order, policy, other legal requirement or determination of an arbitrator or of a Governmental Authority and/or Required Permits imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the workplace, the environment and natural resources, and including public notification requirements and environmental transfer of ownership, notification or approval statutes.

 

“Equipment” means 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” means the Employee Retirement Income Security Act of 1974, and all regulations promulgated thereunder.

 

“Event of Default” has the meaning given it in Section 10.1.

 

“Exigent Circumstance” has the meaning given it in Section 13.14.

 

“FATCA” means (a) Sections 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code, (b) any treaty, law, regulation or other official guidance enacted in any jurisdiction, or relating to an intergovernmental agreement between the United States and any other jurisdiction, with the purpose (in either case) of

 

41

 

facilitating the implementation of clause (a), or (c) any agreement pursuant to the implementation of clauses (a) or (b) with the United States Internal Revenue Service, the United States government, or any governmental or taxation authority.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Agent on such day on such transactions as determined by Agent in a commercially reasonable manner.

 

“Fee Letters” means, collectively, the fee letter agreements among Borrower and Agent and Borrower and each Lender.

 

“Financing Documents” means, collectively, this Agreement, the Perfection Certificate, the Fee Letter(s), each note and guarantee executed by one or more Credit Parties in connection with the indebtedness governed by this Agreement, and each other present or future agreement executed by one or more Credit Parties and, or for the benefit of, the Lenders and/or Agent in connection with this Agreement, all as amended, restated, or otherwise modified from time to time.

 

“Foreign Lender” has the meaning given it in Section 2.6(h)(iii).

 

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

 

“GAAP” means 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” means all “general intangibles”, as defined in the Code, 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 Authority” means 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” means any present or future guarantor of the Obligations.

 

“Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which is prohibited by any Laws; toxic mold, any substance that requires special handling; and any other material or substance now or in the future defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant” or other words of similar import within the meaning of any Environmental Law, including:  (a) any “hazardous substance” defined as such in (or for purposes of) CERCLA, or any so-called “superfund” or “superlien” Law, including the judicial interpretation thereof; (b) any “pollutant or contaminant” as defined in 42 U.S.C.A. § 9601(33);

 

42

 

(c) any material now defined as “hazardous waste” pursuant to 40 C.F.R. Part 260; (d) any petroleum or petroleum by-products, including crude oil or any fraction thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel; (f) any “hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910; (g) any toxic or harmful substances, wastes, materials, pollutants or contaminants (including, without limitation, asbestos, polychlorinated biphenyls (“PCB’s”), flammable explosives, radioactive materials, infectious substances, materials containing lead-based paint or raw materials which include hazardous constituents); and (h) any other toxic substance or contaminant that is subject to any Environmental Laws or other past or present requirement of any Governmental Authority.

 

“Hazardous Materials Contamination” means contamination (whether now existing or hereafter occurring) of the improvements, buildings, facilities, personalty, soil, groundwater, air or other elements on or of the relevant property by Hazardous Materials, or any derivatives thereof, or on or of any other property as a result of Hazardous Materials, or any derivatives thereof, generated on, emanating from or disposed of in connection with the relevant property.

 

“Indebtedness” means (a) indebtedness for borrowed money (including the Obligations) 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) lease obligations required to be capitalized for financial reporting purposes in accordance with GAAP (as in effect on the Closing Date), (d) non- contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, (e) equity securities of such Person subject to repurchase or redemption (other than (i) at the sole option of such Person, or (ii) in the case of Catabasis Pharmaceuticals, Inc., in connection with customary liquidation preference rights consistent with Section 2.3.2(b) of Catabasis Pharmaceuticals, Inc.’s Second Amended and Restated Certificate of Incorporation as in effect on the Closing Date), (f) obligations secured by a Lien on any asset of such Person, whether or not such obligation is otherwise an obligation of such Person, (g) “earnouts” owed by such Person, profit sharing arrangements, deferred purchase money amounts and similar payment obligations, (h) all Indebtedness of others guaranteed by such Person, (i) off-balance sheet liabilities and/or pension plan or multiemployer plan liabilities of such Person, (j) monetary obligations owed by such Person arising under non-compete agreements, (k) obligations arising under bonus, deferred compensation, incentive compensation or similar arrangements, other than those arising in the Ordinary Course of Business, and (l) Contingent Obligations.

 

“Indemnified Liabilities” means those liabilities described in Section 13.2(a) and (b).

 

“Indemnitee” has the meaning given it in Section 13.2.

 

“Insolvency Proceeding” means 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.

 

“Intellectual Property” 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, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, trade names, service marks, mask works, rights of use of any name, domain names, or any other similar rights, any applications therefor, whether registered or not, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing.

 

“Inventory” means all “inventory”, as defined in the Code, 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 Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

“Investment” means, with respect to any Person, directly or indirectly, (a) to purchase or acquire any stock or stock equivalents, or any obligations or other securities of, or any interest in, any Person, including the establishment or creation of a Subsidiary, (b) to make or commit to make (unless such commitment provides, as a condition precedent to the consummation of such acquisition, for either (X) the indefeasible payment in full in cash of all Obligations or (Y) the consent of Agent and Required Lenders) any acquisition (including through licensing) of (i) all or substantially all of the assets of

 

43

 

another Person, or (ii) any business, Product, business line or product line, division or other unit operation of any Person, or (c) make or purchase any advance, loan, extension of credit or capital contribution to, or any other investment in, any Person.

 

“Joinder Requirements” has the meaning set forth in Section 6.8.

 

“Laws” means any and all federal, state, provincial, territorial, local and foreign statutes, laws, judicial decisions, regulations, guidance, guidelines, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, governmental agreements and governmental restrictions, whether now or hereafter in effect, which are applicable to any Credit Party in any particular circumstance.

 

“LC Collateral Account” means that certain Deposit Account ending in 755427 maintained at Silicon Valley Bank which serves as cash collateral supporting the Lease Letter of Credit, wherein the amount on deposit in such Deposit Account shall not exceed the lesser of (i) $125,000 and (ii) the face amount of the Lease Letter of Credit, so long as such account serves such purpose, together with any replacement Deposit Account meeting the same conditions and serving the same purpose.

 

“Lease Letter of Credit” means that certain letter of credit numbered SVBSF006548 issued by Silicon Valley Bank in the face amount of $113,000 obtained for the sole purpose of securing operating lease obligations incurred in the Ordinary Course of Business in respect of Borrower’s leased facilities, including any extension, renewal or replacement of such letter of credit with a bank reasonably acceptable to Agent, so long as the face amount thereof does not exceed $125,000.

 

“Lender” means any one of the Lenders.

 

“Lenders” means the Persons identified on the Credit Facility Schedule as amended from time to time to reflect assignments made in accordance with this Agreement.

 

“Lien” means a claim, mortgage, deed of trust, lien, 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.

 

“Margin Stock” means “margin stock” as such term is defined in Regulation T, U, or X of the Board of Governors of the Federal Reserve System.

 

“Material Adverse Change” means (a) a material impairment in the perfection or priority of the Agent’s Lien (or any Lender’s Lien therein to the extent provided for in the Financing Documents) in the Collateral; (b) a material impairment in the value of the Collateral; (c) a material adverse change in the business, operations, or condition (financial or otherwise) of the Borrower and its Subsidiaries that are Guarantors taken as whole; or (d) a material impairment of the prospect of repayment of any portion of the Obligations.

 

“Material Agreement” means (a) the agreements listed in the Disclosure Schedule, (b) each agreement or contract to which a Credit Party is a party relating to Material Intangible Property or development of Products or Intellectual Property, and (c) any agreement or contract to which such Credit Party or its Subsidiaries is a party the termination of which could reasonably be expected to result in a Material Adverse Change.

 

“Material Indebtedness” has the meaning given it in Section 10.1.

 

“Maturity Date” means October 1, 2018.

 

“Maximum Lawful Rate” has the meaning given it in Section 2.6(g).

 

“MidCap” has the meaning given it in the preamble of this Agreement.

 

“MidCap Obligations” means any Credit Extensions made pursuant to MidCap’s Applicable Commitments as of the Closing Date, and any other Obligations owing in respect thereof.

 

44

 

“Obligations” means all of Borrower’s obligations to pay when due any debts, principal, interest, Protective Advances, fees, indemnities and other amounts Borrower owes the Agent or Lenders now or later, under this Agreement or the other Financing Documents, including, without limitation, interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Agent, and the payment and performance of each other Credit Party’s covenants and obligations under the Financing Documents.  “Obligations” does not include obligations under any warrants issued to Agent or a Lender.

 

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

 

“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

 

“Operating Documents” means, for any Person, such Person’s formation documents, as certified with the Secretary of State of such Person’s state of formation on a date that is no earlier than thirty (30) days prior to the Closing 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.

 

“Ordinary Course of Business” means, in respect of any transaction involving any Credit Party, the ordinary course of business of such Credit Party, as conducted by such Credit Party in accordance with past practices, which shall in any event be on terms no less favorable than would have been obtained in an arms-length transaction.

 

“Payment Date” means the first calendar day of each calendar month.

 

“Perfection Certificate” means the Perfection Certificate delivered to Agent as of the Closing Date, together with any amendments thereto required under this Agreement.

 

“Permitted Contingent Obligations” means (a) Contingent Obligations resulting from endorsements for collection or deposit in the Ordinary Course of Business; (b) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate at any time outstanding; (c) Contingent Obligations arising under indemnity agreements with title insurers; (d) Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions of personal property assets permitted under Article 7; (e) so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction, Contingent Obligations existing or arising under any swap contract, provided, however, that such obligations are (or were) entered into by Borrower or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation; and (f) other Contingent Obligations not permitted by clauses (a) through (e) above, not to exceed $100,000 in the aggregate at any time outstanding.

 

“Permitted Indebtedness” means:  (a) Borrower’s Indebtedness to the Lenders and Agent under this Agreement and the other Financing Documents; (b) Indebtedness existing on the Closing Date and described on the Disclosure Schedule; (c) Indebtedness secured by Permitted Liens; (d) Subordinated Debt; (e) unsecured Indebtedness to trade creditors incurred in the Ordinary Course of Business; (f) Permitted Contingent Obligations; (g) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness under clauses (b) and (c) above, provided, however, that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon the obligors thereunder; (h) Indebtedness consisting of intercompany loans and advances made by any Credit Party to any other Credit Party, provided that (1) the obligations of the Credit Parties under such intercompany loan shall be subordinated at all times to the Obligations of the Credit Parties hereunder or under the other Financing Documents in a manner reasonably satisfactory to Agent and (2) to the extent that such Indebtedness is evidenced by a promissory note or other written instrument, Borrower shall pledge and deliver to Agent, for the benefit of itself and the Lenders, any applicable original promissory note or instrument, as applicable, along with an endorsement in blank in form and substance satisfactory to Agent; and (i) unsecured Indebtedness in respect of Borrower’s credit card obligations in an aggregate amount outstanding not to exceed, and subject to a maximum credit limit of, $100,000.

 

45

 

“Permitted Investments” means:  (a) Investments existing on the Closing Date and described on the Disclosure Schedule; (b) Investments consisting of cash equivalents; (c) any Investments in liquid assets 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 Agent (provided, that, under no circumstances shall Borrower be permitted to invest in or hold Margin Stock); (d) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of any Credit Party; (e) Investments consisting of deposit accounts or securities accounts in which the Agent has a first priority perfected security interest except as otherwise provided by Section 6.6; (f) Investments in Subsidiaries solely to the extent permitted pursuant to Section 6.8; (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; (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; and (i) Investments consisting of intercompany Indebtedness in accordance with and to the extent permitted by clause (h) of the definition of “Permitted Indebtedness”.

 

“Permitted Liens” means: (a) Liens existing on the Closing Date and shown on the Disclosure Schedule or arising under this Agreement and the other Financing Documents; (b) purchase money Liens or capital leases securing no more than (i) One Hundred Thousand Dollars ($100,000) in the aggregate principal amount outstanding prior to a Qualifying IPO and (ii) Five Hundred Thousand Dollars ($500,000) in the aggregate principal amount outstanding following a Qualifying IPO, in each case (x) on Equipment acquired or held by a Credit Party incurred for financing the acquisition of the Equipment, or (y) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the sale of such Equipment; (c) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which adequate reserves are maintained on the Books of the Credit Party against whose asset such Lien exists, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code, and the treasury regulations adopted thereunder; (d) statutory Liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons imposed without action of such parties, provided that they have no priority over any of Agent’s Lien and the aggregate amount of such Liens for all Credit Parties does not any time exceed One Hundred Thousand Dollars ($100,000); (e) leases or subleases of real property granted in the Ordinary Course of Business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or Intellectual Property) granted in the Ordinary Course of Business, if the leases, subleases, licenses and sublicenses do not prohibit granting Agent a security interest; (f) banker’s liens, rights of set-off and Liens in favor of financial institutions incurred made in the Ordinary Course of Business arising in connection with a Credit Party’s Collateral Accounts provided that such Collateral Accounts are subject to a Control Agreement to the extent required hereunder; (g) 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); (h) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default; (i) easements, reservations, rights-of-way, restrictions, minor defects or irregularities in title and similar charges or encumbrances affecting real property not constituting a Material Adverse Change; (j) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) and (b) above, 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; (k) Permitted Licenses; and (l) Liens solely in the form of the LC Collateral Account securing the Lease Letter of Credit.

 

“Person” means 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.

 

“Preferred Investors” means the owners of preferred stock of the Borrower as of the Closing Date, together with any Affiliates or investment funds, in each case controlled by such Preferred Investor.

 

“Pro Rata Share” means, as determined by Agent, with respect to each Credit Facility and Lender holding an Applicable Commitment or Credit Extensions in respect of such Credit Facility, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing (a) in the case of fully-funded Credit Facilities, the amount of Credit Extensions held by such Lender in such Credit Facility by the aggregate amount of all outstanding Credit Extensions for such Credit Facility, and (b) in the case of Credit Facilities that are not fully-funded, the amount of Credit Extensions and

 

46

 

unfunded Applicable Commitments held by such Lender in such Credit Facility by the aggregate amount of all outstanding Credit Extensions and unfunded Applicable Commitments for such Credit Facility.

 

“Protective Advances” means all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) of Agent and Lenders for preparing, amending, negotiating, administering, defending and enforcing the Financing Documents and the Warrants (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Agent or the Lenders in connection with the Financing Documents and the Warrants.

 

“Register” has the meaning given it in Section 13.1(d).

 

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

 

“Replacement Warrants — Tranche 1” means, collectively, warrants to purchase the number of shares of Senior Preferred Stock equal to 3.0% of the amount advanced under Tranche 1, divided by the exercise price, which shall be equivalent to the price per share on the issuance date of such stock, each in form and substance satisfactory to Agent and Lenders.

 

“Replacement Warrants — Tranche 2” means, collectively, warrants to purchase the number of shares of Senior Preferred Stock equal to 3.0% of the amount drawn under Tranche 2, divided by the exercise price, which shall be equivalent to the price per share on the issuance date of such stock, each in form and substance satisfactory to Agent and Lenders.

 

“Required Lenders” means, unless all of the Lenders and Agent agree otherwise in writing, Lenders having (a) more than sixty percent (60%) of the Applicable Commitments of all Lenders, or (b) if such Applicable Commitments have expired or been terminated, more than sixty percent (60%) of the aggregate outstanding principal amount of the Credit Extensions; provided, however, that so long as a Lender on the Closing Date does not assign any portion of its Applicable Commitment and/or Credit Extensions (other than an assignment to any Affiliate of any Lender or an Approved Fund), the “Required Lenders” shall include such Lender.

 

“Required Permit” means all licenses, certificates, accreditations, product clearances or approvals, provider numbers or provider authorizations, supplier numbers, provider numbers, marketing authorizations, other authorizations, registrations, permits, consents and approvals of a Credit Party (a) issued or required under Laws applicable to the business of Borrower or any of its Subsidiaries or necessary in the manufacturing, importing, exporting, possession, ownership, warehousing, marketing, promoting, sale, labeling, furnishing, distribution or delivery of goods or services under Laws applicable to the business of Borrower or any of its Subsidiaries, or (b) issued by any Person from which Borrower or any of its Subsidiaries have received an accreditation.  Without limiting the generality of the foregoing, “Required Permits” includes any Drug Application (including without limitation, at any point in time, all licenses, approvals and permits issued by the FDA or any other applicable Governmental Authority necessary for the testing, manufacture, marketing or sale of any Product by any applicable Borrower(s) as such activities are being conducted by such Borrower with respect to such Product at such time) and any drug listings and drug establishment registrations under 21 U.S.C. Section 510, registrations issued by DEA under 21 U.S.C. Section 823 (if applicable to any Product), and those issued by State governments for the conduct of Borrower’s or any Subsidiary’s business.

 

“Responsible Officer” means any of the President and Chief Executive Officer or Chief Financial Officer of Borrower.

 

“Schedule Update Compliance Certificate” means each monthly Compliance Certificate required to be delivered pursuant to this Agreement for the months ending March 31, June 30, September 30 and December 31 of each year.

 

“Secretary’s Certificate” means, with respect to any Person, a certificate, in form and substance satisfactory to Agent, executed by such Person’s secretary or other appropriate officer acceptable to Agent on behalf of such Person certifying that (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Financing Documents to which it is a party, (b) that attached as Exhibit A to such certificate is a true, correct, and complete copy of the Borrower Resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such

 

47

 

Person of the Financing Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Financing Documents on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Agent and the Lenders may conclusively rely on such certificate unless and until such Person shall have delivered to Agent a further certificate canceling or amending such prior certificate.

 

“Secured Promissory Note” has the meaning given it in Section 2.7.

 

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

 

“Senior Preferred Stock” has the meaning given it in Section 6.15(a).

 

“Square 1” has the meaning given it in the preamble of this Agreement.

 

“Square 1 Obligations” means any Credit Extensions made pursuant to Square 1’s Applicable Commitments as of the Closing Date, and any other Obligations owing in respect thereof.

 

“Stated Rate” has the meaning given it in Section 2.6(g).

 

“Subordinated Debt” means indebtedness incurred by Borrower which shall be (a) in an amount satisfactory to Agent, (b) made pursuant to documents in form and substance satisfactory to Agent in its sole discretion (the “Subordinated Debt Documents”), and (c) subordinated to all of Borrower’s now or hereafter indebtedness to the Agent and Lenders pursuant to a Subordination Agreement.

 

“Subordination Agreement” means a subordination, intercreditor, or other similar agreement in form and substance, and on terms, approved by Agent and the Required Lenders in writing.  For the avoidance of doubt, any Required Lenders’ approval may be provided by email to Agent, and Agent shall be authorized to enter into any such Subordination Agreement on behalf of the Lenders.

 

“Subsidiary” means, with respect to any Person, any Person of which more than fifty percent (50.0%) 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.

 

“Taxes” has the meaning given it in Section 2.6(h).

 

“Tranche 1” means any Credit Extension described as “Credit Facility #1” and “Tranche 1” on the Credit Facility Schedule.

 

“Tranche 2” means any Credit Extension described as “Credit Facility #2” and “Tranche 2” on the Credit Facility Schedule.

 

“Tranche 3” means any Credit Extension described as “Credit Facility #3” and “Tranche 3” on the Credit Facility Schedule.

 

“Transfer” has the meaning given it in Section 7.1.

 

“Warrants” means, collectively, the Warrants — Tranche 1, Warrants — Tranche 2, Warrants — Tranche 3, Replacement Warrants — Tranche 1 and Replacement Warrants — Tranche 2.

 

“Warrants — Tranche 1” means, collectively, warrants, dated as of the date hereof, to purchase shares of Borrower’s Series B Preferred Stock equal to 3.0% of the amount advanced under Tranche 1, divided by the exercise price of $0.9503 per share, each substantially in the form of Exhibit E, or, if applicable and required pursuant to this Agreement, the Replacement Warrants — Tranche 1.

 

48

 

“Warrants — Tranche 2” means, collectively, warrants to purchase shares of Borrower’s (i) if Tranche 2 is advanced prior to Borrower’s authorization and issuance of (or obligation to issue) Senior Preferred Stock and prior to a Qualifying IPO (as defined in the Credit Facility Schedule), Series B Preferred Stock equal to 3.0% of the amount advanced under Tranche 2 divided by the exercise price under such warrants, each in the form of Exhibit E, (ii) if Tranche 2 is advanced after Borrower’s authorization and issuance of (or obligation to issue) Senior Preferred Stock but prior to a Qualifying IPO, Senior Preferred Stock equal to 3.0% of the amount advanced under Tranche 2 divided by the exercise price under such warrants, which shall be the price per share paid by purchasers of the Senior Preferred Stock, or (iii) if Tranche 2 is advanced as of or following a Qualifying IPO, Common Stock equal to 3.0% of the amount advanced under Tranche 2 divided by the exercise price under such warrants, which shall be the average closing share price, as reported on the securities exchange on which Borrower’s Common Stock is traded, for the preceding 10-trading day period immediately prior to the Funding Date for Tranche 2, each substantially in the form of Exhibit F (other than with respect to the class or series), or, if applicable and required pursuant to this Agreement, the Replacement Warrants — Tranche 2.

 

“Warrants — Tranche 3” means, collectively, warrants to purchase shares of Borrower’s Common Stock equal to 3.0% of the amount advanced under Tranche 3 divided by the exercise price under such warrants, which shall be the average closing share price, as reported on the securities exchange on which Borrower’s Common Stock is traded, for the preceding 10-trading day period immediately prior to the Funding Date for Tranche 3, each substantially in the form of Exhibit F.

 

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

49

 

IN WITNESS WHEREOF, intending that this instrument constitute an instrument executed and delivered under seal, the parties hereto have caused this Agreement to be executed as of the Closing Date.

 

BORROWER:

 

CATABASIS PHARMACEUTICALS, INC.

 

	
By: 
    	
/s/ Ian Sanderson
    	
(SEAL)
    
	
 
    	
 
    	
 
    
	
Name:  
    	
Ian Sanderson
    	
 
    
	
Title:    
    	
Chief Financial Officer   and Treasurer
    	
 
    

 

 

AGENT:

 

	
MIDCAP FINANCIAL SBIC, LP,
    	
 
    
	
as Agent for Lenders
    	
 
    
	
 
    	
 
    
	
By:
    	
Midcap Financial SBIC   GP, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Colleen S. Kovas
    	
(SEAL)
    
	
 
    	
Name:
    	
Colleen S. Kovas
    	
 
    
	
 
    	
Title:
    	
Its Authorized   Signatory
    	
 
    

 

 

LENDERS:

 

	
MIDCAP FINANCIAL SBIC, LP,
    	
 
    
	
 
    	
 
    
	
By:
    	
Midcap Financial SBIC   GP, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Colleen S. Kovas
    	
(SEAL)
    
	
 
    	
Name:
    	
Colleen S. Kovas
    	
 
    
	
 
    	
Title:
    	
Its Authorized   Signatory
    	
 
    

 

Notice Address:

 

MidCap Financial SBIC, LP
 7255 Woodmont Avenue, Suite 200

Bethesda, Maryland  20814

Attention:  Portfolio Management- Life Sciences

Fax:  (301) 941-1450

E-Mail: lviera@midcapfinancial.com

 

 

LENDERS (continued):

 

 

	
SQUARE 1 BANK
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Evan Travis
    	
(SEAL)
    
	
Name: 
    	
Evan Travis
    	
 
    
	
 Title:
    	
Vice President
    	
 
    

 

Notice Address:

 

Square 1 Bank

890 Winter Street, Suite 110

Waltham, MA 02451

Attn:  David Kho, AVP

Telephone:  (781) 547-0847

Email: dkho@square1bank.com

 

with a copy to:

 

Square 1 Bank

406 Blackwell Street, Suite 240

Durham, North Carolina  27701

Attention:  Loan Operations Manager

Fax:  (919) 314-3080

 

 

EXHIBITS AND SCHEDULES

 

EXHIBITS

 

	
Exhibit A
    	
 
    	
Collateral
    
	
Exhibit B
    	
 
    	
Form of Compliance   Certificate
    
	
Exhibit C
    	
 
    	
Credit Extension Form
    
	
Exhibit E
    	
 
    	
Form of Warrant   (Preferred)
    
	
Exhibit F
    	
 
    	
Form of Warrant   (Common)
    

 

SCHEDULES

 

Credit Facility Schedule

Amortization Schedule (for each Credit Facility)

Post-Closing Obligations Schedule

Closing Deliveries Schedule

Disclosure Schedule

Intangible Property Schedule

Products Schedule

Required Permits Schedule

 

 

EXHIBIT A

 

COLLATERAL

 

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

 

(a)           all goods, Accounts (including health-care insurance receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, investment accounts, commodity 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

 

(b)           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, except as provided below, the Collateral shall not include any Intellectual Property of any Credit Party, whether now owned or hereafter acquired, except to the extent that it is necessary under applicable law to have a Lien and security interest in any such Intellectual Property in order to have a perfected Lien and security interest in and to IP Proceeds (defined below), and for the avoidance of any doubt, the Collateral shall include, and Agent shall have a Lien and security interest in, (i) all IP Proceeds, and (ii) all payments with respect to IP Proceeds that are received after the commencement of a bankruptcy or insolvency proceeding.  The term “IP Proceeds” means, collectively, all cash, Accounts, license and royalty fees, claims, products, awards, judgments, insurance claims, and other revenues, proceeds or income, arising out of, derived from or relating to any Intellectual Property of any Credit Party, and any claims for damage by way of any past, present or future infringement of any Intellectual Property of any Credit Party (including, without limitation, all cash, royalty fees, other proceeds, Accounts and General Intangibles that consist of rights of payment to or on behalf of a Credit Party and the proceeds from the sale, licensing or other disposition of all or any part of, or rights in, any Intellectual Property by or on behalf of a Credit Party).

 

Pursuant to the terms of a certain negative pledge arrangement with Agent and Lenders, Borrower has agreed not to encumber any of its Intellectual Property without Agent’s and Lenders’ prior written consent.

 

 

EXHIBIT B

 

COMPLIANCE CERTIFICATE

 

	
TO:
    	
 
    	
MidCap Financial SBIC, LP, as Agent
    
	
FROM:
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    
	
DATE:
    	
 
    	
                                     201     
    

 

The undersigned authorized officer of Catabasis Pharmaceuticals, Inc., a Delaware corporation (“Borrower”), certifies that under the terms and conditions of the Credit and Security Agreement between Borrower, Agent and the Lenders (as amended, restated, supplemented, replaced or otherwise modified from time to time, the “Agreement”):

 

(1)           Borrower is in complete compliance with all required covenants for the month ending                , 201  , except as noted below;

 

(2)           there are no Events of Default;

 

(3)           all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; 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;

 

(4)           Each of Borrower and the other Credit Parties has timely filed all required tax returns and reports, and has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed except as otherwise permitted pursuant to the terms of the Agreement; [and]

 

(5)           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 Agent. [; and]

 

[(6)          attached hereto is an updated [Disclosure Schedule,][Required Permit Schedule,][Products Schedule][and][Intangible Assets Schedule] as required to be updated pursuant to the terms of the Credit and Security Agreement][TO BE INCLUDED ONLY FOR COMPLIANCE CERTIFICATES DELIVERED ON MONTHS ENDED MARCH 31, JUNE 31, SEPTEMBER 30 AND DECEMBER 31; AND TO INCLUDE ONLY THOSE SCHEDULES THAT REQUIRE UPDATING]

 

Attached are the required documents supporting the certifications set forth in this Compliance Certificate.  The undersigned certifies, in his/her capacity as an officer of the Borrower, that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges, in his/her capacity as an officer of Borrower, that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

	
Reporting Covenant
    	
 
    	
Required
    	
 
    	
Complies
    
	
Financial Statements
    	
 
    	
Monthly or Quarterly within 30 or 45 days - in each   case if and as required by Section 6.2(a)
    	
 
    	
Yes      No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Monthly Cash Summary
    	
 
    	
Monthly if and as required by Section 6.2(a)
    	
 
    	
Yes     No
    

 

 

	
Audited Financial Statements
    	
 
    	
Annually within 180 days after FYE
    	
 
    	
Yes      No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Board Approved Projections
    	
 
    	
Annually within 90 days after FYE
    	
 
    	
Yes      No
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Compliance Certificate
    	
 
    	
Monthly within 30 or 45 days as required by Section 6.2(b))
    	
 
    	
Yes      No
    

 

 

The following are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions to note.”)

 

 

 

	
CATABASIS PHARMACEUTICALS, INC.
    	
 
    	
AGENT USE ONLY
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
Received by:
    	
 
    
	
Name:
    	
 
    	
 
    	
AUTHORIZED SIGNER
    
	
Title:
    	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Verified:
    	
 
    
	
 
    	
 
    	
AUTHORIZED SIGNER
    
	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Compliance Status:
    	
Yes        No
    
							

 

 

EXHIBIT C CREDIT EXTENSION FORM

 

DEADLINE IS NOON E.S.T.

 

Date:                        , 201     

 

LOAN ADVANCE:

 

Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.

 

	
From Account #
    	
 
    	
 
    	
To Account #
    	
 
    
	
 
    	
(Loan Account #)
    	
 
    	
 
    	
(Deposit Account #)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Amount of Advance $
    	
 
    	
 
    
						

 

All Borrower’s representations and warranties in the Credit and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance; 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:

 

	
Authorized   Signature:
    	
 
    	
 
    	
Phone Number:
    	
 
    
	
Print Name/Title:
    	
 
    	
 
    	
 
    

 

OUTGOING WIRE REQUEST:

 

Complete only if all or a portion of funds from the loan advance above is to be wired.

 

	
Beneficiary Name:
    	
 
    	
 
    
	
Amount of Wire:   $
    	
 
    
	
Beneficiary Lender:
    	
 
    	
 
    	
 
    
	
Account Number:  
    	
 
    	
 
    
	
 
    	
 
    
	
City and State:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
Beneficiary Lender   Transit (ABA) #:
    	
 
    	
 
    	
Beneficiary Lender Code   (Swift, Sort, Chip, etc.):       
    
	
(For   International Wire Only)
    	
 
    	
 
    	
 
    
	
Intermediary Lender:
    	
 
    	
 
    	
Transit (ABA) #:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
For Further Credit to:
    	
 
    	
 
    	
 
    
	
Special Instruction:
    	
 
    	
 
    	
 
    
									

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me.

 

	
Authorized Signature:
    	
 
    	
 
    	
2nd Signature (if   required):
    	
 
    
	
Print Name/Title:
    	
 
    	
 
    	
Print Name/Title:
    	
 
    
	
Telephone #:
    	
 
    	
 
    	
Telephone #:
    	
 
    

 

1

 

Exhibit E

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

	
Company:
    	
CATABASIS PHARMACEUTICALS, INC., a Delaware   corporation
    
	
 
    	
 
    
	
Number of Shares:
    	
                 (Subject   to adjustment as hereinafter provided)
    
	
 
    	
 
    
	
Class of Stock:
    	
Series B Preferred Stock
    
	
 
    	
 
    
	
Warrant Price:
    	
$0.9503 per Share (Subject to adjustment as   hereinafter provided)
    
	
 
    	
 
    
	
Issue Date:
    	
             ,   201
    
	
 
    	
 
    
	
Expiration Date:
    	
The earlier to occur of the (i) expiration of   this Warrant pursuant to Article 1.6 hereof or (ii) 7th anniversary   after the Issue Date
    
	
 
    	
 
    
	
Credit Facility:
    	
This Warrant is issued in connection with the Credit   and Security Agreement, dated as of August 27, 2014, among the Company,   Midcap Financial SBIC, LP, a Delaware limited partnership, and such other   lenders from time to time party thereto, as amended, restated, supplemented   or otherwise modified from time to time (the “Credit Agreement”).
    

 

 

THIS WARRANT TO PURCHASE STOCK (this “Warrant”) CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Credit Agreement (defined above),                , a            (together with any registered holder from time to time of this Warrant or any holder of the Shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class and series of capital stock of the Company at the Warrant Price, all as set forth above or herein below and as adjusted pursuant to the terms of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.  As used herein, “Share” or “Shares” shall refer to either (i) the shares of stock issuable upon the exercise or conversion of this Warrant and any shares of capital stock into which such shares may be converted or exchanged, or (ii) the authorized or issued and outstanding shares of capital stock of the Company which are of the same class and series as the shares of stock issuable upon the exercise or conversion of this Warrant, in either case as the specific provisions of this Warrant or the context may require.

 

ARTICLE 1.         EXERCISE.

 

1.1          Method of Exercise.  Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering a duly completed and executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company.  Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other

 

 

form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

 

1.2          Conversion Right.  In lieu of exercising this Warrant as specified in Article 1.1, Holder may at any time and from time to time after the Issue Date convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the number of Shares or the securities otherwise issuable upon exercise of this Warrant with respect to which Holder elects to convert this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share.  The “fair market value” of the Shares shall be determined pursuant to Section 1.3.

 

1.3          Fair Market Value.  If the Company’s common stock is traded in a public market and the Shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering of its common stock (“IPO”), the “price to public” per share price specified in the final prospectus relating to such offering).  If the Company’s common stock is traded in a public market and the Shares are preferred stock, the fair market value of each Share shall be the closing price of such common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of an IPO, the initial “price to public” per share price specified in the final prospectus relating to the IPO), in either case, multiplied by the number of shares of the Company’s common stock into which a Share is then convertible.  In the event of an exercise in connection with an Acquisition, the fair market value of a Share shall be the value to be received per Share by all holders of such Shares in such transaction.  If the Company’s common stock is not traded in a public market and other than in the event of an exercise in connection with an Acquisition, the Board of Directors of the Company shall determine the fair market value in its reasonable good faith judgment.

 

1.4          Delivery of Certificate and New Warrant.  Promptly after Holder exercises or converts this Warrant pursuant to Article 1.1 or 1.2, respectively, and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall promptly deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant of like tenor representing the Shares not so acquired.  This Warrant shall be deemed to have been exercised and such certificates deemed issued, and Holder shall become the holder of record of the Shares for all purposes, as of 5:00 p.m. (Eastern Time) on the date of Holder’s delivery of the exercise notice pursuant to Article 1.1 and payment of the Warrant Price, if applicable.  If an exercise or conversion is to be made in connection with an IPO or Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

1.5          Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

2

 

1.6          Treatment of Warrant Upon Acquisition of the Company.

 

1.6.1       “Acquisition”.  For the purpose of this Warrant, “Acquisition” means (a) any sale, license, or other disposition, in each case, of all or substantially all of the assets of the Company, or (b) any reorganization, consolidation, share exchange or merger of the Company with or into another person or entity, or sale of outstanding securities of the Company by the holders thereof, in each case where the holders of the Company’s securities before the transaction beneficially own less than fifty percent (50%) of the outstanding voting securities of the successor, acquiring or surviving person or entity after the transaction.

 

1.6.2       Treatment of Warrant Upon Acquisition.

 

A)            Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that (i) is not described in Section 1.6.1(a), (ii) in which the sole consideration is cash, and (iii) in connection with or as a result of which all holders of the Shares are or have the right to receive solely cash in the same proportions in respect of all of their Shares, then either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition, or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition, subject to Section 5.8.  The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may reasonably request in connection with such contemplated Acquisition giving rise to such notice), which notice is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

 

B)            Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is described in Section 1.6.1(a) and is an “arms’-length” transaction with a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), Holder may (a) exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such True Asset Sale, (b) permit this Warrant to continue until the earlier of the Expiration Date or the dissolution and/or liquidation of the Company following the closing of any such True Asset Sale, subject to Section 5.8, or (c) elect to have the terms of Section 1.6.2(D) below apply.  The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which notice is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed True Asset Sale.

 

C)            Upon the written request of the Company, Holder agrees that, in the event of an Acquisition (i) in which the consideration is a combination of cash and equity securities of the acquirer listed for trading on a U.S. national securities exchange and which may be freely resold pursuant to a resale registration statement or under Rule 144 of the Act without any restriction or limitation (including without limitation volume and manner of sale restrictions), (ii) in connection with or as a result of which all holders of the Shares are or have the right to receive solely cash and/or such securities in the same proportions in respect of all of their Shares, and (iii) on the record date for which the fair market value of one Share (or other securities issuable upon exercise of this Warrant) is greater than the Warrant Price, Holder may (a) exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition, or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition, subject to Section 5.8.

 

3

 

D)            Upon the closing of any Acquisition other than those particularly described in subsections (A), (B) and (C) above (or in the case of an Acquisition described in Section 1.6.2(B) above if Holder elects to have the terms of this Section 1.6.2(D) apply), the successor, surviving or acquiring entity shall assume in writing the obligations of this Warrant, including agreements to deliver to Holder in exchange for this Warrant a written instrument issued by the successor, surviving or acquiring entity pursuant to which this Warrant shall thereafter be exercisable for the kind, amount and value of securities, cash, and property as would have been payable for the Shares issuable upon exercise of the unexercised portion of this Warrant had such Shares been outstanding on the record date for the Acquisition and subsequent closing.  The Warrant Price and/or number of Shares shall be adjusted accordingly.

 

E)            Conditional Exercise.  Notwithstanding any other provision hereof, if an exercise of this Warrant is to be made in connection with an Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

As used herein “Affiliate” shall mean any person or entity that controls, is controlled by or is under common control with any such person or entity, and each of such person’s or entity’s officers, directors, members, managers, joint venturers or partners, as applicable (whether as a result of the ownership of voting securities, by contract or otherwise).

 

1.7          [Omitted]

 

1.8          Replacement Warrants.  Holder shall have the right, in its sole and absolute discretion, to cause the Company to exchange this Warrant for a new warrant having substantially similar terms to purchase shares of Senior Preferred Stock as defined in, and subject to the terms and conditions of, the Credit Agreement, and all such terms contained in the Credit Agreement are incorporated by reference herein whether or not the Credit Agreement remains in effect.

 

ARTICLE 2.         ADJUSTMENTS TO THE SHARES.

 

2.1          Stock Dividends, Subdivisions and Combinations.  If the Company declares or pays a dividend on the Shares payable in common stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred.  If the Company subdivides the Shares by reclassification, stock split, split up or otherwise into a greater number of shares or takes any other action which increases the number of shares of any class or series of capital stock into which the Shares are convertible, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased.  If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2          Reclassification, Exchange, Combinations or Substitution. Upon any reclassification, exchange, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of the underlying securities as to which purchase rights under this Warrant exist, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number, amount and kind of securities, money and property that Holder 

 

4

 

would have ultimately received upon the completion of such reclassification, exchange, substitution, reorganization, merger, consolidation or other event if this Warrant had been exercised immediately before such reclassification, exchange, substitution, reorganization, merger, consolidation or other event.  Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Certificate of Incorporation (the “Certificate”).  The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution, reorganization, merger, consolidation or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant.  The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant.  The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, reorganizations, mergers, consolidations or other events.

 

2.3          Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant, and the number of shares of common stock or other securities issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Certificate as if the Shares were issued and outstanding on and as of the date of any such required adjustment.  The provisions set forth for the Shares in the Certificate relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Shares.

 

2.4          No Impairment.  Without the prior written consent of Holder, the Company shall not, by amendment of the Certificate, the Stockholder’s Agreement or its by-laws, or through any reorganization, recapitalization, share exchange, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and shall at all times in good faith assist in carrying out of all such terms and in taking all such action as may be necessary or appropriate to protect Holder’s rights against such avoidance or impairment.

 

2.5          Fractional Shares.  No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share.  If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.

 

2.6          Certificate as to Adjustments.  Upon each adjustment of the Warrant Price or the kind or number of securities issuable under this Warrant pursuant to this Article 2, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Executive Officer, Corporate Secretary or a senior financial officer setting forth such adjustment and the facts upon which such adjustment is based.  The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price and the number and kind of securities issuable under

 

5

 

this Warrant in effect upon the date thereof and the series of adjustments leading to such Warrant Price and such number and kind of securities.

 

ARTICLE 3.         REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

3.1          Representations and Warranties.  The Company represents and warrants and covenants to Holder as follows:

 

(a)           The Company has all requisite legal and corporate power and authority, and has taken all corporate action on the part of itself, its officers, directors and stockholders necessary, to execute, issue and deliver this Warrant, to issue the Shares issuable upon exercise or conversion of this Warrant and the securities issuable upon conversion of the Shares, and to carry out and perform its obligations under this Warrant, and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights, or to principles of equity.

 

(b)           This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws.  All Shares which may be issued upon the exercise of the purchase or conversion right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances (including preemptive or other similar rights) except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

 

(c)           The execution, delivery, and performance of this Warrant will not result in a violation of, be in conflict with, or constitute a default under, with or without the passage of time or giving of notice, any provision of the Certificate, the Stockholder’s Agreement (as defined in Section 3.3) or the Company’s by-laws, any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject, any contract, obligation, or commitment to which the Company is a party or by which it is bound, or any statute, rule, or governmental regulation applicable to the Company, or the creation of any lien, charge, or encumbrance upon any assets of the Company.

 

(d)           The Company has provided Holder with a capitalization table of the Company, and such capitalization table is complete and accurate as of the date hereof and reflects all outstanding capital stock of the Company and all outstanding warrants, options, conversion privileges, preemptive rights and other rights or agreements to purchase or otherwise acquire or issued any equity securities or convertible debt securities of the Company.  The Company has reserved a sufficient number of Shares for issuance upon the exercise of this Warrant and a sufficient number of shares of the securities issuable upon conversion of the Shares.

 

(e)           The Warrant Price is no greater than the lowest price at which the Company has issued Series B Preferred Stock.

 

3.2          Notice of Certain Events; Information. If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, 

 

6

 

stock, or other securities and whether or not a regular cash dividend; (b) to effect any reclassification or recapitalization of any of its stock; (c) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, (d) to approve or participate in any Acquisition or an IPO, (e) to liquidate, dissolve or wind up, or (f) to take any action or to effect any transaction which requires the Company to provide notice to other holders of the Shares, then, in connection with each such event, the Company shall give Holder: (1) at least ten (10) days prior written notice of the date on which a record will be taken for such dividend or distribution (and specifying the date on which the holders of stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) above; and (2) in the case of the matters referred to in (b), (c), (d), (e) or (f) above, at least ten (10) days prior written notice of the date when the same will take place (and, if applicable, specifying the date on which the holders of stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event).  The Company will also use commercially reasonable efforts to provide such information in its possession as is requested by Holder and as is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements, including without limitation, a capitalization table, to be provided to Holder within thirty (30) days after the end of each fiscal quarter of the Company, and including the per share price of the Company’s equity securities most recently issued prior to the date such capitalization table and indication are so provided; provided, that the Company’s obligations set forth in this sentence shall terminate immediately prior to the Company’s IPO.

 

3.3          Stockholder’s Agreement; No Other Stockholder Rights.  Except as provided in this Warrant and subject to the following provisions of this Section 3.3, Holder will not have any rights as a stockholder of the Company until the exercise of this Warrant.  Effective upon any exercise or conversion of this Warrant, Holder and any permitted transferee of the Warrant or the Shares shall be entitled to all of the rights and benefits provided to all other holders of the Shares pursuant to, and the Company and Holder agree that Holder (and any permitted transferee of the Warrant or the Shares) will execute a counterpart signature page and become a party to (a) the Amended and Restated Investors’ Rights Agreement dated as of October 31, 2013 by and among the Company and certain of its stockholders (as the same may be amended and/or restated from time to time the “Stockholder’s Agreement”), provided that no such amendment shall in any respect restrict Holder’s or such permitted transferee’s right and ability to transfer this Warrant or the Shares to any affiliate of Holder or such permitted transferee and (b) provided Holder or any permitted transferee agrees to become a party to any such agreement entered into hereafter (such agreement not to be unreasonably withheld), any agreement to which holders of the Shares may hereafter become parties and the Shares may become bound (including, without limitation, any stockholders, investor rights, registration rights, right of refusal, voting and co-sale rights or similar agreement); and provided, that (v) Holder and any permitted transferee shall have all of the rights of each other holder of shares under the Stockholder’s Agreement without regard to any applicable minimum share ownership or other requirement on which such rights are conditioned (excluding any observer rights under Section 3.3 of the Stockholder’s Agreement), (w) with respect to Holder and its permitted transferees and assigns, notwithstanding any term or restriction on transfer contained in the Stockholder’s Agreement, Holder and its permitted transferees shall have the unrestricted right to transfer all or any portion of the Shares to any assignee of or purchaser from Holder or its affiliate of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, (x) Holder and its permitted transferees may transfer its rights under the Stockholder’s Agreement to any affiliate of Holder or any assignee of or purchaser from Holder or its affiliates of their rights under the Credit Agreement (to the extent permitted by the Credit Agreement) or any interest or participation therein, (y) Holder and its permitted 

 

7

 

transferees shall have any purchase, participation, preemptive and registration rights granted to any other holders of the Shares under the Stockholder’s Agreement, and (z) in the event any term, restriction or condition of the Stockholder’s Agreement or any such agreement conflicts with, is inconsistent with or would otherwise prohibit or restrict the exercise of any right of Holder under this Warrant, the terms of this Warrant shall control and this Warrant and Holder shall not be subject to such term, restriction or condition.  As an illustration and not by way of limitation as to the purpose and intent of this Section 3.3, the Company shall grant registration rights to Holder for any Shares acquired by Holder upon exercise or conversion of this Warrant or conversion of such Shares in parity to the registration rights granted to any other holder of the Shares party to the Stockholder’s Agreement.

 

ARTICLE 4.         REPRESENTATIONS AND WARRANTIES OF HOLDER.  Holder represents and warrants to the Company as follows:

 

4.1          Purchase for Own Account.  This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act and Holder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption.  Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2          Disclosure of Information.  Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities.  Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3          Investment Experience.  Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk.  Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

4.4          Accredited Investor Status.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5          The Act.  Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein.  Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state

 

8

 

 securities laws, or unless exemption from such registration and qualification are otherwise available.

 

4.6          Market Stand-Off.  Holder hereby agrees that, in connection with the Company’s IPO it shall not to the extent requested by the Company’s underwriter(s) sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company (other than any disposed of in the registration and those acquired by Holder in the IPO or thereafter in open market transactions, or any disposed of in a private transaction to a transferee who agrees to be bound by the terms of this Section 4.6) for up to 180 days from the effective date of the registration statement filed in connection with the IPO; provided, however, that such 180 day period may be extended to the extent necessary to permit any managing underwriter to comply with NASD Rule 2711(f)(4); provided further, however, that Holder shall not be bound by the restrictions set forth in this Section 4.6 unless all five percent stockholders of the Company also agree to such restrictions; and provided, further, that any discretionary waiver or termination of the foregoing restrictions by the Company or the underwriters shall apply to all holders of the Company’s equity securities subject to such restrictions pro rata based on the number of shares subject to such restrictions, Holder agrees to enter into the form of agreement as reasonably requested by the underwriter(s) in connection with this Section 4.6.

 

ARTICLE 5.         MISCELLANEOUS.

 

5.1          Term.  This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.  The conditions under which the Warrant shall automatically convert on the Expiration Date are set forth in Section 5.8 below.

 

5.2          Legends.

 

(a)           This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT PURSUANT TO THE PROVISIONS OF ARTICLE 5, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW, OR UNLESS SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION CAN BE MADE IN COMPLIANCE WITH RULE 144 OF THE ACT, OR UNLESS, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A MARKET STAND-OFF PERIOD OF UP TO 180 DAYS IN THE EVENT OF A PUBLIC OFFERING, OR FOR A LONGER PERIOD NOT TO EXCEED 34 DAYS IF THE ISSUER’S TRANSFER AGENT IS NOTIFIED BY THE ISSUER OR THE ISSUER’S COUNSEL THAT THIS MARKET STAND-OFF RESTRICTION HAS

 

9

 

BEEN EXTENDED FOR THE PURPOSE OF COMPLYING WITH NASD RULE 2711(F)(4).

 

(b)           Notwithstanding the foregoing, neither this Warrant nor any certificate or instrument evidencing this Warrant or the Shares shall bear, and the Company hereby agrees to remove, within ten (10) days of any written request (together with such evidence or documentation described in the following provisions) by Holder, pursuant to the following provisions of this Section 5.2(b), or not to affix, as applicable, any restrictive or other legend, notice or provision restricting the sale or transfer of this Warrant or the Shares, in each case provided that Holder has provided reasonable evidence to the Company (including any customary broker’s or transferring stockholder’s letters but expressly excluding an opinion of counsel other than with respect to clause (D) below) that: (A) a transfer of this Warrant or the Shares, as applicable, has been made pursuant to SEC Rule 144 (assuming the transferor is not an “affiliate” (as defined in SEC Rule 144) of the Company); (B) the Warrant or the Shares, as applicable, are then eligible for transfer pursuant to SEC Rule 144; (C) a transfer of this Warrant or the Shares has been made for no consideration to an affiliate of Holder or has otherwise been made to any affiliate of Holder who is an “accredited investor” as defined in Regulation D promulgated under the Act, and that is otherwise in compliance with all applicable securities laws; or (D) in connection with any other sale or transfer, provided that upon the request of the Company, such Holder provides the Company with an opinion of counsel to such Holder, in a reasonably acceptable form to the Company, to the effect that either such sale or transfer may be made without registration under the applicable requirements of the Act or that such a legend, notice or provision is not required by, and is not required in order to establish compliance with any provisions of, the Act. For all purposes of Section 1.4, the Company shall not be deemed to have delivered to Holder Shares unless and until the Company shall have fully complied with all of the terms and conditions of this Section 5.2(b) (if removal has been requested by Holder in compliance with this Section 5.2(b)).

 

5.3          Compliance with Securities Laws on Transfer.  This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and, subject to Section 5.2(b), legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company).  The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder.  Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144.

 

5.4          Transfer Procedure.  Subject to the provisions of Article 5.3 and upon and effective immediately as of providing the Company with written notice substantially in the form attached as Appendix 2, Holder and any permitted transferee may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, Holder or such transferee will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and, in the case of transfer to transferee who is not an affiliate of the Holder, Holder or such transferee promptly thereafter surrenders this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable).  The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

 

10

 

5.5          Notices.  All notices, requests, documents and other communications (collectively, “Notices”) from the Company to Holder, or vice versa, shall be in writing and deemed validly delivered effective as of the earliest to occur of (a) when actually received, (b) when transmitted by facsimile or electronic mail (PDF), (c) the first business day after mailing by first-class registered or certified mail, postage prepaid, or after deposit with a reputable overnight courier with all charges paid, in each case other than actual receipt at such mailing, facsimile or electronic mail address as may have been furnished to the Company or Holder, as the case may be.  As used in this Warrant, “business days” shall refer to all days other than any Saturday, Sunday or day on which the Company’s primary depository bank is closed.  All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Attn:
    	
 
    
	
 
    	
Fax:
    	
 
    
	
 
    	
Email:
    	
 
    

 

With a copy to:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Attn:
    	
 
    
	
 
    	
Fax:
    	
 
    
	
 
    	
Email:
    	
 
    

 

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

 

	
 
    	
CATABASIS   PHARMACEUTICALS, INC.

One Kendall Square,   Suite B14202

Cambridge, MA 02139

Attention: Ian   Sanderson, CFO

Fax:

E-Mail:
    	
 
    

 

With a copy to:

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Attn:
    	
 
    
	
 
    	
Fax:
    	
 
    
	
 
    	
Email:
    	
 
    

 

11

 

5.6          Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.7          Attorneys’ Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

5.8          Automatic Conversion upon Expiration.  Unless Holder notifies the Company in writing to the contrary prior to such automatic conversion, in the event that, upon the earliest to occur of the Expiration Date or any expiration, involuntary termination or cancellation of this Warrant, the fair market value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed as of immediately before such date to have been converted pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares issued upon such conversion to the Holder.

 

5.9          Counterparts.  This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

5.10        Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to its principles regarding conflicts of law.

 

5.11        Headings.  The various headings in this Warrant are inserted for convenience only and shall not affect the meaning or interpretation of this Warrant or any provisions hereof.

 

5.12        Severability.  In the event any one or more of the provisions of this Warrant shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision.

 

[Balance of Page Intentionally Left Blank]

 

12

 

	
“COMPANY”
    	
 
    	
Date:           , 201
    
	
 
    	
 
    	
 
    
	
CATABASIS   PHARMACEUTICALS, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
(SEAL)
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
 
    	
(Print)
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    
	
“HOLDER”
    
	
 
    
	
SQUARE 1 BANK
    
	
 
    	
 
    
	
By:
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
(SEAL)
    
	
Name:
    	
 
    	
 
    
	
 
    	
(Print)
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
					

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.             Holder elects to purchase             shares of the [Preferred/Common] Stock of CATABASIS PHARMACEUTICALS, INC. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

 

[or]

 

1.             Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant.  This conversion is exercised for                       of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.             Please issue a certificate or certificates representing the shares in the name specified below:

 

	
 
    	
 
    
	
Holder’s   Name
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(Address)
    	
 
    

 

3.             By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

	
 
    	
HOLDER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
(SEAL)
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(Date):
    	
 
    

 

A-1

 

APPENDIX 2

 

ASSIGNMENT

 

For value received,                 hereby sells, assigns and transfers unto

 

Name:

 

Address:

 

 

Tax ID:

 

that certain Warrant to Purchase Stock issued by CATABASIS PHARMACEUTICALS, INC. (the “Company”), on        , 201    (the “Warrant”) together with all rights, title and interest therein.

 

 

	
 
    	
HOLDER:
    
	
 
    	
 
    
	
 
    	
SQUARE 1 BANK
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
(SEAL)
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    
						

 

By its execution below, and for the benefit of the Company,                  makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

	
 
    	
[NAME OF   TRANSFEREE]
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    	
(SEAL)
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

A-2

 

Exhibit F

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

COMMON STOCK PURCHASE WARRANT

 

CATABASIS PHARMACEUTICALS, INC.

 

	
Warrant   Shares:
    	
Issue   Date:
    	
 
    
	
 
    	
(the   “Original Issue Date”)
    

 

This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, MIDCAP FINANCIAL SBIC, LP, a Delaware limited partnership, its successors and assigns (together, “Holder”) is entitled, at any time on or after the Issue Date specified above and on or prior to the close of business on                (the “Expiration Date”), to purchase from CATABASIS PHARMACEUTICALS, INC., a Delaware corporation (the “Company”), up to              (            ) shares (the “Shares”) of the Common Stock, par value $0.001 per share, of the Company (the “Common Stock”) at a purchase price per share equal to $       (the “Warrant Price”), subject to the provisions and upon the terms and conditions set forth in this Warrant.

 

ARTICLE 1

EXERCISE.

 

1.1          Method of Exercise.  Holder may exercise this Warrant in whole or in part by delivering to the Company a duly executed facsimile or electronic (pdf) copy of a Notice of Exercise in substantially the form attached as Appendix 1 (or by delivery of an original or copy of such Notice of Exercise by any other method permitted for providing notices under Article 5.4).  Unless Holder is exercising the cashless exercise right set forth in Article 1.2, Holder shall, concurrently therewith, also deliver to the Company a certified or bank cashier’s check, wire transfer of immediately available funds (to an account designated by the Company), or other form of payment acceptable to the Company, in the amount of the aggregate Warrant Price for the Shares being purchased. As used herein, “Trading Day” means a day on which the principal Trading Market is open for trading, and “Trading Market” means any of the following markets or exchanges on which the Common Stock is or has most recently been listed or quoted for trading on the date in question:  the NYSE Amex, the Nasdaq Capital Market, the Nasdaq Global 

 

 

Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 

1.2          Cashless Exercise.  This Warrant may be exercised, in whole or in part, by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of the Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

 

(B) = the Warrant Price, as adjusted hereunder; and

 

(X) = the number of the Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

As used herein, “VWAP” shall mean, with respect to one Share for any date, the price determined by the first of the following clauses that applies:  (a) if the Common Stock is then listed or quoted on a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)),  (b) if the Common Stock is listed or quoted on the National Association of Securities Dealers, Inc. OTC Bulletin Board (the “OTC Bulletin Board”) but the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of one Share as reasonably determined by the Board of Directors of the Company in good faith (provided, that in the event Holder’s cashless exercise under Article 1.2 is exercised or deemed exercised in connection with an Acquisition, such fair market value  shall be determined based upon the cash and fair market value of any securities and other consideration as would have been paid for or in respect of each Share issuable (as of immediately prior to the closing of the Acquisition) upon exercise of this Warrant as if such Share had been issued and outstanding on and as of the closing of such Acquisition).

 

1.3          Delivery of Certificate and New Warrant.  Within five (5) Trading Days after Holder exercises this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.  The Shares shall be deemed to have been issued, and Holder or any other person designated by Holder to be

 

2

 

named therein shall be deemed to have become a holder of record of such Shares for all purposes as of 5:00 p.m. (Eastern Time) on the date the Warrant shall have been exercised.  If the Company fails to deliver a certificate or certificates for the Shares as provided herein, in addition to any other remedy available to Holder hereunder, at law or in equity, Holder will have the right to rescind the exercise of this Warrant.

 

1.4          Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

 

1.5          Treatment of Warrant Upon Acquisition of the Company.

 

1.5.1       Certain Definitions.  For the purposes of this Warrant, “Acquisition” means (A) any sale, license or any other disposition of all or substantially all of the assets of the Company, or (B) any reorganization, consolidation, or merger of the Company with or into another person or entity, or (C) any sale of outstanding Company securities by holders thereof, whereby, in the case of (B) or (C) above, the holders of the Company’s voting securities before the transaction beneficially own less than a majority of the outstanding voting securities of the successor or surviving entity after the transaction (or, if the surviving entity is a wholly-owned subsidiary of another corporation, such surviving entity’s parent).  As used in this Article 1.5, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded on a Trading Market, and (iii) Holder would not be restricted by contract or by applicable federal and state securities laws from  re-selling, within six (6) months and one day in compliance with the federal securities laws, rules and regulations, following the closing of such Acquisition, all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise this Warrant in full on or prior to the closing of such Acquisition.  For purposes of this Article 1.5, “Affiliate” shall mean any person or entity that controls, is controlled by or is under common control with any such person or entity, and each of such person’s or entity’s officers, directors, members, managers, joint venturers or partners, as applicable (whether as a result of the ownership of voting securities, by contract or otherwise).

 

3

 

1.5.2       Treatment of Warrant Upon Acquisition.

 

(A)          Cash or Marketable Securities Acquisition.  In the event of an Acquisition in which (1) the sole consideration is cash, Marketable Securities, or a combination thereof and (2) such consideration is received by the Company’s stockholders in respect of their shares of the Company’s capital stock (including, without limitation, pursuant to the dissolution and liquidation of the Company in connection with or as a result of such Acquisition), Holder may exercise its cashless exercise or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition; provided, that if the Holder fails to make such election prior to the consummation of the Acquisition, the Warrant will, subject to Article 5.7, expire upon the consummation of such Acquisition.  The Company shall provide Holder with written notice of any proposed Acquisition (which notice shall reasonably identify the parties thereto, the proposed structure thereof, the amount and kind of consideration to be paid in connection therewith and the terms and conditions of payment, the number of shares of capital stock outstanding or issuable upon the exercise of rights then outstanding, and facts as shall be reasonably necessary to indicate the effect of the Acquisition on this Warrant), together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice, which shall be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition. Any exercise of this Warrant after delivery of such notice and prior to the consummation of the Acquisition described in such notice shall be deemed to be an exercise in connection with such Acquisition for purposes of Article 1.2.  If the Acquisition described in such notice is terminated or abandoned prior to the consummation thereof, the Company shall provide prompt notice thereof and, unless Holder advises the Company in a written notice that it elects to reaffirm the exercise, any purported exercise of this Warrant in connection with such proposed Acquisition shall be null and void.

 

(B)          Asset Sale.  In the event of an Acquisition that is an arm’s length sale or license of all or substantially all of the Company’s assets (and only its assets) to a third party that is not an Affiliate of the Company and to which 1.5.2(A) above does not apply (a “True Asset Sale”), Holder may, at its option, (1) exercise its rights under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such True Asset Sale, or (2) elect to have the terms of Section 1.5.2(C) below apply; provided, that if Holder fails to exercise or make such election prior to the consummation of the Acquisition the Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale.  The Company shall provide Holder with written notice of any proposed True Asset Sale (which notice shall identify the parties thereto, the proposed structure thereof, the amount and kind of consideration to be paid in connection therewith and the terms and conditions of payment, the number of shares

 

4

 

of capital stock outstanding or issuable upon the exercise of rights then outstanding, and facts as shall be reasonably necessary to indicate the effect of the True Asset Sale on this Warrant), together with such reasonable information as Holder may request in connection with such True Asset Sale giving rise to such notice, which shall be delivered to Holder not less than ten (10) days prior to the closing of the proposed True Asset Sale.  Any exercise of this Warrant after delivery of such notice and prior to the consummation of the True Asset Sale described in such notice shall be deemed to be an exercise in connection with such True Asset Sale for purposes of Article 1.2.  If the True Asset Sale described in such notice is terminated or abandoned prior to the consummation thereof, the Company shall provide prompt notice thereof and any purported exercise of this Warrant in connection with such proposed True Asset Sale shall be null and void.

 

(C)          Assumption of Warrant.  Upon the closing of any Acquisition other than as particularly described in subsection (A) or (B) above, the surviving or successor entity shall assume this Warrant and the obligations of the Company hereunder, and this Warrant shall, from and after such closing, be exercisable for the same class, number and kind of securities, cash and other property as would have been paid for or in respect of the Shares issuable (as of immediately prior to such closing) upon exercise in full hereof as if such Shares had been issued and outstanding on and as of such closing, at an aggregate Warrant Price equal to the aggregate Warrant Price in effect as of immediately prior to such closing (with the Warrant Price being appropriately adjusted and apportioned based upon such securities, cash and other property in order to protect the economic value of this Warrant immediately prior to the closing of such Acquisition); and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.  The Company shall cause any surviving or successor entity in an Acquisition in which the Company is not the surviving or successor entity to assume in writing all of the obligations of the Company under this Warrant prior to the closing of such Acquisition, including agreements to deliver to Holder in exchange for this Warrant a security of such surviving or successor entity evidenced by a written instrument issued by the surviving or successor entity substantially similar in form to this Warrant and exercisable as provided herein (without regard to any limitations on the exercise of this Warrant).  Upon the closing of such an Acquisition, the surviving or successor entity shall succeed to, and be substituted for, and shall assume all of the obligations of the Company under this Warrant.

 

(D)          Conditional Exercise.  Notwithstanding any other provision hereof, if an exercise of this Warrant is to be made in connection with an Acquisition, such exercise may at the election of Holder be conditioned upon the consummation of such transaction, in which case such exercise

 

5

 

shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

ARTICLE 2          
 ADJUSTMENTS TO THE SHARES.

 

2.1          Stock Dividends, Splits, Etc.  If the Company declares or pays a dividend on the outstanding shares of the Common Stock payable in additional shares of the Common Stock or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred.  If the Company subdivides the outstanding shares of the Common Stock by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased.  If the outstanding shares of the Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

 

2.2          Reclassification, Exchange, Conversion or Substitution.  Upon any reclassification, exchange, conversion, substitution or similar event affecting the outstanding shares of the Common Stock, Holder shall be entitled to receive, upon exercise of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised in full immediately before such reclassification, exchange, conversion, substitution or similar event, at an aggregate Warrant Price not exceeding the aggregate Warrant Price in effect as of immediately prior thereto.  The Company or its successor shall promptly issue to Holder a certificate pursuant to Article 2.6 hereof setting forth the number, class and series or other designation of such new securities or other property issuable upon exercise of this Warrant as a result of such reclassification, exchange, conversion, substitution or similar event.  The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, conversions, substitutions, and similar events.

 

2.3          Pro Rata Distributions. In addition to any adjustments pursuant to Articles 2.1 and 2.2 above, the Holder, as the holder of this Warrant, shall be entitled to receive such dividends paid and distributions of any kind made to the holders of Common Stock of the Company to the same extent as if the Holder had exercised this Warrant into Common Stock (without regard to any limitations on exercise herein or elsewhere and without regard to whether or not a sufficient number of shares are authorized and reserved to effect any such exercise and issuance) and had held such shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution to the holders of Common Stock.

 

2.4          No Impairment.  The Company shall not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, share exchange, dissolution, issue, sale of securities, closing of its 

 

6

 

stockholder books and records, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such actions as may be necessary or appropriate to protect Holder’s rights under this Warrant against impairment.

 

2.5          Fractional Shares.  No fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Warrant Price or round up to the next whole share.

 

2.6          Certificate as to Adjustments.  Upon each adjustment of the Warrant Price, the Common Stock and/or number of Shares, or upon the occurrence of any transaction or event described in this Article 2, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price, Common Stock and number of Shares in effect upon the date thereof and the series of adjustments leading to such Warrant Price, Common Stock and number of Shares.

 

ARTICLE 3          
 REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE COMPANY.

 

3.1          Representations and Warranties.  The Company represents and warrants to, and agrees with, Holder as follows:

 

3.1.1       Corporate Existence. The Company is a corporation duly organized, validly existing and in good standing in its jurisdiction of incorporation, has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified as a foreign corporation in all jurisdictions where such qualification is required.

 

3.1.2       Corporate Authority. The Company has all requisite legal and corporate power and authority to execute, issue and deliver this Warrant, to issue the Shares issuable upon exercise of this Warrant, and to carry out and perform its obligations under this Warrant.

 

3.1.3       Corporate Action. All corporate action on the part of the Company, ifs officers, directors and shareholders, necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of this Warrant and the Shares issuable upon exercise hereof has been taken and this Warrant constitutes the legally binding and valid obligation of the Company enforceable in accordance with its terms.

 

7

 

3.1.4       No Violation. The execution, delivery and performance of this Warrant will not result in (i) any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice, any provision of the Company’s Certificate of Incorporation or by-laws, as amended, any provision of any judgment, decree, or order to which the Company is a party, by which it is bound, or to which any of its material assets are subject, any contract, obligation or commitment to which the Company is a party or by which it is bound, or (ii) the creation of any lien, charge, encumbrance or restriction on any assets of the Company.

 

3.1.5       Authorized Shares. The Company shall at all times during the term of this Warrant keep reserved out of its authorized and unissued capital stock a sufficient number of shares of Common Stock to permit exercise in full of this Warrant.  All Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

 

3.2          Exchange Act Reports; Legend.

 

3.2.1       Reports. With a view to making available to Holder the benefits of Securities and Exchange Commission (“SEC”) Rule 144 and any other rule or regulation of the SEC that may at any time permit Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 (or any other Form that may be available at the time of such proposed sale), the Company shall, so long as it is subject to the reporting requirements of the Act (and the rules and regulations promulgated thereunder) and the Exchange Act, (A) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times; (B) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the Exchange Act; and (C) furnish to Holder, so long as Holder owns the Warrant or Shares, forthwith upon request (1) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (or any other Form that may be available at the time of such proposed sale), and (2) such other information as may be reasonably requested in availing Holder of any rule or regulation of the SEC that permits the sale of any securities without registration or pursuant to Form S-3 (or any other Form that may be available at the time of such proposed sale).

 

3.2.2       Legend. Neither this Warrant nor any certificate or instrument evidencing this Warrant or the Shares shall bear (and the Company hereby agrees to remove or not to affix, as applicable and provided herein) any restrictive or other legend, notice or provision (including without limitation the legend included on the first page of this Warrant as of the Issue Date or any similar legend) restricting the sale or transfer of this Warrant or the Shares if (A)  a transfer of this 

 

8

 

Warrant or the Shares is made or proposed to be made pursuant to SEC Rule 144 or (B) such a legend, notice or provision is not required in order to establish compliance with any provisions of the Act.  Within five (5) Trading Days of (X) any written request by Holder indicating its intention to make a transfer of this Warrant or all or a portion of the Shares pursuant to SEC Rule 144 or (Y) satisfaction of the registration and prospectus delivery requirements of the Act, the Company shall remove any such legend, notice or provision restricting the sale or transfer of this Warrant or the Shares, as applicable.  Notwithstanding the foregoing or anything to the contrary contained in this Warrant, no certificate or certificates for any Shares purchased hereunder shall bear any restrictive or other legend, notice or provision restricting the sale or transfer of Shares if, as of the date of any exercise or conversion of this Warrant, the Shares may be transferred pursuant to SEC Rule 144 and, if such sale or transfer cannot, as of such exercise or conversion date, be made, the Company shall cause any such legend, notice or provision to be removed from all or any such certificates within five (5) Trading Days of the first date on which such a transfer pursuant to SEC Rule 144 can be made.  For all purposes of Article 1.3, the Company shall not be deemed to have delivered to Holder Shares unless and until the Company shall have fully complied with all of the terms and conditions of this Article 3.2.2.

 

3.3          No Shareholder Rights.  Except as provided in this Warrant, Holder will not have any rights as a shareholder of the Company with respect to the Shares issuable hereunder until the exercise of this Warrant.

 

ARTICLE 4          
 REPRESENTATIONS AND WARRANTIES OF HOLDER.

 

4.1          Holder represents and warrants to the Company as follows:

 

4.1.1       Purchase for Own Account.  This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act, and has no present intention of distributing this Warrant and the securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such securities in violation of the Act or any applicable state securities law (this representation and warranty not limiting the Holder’s right to sell such securities at any time pursuant to the registration statement described herein or otherwise in compliance with applicable federal and state securities laws). Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.1.2       Disclosure of Information.  Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and  its underlying securities.  Holder further has had an opportunity to ask questions 

 

9

 

and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.1.3       Investment Experience.  Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk.  Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

4.1.4       Accredited Investor Status.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.1.5       The Act.  Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.  Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

 

4.1.6       Reliance on Exemptions.  The Holders understands that this Warrant and the Shares issuable upon exercise hereof may be offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Warrant and the Shares.

 

4.1.7       No Governmental Review.  The Holder understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of this Warrant and the Shares or the fairness or suitability of an investment in such securities nor have such authorities passed upon or endorsed the merits of the offering of such securities.

 

10

 

4.1.8       Validity; Enforcement.  This Warrant has been duly and validly authorized, executed and delivered on behalf of the Holder and is a valid and binding agreement of the Holder enforceable against the Holder in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

4.1.9       No Short Selling.  The Holder represents and warrants to the Company that at no time prior to the date of this Agreement has any of the Holder, its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (i) “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Company’s common stock or (ii) hedging transaction, which establishes a net short position with respect to the common stock.

 

ARTICLE 5
 MISCELLANEOUS.

 

5.1          Term.  This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

 

5.2          Legend. Subject to Article 3.2.2 above, each certificate representing Shares issued upon any exercise hereof shall be imprinted with a legend in substantially the following form:

 

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS PROVIDED IN THAT CERTAIN COMMON STOCK PURCHASE WARRANT ISSUED BY THE COMPANY TO MIDCAP FINANCIAL SBIC, LP DATED AS OF            , 201 , MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED (UNLESS SUCH TRANSFER IS TO AN AFFILIATE OF HOLDER), PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS PERMITTED UNDER RULE 144 OF THE ACT OR IS EXEMPT FROM SUCH REGISTRATION.

 

5.3          Transfer Procedure.  Subject to compliance with any applicable securities laws and upon providing the Company with written notice in substantially the form attached as Appendix 2, Holder may transfer all or part of this Warrant (and all rights hereunder) or the Shares issuable upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable).

 

11

 

5.4          Notices; Business Day.   Unless otherwise specifically provided herein, all notices, requests, documents or other communications by either the Company or Holder to the other 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 electronic mail (if an email address is specified herein) or 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.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.  For purposes of this Article 5.4, “Business Day” shall mean any day that is not a Saturday, Sunday or a day on which Holder is closed.  The Company or Holder may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Article 5.4.

 

If to the Company:

 

CATABASIS PHARMACEUTICALS, INC.

One Kendall Square, Suite B14202

Cambridge, MA 02139

Attention: Ian Sanderson, CFO

Fax:

E-Mail:

 

If to Holder:

 

MIDCAP FINANCIAL SBIC, LP

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland  20814

Attention: Portfolio Management- Life Sciences

Fax:  (301) 941-1450

E-Mail: lviera@midcapfinancial.com

 

with a copy to:

 

MC Serviceco, LLC 

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland  20814

Attention:  General Counsel

Fax:  (301) 941-1450

E-Mail: legalnotices@midcapfinancial.com

 

12

 

5.5          Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.6          Attorneys’ Fees; Remedies.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees and disbursements.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.

 

5.7          Automatic Exercise upon Expiration.  This Warrant shall, to the extent not previously exercised, automatically be deemed to have been fully exercised pursuant to Article 1.2 above (even if not surrendered) as of immediately before any expiration, termination or cancellation of this Warrant (including, without limitation, pursuant to Article 1.5.2(A)) if the then Fair Market Value of a Share exceeds the then Warrant Price, unless Holder notifies the Company in writing to the contrary prior to such automatic exercise, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such exercise or any consideration payable in respect of such Shares in connection with an Acquisition, if applicable, to Holder or its successor or assigns.

 

5.8          Counterparts.  This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

5.9          Governing Law.  This Warrant and any dispute, disagreement, or issue of construction or interpretation arising hereunder, whether relating to its execution, its validity, the obligations provided herein or performance, shall be governed or interpreted according to the laws of the State of Delaware without regard for principles of conflicts of laws.

 

5.10        Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced thereby shall inure to the benefit of and be binding upon the successors and assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Shares.

 

5.11        Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

5.12        Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without  invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

13

 

5.13        Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

5.14        No Strict Construction.  This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

[Remainder of page left blank intentionally; signature page follows]

 

14

 

IN WITNESS WHEREOF, the parties have executed this Common Stock Purchase Warrant by their duly authorized representatives as of the date first above written.

 

 

	
COMPANY
    	
 
    
	
 
    	
 
    
	
CATABASIS   PHARMACEUTICALS, INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
(SEAL)
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
 
    	
(Print)
    	
 
    
	
Title:
    	
 
    	
 
    

 

 

	
HOLDER
    	
 
    
	
 
    	
 
    
	
MIDCAP FINANCIAL SBIC, LP
    	
 
    
	
 
    	
 
    
	
By: MidCap Financial   SBIC GP, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
(SEAL)
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    
	
 
    	
(Print)
    	
 
    
	
Title:
    	
 
    	
 
    
					

 

 

APPENDIX 1

TO COMMON STOCK PURCHASE WARRANT

 

NOTICE OF EXERCISE

 

TO:  CATABASIS PHARMACEUTICALS, INC. (“Company”)

 

1.                                      The undersigned hereby elects to purchase           Shares of the Common Stock of Company pursuant to the terms of the Common Stock Purchase Warrant between the undersigned (or the undersigned’s predecessor or assignor) and Company, and shall tender payment of the exercise price in full, together with all applicable transfer taxes, if any, in accordance with the terms of the Warrant.

 

2.                                      Payment shall take the form of (check applicable box):

 

o                                    in lawful money of the United States; or

 

o                                    the cancellation of such number of Shares as is necessary, in accordance with the formula set forth in Article 1.2 of the Warrant, to exercise this Warrant with respect to the maximum number of Shares purchasable pursuant to the cashless exercise procedure set forth in Article 1.2 of the Warrant.

 

3.                                      Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:

 

 

The Shares shall be delivered by physical delivery of a certificate to:

 

 

[SIGNATURE OF HOLDER]

 

	
Name of Holder:
    	
 
    
	
Signature of Authorized   Signatory of Holder:
    	
 
    
	
Name of Authorized Signatory:
    	
 
    
	
Title of Authorized Signatory:
    	
 
    
	
Date:
    	
 
    
						

 

A-1

 

APPENDIX 2

TO COMMON STOCK PURCHASE WARRANT

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information.  Do not use this form to exercise the Warrant.)

 

For value received, Midcap Financial SBIC, LP hereby sells, assigns and transfers unto

 

Name:

 

 

Address:

 

 

Tax ID:

 

that certain Warrant to Purchase Stock issued by CATABASIS PHARMACEUTICALS, INC. (the “Company”), on          , 201    (the “Warrant”) together with all rights, title and interest therein.

 

	
 
    	
MIDCAP FINANCIAL SBIC,   LP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:    MidCap Financial SBIC GP, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    

 

By its execution below, and for the benefit of the Company,                 makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

	
 
    	
[NAME OF TRANSFEREE]
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

A-2

 

CREDIT FACILITY SCHEDULE

 

The following Credit Facilities are specified on this Credit Facility Schedule:

 

Credit Facility #1:

 

	
Credit Facility and Type:
    	
Term, Tranche 1
    

 

Lenders for and their respective Applicable Commitments to this Credit Facility:

 

	
Lender
    	
 
    	
Applicable Commitment
    	
 
    
	
MidCap Financial   SBIC, LP
    	
 
    	
$
    	
3,500,000
    	
 
    
	
Square 1 Bank
    	
 
    	
$
    	
1,500,000
    	
 
    

 

The following defined terms apply to this Credit Facility:

 

Applicable Interest Rate:  means (a) eight and fifty hundredths percent (8.50%) per annum with respect to the MidCap Obligations, and (b) five and twelve hundredths percent (5.12%) per annum with respect to the Square 1 Obligations (which, collectively, constitutes a blended interest rate of seven and forty-nine hundredths percent (7.49%) per annum).

 

Applicable Prepayment Fee:  means the following amount, calculated as of the date (the “Accrual Date”) that the Applicable Prepayment Fee becomes payable in the case of prepayments required under the Financing Documents or the date any voluntary prepayment is made:  (a) for an Accrual Date on or after the Closing Date through and including the date which is twelve (12) months after the Closing Date, three percent (3.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater); (b) for an Accrual Date on or after the date which is twelve (12) months after the Closing Date through and including the date which is twenty-four (24) months after the Closing Date, two percent (2.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater); and (c) for an Accrual Date after the date which is twenty-four (24) months after the Closing Date through and including the date immediately preceding the Maturity Date, one percent (1.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater).

 

Closed Period:  not applicable.

 

Commitment Commencement Date:  the Closing Date

 

Commitment Termination Date:  the earliest to occur of (a) the close of the Business Day following the Closing Date, (b) an Event of Default, or (c) the Maturity Date.

 

Minimum Credit Extension Amount: $5,000,000

 

Permitted Purpose:  not applicable.

 

1

 

Credit Facility #2:

 

	
Credit Facility and Type:
    	
Term, Tranche 2
    

 

Lenders for and their respective Applicable Commitments to this Credit Facility:

 

	
Lender
    	
 
    	
Applicable Commitment
    	
 
    
	
MidCap Financial   SBIC, LP
    	
 
    	
$
    	
7,000,000
    	
 
    
	
Square 1 Bank
    	
 
    	
$
    	
3,000,000
    	
 
    

 

The following defined terms apply to this Credit Facility:

 

Applicable Funding Condition: means (1) the Warrants — Tranche 2 have been, or contemporaneously with the Credit Extension will be, duly executed and delivered to Agent, together with evidence reasonably satisfactory to Agent that the Warrants — Tranche 2 and the related shares have been duly authorized and issued by all necessary corporate and shareholder action of Borrower, and (2) Agent has received a completed Credit Extension Form, in accordance with Section 2.3(a).

 

Applicable Interest Rate:  means (a) eight and fifty hundredths percent (8.50%) per annum with respect to the MidCap Obligations, and (b) five and twelve hundredths percent (5.12%) per annum with respect to the Square 1 Obligations (which, collectively, constitutes a blended interest rate of seven and forty-nine hundredths percent (7.49%) per annum).

 

Applicable Prepayment Fee:  means the following amount, calculated as of the date (the “Accrual Date”) that the Applicable Prepayment Fee becomes payable in the case of prepayments required under the Financing Documents or the date any voluntary prepayment is made:  (a) for an Accrual Date on or after the Closing Date through and including the date which is twelve (12) months after the Closing Date, three percent (3.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater); (b) for an Accrual Date on or after the date which is twelve (12) months after the Closing Date through and including the date which is twenty-four (24) months after the Closing Date, two percent (2.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater); and (c) for an Accrual Date after the date which is twenty-four (24) months after the Closing Date through and including the date immediately preceding the Maturity Date, one percent (1.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater).

 

Closed Period:  not applicable.

 

Commitment Commencement Date:  the later to occur of (a) Closing Date, or (b) satisfaction of the Applicable Funding Conditions for this Credit Facility

 

Commitment Termination Date:  the earliest to occur of (a) March 31, 2015, (b) an Event of Default, or (c) the Maturity Date.

 

Minimum Credit Extension Amount: $10,000,000

 

Permitted Purpose:  not applicable.

 

2

 

Credit Facility #3:

 

	
Credit Facility and Type:
    	
Term, Tranche 3
    

 

Lenders for and their respective Applicable Commitments to this Credit Facility:

 

	
Lender
    	
 
    	
Applicable Commitment
    	
 
    
	
MidCap Financial   SBIC, LP
    	
 
    	
$
    	
7,000,000
    	
 
    
	
Square 1 Bank
    	
 
    	
$
    	
3,000,000
    	
 
    

 

The following defined terms apply to this Credit Facility:

 

Applicable Funding Condition: means that (1) A “Qualifying IPO” (as defined below) has occurred, (2) the Warrants — Tranche 3 have been, or contemporaneously with the Credit Extension will be, duly executed and delivered to Agent, together with evidence reasonably satisfactory to Agent that the Warrants — Tranche 3 have been duly authorized and issued by all necessary corporate and shareholder action of Borrower, (3) Agent has received a completed Credit Extension Form, in accordance with Section 2.3(a) and (4) Borrower has drawn all of Tranche 2 or the Tranche 2 Commitment Termination Date has occurred.

 

Applicable Interest Rate:  means (a) eight and fifty hundredths percent (8.50%) per annum with respect to the MidCap Obligations, and (b) five and twelve hundredths percent (5.12%) per annum with respect to the Square 1 Obligations (which, collectively, constitutes a blended interest rate of seven and forty-nine hundredths percent (7.49%) per annum).

 

Qualifying IPO: means Borrower’s initial, firm-commitment underwritten offering and sale of its Common Stock to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in total aggregate net cash proceeds actually received by Borrower (net of any and all underwriter and/or investment banker fees, commissions and discount and any and all fees and disbursement of counsel and/or independent certified public accounts, and exclusive of any and all proceeds received by the Company pursuant to the exercise of any underwriter’s over-allotment or “Green Shoe” option) of at least $50,000,000 (subject to no clawback, escrow or other terms limiting Borrower’s ability to freely use such proceeds) from such Qualifying IPO and shall have deposited such net cash proceeds into a deposit account with Square 1 subject to a Control Agreement in favor of Agent and shall have delivered to Agent and each Lender evidence reasonably satisfactory to Agent and each Lender of the occurrence of such Qualifying IPO and the deposit of such proceeds.

 

Applicable Prepayment Fee:  means the following amount, calculated as of the date (the “Accrual Date”) that the Applicable Prepayment Fee becomes payable in the case of prepayments required under the Financing Documents or the date any voluntary prepayment is made:  (a) for an Accrual Date on or after the Closing Date through and including the date which is twelve (12) months after the Closing Date, three percent (3.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater); (b) for an Accrual Date on or after the date which is twelve (12) months after the Closing Date through and including the date which is twenty-four (24) months after the Closing Date, two percent (2.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater); and (c) for an Accrual Date after the date which is twenty-four (24) months after the Closing Date through and including the date immediately preceding the Maturity Date, one percent (1.0%) multiplied by the amount of the outstanding principal of the Credit Extension prepaid or required to be prepaid (whichever is greater).

 

Closed Period:  not applicable.

 

Commitment Commencement Date:  The later to occur of (a) the Closing Date, or (b) satisfaction of the Applicable Funding Conditions for this Credit Facility.

 

Commitment Termination Date:  the earliest to occur of (a) June 30, 2015, or (b) an Event of Default, or (c) the Maturity Date.

 

Minimum Credit Extension Amount: $10,000,000

Permitted Purpose:  not applicable.

 

3

 

AMORTIZATION SCHEDULE (FOR EACH CREDIT FACILITY)

 

Commencing on October 1, 2015, and continuing on the first day of each calendar month thereafter, an amount per month equal to the total amount of Credit Extensions made under all Credit Facilities divided by thirty-six (36) months.

 

4

 

POST-CLOSING OBLIGATIONS SCHEDULE

 

Borrower shall satisfy and complete each of the following obligations, or provide Agent each of the items listed below, as applicable, on or before the date indicated below, all to the satisfaction of Agent in its sole and absolute discretion:

 

1.                                      On or prior to the fifth (5th) Business Day after the Closing Date, Borrower shall deliver a completed Control Agreement with respect to Borrower’s Securities Account numbered 19-SQ19041 maintained with U.S. Bank National Association.

 

2.                                      On or prior to the fifth (5th) Business Day after the Closing Date (subject to any extensions as may be granted by Agent in its sole discretion in writing), Borrower shall deliver to Agent evidence that it has closed the Designated SVB Securities Account and transferred all securities and other funds maintained in the Designated SVB Securities Account to Borrower’s Securities Account numbered 19-SQ19041 maintained with U.S. Bank National Association.

 

3.                                      On or prior to September 27, 2014, Borrower shall deliver to Agent a completed Access Agreement executed by Borrower, Agent and the landlord, in respect of Borrower’s facilities located at the second (2nd) floor of Building No. 1400 at One Kendall Square, Cambridge, Massachusetts 02139.

 

4.                                      On or prior to November 27, 2014 (subject to any extensions as may be granted by Agent in its sole discretion in writing), Borrower shall deliver to Agent evidence that it has closed the Designated SVB Deposit Account and transferred all funds maintained in the Designated SVB Deposit Account to the Borrower’s Deposit Accounts maintained with Square 1; provided, that, until such time as Borrower closes the Designated SVB Deposit Account, the amount on deposit therein shall not exceed the lesser of (i) the amount necessary to cover checks that are outstanding on or prior to the Closing Date and (ii) $500,000 for the first 30 days following the Closing Date, $100,000 for the 31st through the 60th day following the Closing Date, and $50,000 for 61st day following the Closing Date through November 27, 2014.

 

Borrower’s failure to complete and satisfy any of the above obligations on or before the date indicated above, or Borrower’s failure to deliver any of the above listed items on or before the date indicated above, shall constitute an immediate and automatic Event of Default.

 

1

 

CLOSING DELIVERIES SCHEDULE

 

1.              duly executed original signatures to the Financing Documents to which Borrower is a party.

2.              duly executed original signatures to the Control Agreements with Square 1 Bank;

3.              duly executed original Secured Promissory Notes in favor of each Lender with a face amount equal to such Lender’s Applicable Commitment under each Credit Facility;

4.              the Operating Documents of Borrower and good standing certificates of Borrower certified by the Secretary of State of the state(s) of organization of Borrower as of a date no earlier than thirty (30) days prior to the Closing Date;

5.              good standing certificates dated as of a date no earlier than thirty (30) days prior to the Closing Date to the effect that Borrower is qualified to transact business in all states in which the nature of Borrower’s business so requires;

6.              duly executed original signatures to the completed Borrowing Resolutions for Borrower;

7.              certified copies, dated as of a recent date, of financing statement searches, as 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;

8.              the Perfection Certificate executed by Borrower;

9.              a landlord’s consent executed in favor of Agent in respect of Borrower’s facilities in                  - and                  , and a bailee waiver executed in favor of Agent in respect of the                       location in                     (required for initial Credit Extension and to the extent otherwise required under the Credit Agreement);

10.       a legal opinion of Borrower’s counsel dated as of the Closing Date together with the duly executed original signatures thereto (required for initial Credit Extension);

11.       evidence satisfactory to Agent that the insurance policies required by Article 6 are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Agent, for the ratable benefit of the Lenders;

12.       payment of the fees and expenses of Agent and Lenders then accrued, including pursuant to the Fee Letters;

13.       a duly executed original Secretary’s Certificate dated as of the Closing Date which includes copies of the completed Borrowing Resolutions for Borrower;

14.       timely receipt by the Agent of an executed disbursement letter;

15.       a certificate executed by a Responsible Officer of Borrower, in form and substance satisfactory to Agent, which shall, among other things, certify as to certain conditions to the funding of the Credit Extensions on the Closing Date (required for initial Credit Extension);

16.       Registration Rights Agreement/Investors’ Rights Agreement, Shareholders Agreement and any amendments thereto; and

17.       the Warrants — Tranche 1 (required for initial Credit Extension).

 

1

 

DISCLOSURE SCHEDULE

 

Scheduled Permitted Liens

 

None.

 

	
Debtor
    	
 
    	
Secured Party
    	
 
    	
Collateral
    	
 
    	
State and
   Jurisdiction
    	
 
    	
Filing Date and
   Number (include
   original file date and
   continuations,
   amendments, etc.)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Scheduled Permitted Indebtedness

 

None.

 

	
Debtor
    	
 
    	
Creditor
    	
 
    	
Amount of Indebtedness
   outstanding as of         ,
    	
 
    	
Maturity Date
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Scheduled Permitted Investments

 

None.

 

	
Debtor
    	
 
    	
Type of Investment
    	
 
    	
Date
    	
 
    	
Amount Outstanding as of
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

Scheduled Material Agreements

 

	
Other Party to Contract
    	
 
    	
Title/Date of Contract
    
	
 
    	
 
    	
 
    
	
RB Kendall Fee, LLC (now Divco West)
    	
 
    	
Lease Agreement 12/17/10 amended 12/21/11.
    
	
 
    	
 
    	
 
    
	
Catalent Pharma Solutions
    	
 
    	
Various
    
	
 
    	
 
    	
 
    
	
Cambridge Major Labs
    	
 
    	
Various
    
	
 
    	
 
    	
 
    
	
Medpace Clinical Pharmacology, LLC
    	
 
    	
MSA for clinical services
    
	
 
    	
 
    	
 
    
	
Spaulding Clinical Research, LLC
    	
 
    	
MSA for 2003-102 study
    

 

Scheduled Litigation

 

1. N/A

 

2.

 

3.

 

Scheduled ownership interest in any Chattel Paper, letter of credit rights, commercial tort claims, Instruments, documents or investment property

 

1. N/A

 

2.

 

3

 

 

INTANGIBLE PROPERTY SCHEDULE

 

INTELLECTUAL PROPERTY (REGISTRATIONS AND APPLICATIONS)

 

	
 
    	
 
    	
Borrower that is Owner of
   IP
    	
 
    	
Name / Identifier of IP
    	
 
    	
Type of IP (e.g.,
   patent, TM, ©, mask
   work)
    	
 
    	
Application Number /
   Registration
    	
 
    	
Expiration Date if
   Granted/ Issued/
   Registered
    
	
1
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05AU
    	
 
    	
Patent
    	
 
    	
2009268610 / 2009268610
    	
 
    	
July 8, 2029
    
	
2
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05BR
    	
 
    	
Patent
    	
 
    	
PI0915536-8
    	
 
    	
n/a
    
	
3
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05CA
    	
 
    	
Patent
    	
 
    	
2,729,186
    	
 
    	
n/a
    
	
4
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05CL
    	
 
    	
Patent
    	
 
    	
24-2011
    	
 
    	
n/a
    
	
5
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05CN
    	
 
    	
Patent
    	
 
    	
200980135113.X
    	
 
    	
n/a
    
	
6
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05CO
    	
 
    	
Patent
    	
 
    	
11.001.289
    	
 
    	
n/a
    
	
7
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05CR
    	
 
    	
Patent
    	
 
    	
20110015
    	
 
    	
n/a
    
	
8
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05EC
    	
 
    	
Patent
    	
 
    	
SP-11-10746
    	
 
    	
n/a
    
	
9
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05EG
    	
 
    	
Patent
    	
 
    	
PCT35/2011
    	
 
    	
n/a
    
	
10
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05EP
    	
 
    	
Patent
    	
 
    	
09790168.0
    	
 
    	
n/a
    
	
11
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05GT
    	
 
    	
Patent
    	
 
    	
A-2011-00006
    	
 
    	
n/a
    
	
12
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05HK
    	
 
    	
Patent
    	
 
    	
11111506.1
    	
 
    	
n/a
    
	
13
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05HN
    	
 
    	
Patent
    	
 
    	
2011-000079
    	
 
    	
n/a
    
	
14
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05ID
    	
 
    	
Patent
    	
 
    	
W00201100328
    	
 
    	
n/a
    
	
15
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05IL
    	
 
    	
Patent
    	
 
    	
210318
    	
 
    	
n/a
    
	
16
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05IN
    	
 
    	
Patent
    	
 
    	
964/DELNP/2011
    	
 
    	
n/a
    
	
17
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05JP
    	
 
    	
Patent
    	
 
    	
2011-517582
    	
 
    	
n/a
    
	
18
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05KR
    	
 
    	
Patent
    	
 
    	
10-2011-7002838
    	
 
    	
n/a
    
	
19
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05MX
    	
 
    	
Patent
    	
 
    	
MX/A/A2011/000273 / 307140
    	
 
    	
July 8, 2029
    
	
20
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05MY
    	
 
    	
Patent
    	
 
    	
PI2011000034
    	
 
    	
n/a
    
	
21
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05NI
    	
 
    	
Patent
    	
 
    	
2011-00013
    	
 
    	
n/a
    
	
22
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05NZ
    	
 
    	
Patent
    	
 
    	
590179 / 590179
    	
 
    	
July 8, 2029
    
	
23
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05PH
    	
 
    	
Patent
    	
 
    	
1-2011-500106 / 1-2011-500106
    	
 
    	
July 8, 2029
    
	
24
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05RU
    	
 
    	
Patent
    	
 
    	
2011104016
    	
 
    	
n/a
    
	
25
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05SG
    	
 
    	
Patent
    	
 
    	
201100093-2
    	
 
    	
n/a
    
	
26
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05SV
    	
 
    	
Patent
    	
 
    	
20110010485
    	
 
    	
n/a
    
	
27
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05UA
    	
 
    	
Patent
    	
 
    	
a201101408
    	
 
    	
n/a
    
	
28
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05US
    	
 
    	
Patent
    	
 
    	
12/499,779 / 8,173,831
    	
 
    	
Oct. 2, 2029
    
	
29
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05VN
    	
 
    	
Patent
    	
 
    	
1-2011-00308
    	
 
    	
n/a
    
	
30
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/05ZA
    	
 
    	
Patent
    	
 
    	
2011/00179 / 2011/00179
    	
 
    	
July 8, 2029
    
	
31
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06CN
    	
 
    	
Patent
    	
 
    	
201410254305.5
    	
 
    	
n/a
    
	
32
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06CO
    	
 
    	
Patent
    	
 
    	
14-019136
    	
 
    	
n/a
    
	
33
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06EP
    	
 
    	
Patent
    	
 
    	
14176625.3
    	
 
    	
n/a
    
	
34
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06JP
    	
 
    	
Patent
    	
 
    	
2014-026425
    	
 
    	
n/a
    

 

 

	
35
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06MX
    	
 
    	
Patent
    	
 
    	
MX/a/2012/013235
    	
 
    	
n/a
    
	
36
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06MY
    	
 
    	
Patent
    	
 
    	
PI 2014000111
    	
 
    	
n/a
    
	
37
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06NZ
    	
 
    	
Patent
    	
 
    	
601932 / 601932
    	
 
    	
July 8, 2029
    
	
38
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06PH
    	
 
    	
Patent
    	
 
    	
1-2013-501319
    	
 
    	
n/a
    
	
39
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06SG
    	
 
    	
Patent
    	
 
    	
201305271-7
    	
 
    	
n/a
    
	
40
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06UA
    	
 
    	
Patent
    	
 
    	
a201406679
    	
 
    	
n/a
    
	
41
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/06US
    	
 
    	
Patent
    	
 
    	
12/714,308
    	
 
    	
n/a
    
	
42
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/07MY
    	
 
    	
Patent
    	
 
    	
PI2014000111
    	
 
    	
n/a
    
	
43
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/07US
    	
 
    	
Patent
    	
 
    	
13/427,654
    	
 
    	
n/a
    
	
44
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/08US
    	
 
    	
Patent
    	
 
    	
13/427,650 / 8,735,379
    	
 
    	
July 8, 2029
    
	
45
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/09US
    	
 
    	
Patent
    	
 
    	
13/427,644 / 8,729,293
    	
 
    	
July 8, 2029
    
	
46
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/10US
    	
 
    	
Patent
    	
 
    	
13/427,639 / 8,735,378
    	
 
    	
July 8, 2029
    
	
47
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/11US
    	
 
    	
Patent
    	
 
    	
14/251,247
    	
 
    	
n/a
    
	
48
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-001/12US
    	
 
    	
Patent
    	
 
    	
14/251,257
    	
 
    	
n/a
    
	
49
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03AR
    	
 
    	
Patent
    	
 
    	
20100103208
    	
 
    	
n/a
    
	
50
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03AU
    	
 
    	
Patent
    	
 
    	
2010289683
    	
 
    	
n/a
    
	
51
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03BR
    	
 
    	
Patent
    	
 
    	
1120120046772
    	
 
    	
n/a
    
	
52
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03CA
    	
 
    	
Patent
    	
 
    	
2,772,618
    	
 
    	
n/a
    
	
53
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03CL
    	
 
    	
Patent
    	
 
    	
935-2010
    	
 
    	
n/a
    
	
54
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03CN
    	
 
    	
Patent
    	
 
    	
201080049012.3
    	
 
    	
n/a
    
	
55
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03CO
    	
 
    	
Patent
    	
 
    	
12-036.477
    	
 
    	
n/a
    
	
56
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03CR
    	
 
    	
Patent
    	
 
    	
2012-12648-IP
    	
 
    	
n/a
    
	
57
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03EC
    	
 
    	
Patent
    	
 
    	
SP-12-11709
    	
 
    	
n/a
    
	
58
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03EG
    	
 
    	
Patent
    	
 
    	
PCT 379/2012
    	
 
    	
n/a
    
	
59
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03EP
    	
 
    	
Patent
    	
 
    	
10814349.6
    	
 
    	
n/a
    
	
60
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03GT
    	
 
    	
Patent
    	
 
    	
A2012-000057
    	
 
    	
n/a
    
	
61
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03HK
    	
 
    	
Patent
    	
 
    	
13100544.6
    	
 
    	
n/a
    
	
62
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03HN
    	
 
    	
Patent
    	
 
    	
2012-000453
    	
 
    	
n/a
    
	
63
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03ID
    	
 
    	
Patent
    	
 
    	
W00201201244
    	
 
    	
n/a
    
	
64
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03IL
    	
 
    	
Patent
    	
 
    	
218417
    	
 
    	
n/a
    
	
65
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03IN
    	
 
    	
Patent
    	
 
    	
2661/DELNP/2012
    	
 
    	
n/a
    
	
66
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03JP
    	
 
    	
Patent
    	
 
    	
2012-527967
    	
 
    	
n/a
    
	
67
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03KR
    	
 
    	
Patent
    	
 
    	
10-2012-7008230
    	
 
    	
n/a
    
	
68
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03MX
    	
 
    	
Patent
    	
 
    	
MX/A/2012/002710
    	
 
    	
n/a
    
	
69
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03MY
    	
 
    	
Patent
    	
 
    	
PI 2012000916
    	
 
    	
n/a
    
	
70
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03NI
    	
 
    	
Patent
    	
 
    	
2012-000038
    	
 
    	
n/a
    
	
71
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03NZ
    	
 
    	
Patent
    	
 
    	
599067
    	
 
    	
n/a
    
	
72
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03PH
    	
 
    	
Patent
    	
 
    	
1-2012-500434
    	
 
    	
n/a
    
	
73
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03RU
    	
 
    	
Patent
    	
 
    	
2012112461
    	
 
    	
n/a
    
	
74
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03SG
    	
 
    	
Patent
    	
 
    	
201201472-6
    	
 
    	
n/a
    
	
75
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03SV
    	
 
    	
Patent
    	
 
    	
20120012627
    	
 
    	
n/a
    
	
76
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03TW
    	
 
    	
Patent
    	
 
    	
099129538
    	
 
    	
n/a
    
	
77
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03UA
    	
 
    	
Patent
    	
 
    	
201203931
    	
 
    	
n/a
    
	
78
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03US
    	
 
    	
Patent
    	
 
    	
12/872,555 / 8,304,551
    	
 
    	
Feb. 16, 2031
    
	
79
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03VN
    	
 
    	
Patent
    	
 
    	
1-2012-00889
    	
 
    	
n/a
    
	
80
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/03ZA
    	
 
    	
Patent
    	
 
    	
2012/02336 / 2012/02336
    	
 
    	
Aug. 31, 2030
    
	
81
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/04US
    	
 
    	
Patent
    	
 
    	
13/427,001 / 8,304,552
    	
 
    	
Aug. 31, 2030
    
	
82
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/05US
    	
 
    	
Patent
    	
 
    	
13/451,217 / 8,765,963
    	
 
    	
Aug. 31, 2030
    

 

 

	
83
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/06US
    	
 
    	
Patent
    	
 
    	
13/437,643
    	
 
    	
n/a
    
	
84
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/07US
    	
 
    	
Patent
    	
 
    	
14/143,948 / 8,765,964
    	
 
    	
Aug. 31, 2030
    
	
85
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/08US
    	
 
    	
Patent
    	
 
    	
14/278,885
    	
 
    	
n/a
    
	
86
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/09US
    	
 
    	
Patent
    	
 
    	
14/108,202
    	
 
    	
n/a
    
	
87
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/10US
    	
 
    	
Patent
    	
 
    	
14/108,196
    	
 
    	
n/a
    
	
88
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-002/11US
    	
 
    	
Patent
    	
 
    	
14/258,889
    	
 
    	
n/a
    
	
89
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-004/02US
    	
 
    	
Patent
    	
 
    	
12/898,467
    	
 
    	
n/a
    
	
90
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02AR
    	
 
    	
Patent
    	
 
    	
20110100061
    	
 
    	
n/a
    
	
91
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02AU
    	
 
    	
Patent
    	
 
    	
2011204277
    	
 
    	
n/a
    
	
92
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02BR
    	
 
    	
Patent
    	
 
    	
BR1120120168797
    	
 
    	
n/a
    
	
93
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02CA
    	
 
    	
Patent
    	
 
    	
2,786,605
    	
 
    	
n/a
    
	
94
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02CL
    	
 
    	
Patent
    	
 
    	
01911-2012
    	
 
    	
n/a
    
	
95
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02CN
    	
 
    	
Patent
    	
 
    	
201180012336.4
    	
 
    	
n/a
    
	
96
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02CO
    	
 
    	
Patent
    	
 
    	
12-133089
    	
 
    	
n/a
    
	
97
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02CR
    	
 
    	
Patent
    	
 
    	
2012-0413
    	
 
    	
n/a
    
	
98
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02EC
    	
 
    	
Patent
    	
 
    	
SP-12-12097
    	
 
    	
n/a
    
	
99
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02EG
    	
 
    	
Patent
    	
 
    	
PCT1228/2012
    	
 
    	
n/a
    
	
100
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02EP
    	
 
    	
Patent
    	
 
    	
11732212.3
    	
 
    	
n/a
    
	
101
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02GT
    	
 
    	
Patent
    	
 
    	
A2012-000224
    	
 
    	
n/a
    
	
102
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02HK
    	
 
    	
Patent
    	
 
    	
13105691.6
    	
 
    	
n/a
    
	
103
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02HN
    	
 
    	
Patent
    	
 
    	
2012-001505
    	
 
    	
n/a
    
	
104
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02ID
    	
 
    	
Patent
    	
 
    	
W00201203203
    	
 
    	
n/a
    
	
105
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02IL
    	
 
    	
Patent
    	
 
    	
220822
    	
 
    	
n/a
    
	
106
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02IN
    	
 
    	
Patent
    	
 
    	
6271/DELNP/2012
    	
 
    	
n/a
    
	
107
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02JP
    	
 
    	
Patent
    	
 
    	
2012-548168
    	
 
    	
n/a
    
	
108
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02KR
    	
 
    	
Patent
    	
 
    	
10-2012-7020810
    	
 
    	
n/a
    
	
109
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02MX
    	
 
    	
Patent
    	
 
    	
MX/a/2012/007981
    	
 
    	
n/a
    
	
110
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02MY
    	
 
    	
Patent
    	
 
    	
PI 2012003107
    	
 
    	
n/a
    
	
111
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02NI
    	
 
    	
Patent
    	
 
    	
2012-000120
    	
 
    	
n/a
    
	
112
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02NZ
    	
 
    	
Patent
    	
 
    	
601698
    	
 
    	
n/a
    
	
113
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02PH
    	
 
    	
Patent
    	
 
    	
1-2012-501390
    	
 
    	
n/a
    
	
114
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02RU
    	
 
    	
Patent
    	
 
    	
2012134069
    	
 
    	
n/a
    
	
115
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02SG
    	
 
    	
Patent
    	
 
    	
201205021-7
    	
 
    	
n/a
    
	
116
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02SV
    	
 
    	
Patent
    	
 
    	
20120013322
    	
 
    	
n/a
    
	
117
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02TW
    	
 
    	
Patent
    	
 
    	
100100745
    	
 
    	
n/a
    
	
118
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02UA
    	
 
    	
Patent
    	
 
    	
201209621
    	
 
    	
n/a
    
	
119
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02VN
    	
 
    	
Patent
    	
 
    	
1-2012-02352
    	
 
    	
n/a
    
	
120
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/02ZA
    	
 
    	
Patent
    	
 
    	
2012/05990
    	
 
    	
n/a
    
	
121
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-010/03US
    	
 
    	
Patent
    	
 
    	
13/673,588
    	
 
    	
n/a
    
	
122
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-012/01US
    	
 
    	
Patent
    	
 
    	
13/582,932
    	
 
    	
n/a
    
	
123
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-013/05US
    	
 
    	
Patent
    	
 
    	
13/581,392
    	
 
    	
n/a
    
	
124
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-014/01US
    	
 
    	
Patent
    	
 
    	
13/636,020
    	
 
    	
n/a
    
	
125
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-018/01CN
    	
 
    	
Patent
    	
 
    	
201280024126.1
    	
 
    	
n/a
    
	
126
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-018/01EP
    	
 
    	
Patent
    	
 
    	
12761015.2
    	
 
    	
n/a
    
	
127
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-018/01US
    	
 
    	
Patent
    	
 
    	
14/006,037
    	
 
    	
n/a
    
	
128
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-020/01US
    	
 
    	
Patent
    	
 
    	
13/439,168
    	
 
    	
n/a
    
	
129
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-021/01US
    	
 
    	
Patent
    	
 
    	
13/464,435
    	
 
    	
n/a
    
	
130
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-023/01EP
    	
 
    	
Patent
    	
 
    	
12776652.5
    	
 
    	
n/a
    

 

 

	
131
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-023/01US
    	
 
    	
Patent
    	
 
    	
13/458,494
    	
 
    	
n/a
    
	
132
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-025/02US
    	
 
    	
Patent
    	
 
    	
13/874,993
    	
 
    	
n/a
    
	
133
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-025/02WO
    	
 
    	
Patent
    	
 
    	
PCT/US2013/039103
    	
 
    	
n/a
    
	
134
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-028/02CA
    	
 
    	
Patent
    	
 
    	
2,847,418
    	
 
    	
n/a
    
	
135
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-028/02EP
    	
 
    	
Patent
    	
 
    	
12828585.5
    	
 
    	
n/a
    
	
136
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-028/02US
    	
 
    	
Patent
    	
 
    	
13/601,344
    	
 
    	
n/a
    
	
137
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-030/01US
    	
 
    	
Patent
    	
 
    	
13/712,544
    	
 
    	
n/a
    
	
138
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-030/03US
    	
 
    	
Patent
    	
 
    	
14/206,845
    	
 
    	
n/a
    
	
139
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-031/03US
    	
 
    	
Patent
    	
 
    	
62/003,213
    	
 
    	
n/a
    
	
140
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-032/01WO
    	
 
    	
Patent
    	
 
    	
PCT/US2014/042542
    	
 
    	
n/a
    
	
141
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-033/03AR
    	
 
    	
Patent
    	
 
    	
20130101843
    	
 
    	
n/a
    
	
142
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-033/03TH
    	
 
    	
Patent
    	
 
    	
1301002797
    	
 
    	
n/a
    
	
143
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-033/03TW
    	
 
    	
Patent
    	
 
    	
102118590
    	
 
    	
n/a
    
	
144
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-033/03US
    	
 
    	
Patent
    	
 
    	
13/902,360
    	
 
    	
n/a
    
	
145
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-033/03VE
    	
 
    	
Patent
    	
 
    	
00631-2013
    	
 
    	
n/a
    
	
146
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-033/03WO
    	
 
    	
Patent
    	
 
    	
PCT/US2013/042693
    	
 
    	
n/a
    
	
147
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-035/01WO
    	
 
    	
Patent
    	
 
    	
PCT/US2014/010515
    	
 
    	
n/a
    
	
148
    	
 
    	
Catabasis Pharmaceuticals, Inc.
    	
 
    	
CATB-TM1
    	
 
    	
Trademark
    	
 
    	
77521588 / 3716337
    	
 
    	
n/a
    

 

 

INTANGIBLE PROPERTY SCHEDULE (CONTINUED)

 

LICENSE AND SIMILAR AGREEMENTS

 

None (other than over-the-counter software that is commercially available to the public).

 

LICENSE # 1 [COMPLETE FOR EACH AGREEMENT]

 

	
Name   and Date of License Agreement:
    
	
Borrower   that is Licensee:
    
	
Name   and address of Licensor:
    
	
Expiration   Date of License
    
	
Exclusive   License [Y/N]?
    
	
Restrictions on:
    	
Right to Grant a Lien [Y/N]?
    
	
 
    	
Right to Assign [Y/N]?
    
	
 
    	
Right to Sublicense [Y/N]?
    

 

Describe Licensed Intellectual Property For This License

 

	
Name / Identifier of IP
    	
 
    	
Type of IP (e.g., patent,
   TM, ©, mask work)
    	
 
    	
Registration/
   Publication or Application Number
    	
 
    	
Expiration Date
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

PERMITTED LICENSES:

 

None.

 

PERMITTED LICENSE # 1 [COMPLETE FOR EACH AGREEMENT]

 

	
Name and Date of License Agreement:
    
	
Borrower   that is Licensor:
    
	
Name   and address of Licensee:
    
	
Expiration   Date of License
    
	
Exclusive   License [Y/N]?
    
	
Restrictions on:
    	
Right to Grant a Lien [Y/N]?
    
	
 
    	
Right to Assign [Y/N]?
    
	
 
    	
Right to Sublicense [Y/N]?
    

 

Describe Licensed Intellectual Property For This License

 

	
Name / Identifier of IP
    	
 
    	
Type of IP (e.g., patent,
   TM, ©, mask work)
    	
 
    	
Registration/
   Publication or Application Number
    	
 
    	
Expiration Date
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

PRODUCTS SCHEDULE

 

1.                   CAT-2003

 

2.                   CAT-2054

 

3.                   CAT-1004

 

 

REQUIRED PERMITS SCHEDULE

 

INDs and CTAs

 

CAT-1004

 

US IND # 112732 that is open in the Division of Metabolism and Endocrinology Products (DMEP) and has been updated through Serial 0010

 

US IND #123319 that is not an open IND but is an open PIND in the Division of Neurology Products (DNP) with Sequence 0000

 

Serial refers always to an open IND and Sequence always refers to a preIND or PIND

 

CAT-2003

 

US IND #116405 that is open in the Division of Metabolism and Endocrinology Products (DMEP) and has been updated through Serial 0011

 

Health Canada we have an open CTA: CAT-2003 File #: 9427-C3072-21C to study CAT-2003 in the 203 trial Control #: 171734 we have filed 2 amendments to this CTA and are now filing our 3rd Amendment

 

Other

 

City of Cambridge - Flammable materials permit

Cambridge Dept. of Public Health — Laboratory biosafety permit

Commonwealth of MA Radiation Ctrl - Radioactive Materials License

Commonwealth of MA DEP — hazardous waste materials

USDA import permits for EPA and DHAExhibit 10.15

 

EXHIBIT 1, SHEET 1 
 Building No. 1400, One Kendall Square 
 Cambridge, Massachusetts
 (the “Building”)

 

	
Execution Date:
    	
December 17, 2010
    
	
 
    	
 
    
	
Tenant:
    	
Catabasis Pharmaceuticals, Inc., a Delaware   corporation
    
	
 
    	
 
    
	
Mailing Address:
    	
Prior to the Specified Commencement Date: 161 First   Street, Suite I A, Cambridge, MA 02142
    
	
 
    	
 
    
	
 
    	
From and after the Specified Commencement Date:   Building No. 1400, Suite B14202, One Kendall Square, Cambridge, MA   02142
    
	
 
    	
 
    
	
Landlord:
    	
RB Kendall Fee, LLC
    
	
 
    	
 
    
	
Mailing address:
    	
c/o The Beal Companies LLP, 177 Milk Street, Boston,   Massachusetts 02109
    
	
 
    	
Attn: Senior Vice President - Asset Management
    
	
 
    	
 
    
	
Building:
    	
Building No. 1400 in One Kendall Square in the   City of Cambridge, Middlesex County, Commonwealth of Massachusetts
    

 

 

Art. 2                                                Premises: An area on the second (2nd) floor of the Building, substantially as shown on Lease Plan, Exhibit 2

 

Art. 3.1                                      Term Commencement Date: The day Landlord delivers the Premises with Tenant’s Improvements Substantially Completed (as hereinafter defined).

 

Art 3.1                                         Rent Commencement Date: The date that is two (2) months following the Term Commencement Date.

 

Art 3.1                                         Specified Commencement Date: April 15, 2011

 

Art. 3.2                                      Termination Date: The date that is sixty-two (62) months following the Term Commencement Date

 

Art. 5                                                Use of Premises: Laboratory, research and development (but excluding a vivarium) and general office use and for no other purposes in accordance with the terms of the Lease

 

Art. 6                                                Yearly Rent/Monthly Payment:

 

	
Time Period
    	
 
    	
Yearly Rent
    	
 
    	
Monthly Rent
    	
 
    	
P.S.F.
    	
 
    
	
Term   Commencement Date through the end of the second (2nd) full month following the   Term Commencement Date
    	
 
    	
$
    	
0
    	
 
    	
$
    	
0
    	
 
    	
$
    	
0
    	
 
    
	
Month 3 through Month   14
    	
 
    	
$
    	
447,994.00
    	
 
    	
$
    	
37,332.83
    	
 
    	
$
    	
46.00
    	
 
    
	
Month 15 through   Month 26
    	
 
    	
$
    	
457,733.00
    	
 
    	
$
    	
38,144.42
    	
 
    	
$
    	
47.00
    	
 
    
	
Month 27 through   Month 38
    	
 
    	
$
    	
467,472.00
    	
 
    	
$
    	
38,956.00
    	
 
    	
$
    	
48.00
    	
 
    
	
Month 39 through   Month 50
    	
 
    	
$
    	
477,211.00
    	
 
    	
$
    	
39,767.58
    	
 
    	
$
    	
49.00
    	
 
    
	
Month 51 through   Month 62
    	
 
    	
$
    	
486,950.00
    	
 
    	
$
    	
40,579.17
    	
 
    	
$
    	
50.00
    	
 
    

 

 

Art. 7                                                Total Rentable Area: 9,739 square feet

 

Total Rentable Area of Building No. 1400: 129,220 square feet

 

Total Rentable Area of Complex: 639,586 square feet

 

Art. 8                                                Electric current will be furnished by Landlord to Tenant

 

Art. 9                                                Operating and Taxes:

 

Tenant’s Proportionate Common Share: 1.52%
 Tenant’s Proportionate Building Share: 7.54%

 

Art. 29.3                               Broker: CB Richard Ellis/New England for Tenant and FHO Partners for Landlord

 

Art. 29.5                               Arbitration:   Massachusetts; Superior Court

 

Art. 29.13                        Security Deposit: $113,098.06 in the form of a Letter of Credit in accordance with Article 29.13

 

Art. 29.14                        Parking Spaces: Nine (9) spaces

 

Art. 29.15                        Option to Extend Term: One (1) additional five (5) year period

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
REFERENCE DATA
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
DESCRIPTION OF DEMISED   PREMISES
    	
1
    
	
 
    	
2.1                               Demised   Premises
    	
1
    
	
 
    	
2.2                               Appurtenant   Rights
    	
1
    
	
 
    	
2.3                               Exclusions   and Reservations
    	
2
    
	
 
    	
 
    	
 
    
	
3.
    	
TERM OF LEASE
    	
2
    
	
 
    	
3.1                               Definitions
    	
2
    
	
 
    	
3.2                               Habendum
    	
2
    
	
 
    	
3.3                               Declaration   Fixing Term Commencement Date
    	
3
    
	
 
    	
 
    	
 
    
	
4.
    	
READINESS FOR   OCCUPANCY-TENANT’S IMPROVEMENTS
    	
3
    
	
 
    	
4.1                               Tenant’s   Improvements
    	
3
    
	
 
    	
4.2                               Improvement   Allowance
    	
6
    
	
 
    	
4.3                               Tenant   Payments of Construction Costs
    	
7
    
	
 
    	
 
    	
 
    
	
5.
    	
USE OF PREMISES
    	
7
    
	
 
    	
5.1                               Permitted   Use
    	
7
    
	
 
    	
5.2                               Prohibited   Uses
    	
7
    
	
 
    	
5.3                               Licenses   and Permits
    	
8
    
	
 
    	
 
    	
 
    
	
6.
    	
RENT
    	
8
    
	
 
    	
 
    	
 
    
	
7.
    	
RENTABLE AREA
    	
9
    
	
 
    	
 
    	
 
    
	
8.
    	
SERVICES FURNISHED BY   LANDLORD
    	
9
    
	
 
    	
8.1                               Electric   Current
    	
9
    
	
 
    	
8.2                               Water
    	
10
    
	
 
    	
8.3                               Elevators,   Heat and Cleaning
    	
11
    
	
 
    	
8.4                               Air   Conditioning
    	
11
    
	
 
    	
8.5                               Additional   Heat and Air Conditioning Services
    	
11
    
	
 
    	
8.6                               Additional   Air Conditioning Equipment
    	
12
    
	
 
    	
8.7                               Repairs
    	
12
    
	
 
    	
8.8                               Interruption   or Curtailment of Services
    	
12
    
	
 
    	
8.9                               Energy   Conservation
    	
13
    
	
 
    	
8.10                        Additional   Services
    	
13
    
	
 
    	
 
    	
 
    
	
9.
    	
ESCALATION
    	
13
    
	
 
    	
9.1                               Definitions
    	
13
    
	
 
    	
9.2                               Tax   Share
    	
18
    
	
 
    	
9.3                               Operating   Expense Share
    	
19
    
	
 
    	
9.4                               Part Years
    	
19
    
	
 
    	
9.5                               Effect   of Taking
    	
19
    

 

i

 

	
 
    	
9.6                               Tenant   Audit Right
    	
19
    
	
 
    	
9.7                               Survival
    	
20
    
	
 
    	
 
    	
 
    
	
10.
    	
CHANGES OR ALTERATIONS   BY LANDLORD
    	
20
    
	
 
    	
 
    	
 
    
	
11.
    	
FIXTURES, EQUIPMENT AND   IMPROVEMENTS-REMOVAL BY TENANT
    	
21
    
	
 
    	
 
    	
 
    
	
12.
    	
ALTERATIONS AND   IMPROVEMENTS BY TENANT
    	
21
    
	
 
    	
 
    	
 
    
	
13.
    	
TENANT’S   CONTRACTORS-MECHANICS’ AND OTHER LIENS-STANDARD OF TENANT’S PERFORMANCE-COMPLIANCE   WITH LAWS
    	
23
    
	
 
    	
 
    	
 
    
	
14.
    	
REPAIRS BY TENANT-FLOOR   LOAD
    	
24
    
	
 
    	
14.1                        Repairs   by Tenant
    	
24
    
	
 
    	
14.2                        Floor   Load-Heavy Machinery
    	
24
    
	
 
    	
 
    	
 
    
	
15.
    	
INSURANCE, INDEMNIFICATION,   EXONERATION AND EXCULPATION
    	
25
    
	
 
    	
15.1                        General   Liability Insurance
    	
25
    
	
 
    	
15.2                        Certificates   of Insurance
    	
25
    
	
 
    	
15.3                        General
    	
26
    
	
 
    	
15.4                        Property   of Tenant
    	
26
    
	
 
    	
15.5                        Bursting   of Pipes, etc.
    	
27
    
	
 
    	
15.6                        Repairs   and Alterations-No Diminution of Rental Value
    	
27
    
	
 
    	
 
    	
 
    
	
16.
    	
ASSIGNMENT, MORTGAGING   AND SUBLETTING
    	
27
    
	
 
    	
16.1                        Generally
    	
27
    
	
 
    	
16.2                        Reimbursement,   Recapture and Excess Rent
    	
29
    
	
 
    	
16.3                        Certain   Transfers/Miscellaneous
    	
31
    
	
 
    	
 
    	
 
    
	
17.
    	
MISCELLANEOUS COVENANTS
    	
32
    
	
 
    	
17.1                        Rules and   Regulations
    	
32
    
	
 
    	
17.2                        Access   to Premises-Shoring
    	
33
    
	
 
    	
17.3                        Accidents   to Sanitary and Other Systems
    	
34
    
	
 
    	
17.4                        Signs, Blinds   and Drapes
    	
34
    
	
 
    	
17.5                        Estoppel   Certificate and Financial Statements
    	
34
    
	
 
    	
17.6                        Prohibited   Materials and Property
    	
35
    
	
 
    	
17.7                        Requirements   of Law-Fines and Penalties
    	
35
    
	
 
    	
17.8                        Tenant’s   Acts—Effect on Insurance
    	
36
    
	
 
    	
17.9                        Miscellaneous
    	
36
    
	
 
    	
 
    	
 
    
	
18.
    	
DAMAGE BY   FIRE, ETC.
    	
36
    
	
 
    	
 
    	
 
    
	
19.
    	
WAIVER OF SUBROGATION
    	
37
    
	
 
    	
 
    	
 
    
	
20.
    	
CONDEMNATION-EMINENT   DOMAIN
    	
38
    
	
 
    	
 
    	
 
    
	
21.
    	
DEFAULT
    	
39
    
	
 
    	
21.1                        Conditions   of Limitation-Re-Entry-Termination
    	
39
    

 

ii

 

	
 
    	
21.2                        Intentionally   Omitted
    	
40
    
	
 
    	
21.3                        Damages-Termination
    	
40
    
	
 
    	
21.4                        Fees and   Expenses
    	
41
    
	
 
    	
21.5                        Waiver   of Redemption
    	
42
    
	
 
    	
21.6                        Landlord’s   Remedies Not Exclusive
    	
42
    
	
 
    	
21.7                        Grace   Period
    	
42
    
	
 
    	
 
    	
 
    
	
22.
    	
END OF TERM-ABANDONED   PROPERTY
    	
43
    
	
 
    	
 
    	
 
    
	
23.
    	
SUBORDINATION
    	
44
    
	
 
    	
 
    	
 
    
	
24.
    	
QUIET ENJOYMENT
    	
46
    
	
 
    	
 
    	
 
    
	
25.
    	
ENTIRE   AGREEMENT-WAIVER-SURRENDER
    	
46
    
	
 
    	
25.1                        Entire   Agreement
    	
46
    
	
 
    	
25.2                        Waiver   by Landlord
    	
46
    
	
 
    	
25.3                        Surrender
    	
47
    
	
 
    	
 
    	
 
    
	
26.
    	
INABILITY TO   PERFORM-EXCULPATORY CLAUSE
    	
47
    
	
 
    	
 
    	
 
    
	
27.
    	
BILLS AND NOTICES
    	
48
    
	
 
    	
 
    	
 
    
	
28.
    	
PARTIES BOUND-SEIZING   OF TITLE
    	
49
    
	
 
    	
 
    	
 
    
	
29.
    	
MISCELLANEOUS
    	
49
    
	
 
    	
29.1                        Separability
    	
49
    
	
 
    	
29.2                        Captions,   etc.
    	
49
    
	
 
    	
29.3                        Broker
    	
49
    
	
 
    	
29.4                        Modifications
    	
50
    
	
 
    	
29.5                        Arbitration
    	
50
    
	
 
    	
29.6                        Governing   Law
    	
50
    
	
 
    	
29.7                        Assignment   of Rents
    	
50
    
	
 
    	
29.8                        Representation   of Authority
    	
51
    
	
 
    	
29.9                        Expenses   Incurred by Landlord Upon Tenant Requests
    	
51
    
	
 
    	
29.10                 Survival
    	
51
    
	
 
    	
29.11                 Hazardous   Materials
    	
51
    
	
 
    	
29.12                 Patriot Act
    	
53
    
	
 
    	
29.13                 Security   Deposit/Letter of Credit
    	
54
    
	
 
    	
29.14                 Parking
    	
56
    
	
 
    	
29.15                 Tenant’s Option   to Extend the Term of the Lease
    	
56
    
	
 
    	
29.16                 Definition of   Fair Market Rental Value
    	
57
    
	
 
    	
29.17                 Right of First   Refusal to Lease
    	
58
    
	
 
    	
29.18                 Confidentiality
    	
59
    
	
 
    	
29.19                 Termination   Right
    	
61
    

 

iii

 

	
Exhibit 2
    	
Lease Plan
    
	
Exhibit 2A
    	
Space Plans
    
	
Exhibit 3
    	
Plan of Complex
    
	
Exhibit 4
    	
Term Commencement Date   Agreement
    
	
Exhibit 5
    	
Form of Letter of   Credit
    
	
Exhibit 6
    	
Plan Showing ROFR Space
    
	
Exhibit 7
    	
Estimated Draft Budget   for Operating Year 2011
    

 

iv

 

THIS INDENTURE OF LEASE made and entered into on the Execution Date as stated in Exhibit 1 and between the Landlord and the Tenant named in Exhibit 1.

 

Landlord does hereby demise and lease to Tenant, and Tenant does hereby hire and take from Landlord, the premises hereinafter mentioned and described (hereinafter referred to as “Premises”), upon and subject to the covenants, agreements, terms, provisions and conditions of this Lease for the term hereinafter stated:

 

1.                                      REFERENCE DATA

 

Each reference in this Lease to any of the terms and titles contained in any Exhibit attached to this Lease shall be deemed and construed to incorporate the data stated under that term or title in such Exhibit.

 

2.                                      DESCRIPTION OF DEMISED PREMISES

 

2.1                               Demised Premises.  The Premises are that portion of the Building as described in Exhibit 1 (as the same may from time to time be constituted after changes therein, additions thereto and eliminations therefrom pursuant to rights of Landlord hereinafter reserved) and is hereinafter referred to as the “Building”, substantially as shown hatched or outlined on the Lease Plan (Exhibit 2) hereto attached and incorporated by reference as a part hereof.  Landlord reserves the right, at Landlord’s own cost and expense (including, but not limited to, all of Tenant’s verifiable and documented direct and indirect costs and expenses incurred in connection with such move), but not more than once during the initial term of the Lease, to require Tenant, upon not less than one hundred twenty (120) days’ notice, to relocate its Premises elsewhere in the Building or Complex of which the Building is a part, to an area of substantially equivalent size, construction and finish designated by Landlord and reasonably acceptable to Tenant; provided, however, in the event Landlord notifies Tenant that Landlord intend to move Tenant, and such move would be conducted within twenty-four (24) months of the expiration of the term of this Lease, Tenant shall have the option to terminate this Lease rather than agree to such proposed move.  Any dispute between the parties as to whether the area designated by Landlord is “substantially equivalent” shall be submitted to arbitration pursuant to Article 29.5 hereof.

 

2.2                               Appurtenant Rights.  Tenant shall have, as appurtenant to the Premises, rights to use in common, with others entitled thereto, subject to reasonable rules and regulations from time to time made by Landlord of which Tenant is given notice; (a) the common lobbies, hallways, stairways and elevators of the Building, serving the Premises in common with others, (b) common walkways necessary for access to the Building, and (c) if the Premises include less than the entire rentable area of any floor, the common toilets and other common facilities of such floor; and no other appurtenant rights or easements.  Notwithstanding anything to the contrary herein or in the Lease contained, Landlord has no obligation to allow any particular telecommunication service provider to have access to the Building or to Tenant’s Premises; provided however, that upon reasonable request Landlord agrees to provide access to any nationally-recognized telecommunication service provider engaged by Tenant.  If Landlord permits such access.  Landlord may condition such access upon the payment to Landlord by the service provider of fees assessed by Landlord in its sole discretion.  Tenant shall have the right to use, in common with others entitled thereto (which use shall be subject to Landlord’s rules and regulations), a shared a

 

1

 

pH neutralization system and RODI system.  Tenant shall pay its pro rata share of the costs associated with such shared equipment.  Tenant shall have the right to use 50kw of capacity from an existing emergency generator on a non-exclusive basis in common with other tenants in the Building.  Landlord shall perform all necessary maintenance and repair to the generator to keep such generator in good working order and repair at all times and Tenant shall share with other tenants having shared use of the generator in the maintenance and operating costs in connection with the generator.

 

2.3                               Exclusions and Reservations.  All the perimeter walls of the Premises except the inner surfaces thereof, any balconies (except to the extent same are shown as part of the Premises on the Lease Plan (Exhibit 2)), terraces or roofs adjacent to the Premises, and any space in or adjacent to the Premises used for shafts, stacks, pipes, conduits, wires and appurtenant fixtures, fan rooms, ducts, electric or other utilities, sinks or other Building facilities, and the use thereof, as well as the right of access through the Premises for the purposes of operation, maintenance, decoration and repair, are expressly excluded from the Premises and reserved to Landlord.

 

3.                                      TERM OF LEASE

 

3.1                               Definitions.  As used in this Lease the words and terms which follow mean and include the following:

 

(a)                                 “Specified Commencement Date” - The date (as stated in Exhibit 1) on which it is estimated that the Premises will be ready for Tenant’s occupancy for its use as stated in Exhibit 1.

 

(b)                                 “Term Commencement Date” - as defined on Exhibit 1.  If the Premises are not ready for such occupancy but if, pursuant to permission therefor duly given by Landlord, Tenant takes possession of the whole or any part of the Premises for use as set forth in Exhibit 1, “Term Commencement Date” shall be the date on which Tenant takes such possession.

 

(c)                                  “Complex” shall be defined as all of the Building, the other buildings, and the Common Areas serving such buildings, all located on the land (“Land”) shown outlined on Exhibit 3.

 

(d)                                 “Common Areas” shall be defined as the common walkways, accessways, and parking facilities located on the Land and common facilities in the Complex, as the same may be changed, from time to time, including without limitation, alleys, sidewalks, lobbies, hallways, toilets, stairways, fan rooms, utility closets, shaftways, street entrances, elevators, wires, conduits, meters, pipes, ducts, vaults, and any other equipment, machinery, apparatus, and fixtures wherever located on the Land, in the Complex, in the buildings in the Complex or in the Premises that either (a) serve the Premises as well as other parts of the Land or Complex, or (b) serve other parts of the Land or Complex but not the Premises.

 

3.2                               Habendum.  TO HAVE AND TO HOLD the Premises for a term of years commencing on the Term Commencement Date and ending at 11:59 p.m. on the last day of the sixty-second (62nd) complete month following the Term Commencement Date (as same may be extended in accordance with Section 29.15 below) or on such earlier date upon which said term may expire or be terminated pursuant to any of the conditions of limitation or other provisions of

 

2

 

this Lease or pursuant to law (which date for the termination of the terms hereof will hereafter be called “Termination Date”).  Notwithstanding the foregoing, if the Termination Date as stated in Exhibit 1 shall fall on other than the last day of a calendar month, said Termination Date shall, at the option of Landlord, be deemed to be the last day of the calendar month in which said Termination Date occurs.

 

3.3                               Declaration Fixing Term Commencement Date.  Landlord and Tenant hereby agree to execute a Term Commencement Date Agreement substantially in the form attached hereto as Exhibit 4, or as otherwise reasonably requested by Landlord confirming the actual Term Commencement Date and Termination Date, once same are determined.  As soon as may be after the execution date hereof, each of the parties hereto agrees, upon demand of the other party to join in the execution, in recordable form, of a statutory notice, memorandum, etc. of lease.  If this Lease is terminated before the term expires, then upon Landlord’s request the parties shall execute, deliver and record an instrument acknowledging such fact and the date of termination of this Lease, and Tenant hereby appoints Landlord its attorney-in-fact in its name and behalf to execute such instrument if Tenant shall fail to execute and deliver such instrument within ten business (10) days of Tenant’s receipt of Landlord’s request therefor.  In no event shall this Lease be recorded or filed by Tenant with the Middlesex South Registry of Deeds or Middlesex South Registry District of the Land Court.

 

4.                                      READINESS FOR OCCUPANCY-TENANT’S IMPROVEMENTS

 

4.1                               Tenant’s Improvements.

 

(a)                                 Landlord and Tenant have mutually agreed to the initial space plan and specifications (collectively, the “Space Plans”) for the layout of Tenant’s leasehold improvements to the Premises and the scope of work to be completed by Landlord within the Premises and to the base Building systems servicing the Premises (collectively, the “Tenant’s Improvements”).  Tenant’s Improvements shall not include, without limitation, Tenant’s furniture, trade fixtures, equipment, personal property, data and communications equipment and cabling (but shall include all life safety equipment and supplemental HVAC equipment in the information technology room in the Premises and one (1) Control Area, as hereinafter defined, within the Premises), and shall be limited to construction as generally laid out and specified on the Space Plans.  “Control Areas” are defined as areas in the Building or Complex designated for the storage of chemicals, including but not limited to, Hazardous Materials (as hereinafter defined).  Except as otherwise may be expressly provided on the Plans (as hereinafter defined), Tenant acknowledges that Tenant’s Improvements will be designed and constructed to the general quality of the design and construction of the Building and in accordance with Landlord’s building standards (including but not limited to construction materials, design and finishes) for the Building.  The Space Plans are attached hereto as Exhibit 2A.

 

(b)                                 Based upon the Space Plans, the Landlord shall cause final plans and specifications, sufficient to permit the construction of Tenant’s Improvements, to be prepared (the “Plans”), which Plans along with a cost estimate for work shown on the Plans shall be submitted to Tenant for approval, which approval shall not be unreasonably withheld or delayed and shall be deemed given if not disapproved of in writing (with a detailed list of the deficiencies in the Plans) within five (5) days of submittal.  Tenant understands and agrees that changes to the Space Plans

 

3

 

or the Plans that may be needed or desired by Tenant, and or the specification by Tenant of any components or finishes that are not building standard or as depicted on the Space Plans or Plans, will be approved by Landlord and incorporated into the Space Plans or Plans only if (1) such changes are not Material Changes (as defined below) or (2) Tenant agrees to pay (as provided below) any net increase in the cost of the Tenant’s Improvements resulting from such changes and be responsible for any resulting delay in Substantial Completion.  The term “Material Changes” as used herein are (i) changes that, individually or in the aggregate, modify the scope, cost or character of the Tenant’s Improvements or any material component thereof from that set forth in the Space Plans or Plans, and (ii) changes that will, individually or in the aggregate, in Landlord’s reasonable opinion, result in a likelihood of delay in the Substantial Completion of Tenant’s Improvements.  Tenant agrees that any additional cost or expense resulting from any Material Changes approved by Landlord, as well as from any changes requested by Tenant to the Tenant’s Improvements after the date hereof (including design and construction costs, including, but not limited to, materials, labor and general conditions costs) shall be the responsibility of Tenant and shall be paid in full, or reimbursed, as the case may be, by Tenant to Landlord within ten (10) business days of billing therefor by Landlord and Tenant agrees that if any such changes do result in delay in Substantial Completion, same shall be deemed a Tenant Delay (as defined below).

 

(c)                                  If, after the Plans are finalized, Landlord is thereafter notified that additional expenditures in excess of the final cost estimate are required to complete Tenant’s Improvements Landlord will provide Tenant with the estimate of such additional expense for Tenant’s approval.  Tenant shall approve or disapprove the same within five (5) business days of receipt of Landlord’s notice.  Landlord and Tenant shall work in good faith to agree upon a mutually acceptable change order to reduce such additional costs so the total cost of the Tenant’s Improvements is equal to or below the Improvement Allowance (as hereinafter defined).  If no response is received by Landlord within said time frame then Landlord may elect to either (i) go forward and complete that portion of the Tenant’s Improvements and deem the additional expenditure approved by Tenant (in which case such additional expenditure to be paid for by Tenant in the same manner as those relating to Material Changes as set forth in subparagraph (b) above) or (ii) not complete that portion of the Tenant’s Improvements .  If Tenant disapproves the additional expenditure then Landlord shall have no obligation to complete that portion of the Tenant’s Improvements.  In no event shall Landlord be responsible or liable for any proposed changes in design based on Tenant’s value engineering.  In no event shall Landlord be obligated to pay for any additional expenditures relating to changes in the scope of Tenant’s Improvements as contemplated in the Space Plans or in excess of the Improvement Allowance (as hereinafter defined).

 

(d)                                 Landlord shall proceed to construct Tenant’s Improvements at Landlord’s sole cost and expense (except as otherwise set forth herein and not to exceed the Improvement Allowance) in substantial conformance with the Plans and in a good and workmanlike manner.  Landlord reserves the right to make changes and substitutions to the Plans in connection with the construction of Tenant’s Improvements, provided same do not materially adversely modify the Plans and Tenant agrees to not unreasonably withhold or delay its consent to any changes that do not materially adversely modify the Plans.  Tenant’s Improvements shall be constructed and completed by Landlord’s contractor, in compliance with all applicable statutes and regulations.

 

4

 

(e)           Landlord agrees to use reasonable speed and diligence to Substantially Complete Tenant’s Improvements by the Specified Commencement Date, provided, however, the failure to do so shall in no way affect the validity of this Lease or the obligations of Tenant hereunder nor shall the same be construed in any way to extend the term of this Lease and Tenant shall not have any claim against Landlord, and Landlord shall have no liability to Tenant, by reason thereof.

 

(f)            Tenant’s Improvements shall be deemed “Substantially Complete” on the date (the “Substantial Completion Date”) as of all approvals necessary to legally occupy the Premises (including a Certificate of Occupancy, either temporary or permanent, if applicable, or all required “sign-offs” or approvals necessary therefor) have been received from the City of Cambridge (the “Certificate of Occupancy”) or Tenant receives Landlord’s architect’s certificate that the Premises are substantially completed in accordance with the Plans (subject only to the completion of Punchlist Work (defined below)).  Any Punchlist Work not fully completed (of which Tenant shall give Landlord notice as provided below) on the Term Commencement Date shall thereafter be so completed with reasonable diligence by Landlord.  Notwithstanding the foregoing, if any delay in the Substantial Completion of the Tenant’s Improvements by Landlord is due to Tenant Delays, then the Substantial Completion Date shall be deemed to be the date Tenant’s Improvements would have been Substantially Complete, if not for such Tenant Delays, as reasonably determined by Landlord.  “Tenant Delays” shall mean delays caused by: (i) any material change in the Space Plans or Plans requested by Tenant; (ii) any request by Tenant for a delay in the commencement or completion of Tenant’s Improvements for any reason; or (iii) any other act or omission of Tenant or its employees, agents or contractors which reasonably inhibits the Landlord from timely completing the Tenant’s Improvements.  For purposes hereof, “Punchlist Work” is defined as minor or insubstantial details or defects of construction, decoration or mechanical adjustments that do not significantly affect Tenant’s use of the Premises for the Permitted Use.  If as a result of Tenant Delays the Premises are deemed ready for Tenant’s occupancy, pursuant to the foregoing (and the Term shall have commenced by reason thereof), but the Premises are not in fact actually ready for Tenant’s occupancy, Tenant shall not (except with Landlord’s consent not to be unreasonably withheld, conditioned or delayed) be entitled to take possession of the Premises for use as set forth in Exhibit 1 until the Premises are in fact actually ready for such occupancy.

 

(g)           Within seven (7) business days after the Term Commencement Date, Landlord and Tenant shall confer and create a specific list of any Punchlist Work remaining items of work with respect to Tenant’s Improvements (a “Punchlist”).  Except with respect to the items contained in the Punchlist, Tenant shall be deemed satisfied with Tenant’s Improvements, Landlord shall be deemed to have completed all of its obligations under this Section 4.1 and Tenant shall have no claim that Landlord has failed to perform in full its obligations hereunder.

 

(h)           This Lease is subject to the Landlord obtaining all permits, licenses and approvals necessary to allow Landlord to construct Tenant’s Improvements and obtaining a Certificate of Occupancy, if applicable, with respect thereto; and if despite Landlord’s good faith efforts Landlord shall be unable to obtain such permits, license, approvals, or Certificate of Occupancy (if applicable), and is therefore unable to commence or complete Tenant’s Improvements, then this lease may be terminated by Landlord or Tenant by written notice being provided to the other party.

 

5

 

(i)            In the event that Landlord either fails to commence the Tenant’s Improvements in a timely manner following the execution of this Lease or, after commencing the Tenant’s Improvements, Landlord, in Tenant’s commercially reasonable opinion, substantially discontinues its work to complete the Tenant’s Improvements in accordance with the terms of this Lease (and such failure or discontinuance is not the result of a Tenant Delay or force majeure), and, after failing to cure such failure within five (5) business days of receiving a written request from Tenant to commence or recommence such work, as the case may be (a “Landlord TI Default”), Tenant shall have the option, but not the obligation, to begin or continue the Tenant’s Improvements at Landlord’s sole cost and expense but not to exceed the amount of the Improvement Allowance.  In the event Tenant is working on the Tenant’s Improvements pursuant to this Section 4.1(i): (a) Landlord hereby authorizes and instructs all involved parties (including, but not limited to, architects, engineers and contractors (whether under contract with Landlord or not) to work with Tenant on the same terms and conditions as such parties were previously working with Landlord on the Tenant’s Improvements, and (b) Landlord agrees to provide all reasonable assistance to transition the performance of the Tenant’s Improvements to Tenant so as to minimize any delay in the Specified Commencement Date.  For the avoidance of doubt, in the event of a Landlord TI Default, Tenant shall have no obligation to complete the Tenant’s Improvements pursuant to this Section 4.1(i).  Nothing contained in this Section 4.1(i) releases Landlord from its obligation to complete the Tenant’s Improvements as set forth in this Lease.

 

(j)            In order to secure Landlord’s obligations to complete the Tenant’s Improvements under this Lease, Landlord shall deliver to Tenant, on the date that Landlord executes and delivers the Lease to Tenant, either (a) an Irrevocable Standby Letter of Credit (“Letter of Credit”) which shall be (1) in a form reasonably satisfactory to Tenant, (2) issued by a bank reasonably acceptable to Tenant with minimum assets of Ten Billion Dollars ($10,000,000,000.00), upon which presentment may be made in Boston, Massachusetts, (3) in an amount equal to the Improvement Allowance (as hereinafter defined); and (4) for a term of not less than nine (9) months; (b) a completion bond in a form reasonably satisfactory to Tenant to ensure the completion of the Tenant’s Improvements up to the amount of the Improvement Allowance and naming Tenant as a co-obligee; (c) an amount equal to the Improvement Allowance to be held in escrow by a mutually agreeable escrow agent under the terms of a mutually agreeable escrow agreement or (d) such other alternate form of security as may be reasonably satisfactory to Tenant.  The election of the form of security shall be at Landlord’s option provided that the conditions set forth in this Section 4.1(i) are satisfied.  In the event of a Landlord TI Default, the Tenant shall have the right, at any time after such event, without giving any further notice to Landlord, to draw down from said Letter of Credit, escrow account, bond or alternate security as the case may be for the purposes of Tenant completing the Tenant’s Improvements pursuant to Section 4(i) of the Lease.  Landlord hereby covenants and agrees not to oppose, contest or otherwise interfere with any attempt by Tenant to draw down from said surety instruments including, without limitation, by commencing an action seeking to enjoin or restrain Tenant from drawing upon said instruments.

 

4.2          Improvement Allowance.  Landlord shall pay the costs and expenses incurred by Landlord in connection with the performance and completion of Tenant’s Improvements (including but not limited to the cost of all architectural plans, construction drawings and design specifications) in an amount not to exceed One Million Five Hundred Fifty-Eight Thousand Two Hundred and Forty and 00/100 Dollars ($1,558,240.00) ($160.00 per rentable square feet of Premises) (the “Improvement Allowance”).  Tenant shall be responsible for and promptly (but in

 

6

 

no event longer than ten (10) business days after request therefore) pay directly or pay to Landlord for, as appropriate, and indemnify and reimburse Landlord from and against, any actual costs of Tenant’s Improvements that are in excess of the Improvement Allowance including without limitation such costs resulting from Material Changes to the Space Plans or Plans.  Notwithstanding the foregoing, in the event the total cost of the Tenant’s Improvements based on the Space Plans exceeds the Improvement Allowance, Tenant may elect to amortize the payment of the excess cost (up to a maximum amount of an additional $10.00 per rentable square foot of the Premises), together with interest accruing thereon in the amount of 6.5% over the term of the Lease, in equal monthly payments.  Any excess above the $10.00 per rentable square foot of the Premises shall be paid promptly by Tenant as set forth in this Section 4.2.  In the event the total cost of the Tenant’s Improvements based on the Space Plans is less than the Improvement Allowance, Tenant shall have the right to utilize up to a maximum amount of $4.00 per rentable square foot of the Premises of such savings towards the cost of Tenant’s information technology infrastructure, cabling and wiring.  Landlord will pay such amount to Tenant after receipt of written request from Tenant along with such documentation relating to such expenses as landlord may reasonably require including, without limitation, invoices and lien waivers.

 

4.3          Tenant Payments of Construction Costs.  Landlord shall have the same rights and remedies which Landlord has upon the nonpayment of Yearly Rent and other charges due under this Lease for nonpayment of any amounts which Tenant is required to pay to Landlord or Landlord’s contractor in connection with the construction and initial preparation of the Premises (including, without limitation, any amounts which Tenant is required to pay in accordance with this Article 4).

 

5.                                      USE OF PREMISES

 

5.1          Permitted Use.  Tenant shall continuously during the term hereof occupy and use the Premises only for the purposes as stated in Exhibit 1 and for no other purposes.  Service and utility areas (whether or not a part of the Premises) shall be used only for the particular purpose for which they were designed.  Without limiting the generality of the foregoing, Tenant agrees that it shall not use the Premises or any part thereof, or permit the Premises or any part thereof to be used for the preparation or dispensing of food, whether by vending machines or otherwise.  So long as Tenant complies with the Landlord’s reasonable security program for the Building, Tenant shall have access to the Premises twenty-four(24) hours per day, seven (7) days per week, fifty-two (52) weeks per year during the term, except in cases of force majeure, emergencies or closures due to casualties or condemnation or repairs, maintenance or alterations with the Building.  Notwithstanding the foregoing, but subject to the other terms and provisions of this Lease, Tenant may, with Landlord’s prior written consent, which consent shall not be unreasonably withheld, install at its own cost and expense so-called hot-cold water fountains, coffee makers and so-called Dwyer refrigerator-sink-stove combinations for the preparation of beverages and foods, provided that no cooking, frying, etc., are carried on in the Premises to such extent as requires special exhaust venting, Tenant hereby acknowledging that the Building is not engineered to provide any such special venting.

 

5.2          Prohibited Uses.  Notwithstanding any other provision of this Lease, Tenant shall not use, or suffer or permit the use or occupancy of, or suffer or permit anything to be done in or anything to be brought into or kept in or about the Premises or the Building or any part thereof

 

7

 

(including, without limitation, any materials, appliances or equipment used in the construction or other preparation of the Premises and furniture and carpeting): (i) which would violate any of the covenants, agreements, terms, provisions and conditions of this Lease or that are otherwise applicable to or binding upon the Premises; (ii) for any unlawful purposes or in any unlawful manner; (iii) which, in the reasonable judgment of Landlord shall in any way (a) impair the appearance or reputation of the Building; or (b) impair, interfere with or otherwise diminish the quality of any of the Building services or the proper and economic heating, cleaning, ventilating, air conditioning or other servicing of the Building or Premises, or with the use or occupancy of any of the other areas of the Building, or occasion discomfort, inconvenience or annoyance, or injury or damage to any occupants of the Premises or other tenants or occupants of the Building; or (iv) which is inconsistent with the maintenance of the Building as an office building of the first class in the quality of its maintenance, use, or occupancy.  Tenant shall not install or use any electrical or other equipment of any kind which, in the reasonable judgment of Landlord, might cause any such impairment, interference, discomfort, inconvenience, annoyance or injury.

 

5.3          Licenses and Permits.  If any governmental license or permit shall be required for the proper and lawful conduct of Tenant’s business, and if the failure to secure such license or permit would in any way affect Landlord, the Premises, the Building or Tenant’s ability to perform any of its obligations under this Lease, Tenant, at Tenant’s expense, shall duly procure and thereafter maintain such license and submit the same to inspection by Landlord.  Tenant, at Tenant’s expense, shall at all times comply with the terms and conditions of each such license or permit.  Tenant shall furnish all data and information to governmental authorities and Landlord as required in accordance with legal, regulatory, licensing or other similar requirements as they relate to Tenant’s use or occupancy of the Premises or the Building.

 

6.                                      RENT

 

During the term of this Lease, the Yearly Rent and other charges, at the rate stated in Exhibit 1, shall be payable by Tenant to Landlord by monthly payments, as stated in Exhibit 1, in advance and without demand on the first day of each month for and in respect of such month.  The rent and other charges reserved and covenanted to be paid under this Lease shall commence on the Rent Commencement Date.  If, by reason of any provisions of this Lease, the rent reserved hereunder shall commence or terminate on any day other than the first day of a calendar month, the rent for such calendar month shall be prorated.  The rent and all other amounts payable to Landlord at the address provided in Exhibit 1 to this Lease or, if Landlord shall so direct in writing, to Landlord’s agent or nominee, in lawful money of the United States which shall be legal tender for payment of all debts and dues, public and private, at the time of payment, at the office of the Landlord or such place as Landlord may designate, and the rent and other charges in all circumstances shall be payable without any setoff or deduction whatsoever.  Rental and any other sums due hereunder not paid on or before the date due shall bear interest for each month or fraction thereof from the due date until paid computed at the annual rate of five percentage (5%) points over the so-called prime rate then currently from time to time charged to its most favored corporate customers by the largest national bank (N.A.) located in the city in which the Building is located, or at any applicable lesser maximum legally permissible rate for debts of this nature.

 

8

 

7.                                      RENTABLE AREA

 

Total Rentable Area of the Premises, the Building and the Complex are agreed to be the amounts set forth in Exhibit 1.  Landlord reserves the right, throughout the term of the Lease, to recalculate the Total Rentable Area of the Building and/or the Complex.

 

8.                                      SERVICES FURNISHED BY LANDLORD

 

8.1          Electric Current.

 

(a)           As stated in Exhibit 1, Landlord will either furnish to Tenant, as an incident of this Lease, electric current for the operation of lighting fixtures, the 120-volt electrical outlets and any supplemental electric heating system initially installed in the Premises and Tenant will reimburse Landlord for the cost of such electric current as measured by a separate submeter or checkmeter, as hereinafter set forth, or Landlord will require Tenant to contract with the company supplying electric current for the purchase and obtaining by Tenant of electric current directly from such company to be billed directly to, and paid for by, Tenant.

 

(b)           If Landlord is providing electric current to Tenant, as aforesaid, then Tenant shall reimburse Landlord for the entire cost of such electric current as follows:

 

(1)           Commencing as of the Term Commencement Date and continuing until the procedures set forth in Paragraph 2 of this Article 8.1(b) are effected,  Tenant shall pay to Landlord at the same time and in the same manner that it pays its monthly payments of Yearly Rent hereunder, estimated payments (i.e., based upon Landlord’s reasonable estimate) on account of Tenant’s obligation to reimburse Landlord for electricity consumed in the Premises.

 

(2)           Periodically after the Term Commencement Date, Landlord shall determine the actual cost of electricity consumed by Tenant in the Premises (i.e. by reading Tenant’s sub-meter and by applying an electric rate which shall not exceed the retail rate which would have been payable by Tenant had Tenant obtained electric services directly from the utility company providing electric current to Landlord.)  If the total of Tenant’s estimated monthly payments on account of such period is less than the actual cost of electricity consumed in the Premises during such period, Tenant shall pay the difference to Landlord within thirty (30) days of when billed therefor.  If the total of Tenant’s estimated monthly payments on account of such period is greater than the actual cost of electricity consumed in the Premises during such period, Tenant may credit the difference against its next installment of rental or other charges due hereunder, provided that any excess credit shall be repaid to Tenant within a reasonable time following the expiration of the Lease term provided Tenant is not in default under this Lease.

 

(3)           After each adjustment, as set forth in Paragraph 2 above, the amount of estimated monthly payments on account of Tenant’s obligation to reimburse Landlord for electricity in the Premises shall be adjusted based upon the actual cost of electricity consumed during the immediately preceding period.

 

9

 

(c)           If Landlord is furnishing Tenant electric current hereunder, Landlord, at any time, at its option and upon not less than thirty (30) days’ prior written notice to Tenant, may discontinue such furnishing of electric current to the Premises; and in such case Tenant shall contract with the company supplying electric current for the purchase and obtaining by Tenant of electric current directly from such company.  In the event Tenant itself contracts for electricity with the supplier, pursuant to Landlord’s option as above stated, Landlord shall (i) permit its risers, conduits and feeders to the extent available, suitable and safely capable, to be used for the purpose of enabling Tenant to purchase and obtain electric current directly from such company, (ii) without cost or charge to Tenant, make such alterations and additions to the electrical equipment and/or appliances in the Building as such company shall specify for the purpose of enabling Tenant to purchase and obtain electric current directly from such company, and (iii) at Landlord’s expense, furnish and install in or near the Premises any necessary metering equipment used in connection with measuring Tenant’s consumption of electric current and Tenant, at Tenant’s expense, shall maintain and keep in repair such metering equipment.

 

(d)           Whether or not Landlord is furnishing electric current to Tenant, if Tenant shall require electric current for use in the Premises in excess of such reasonable quantity to be furnished for such use as hereinabove provided and if (i) in Landlord’s reasonable judgment, Landlord’s facilities are inadequate for such excess requirements or (ii) such excess use shall result in an additional burden on the Building air conditioning system and additional cost to Landlord on account thereof, then, as the case may be, (x) Landlord, upon written request and at the sole cost and expense of Tenant, will furnish and install such additional wire, conduits, feeders, switchboards and appurtenances as reasonably may be required to supply such additional requirements of Tenant if current therefor be available to Landlord, provided that the same shall be permitted by applicable laws and insurance regulations and shall not cause damage to the Building or the Premises or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations or repairs or interfere with or disturb other tenants or occupants of the Building or (y) Tenant shall reimburse Landlord for such additional cost, as aforesaid.  Tenant acknowledges that it has been provided with an opportunity to confirm that the electric current serving the Premises will be adequate to supply its proposed permitted uses of the Premises.

 

(e)           Landlord, at Tenant’s expense and upon Tenant’s request, shall purchase and install all replacement lamps of types generally commercially available (including, but not limited to, incandescent and fluorescent) used in the Premises.

 

(f)            Landlord shall not in any way be liable or responsible to Tenant for any loss, damage or expense which Tenant may sustain or incur if the quantity, character, or supply of electrical energy is changed or is no longer available or suitable for Tenant’s requirements.

 

(g)           Tenant agrees that it will not make any material alteration or material addition to the electrical equipment and/or appliances in the Premises without the prior written consent of Landlord in each instance first obtained, which consent will not be unreasonably withheld, and using contractor(s) approved by Landlord, and will promptly advise Landlord of any other alteration or addition to such electrical equipment and/or appliances.

 

8.2          Water.  Landlord shall furnish hot and cold water for ordinary Premises, cleaning, toilet, lavatory and drinking purposes.  If Tenant requires, uses or consumes water for any

 

10

 

purpose other than for the aforementioned purposes, Landlord may (i) assess a reasonable charge for the additional water so used or consumed by Tenant or (ii) install a water meter and thereby measure Tenant’s water consumption for all purposes.  In the latter event, Tenant shall pay the cost of the meter and the cost of installation thereof and shall keep said meter and installation equipment in good working order and repair.  Tenant agrees to pay for water consumed during the term, as shown on said meter, together with the sewer charge based on said meter charges, as and when bills are rendered, and on default in making such payment Landlord may pay such charges and collect the same from Tenant.  All piping and other equipment and facilities for use of water outside the building core will be installed and maintained by Landlord at Tenant’s sole cost and expense.

 

8.3          Elevators, Heat and Cleaning.  Landlord shall: (i) provide necessary elevator facilities (which may be manually or automatically operated, either or both, as Landlord may from time to time elect) on Mondays through Fridays, excepting Massachusetts and federal legal holidays, from 8:00 a.m. to 6:00 p.m. and on Saturdays, excepting legal holidays, from 8:00 a.m. to 1:00 p.m. (called “business days”) and have one (1) elevator in operation available for Tenant’s use, non-exclusively, together with others having business in the Building, at all other times; (ii) furnish heat (substantially equivalent to that being furnished in comparably aged similarly equipped office buildings in the same city) to the Premises during the normal heating season on business days; and (iii) cause the common areas of the Building to be cleaned on Monday through Friday (excepting Massachusetts or City of Cambridge legal holidays) in a manner consistent with cleaning standards generally prevailing in the comparable office buildings in the City of Cambridge.  All costs and expenses incurred by Landlord in connection with foregoing services shall be included as part of the Operating Costs (as defined below).  Tenant shall be responsible, at its sole cost and expense, for providing cleaning and janitorial services to the Premises in a neat and first-class manner consistent with the cleaning standards generally prevailing in the comparable buildings in the City of Cambridge or as otherwise reasonably established by Landlord in writing from time to time using an insured contractor or contractors selected by Tenant and [reasonably] approved in writing by Landlord and such provider shall not interfere with the use and operation of the Building or Complex by Landlord or any other tenant or occupant thereof.

 

8.4          Air Conditioning.  Landlord shall through the air conditioning equipment of the Building furnish to and distribute in the Premises air conditioning as normal seasonal changes may require on business days during the hours as aforesaid in Article 8.3 when air conditioning may reasonably be required for the comfortable occupancy of the Premises by Tenant.  Tenant agrees to lower and close the blinds or drapes when necessary because of the sun’s position, whenever the air conditioning system is in operation, and to cooperate fully with Landlord with regard to, and to abide by all the reasonable regulations and requirements which Landlord may prescribe for the proper functioning and protection of the air conditioning system.

 

8.5          Additional Heat and Air Conditioning Services.  Landlord will use reasonable efforts upon reasonable advance written notice from Tenant of its requirements in that regard, to furnish additional heat or air conditioning services to the Premises on days and at times other than as above provided.  Tenant will pay to Landlord a reasonable charge for any such additional heat or air conditioning service required by Tenant.  As of the Execution Date, the current charge for such after-hours additional heat and air conditioning services is approximately $55.00 per hour for

 

11

 

the entire Premises.  Tenant hereby acknowledges that such charge is subject to reasonable increases from time to time.

 

8.6          Additional Air Conditioning Equipment.  In the event Tenant requires additional air conditioning for business machines, meeting rooms or other special purposes, or because of occupancy or excess electrical loads, any additional air conditioning units, chillers, condensers, compressors, ducts, piping and other equipment, such additional air conditioning equipment will be installed, but only if, in Landlord’s reasonable judgment, the same will not cause damage or injury to the Building or create a dangerous or hazardous condition or entail excessive or unreasonable alterations, repairs or expense or interfere with or disturb other tenants.  At Landlord’s sole election, such equipment will either be installed:

 

(a)           by Landlord at Tenant’s expense and Tenant shall reimburse Landlord in such an amount as will compensate it for the cost incurred by it in operating, maintaining, repairing and replacing, if necessary, such additional air conditioning equipment.  At Landlord’s election, such equipment shall (i) be maintained, repaired and replaced by Tenant at Tenant’s sole cost and expense, and (ii) throughout the term of this Lease, Tenant shall, at Tenant’s sole cost and expense, purchase and maintain a service contract for such equipment from a service provider approved by Landlord.  Tenant shall obtain Landlord’s prior written approval of both the form of service contract and of the service provider; or

 

(b)           by Tenant, subject to Landlord’s prior approval of Tenant’s plans and specifications for such work.  In such event: (i) such equipment shall be maintained, repaired and replaced by Tenant at Tenant’s sole cost and expense, and (ii) throughout the term of this Lease, Tenant shall, at Tenant’s sole cost and expense, purchase and maintain a service contract for such equipment from a service provider approved by Landlord.  Tenant shall obtain Landlord’s prior written approval of both the form of service contract and of the service provider.

 

8.7          Repairs.  Except as otherwise provided in Articles 18 and 20, and subject to Tenant’s obligations in Article 14, Landlord shall keep and maintain the roof, exterior walls, structural floor slabs, columns, elevators, public stairways and corridors, public lavatories, and other common equipment (including, without limitation, sanitary, electrical, heating, air conditioning, or other systems) serving both the Building and the Common Areas in good condition and repair.  Landlord shall keep the paved portions of the Common Areas reasonably free of ice and snow.

 

8.8          Interruption or Curtailment of Services.  When necessary by reason of accident or emergency, or for repairs, alterations, replacements or improvements which in the reasonable judgment of Landlord are desirable or necessary to be made, or of difficulty or inability in securing supplies or labor, or of strikes, or of any other cause beyond the reasonable control of Landlord, whether such other cause be similar or dissimilar to those hereinabove specifically mentioned until said cause has been removed, Landlord reserves the right to interrupt, curtail, stop or suspend (i) the furnishing of heating, elevator, air conditioning, and cleaning services and (ii) the operation of the plumbing and electric systems.  Landlord shall exercise reasonable diligence to eliminate the cause of any such interruption, curtailment, stoppage or suspension, but there shall be no diminution or abatement of rent or other compensation due from Landlord to Tenant hereunder, nor shall this Lease be affected or any of the Tenant’s obligations hereunder reduced, and the

 

12

 

Landlord shall have no responsibility or liability for any such interruption, curtailment, stoppage, or suspension of services or systems.  In the event of a planned interruption or curtailment, Landlord shall notify Tenant (which notification may be verbal) in advance; in the event of an emergency or unforeseen interruption or curtailment, Landlord shall endeavor to notify Tenant (which notification may be verbal) in advance if possible.

 

8.9          Energy Conservation.  Notwithstanding anything to the contrary in this Article 8 or in this Lease contained, Landlord may institute, and Tenant shall comply with, such policies, programs and measures as may be necessary, required, or expedient for the conservation and/or preservation of energy or energy services, or as may be necessary or required to comply with applicable codes, rules regulations or standards, provided that Tenant has been notified in writing of all such policies, programs or measures.

 

8.10        Additional Services.  Landlord shall provide, at no additional cost to Tenant (other than as such may already be included in Operating Costs (as defined below)) the following: (a) roving security to the Building and Complex twenty-four (24) hours per day, seven (7) days per week, fifty-two (52) weeks per year, or such other security measures as Landlord deems appropriate, (b) a dumpster or trash compactor at the Building’s loading dock or other designated location for Tenant’s use for the disposal of trash (other than the disposal of Hazardous Materials), such use shall be non-exclusive to Tenant and in common with other tenants of the Building and/or Complex, and (c) subject to reasonable notice and scheduling and during normal business hours, access to and use of the Building’s freight elevators and (d) in addition to the Control Area within the Premises provided pursuant to Section 4.1(a) of this Lease, upon Tenant’s reasonable request and subject to availability, Landlord may make other Control Areas available for Tenant’s use in the Building or Complex at the then prevailing market rent for such space. .

 

9.                                      ESCALATION

 

9.1          Definitions.  As used in this Article 9, the words and terms which follow mean and include the following:

 

(a)           “Operating Year” shall mean a calendar year in which occurs any part of the term of this Lease.

 

(b)           “Tenant’s Proportionate Building Share” shall initially be the figure as stated in Exhibit 1.  Tenant’s Proportionate Building Share is the ratio of the Total Rentable Area of the Premises to the aggregate Total Rentable Area of the Building, from time to time.  As changes or modifications to the Building occurs, Tenant’s Proportionate Building Share shall be adjusted to equal the then current ratio of the Total Rentable Area of the Premises to the aggregate Total Rentable Area within the Building which is then completed and as to which a certificate of occupancy is issued.

 

(c)           “Tenant’s Proportionate Common Share” shall initially be the figure as stated in Exhibit 1.  Tenant’s Proportionate Common Share is the ratio of the Total Rentable Area of the Premises to the aggregate Total Rentable Area, from time to time, of all buildings within the Complex which have been completed and for which a certificate of occupancy has been issued.  As additional buildings are completed within the Complex, Tenant’s Proportionate Common

 

13

 

Share shall be adjusted to equal the then current ratio of the Total Rentable Area of the Premises to the aggregate Total Rentable Area within the Complex which is then completed and as to which a certificate of occupancy is issued.

 

(d)           “Taxes” shall mean the real estate taxes and other taxes, levies and assessments imposed upon the Building and the Common Areas of the Complex and upon any personal property of Landlord used in the operation thereof, or Landlord’s interest in the Building, the Common Areas, or such personal property; charges, fees and assessments for transit, housing, police, fire or other governmental services or purported benefits to the Building and/or the Common Areas; service or user payments in lieu of taxes; and any and all other taxes, levies, betterments, assessments and charges arising from the ownership, leasing, operating, use or occupancy of the Building, the Common Areas or based upon rentals derived therefrom, which are or shall be imposed by Federal, State, Municipal or other authorities.  As of the Execution Date, “Taxes” shall not include any franchise, rental, income or profit tax, capital levy or excise, provided, however, that any of the same and any other tax, excise, fee, levy, charge or assessment, however described, that may in the future be levied or assessed as a substitute for or an addition to, in whole or in part, any tax, levy or assessment which would otherwise constitute “ Taxes,” whether or not now customary or in the contemplation of the parties on the Execution Date of this Lease, shall constitute “Taxes,” but only to the extent calculated as if the Complex is the only real estate owned by Landlord.  “Taxes” shall also include expenses of tax abatement or other proceedings contesting assessments or levies.  The parties acknowledge that, as of the Execution Date, Taxes are based upon several separate tax bills affecting the Complex.  Taxes shall be allocated by Landlord, in Landlord’s reasonable judgment, among the Building (the portion of Taxes allocable to the Building being referred to herein as “Building Taxes”), the other buildings of the Complex, and the Common Areas (the portion of Taxes allocable to the Common Areas being referred to herein as “Common Area Taxes”).

 

(e)           “Tax Period” shall be any fiscal/tax period in respect of which Taxes are due and payable to the appropriate governmental taxing authority, any portion of which period occurs during the term of this Lease, the first such Period being the one in which the Term Commencement Date occurs.

 

(f)            “Operating Costs”:

 

(1)           Definition of Operating Costs.  “Operating Costs” shall mean all costs incurred and expenditures of whatever nature made by Landlord in the operation and management, for repair and replacements, cleaning and maintenance of the Building and the Complex, and the Common Areas of the Complex including, without limitation, vehicular and pedestrian passageways related to the Complex, related equipment, facilities and appurtenances, elevators, cooling and heating equipment.  In the event that Landlord or Landlord’s managers or agents perform services for the benefit of the Complex off-site which would otherwise be performed on-site (e.g., accounting), the cost of such services shall be reasonably allocated among the properties benefiting from such service and shall be included in Operating Costs.  Landlord shall have the right but not the obligation, from time to time, to equitably allocate some or all of the Operating Costs among different tenants of the Building or properties (the “Cost Pools”).  Such Cost Pools may

 

14

 

include, but shall not be limited to, tenants that share particular systems or equipment or tenants that are similar users of particular systems or equipment such as by way of example but not limitation the office space tenants of the Building or properties, the laboratory tenants of the Building or properties and the retail space tenants of the Building or properties.  Operating Costs shall include, without limitation, those categories of “Specifically Included Operating Costs,” as set forth below, but shall not include “Excluded Costs,” as hereinafter defined.

 

(2)           Definition of Excluded Costs.  “Excluded Costs” shall be defined as (i) mortgage charges, (ii) brokerage commissions, (iii) salaries of executives and owners not directly employed in the management/operation of the Complex, (iv) the cost of work done by Landlord for a particular tenant for which Landlord has the right to be reimbursed by such tenant, and, subject to Subparagraph (3) below, such portion of expenditures as are not properly chargeable against income, (v) ground lease rental, (vi) attorneys’ fees, leasing commissions and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of or persons, firms or entities with respect to the Building, (vii) expenses in connection with services or benefits which are not offered to Tenant, (viii) all items and services for which Tenant or any other tenant reimburses Landlord, outside of Operating Costs, or which Landlord provides exclusively to one or more tenants (other than Tenant) but not all tenants, (ix) electric power and any other utility costs for which any tenant or occupant (except Landlord) directly contracts with the local public service company, (x) the cost to construct any additions or expansions to the Building or Complex,(xi) any reserves for future expenditures not yet incurred, (xii) costs incurred by Landlord due to the gross negligence or misconduct of Landlord or its agents, (xiii) advertising and promotional expenses in connection with the leasing of the Building, (xiv) the costs of remediating or removing Hazardous Materials, as defined in Article 29.11 except: (a) any material or substance which, as of the Execution Date, exists in the Complex, which was not considered, as a matter of law, to be a hazardous substance, but which is subsequently determined to be a hazardous substance as a matter of law or (b) any material or substance which is introduced to the Complex after the Execution Date, but, which was not considered, as a matter of law, to be a hazardous substance as of the time of its introduction to the Building, but which is subsequently determined to be a hazardous substance as a matter of law after its introduction to the Complex.  Notwithstanding the foregoing, environmental insurance costs and costs related to remediation, removal or treatment of lead paint or asbestos remediation required in connection with repairs, upgrades or improvements to the Building and/or Complex, the cost of which Landlord shall have the right to pass-through to Tenant as Operating Costs shall be included in Operating Costs and (xv) costs associated with owning, operating or maintaining any parking facility, including without limitation, the Garage (as defined in Section 29.14) for so long as seprate fees are required for use of such facilities and except for costs associated with security for such facilities.

 

15

 

(3)           Capital Expenditures.

 

(i)            Replacements.  If, during the term of this Lease, Landlord shall replace any capital items or make any capital expenditures (collectively called “capital expenditures”) the total amount of which is not properly includible in Operating Costs for the Operating Year in which they were made, there shall nevertheless be included in such Operating Costs and in Operating Costs for each succeeding Operating Year the amount, if any, by which the Annual Charge-Off (determined as hereinafter provided) of such capital expenditure (less insurance proceeds, if any, collected by Landlord by reason of damage to, or destruction of the capital item being replaced) exceeds the Annual Charge-Off of the capital expenditure for the item being replaced.

 

(ii)           New Capital Items.  If a new capital item is acquired which does not replace another capital item which was worn out, has become obsolete, etc., then there shall be included in Operating Costs for each Operating Year in which and after such capital expenditure is made the Annual Charge-Off of such capital expenditure.

 

(iii)          Annual Charge-Off.  “Annual Charge-Off” shall be defined as the annual amount of principal and interest payments which would be required to repay a loan (“Capital Loan”) in equal monthly installments over the Useful Life, as hereinafter defined, of the capital item in question on a direct reduction basis at an annual interest rate equal to the Capital Interest Rate, as hereinafter defined, where the initial principal balance is the cost of the capital item in question.  Notwithstanding the foregoing, if Landlord reasonably concludes on the basis of engineering estimates that a particular capital expenditure will effect savings in Building operating expenses including, without limitation, energy-related costs, and that such projected savings will, on an annual basis (“Projected Annual Savings”), exceed the Annual Charge-Off of such capital expenditure computed as aforesaid, then and in such events, the Annual Charge-Off shall be increased to an amount equal to the Projected Annual Savings; and in such circumstances, the increased Annual Charge-Off (in the amount of the Projected Annual Savings) shall be made for such period of time as it would take to fully amortize the cost of the capital item in question, together with interest thereon at the Capital Interest Rate as aforesaid, in equal monthly payments, each in the amount of one-twelfth (1/12th) of the Projected Annual Savings, with such payments being applied first to interest and the balance to principal.

 

(iv)          Useful Life.  “Useful Life” shall be reasonably determined by Landlord in accordance with generally accepted accounting principles and practices in effect at the time of acquisition of the capital item.

 

(v)           Capital Interest Rate.  “Capital Interest Rate” shall be defined as an annual rate of either one percentage point over the AA Bond rate (Standard & Poor’s corporate composite or, if unavailable, its

 

16

 

equivalent) as reported in the financial press at the time the capital expenditure is made or, if the capital item is acquired through third-party financing, then the actual (including fluctuating) rate paid by Landlord in financing the acquisition of such capital item.

 

(4)           Specifically Included Categories of Operating Costs.  Operating Costs shall include, but not be limited to, the following:

 

Taxes (other than real estate taxes): Sales, Federal Social Security, Unemployment and Old Age Taxes and contributions and State Unemployment taxes and contributions accruing to and paid by the Landlord on account of all employees of Landlord and/or Landlord’s managing agent, who are employed in, about or on account of the Complex, except that taxes levied upon the net income of the Landlord and taxes withheld from employees, and “Taxes” as defined in Article 9.1(d) shall not be included herein.

 

Water: All charges and rates connected with water supplied to the Building and related sewer use charges.

 

Heat and Air Conditioning: All charges connected with heat and air conditioning supplied to the Building.

 

Wages: Wages and cost of all employee benefits of all employees of the Landlord and/or Landlord’s managing agent who are employed in about or on account of the Building.

 

Cleaning: The cost of labor (including third party janitorial contracts), supplies, tools and material for cleaning the Building and Complex.

 

Elevator Maintenance: All expenses for or on account of the upkeep and maintenance of all elevators in the Building.

 

Management Fee: The cost of professional management of the Complex.

 

Administrative Costs: The cost of office expense for the management of the Complex, including, without limitation, rent, business supplies and equipment.

 

Electricity: The cost of all electric current for the operation of any machine, appliance or device used for the operation of the Premises and the Building, including the cost of electric current for the elevators, lights, air conditioning and heating, but not including electric current which is paid for directly to the utility by the user/tenant in the Building or for which the user/tenant reimburses Landlord.  (If and so long as Tenant is billed directly by the electric utility for its own consumption as determined by its separate meter, or billed directly by Landlord as determined by a check meter, then Operating Costs shall include only Building and public area electric current consumption and not any demised Premises electric current consumption.)  Wherever separate metering is unlawful, prohibited by utility company regulation or tariff or is otherwise impracticable, relevant

 

17

 

consumption figures for the purposes of this Article 9 shall be determined by fair and reasonable allocations and engineering estimates made by Landlord.

 

Insurance, etc.: Fire, casualty, liability, rent loss and such other insurance as may from time to time be required by lending institutions on first-class office buildings in the City or Town wherein the Building is located and all other expenses customarily incurred in connection with the operation and maintenance of first-class office buildings in the City or Town wherein the Building is located including, without limitation, insurance deductible amounts and rental costs associated with the Building’s management office.

 

(5)           Definitions of Building Operating Costs and Common Area Operating Costs.  “Building Operating Costs” shall be defined as the amount of Operating Costs allocable to the Building in any Operating Year.  “Common Area Operating Costs” shall be defined as the amount of Operating Costs allocable to the Common Areas in any Operating Year.  All Operating Costs incurred by Landlord in respect of the Complex shall be allocated, in Landlord’s reasonable judgment, among the Building, the other buildings of the Complex, and the Common Areas.

 

(6)           Gross-Up Provision.  Notwithstanding the foregoing, in determining the amount of Operating Costs for any calendar year or any portion thereof falling within the term, if less than ninety-five percent (95%) of the Rentable Area of the Building shall have been occupied by tenants at any time during the period in question, then, at Landlord’s election, Operating Costs for such period shall be adjusted to equal the amount Operating Costs would have been for such period had occupancy been ninety-five percent (95%) throughout such period.  The extrapolation of Operating Costs under this paragraph shall be performed by appropriately adjusting the cost of those components of Operating Costs that are impacted by changes in the occupancy of the Building.

 

9.2          Tax Share.  Commencing as of the Term Commencement Date and continuing thereafter with respect to each Tax Year occurring during the term of the Lease, Tenant shall pay to Landlord, with respect to any Tax Period, the sum of: (x) Tenant’s Proportionate Building Share of Building Taxes for such Tax Period, plus (y) Tenant’s Proportionate Common Share of Common Area Taxes for such Tax Period, such sum being hereinafter referred to as “Tax Share”.  Tax Share shall be due within thirty (30) days of the date it is billed by Landlord.  In implementation and not in limitation of the foregoing, Tenant shall remit to Landlord pro rata monthly installments on account of projected Tax Share, calculated by Landlord on the basis of the most recent Tax data or budget available.  If the total of such monthly remittances on account of any Tax Period is greater than the actual Tax Share for such Tax Period, Tenant may credit the difference against the next installment of rental or other charges due to Landlord hereunder.  If the total of such remittances is less than the actual Tax Share for such Tax Period, Tenant shall pay the difference to Landlord within thirty (30) days of when billed therefor.

 

Appropriate credit against Tax Share shall be given for any refund obtained by reason of a reduction in any Taxes by the Assessors or the administrative, judicial or other governmental agency responsible therefor.  The original computations, as well as reimbursement or payments of

 

18

 

additional charges, if any, or allowances, if any, under the provisions of this Article 9.2 shall be based on the original assessed valuations with adjustments to be made at a later date when the tax refund, if any, shall be paid to Landlord by the taxing authorities.  Expenditures for legal fees and for other similar or dissimilar expenses incurred in obtaining the tax refund may be charged against the tax refund before the adjustments are made for the Tax Period.

 

9.3          Operating Expense Share.  Commencing as of the Term Commencement Date and continuing thereafter with respect to each Operating Year occurring during the term of the Lease, Tenant shall pay to Landlord, with respect to any Operating Year, the sum of: (x) Tenant’s Proportionate Building Share of Building Operating Costs for such Operating Year, plus (y) Tenant’s Proportionate Common Share of Common Operating Costs for such Operating Year, such sum being hereinafter referred to as “Operating Expense Share”.  In implementation and not in limitation of the foregoing, Tenant shall remit to Landlord pro rata monthly installments on account of projected Operating Expense Share, calculated by Landlord on the basis of the most recent Operating Costs data or budget available.  If the total of such monthly remittances on account of any Operating Year is greater than the actual Operating Expense Share for such Operating Year, Landlord may credit the difference against the next installment of rent or other charges due to Landlord hereunder.  If the total of such remittances is less than actual Operating Expense Share for such Operating Year, Tenant shall pay the difference to Landlord when billed therefor.  Attached hereto as Exhibit 7 is Landlord’s estimated, draft Building operating budget for Operating Year 2011.  The foregoing information is provided for informational purposes only and Landlord and Tenant acknowledge that the actual amount of Taxes and Operating Costs may differ from those set forth in the estimated draft budget and nothing shall preclude Landlord from determining Tenant’s Proportionate Building and Common Share of Taxes and Operating Costs based upon figures different from those contained therein.

 

9.4          Part Years.  If the Term Commencement Date or the Termination Date occurs in the middle of an Operating Year or Tax Period, Tenant shall be liable for only that portion of the Operating Expense or Tax Share, as the case may be, in respect of such Operating Year or Tax Period represented by a fraction, the numerator of which is the number of days of the herein term which falls within the Operating Year or Tax Period and the denominator of which is three hundred sixty-five (365), or the number of days in said Tax Period, as the case may be.

 

9.5          Effect of Taking.  In the event of any taking of the Building or the land upon which it stands under circumstances whereby this Lease shall not terminate under the provisions of Article 20 then, Tenant’s Proportionate Building Share and Tenant’s Proportionate Common Share shall be adjusted appropriately to reflect the proportion of the Premises and/or the Building remaining after such taking.

 

9.6          Tenant Audit Right.  Landlord shall permit Tenant, at Tenant’s expense and during normal business hours, but only one time with respect to any Operating Year, to review Landlord’s invoices and statements relating to the Operating Costs for the applicable Operating Year for the purpose of verifying the Operating Costs and Tenant’s share thereof; provided that notice of Tenant’s desire to so review is given to Landlord not later than thirty (30) days after Tenant receives an annual statement from Landlord, and provided that such review is thereafter commenced and prosecuted by Tenant with due diligence.  Any Operating Costs statement or accounting by Landlord shall be binding and conclusive upon Tenant unless (i) Tenant duly

 

19

 

requests such review within such thirty (30) day period, and (ii) within three (3) months after such review request, Tenant shall notify Landlord in writing that Tenant disputes the correctness of such statement, specifying the particular respects in which the statement is claimed to be incorrect.  Tenant shall have no right to conduct a review or to give Landlord notice that it desires to conduct a review at any time Tenant is in default under the Lease.  The review shall be completed by a qualified lease auditor approved by Landlord (such approval not to be unreasonably withheld) having at least five (5) years experience.  Such auditor conducting the review shall be compensated on an hourly basis and shall not be compensated based upon a percentage of overcharges it discovers.  No subtenant shall have any right to conduct a review, and no assignee shall conduct a review for any period during which such assignee was not in possession of the Premises.  Tenant agrees that all information obtained from any such Operating Costs review, including without limitation, the results of any Operating Costs review shall be kept strictly confidential by Tenant and shall not be disclosed to any other person or entity.  If, after such review, it is finally determined that: (i) Tenant has made an overpayment of its Operating Expense Share, Landlord shall credit such overpayment against future installments of Yearly Rent, except that is such overpayment is determined after the termination or expiration of the Term, Landlord shall refund to Tenant the amount of any such overpayment less any amounts then due from Tenant to Landlord, and (ii) Tenant has made an underpayment of its Operating Expense Share, Tenant shall within thirty (30) business days of such determination, pay such underpayment to Landlord.

 

9.7          Survival.  Any obligations under this Article 9 which shall not have been paid at the expiration or sooner termination of the term of this Lease shall survive such expiration and shall be paid when and as the amount of same shall be determined to be due.

 

10.                               CHANGES OR ALTERATIONS BY LANDLORD

 

Landlord reserves the right, exercisable by itself or its nominee, at any time and from time to time without the same constituting an actual or constructive eviction and without incurring any liability to Tenant therefor or otherwise affecting Tenant’s obligations under this Lease, to make such changes, alterations, additions, improvements, repairs or replacements in or to: (i) the Building (including the Premises after notice to Tenant (which may be oral notice), provided that no prior notice needs to be given in the case of emergency) and the fixtures and equipment thereof, (ii) the street entrances, halls, passages, elevators, escalators, and stairways of the Building, and (iii) the Common Areas, and facilities located therein, as Landlord may deem necessary or desirable, and to change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets, or other public parts of the Building and/or the Common Areas, provided, however, that there be no unreasonable obstruction of the right of access to, or unreasonable interference with the use and enjoyment of, the Premises by Tenant.  Nothing contained in this Article 10 shall be deemed to relieve Tenant of any duty, obligation or liability of Tenant with respect to making any repair, replacement or improvement or complying with any law, order or requirement of any governmental or other authority.  Landlord reserves the right to adopt and at any time and from time to time to change the name or address of the Building.  Neither this Lease nor any use by Tenant shall give Tenant any right or easement for the use of any door, passage, concourse, walkway or parking area within the Building or in the Common Areas, and the use of such doors, passages, concourses, walkways, parking areas and such conveniences may be regulated or discontinued at any time and from time to time by Landlord without notice to

 

20

 

Tenant and without affecting the obligation of Tenant hereunder or incurring any liability to Tenant therefor, provided, however, that there be no unreasonable obstruction of the right of access to, or unreasonable interference with the use of the Premises by Tenant.

 

If at any time any windows of the Premises are temporarily closed or darkened for any reason whatsoever including but not limited to, Landlord’s own acts, Landlord shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatements of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction.

 

11.                               FIXTURES, EQUIPMENT AND IMPROVEMENTS-REMOVAL BY TENANT

 

All fixtures, non-moveable or fixed equipment, improvements and appurtenances attached to or built into the Premises prior to or during the term, whether by Landlord at its expense or at the expense of Tenant (either or both) or by Tenant shall be and remain part of the Premises and shall not be removed by Tenant during or at the end of the term unless Landlord otherwise elects to require Tenant to remove such fixtures, equipment, improvements and appurtenances, in accordance with Articles 12 and/or 22 of the Lease.  All electric, telephone, telegraph, communication, radio, plumbing, heating and sprinkling systems, fixtures and outlets, vaults, paneling, molding, shelving, radiator enclosures, cork, rubber, linoleum and composition floors, ventilating, silencing, air conditioning and cooling equipment, shall be deemed to be included in such fixtures, equipment, improvements and appurtenances, whether or not attached to or built into the Premises.  Where not built into the Premises, all removable electric fixtures, carpets, drinking or tap water facilities, furniture, or trade fixtures or business equipment or Tenant’s inventory or stock in trade shall not be deemed to be included in such fixtures, equipment, improvements and appurtenances and may be, and upon the request of Landlord as set forth above, will be removed by Tenant upon the condition that such removal shall not materially damage the Premises or the Building and that the cost of repairing any damage to the Premises or the Building arising from installation or such removal shall be paid by Tenant.  The covenants of this Section shall survive the expiration or earlier termination of the Term.

 

12.                               ALTERATIONS AND IMPROVEMENTS BY TENANT

 

Tenant shall make no alterations, decorations, installations, removals, additions or improvements in or to the Premises without Landlord’s prior written consent, which consent shall not be unreasonably withheld or delayed, and unless made by contractors or mechanics approved by Landlord.  No installations or work shall be undertaken or begun by Tenant until: (i) Landlord has approved written plans and specifications and a time schedule for such work; (ii) Tenant has made provision for either written waivers of liens from all contractors, laborers and suppliers of materials for such installations or work, the filing of lien bonds on behalf of such contractors, laborers and suppliers, or other appropriate protective measures approved by Landlord; and (iii) Tenant has procured appropriate surety payment and performance bonds.  No amendments or additions to such plans and specifications shall be made without the prior written consent of Landlord.  Landlord’s consent and approval required under this Article 12 shall not be unreasonably withheld.  Landlord’s approval is solely given for the benefit of Landlord and neither Tenant nor any third party shall have the right to rely upon Landlord’s approval of Tenant’s plans for any purpose whatsoever.  Without limiting the foregoing, Tenant shall be responsible

 

21

 

for all elements of the design of Tenant’s plans (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the Premises and the placement of Tenant’s furniture, appliances and equipment), and Landlord’s approval of Tenant’s plans shall in no event relieve Tenant of the responsibility for such design.  Landlord shall have no liability or responsibility for any claim, injury or damage alleged to have been caused by the particular materials, whether building standard or non-building standard, appliances or equipment selected by Tenant in connection with any work performed by or on behalf of Tenant in the Premises including, without limitation, furniture, carpeting, copiers, laser printers, computers and refrigerators.  Any such work, alterations, decorations, installations, removals, additions and improvements shall be done at Tenant’s sole expense and at such times and in such manner as Landlord may from time to time designate.  If Tenant shall make any alterations, decorations, installations, removals, additions or improvements (“Tenant Alterations”), then at the time of requesting consent therefore Tenant may make a written request to Landlord that such Tenant Alterations will not have to be removed at the expiration or earlier termination of the Lease.  If Tenant makes such request, then unless the Landlord requires at the time it provides Landlord’s consent that such Tenant Alterations must be removed at the expiration or sooner termination of the term of this Lease or that Tenant must restore the Premises to substantially the same condition as existed at the Term Commencement Date, then Tenant shall not be required to remove the Tenant Alterations at the expiration or sooner termination of the term of this Lease.  Tenant shall pay, as an additional charge, the entire increase in real estate taxes on the Building which shall, at any time prior to or after the Term Commencement Date, result from or be attributable to any alteration, addition or improvement to the Premises made by or for the account of Tenant.  Notwithstanding the foregoing, Landlord’s consent shall not be required (but Tenant shall be required to notify Landlord of such prior to commencement of work) for any alteration that satisfies all of the following criteria (each a “Limited Alteration”): (1) is an interior alteration of a non-structural nature to the Premises; (2) is not visible from the exterior of the Premises or Building; (3) will not affect the systems serving any portion of the Building (including, without limitation, any fire, safety, telecommunication, electrical, mechanical, ventilation or plumbing systems of the Building) and will not affect the structure of the Building; (4) does not cause any material penetration in or otherwise affect any walls, floors, roofs or other structural elements of the Building, (5) does not require the issuance of any permits, licenses, approvals or the like, (6) does not require unusual expense to readapt the premises to normal office use at the termination; and (7) does not cost more than $10,000.00 for each such Limited Alteration; provided that all work shall be done by contactors reasonably approved by Landlord and otherwise in accordance with the terms of this Lease.

 

If, as a result of any alterations, decorations, installations, removals, additions and improvements made by Tenant, Landlord is obligated to comply with the Americans With Disabilities Act or any other federal, state or local laws or regulations and such compliance requires Landlord to make any improvement or alteration to any portion of the Building or the Complex, as a condition to Landlord’s consent, Landlord shall have the right to require Tenant to pay to Landlord prior to the construction of any such alteration, decoration, installation, removal, addition or improvement by Tenant, the entire cost of any improvement or alteration Landlord is obligated to complete by such law or regulation; provided, however, that absent such alterations, Landlord shall be responsible, at Landlord’s sole cost and expense, for ensuring that the Building’s common areas are in compliance with the Americans With Disabilities Act.

 

22

 

Without limiting any of the terms hereof, Landlord will not approve any alteration, decoration, installation, removal, addition or improvement requiring unusual expense to readapt the Premises to normal office use on lease termination or increasing the cost of construction, insurance or Taxes on the Building or of Landlord’s services to the Premises, unless Tenant first gives assurances or security acceptable to Landlord that such re-adaptation will be made prior to such termination without expense to Landlord and makes provisions acceptable to Landlord for payment of such increased cost.

 

13.                               TENANT’S CONTRACTORS-MECHANICS’ AND OTHER LIENS-STANDARD OF TENANT’S PERFORMANCE-COMPLIANCE WITH LAWS

 

Whenever Tenant shall make any alterations, decorations, installations, removals, additions or improvements in or to the Premises—whether such work be done prior to or after the Term Commencement Date—Tenant will strictly observe the following covenants and agreements:

 

(a)           Tenant agrees that it will not, either directly or indirectly, use any contractors and/or materials if their use will create any difficulty, whether in the nature of a labor dispute or otherwise, with other contractors and/or labor engaged by Tenant or Landlord or others in the construction, maintenance and/or operation of the Building or any part thereof.

 

(b)           In no event shall any material or equipment be incorporated in or added to the Premises, so as to become a fixture or otherwise a part of the Building, in connection with any such alteration, decoration, installation, addition or improvement which is subject to any lien, charge, mortgage or other encumbrance of any kind whatsoever or is subject to any security interest or any form of title retention agreement.  No installations or work shall be undertaken or begun by Tenant until (i) Tenant has made provision for written waiver of liens from all contractors, laborers and suppliers of materials for such installations or work, and taken other appropriate protective measures approved by Landlord; and (ii) Tenant has procured appropriate surety payment and performance bonds which shall name Landlord as an additional obligee and has filed lien bond(s) (in jurisdictions where available) on behalf of such contractors, laborers and suppliers.  Any mechanic’s lien filed against the Premises or the Building for work claimed to have been done for, or materials claimed to have been furnished to, Tenant shall be discharged by Tenant within ten (10) days thereafter, at Tenant’s expense by filing the bond required by law or otherwise.  If Tenant fails so to discharge any lien, Landlord may do so at Tenant’s expense and Tenant shall reimburse Landlord for any expense or cost incurred by Landlord in so doing within fifteen (15) days after rendition of a bill therefor.

 

(c)           All installations or work done by Tenant shall be at its own expense and shall at all times comply with (i) laws, rules, orders and regulations of governmental authorities having jurisdiction thereof; (ii) orders, rules and regulations of any Board of Fire Underwriters, or any other body hereafter constituted exercising similar functions, and governing insurance rating bureaus; (iii) Rules and Regulations of Landlord; and (iv) plans and specifications prepared by and at the expense of Tenant theretofore submitted to and approved by Landlord.

 

(d)           Tenant shall procure and deliver to Landlord copies of all necessary permits before undertaking any work in the Premises; do all of such work in a good and workmanlike manner, employing materials of good quality and complying with all governmental requirements;

 

23

 

and defend, save harmless, exonerate and indemnify Landlord from all injury, loss or damage to any person or property occasioned by or growing out of such work.  Tenant shall cause contractors employed by Tenant to carry Worker’s Compensation Insurance in accordance with statutory requirements, Automobile Liability Insurance and, naming Landlord as an additional insured, Commercial General Liability Insurance covering such contractors on or about the Premises in the amounts stated in Article 15 hereof or in such other reasonable amounts as Landlord shall require and to submit certificates evidencing such coverage to Landlord prior to the commencement of such work.

 

14.                               REPAIRS BY TENANT-FLOOR LOAD

 

14.1        Repairs by Tenant.  Tenant shall keep all and singular the Premises neat and clean (including periodic rug shampoo and waxing of tiled floors and cleaning of blinds and drapes) and in such repair, order and condition as the same are in on the Term Commencement Date or may be put in during the term hereof, reasonable use and wearing thereof and damage by fire or by other casualty excepted.  For purposes of this Lease, the terms “reasonable use and wearing” and “ordinary wear and use” (as referred to in Article 22 herein) constitute that normal, gradual deterioration which occurs due to aging and ordinary use of the Premises despite reasonable and timely maintenance and repair, but in no event shall the aforementioned terms excuse Tenant from its duty to keep the Premises in good maintenance and repair or otherwise usable, serviceable and tenantable as required in the Lease.  Tenant shall be solely responsible for the proper maintenance of all equipment and appliances operated by Tenant, including, without limitation, copiers, laser printers, computers and refrigerators.  Tenant shall make, as and when needed as a result of misuse by, or neglect or improper conduct of, Tenant or Tenant’s servants, employees, agents, contractors, invitees, or licensees or otherwise, all repairs in and about the Premises necessary to preserve them in such repair, order and condition, which repairs shall be in quality and class equal to the original work.  Landlord may elect, at the expense of Tenant, to make any such repairs or to repair any damage or injury to the Building or the Premises caused by moving property of Tenant in or out of the Building, or by installation or removal of furniture or other property, or by misuse by, or neglect, or improper conduct of, Tenant or Tenant’s servants, employees, agents, contractors, or licensees.

 

14.2        Floor Load-Heavy Machinery.  Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot of area which such floor was designed to carry and which is allowed by law.  Landlord reserves the right to prescribe the weight and position of all business machines and mechanical equipment, including safes, which shall be placed so as to distribute the weight.  Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant’s expense in settings sufficient in Landlord’s judgment to absorb and prevent vibration, noise and annoyance.  Tenant shall not move any safe, heavy machinery, heavy equipment, freight, bulky matter, or fixtures into or out of the Building without Landlord’s prior written consent.  If such safe, machinery, equipment, freight, bulky matter or fixtures requires special handling, Tenant agrees to employ only persons holding a Master Rigger’s License to do said work, and that all work in connection therewith shall comply with applicable laws and regulations.  Any such moving shall be at the sole risk and hazard of Tenant and Tenant will defend, indemnify and save Landlord harmless against and from any liability, loss, injury, claim or suit resulting directly or indirectly from such moving.  Proper placement of all such business machines, etc., in the Premises shall be Tenant’s responsibility.

 

24

 

15.                               INSURANCE, INDEMNIFICATION, EXONERATION AND EXCULPATION

 

15.1        General Liability Insurance.  During the term of this Lease, Tenant shall procure, and keep in force and pay for :

 

(a)           Commercial General Liability Insurance insuring Tenant on an occurrence basis against all claims and demands for personal injury liability (including, without limitation, bodily injury, sickness, disease, and death) or damage to property which may be claimed to have occurred from and after the time Tenant and/or its contractors enter the Premises in accordance with Article 4 of this Lease, of not less than Three Million ($3,000,000) Dollars in the event of personal injury to any number of persons or damage to property, arising out of any one occurrence, and contain the “Amendment of the Pollution Exclusion” for damage caused by heat, smoke or fumes from a hostile fire.  The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an “insured contract” for the performance of Tenant’s indemnity obligations under this Lease.  Landlord may from time to time during the term reasonably increase the coverages required of Tenant hereunder to that customarily carried in the area in which the Premises are located on property similar to the Premises.

 

(b)           Workers’ Compensation in amounts required by the State in which the Building is located and Employer’s Liability insurance in the amount of $1,000,000.00 per occurrence.

 

(c)           Tenant shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Tenant for direct or indirect loss of earnings attributable to all peril commonly insured against by prudent lessees in the business of Tenant or attributable to prevention of access to the Premises as a result of such perils.

 

(d)           So called “Special Form” insurance coverage for all of its contents, furniture, furnishings, equipment, improvements, fixtures and personal property located at the Premises providing protection in an amount equal to one hundred percent (100%) of the replacement cost basis of said items.  If this Lease is terminated as the result of a casualty in accordance with Section 18, the proceeds of said insurance attributable to the replacement of all Tenant’s Improvements installed at the Premises by Landlord or at Landlord’s cost shall be paid to Landlord.

 

(e)           Any other form or forms of insurance as Tenant or Landlord or any mortgagees of Landlord may reasonably require from time to time in form, in amounts and for insurance risks against which a prudent tenant would protect itself.

 

15.2        Certificates of Insurance.  Such insurance shall be effected with insurers approved by Landlord, authorized to do business in the State wherein the Building is situated under valid and enforceable policies wherein Tenant names Landlord, Landlord’s managing agent and Landlord’s Mortgagees as additional insureds.  Such insurance shall provide that it shall not be canceled or modified without at least thirty (30) days’ prior written notice to each insured named therein.  On or before the time Tenant and/or its contractors enter the Premises in accordance with Articles 4 and 14 of this Lease and thereafter not less than fifteen (15) days prior

 

25

 

to the expiration date of each expiring policy, original copies of the policies provided for in Article 15.1 issued by the respective insurers, or certificates of such policies setting forth in full the provisions thereof and issued by such insurers together with evidence satisfactory to Landlord of the payment of all premiums for such policies, shall be delivered by Tenant to Landlord and certificates as aforesaid of such policies shall upon request of Landlord, be delivered by Tenant to the holder of any mortgage affecting the Premises.

 

15.3        General.  Tenant will save Landlord, its agents and employees, harmless and will exonerate, defend and indemnify Landlord, its agents and employees, from and against any and all claims, liabilities or penalties asserted by or on behalf of any person, firm, corporation or public authority arising from the Tenant’s breach of the Lease or:

 

(a)           On account of or based upon any injury to person, or loss of or damage to property, sustained or occurring on the Premises on account of or based upon the act, omission, fault, negligence or misconduct of any person whomsoever (except to the extent the same is caused by the negligence of Landlord, its agents, contractors or employees);

 

(b)           On account of or based upon any injury to person, or loss of or damage to property, sustained or occurring elsewhere (other than on the Premises) in or about the Building (and, in particular, without limiting the generality of the foregoing, on or about the elevators, stairways, public corridors, sidewalks, concourses, arcades, malls, galleries, vehicular tunnels, approaches, areaways, roof, or other appurtenances and facilities used in connection with the Building or Premises) arising out of the use or occupancy of the Building or Premises by the Tenant, or by any person claiming by, through or under Tenant, or on account of or based upon the act, omission, fault, negligence or misconduct of Tenant, its agents, employees or contractors;

 

(c)           On account of or based upon (including monies due on account of) any work or thing whatsoever done (other than by Landlord or its contractors, or agents or employees of either) on the Premises during the term of this Lease and during the period of time, if any, prior to the Term Commencement Date that Tenant may have been given access to the Premises; and

 

(d)           Tenant’s obligations under this Article 15.3 shall be insured either under the Commercial General Liability Insurance required under Article 15.1, above, or by a contractual insurance rider or other coverage; and certificates of insurance in respect thereof shall be provided by Tenant to Landlord upon request.

 

So long as Tenant is not in default under this Lease, Landlord will save Tenant, its agents and employees, harmless and will exonerate, defend and indemnify Tenant, its agents and employees, from and against any and all claims, liabilities or penalties asserted by or on behalf of any person, firm, corporation or public authority on account of or based upon any injury to person, or loss of or damage to property, sustained or occurring in or about the Building or the Complex (other than on the Premises) and caused by the negligence or misconduct of Landlord, its agents, employees or contractors.

 

15.4        Property of Tenant.  In addition to and not in limitation of the foregoing.  Tenant covenants and agrees that, to the maximum extent permitted by law, all merchandise, furniture, fixtures and property of every kind, nature and description related or arising out of

 

26

 

Tenant’s leasehold estate hereunder, which may be in or upon the Premises or Building, in the public corridors, or on the sidewalks, areaways and approaches adjacent thereto, shall be at the sole risk and hazard of Tenant, and that if the whole or any part thereof shall be damaged, destroyed, stolen or removed from any cause or reason whatsoever, no part of said damage or loss shall be charged to, or borne by, Landlord.

 

15.5        Bursting of Pipes, etc.  Landlord shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, air contaminants or emissions, electricity, electrical or electronic emanations or disturbance, water, rain or snow or leaks from any part of the Building or from the pipes, appliances, equipment or plumbing works or from the roof, street or subsurface or from any other place or caused by dampness, vandalism, malicious mischief or by any other cause of whatever nature, unless caused by or due to the negligence of Landlord, its agents, servants or employees, and then only after (i) notice to Landlord of the condition claimed to constitute negligence and (ii) the expiration of a reasonable time after such notice has been received by Landlord without Landlord having taken all reasonable and practicable means to cure or correct such condition; and pending such cure or correction by Landlord, Tenant shall take all reasonably prudent temporary measures and safeguards to prevent any injury, loss or damage to persons or property.  In no event shall Landlord be liable for any loss, the risk of which is covered by Tenant’s insurance or is required to be so covered by this Lease; nor shall Landlord or its agents be liable for any such damage caused by other tenants or persons in the Building or caused by operations in construction of any private, public, or quasi-public work; nor shall Landlord be liable for any latent defect in the Premises or in the Building.

 

15.6        Repairs and Alterations-No Diminution of Rental Value.  Except as otherwise provided in Article 18, there shall be no allowance to Tenant for diminution of rental value and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to Tenant arising from any repairs, alterations, additions, replacements or improvements made by Landlord, or any related work, Tenant or others in or to any portion of the Building or Premises or any property adjoining the Building, or in or to fixtures, appurtenances, or equipment thereof, or for failure of Landlord or others to make any repairs, alterations, additions or improvements in or to any portion of the Building, or of the Premises, or in or to the fixtures, appurtenances or equipment thereof.

 

16.                               ASSIGNMENT, MORTGAGING AND SUBLETTING

 

16.1        Generally.  (a)     Tenant covenants and agrees that neither this Lease nor the term and estate hereby granted, nor any interest herein or therein, will be assigned, sublet, mortgaged, pledged, encumbered or otherwise transferred, voluntarily, by operation of law or otherwise, and that neither the Premises, nor any part thereof will be encumbered in any manner by reason of any act or omission on the part of Tenant, or used or occupied, or permitted to be used or occupied, or utilized for desk space or for mailing privileges, by anyone other than Tenant, or for any use or purpose other than as stated in Exhibit 1, or be sublet, or offered or advertised for subletting.  Notwithstanding the foregoing, Tenant may assign or sublet (which term, without limitation, shall include the granting of any concessions, licenses, occupancy rights, management arrangements and the like) the whole or any part of the Premises with, in each instance, having first received the express, written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned.

 

27

 

(b)           Without limitation, it shall not be unreasonable for Landlord to withhold such approval from any assignment or subletting where, in Landlord’s reasonable opinion: (i) the proposed assignee or sublessee does not have a financial standing and credit rating reasonably acceptable to Landlord; (ii) the business in which the proposed assignee or sublessee is engaged could detract from the Building, its value or the costs of ownership thereof; (iii) intentionally omitted; (iv) the proposed sublessee or assignee is a current tenant or a prospective tenant (meaning such tenant, within the past six (6) months preceding the request for an assignment or sublease) has been shown or has been presented with or has made an offer to lease space) of the Building; (v) the use of the Premises by any sublessee or assignee (even though a Permitted Use) violates any use restriction granted by Landlord in any other lease or would otherwise cause Landlord to be in violation of its obligations under another lease or agreement to which Landlord is a party; (vi) if such assignment or subleasing is not approved of by the holder of any mortgage on the Building (if such approval is required); (vii) a proposed assignee’s or subtenant’s business will impose a burden on the Building’s parking facilities, elevators, common areas, facilities, or utilities that is greater than the burden imposed by Tenant, in Landlord’s reasonable judgment; (viii) any guarantor of this Lease refuses to consent to the proposed transfer or to execute a written agreement reaffirming the guaranty; (ix) Tenant is in default of any of its obligations under the Lease at the time of the request or at the time of the proposed assignment or sublease, each beyond any applicable notice or cure period; (x) if requested by Landlord, the assignee or subtenant refuses to sign a non-disturbance and attornment agreement in favor of Landlord’s lender; (xi) Landlord has sued or been sued by the proposed assignee or subtenant or has otherwise been involved in a legal dispute with the proposed assignee or subtenant; (xii) the assignee or subtenant is involved in a business which is not in keeping with the then current standards of the Building; (xiii) the assignment or sublease will result in there being more than one (1) subtenant of the Premises (e.g., the assignee or subtenant intends to use the Premises as an executive suite); or (xiv) the assignee or subtenant is a governmental or quasi-governmental entity or an agency, department or instrumentality of a governmental or quasi-governmental agency.  Landlord may condition its consent upon such assignee or sublessee depositing with Landlord such additional security as Landlord may reasonably require to assure the performance and observance of the obligations of such party to Landlord.  In no event, however, shall Tenant assign this Lease or sublet the whole or any part of the Premises to a proposed assignee or sublessee which has been judicially declared bankrupt or insolvent according to law, or with respect to which an assignment has been made of property for the benefit of creditors, or with respect to which a receiver, guardian, conservator, trustee in involuntary bankruptcy or similar officer has been appointed to take charge of all or any substantial part of the proposed assignee’s or sublessee’s property by a court of competent jurisdiction, or with respect to which a petition has been filed for reorganization under any provisions of the Bankruptcy Code now or hereafter enacted, or if a proposed assignee or sublessee has filed a petition for such reorganization, or for arrangements under any provisions of the Bankruptcy Code now or hereafter enacted and providing a plan for a debtor to settle, satisfy or extend the time for the payment of debts.

 

(c)           Any request by Tenant for such consent shall set forth or be accompanied by, in detail reasonably satisfactory to Landlord, the identification of the proposed assignee or sublessee, its financial condition and the terms on which the proposed assignment or subletting is to be made, including, without limitation, a signed copy of all assignment and sublease documents, and clearly stating the rent or any other consideration to be paid in respect thereto; and such request shall be treated as Tenant’s warranty in respect of the information submitted therewith.

 

28

 

Tenant’s request shall not be deemed complete or submitted until all of the foregoing information has been received by Landlord.  Landlord shall respond to such request for consent within thirty (30) days following Landlord’s receipt of all information, documentation and security required by Landlord with respect to such proposed sublease or assignment.  In the event Landlord fails to respond in such thirty (30) business day period, Landlord shall be deemed to have approached such request for consent; provided that there appears in bold type on the exterior of the envelope containing Tenant’s request, as well as on the top of the written request itself, the statement (in a reasonably large size font and in bold) that Landlord’s failure to respond to the written request within thirty (30) business days after receipt thereof shall be deemed approval of the within request.

 

(d)           The foregoing restrictions shall be binding on any assignee or sublessee to which Landlord has consented, provided, notwithstanding anything else contained in this Lease, Landlord’s consent to any further assignment, subleasing or any sub-subleasing by any approved assignee or sublessee may be withheld by Landlord at Landlord’s sole and absolute discretion.

 

(e)           Consent by Landlord to any assignment or subleasing shall not include consent to the assignment or transferring of any lease renewal, extension or other option, first offer, first refusal or other rights granted hereunder, or any special privileges or extra services granted to tenant by separate agreement (written or oral), or by addendum or amendment of the Lease.

 

(f)            In the case of any assignment of this Lease or subletting of the Premises, the Tenant named herein shall be and remain fully and primarily liable for the obligations of Tenant hereunder, notwithstanding such assignment or subletting, including, without limitation, the obligation to pay the Yearly Rent and other amounts provided under this Lease, and the Tenant shall be deemed to have waived all suretyship defenses.

 

(g)           In addition to the foregoing, it shall be a condition of the validity of any such assignment or subletting that the assignee or sublessee agrees directly with Landlord, in form satisfactory to Landlord, to be bound by all the obligations of Tenant hereunder, including, without limitation, the obligation to pay Yearly Rent and other amounts provided for under this Lease, the covenant regarding use and the covenant against further assignment and subletting.

 

16.2        Reimbursement, Recapture and Excess Rent.

 

(a)           Tenant shall, upon demand, reimburse Landlord for the fees and expenses (including legal and administrative fees and costs) incurred by Landlord in processing any request to assign this Lease or to sublet all or any portion of the Premises, whether or not Landlord agrees thereto, and if Tenant shall fail promptly so to reimburse Landlord, the same shall be a default in Tenant’s monetary obligations under this Lease subject to the applicable grace and cure period set forth in Article 21.

 

(b)           If Tenant requests Landlord’s consent to assign this Lease or sublet (or otherwise grant occupancy rights in and to) all or a portion of the Premises, Landlord shall have the option, exercisable by written notice to Tenant given within thirty (30) days after Landlord’s receipt of Tenant’s completed request, to terminate this Lease as of the date specified in such

 

29

 

notice, which shall not be less than thirty (30) nor more than one hundred twenty (120) days after the date of such notice, as to the entire Premises in the case of a proposed assignment or subletting of the whole Premises, and as to the portion of the Premises to be sublet in the case of a subletting of a portion.  In the event of termination in respect of a portion of the Premises, the portion so eliminated shall be delivered to Landlord on the date specified in good order and condition in the manner provided in this Lease at the end of the Term and thereafter, to the extent necessary in Landlord’s judgment, Landlord, at its own cost and expense, may have access to and may make modification to the Premises (or portion thereof) so as to make such portion a self-contained rental unit with access to common areas, elevators and the like.  Yearly Rent and the Total Rentable Area of the Premises shall be adjusted according to the extent of the Premises for which the Lease is terminated.

 

(c)           Without limitation of the rights of Landlord hereunder in respect thereto, if there is any assignment of this Lease by Tenant for consideration or a subletting of the whole of the Premises by Tenant at a rent which exceeds the rent payable hereunder by Tenant, or if there is a subletting of a portion of the Premises by Tenant at a rent in excess of the subleased portion’s pro rata share of the rent payable hereunder by Tenant, then Tenant shall pay to Landlord, as additional rent, forthwith upon Tenant’s receipt of in the case of an assignment, one-half (1/2) of all of the consideration (or the cash equivalent thereof) therefor which exceeds the rent payable hereunder by Tenant and in the case of a subletting, one-half (1/2) of all of any such excess rent.  For the purposes of this subsection, the term “rent” shall mean all Yearly Rent, additional rent or other payments and/or consideration payable by one party to another for the use and occupancy of all or a portion of the Premises including, without limitation, key money, or bonus money paid by the assignee or subtenant to Tenant in connection with such transaction and any payment in excess of fair market value for services rendered by Tenant to the assignee or subtenant or for assets, fixtures, inventory, equipment or furniture transferred by Tenant to the assignee or subtenant in connection with any such transaction, but shall exclude any separate payments by Tenant for reasonable attorney’s fees and broker’s commissions in connection with such assignment or subletting and leasehold improvements paid for by Tenant in connection with such assignment or subletting.

 

(d)           If the Premises or any part thereof are sublet by Tenant, following the occurrence of a default which has continued beyond the applicable cure period, Landlord, in addition to any other remedies provided hereunder or at law, may at its option collect directly from such sublessee(s) all rents becoming due to the Tenant under such sublease(s) and apply such rent against any amounts due Landlord by Tenant under this Lease, and Tenant hereby irrevocably authorizes and directs such sublessee(s) to so make all such rent payments, if so directed by Landlord; and it is understood that no such election or collection or payment shall be construed to constitute a novation of this Lease or a release of Tenant hereunder, or to create any lease or occupancy agreement between the Landlord and such subtenant or impose any obligations on Landlord, or otherwise constitute the recognition of such sublease by Landlord for any purpose whatsoever.

 

(e)           The following terms and conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

 

30

 

Tenant hereby absolutely and unconditionally assigns and transfers to Landlord all of Tenant’s interest in all rentals and income arising from any sublease entered into by Tenant, and Landlord may collect such rent and income and apply same toward Tenant’s obligations under this Lease; provided, however, that until a default occurs in the performance of Tenant’s obligations under this Lease, Tenant may receive, collect and enjoy the rents accruing under such sublease.  Landlord shall not, by reason of this or any other assignment of such rents to Landlord nor by reason of the collection of the rents from a subtenant, be deemed to have assumed or recognized any sublease or to be liable to the subtenant for any failure of Tenant to perform and comply with any of Tenant’s obligations to such subtenant under such sublease, including, but not limited to, Tenant’s obligation to return any security deposit.  Tenant hereby irrevocably authorizes and directs any such subtenant, upon receipt of a written notice from Landlord stating that a default exists in the performance of Tenant’s obligations under this Lease, to pay to Landlord the rents due as they become due under the sublease.  Tenant agrees that such subtenant shall have the right to rely upon any such statement and request from Landlord, and that such subtenant shall pay such rents to Landlord without any obligation or right to inquire as to whether such default exists and notwithstanding any notice from or claim from Tenant to the contrary.  In the event Tenant shall default in the performance of its obligations under this Lease or Landlord terminates this Lease by reason of a default of Tenant, Landlord at its option and without any obligation to do so, may require any subtenant to attorn to Landlord, in which event Landlord shall undertake the obligations of Tenant under such sublease from the time of the exercise of said option to the termination of such sublease; provided, however, Landlord shall not be liable for any prepaid rents or security deposit paid by such subtenant to Tenant or for any other prior defaults of Tenant under such sublease.

 

16.3        Certain Transfers/Miscellaneous.

 

Notwithstanding any other provision of this Article 16, transactions with an entity (each an “Assignee”) (i) into or with which Tenant is merged or consolidated, (ii) to which substantially all of Tenant’s assets are transferred as a going concern, or (iii) which controls or is controlled by Tenant or is under common control with Tenant, shall not be deemed to be an assignment or subletting within the meaning of this Article, provided that in any of such events (1) Landlord receives prior written notice of any such transactions, (2) the assignee or subtenant agrees directly with Landlord, by written instrument in form satisfactory to Landlord, to be bound by all the obligations of Tenant hereunder including, without limitation, the covenant against further assignment and subletting, (3) in no event shall Tenant be released from its obligations under this Lease, (4) any such transfer or transaction is for a legitimate, regular business purpose of Tenant other than a transfer of Tenant’s interest in this Lease, and (5) the involvement by Tenant or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, refinancing, transfer, leveraged buy-out or otherwise) whether or not a formal assignment or hypothecation of this Lease or Tenant’s assets occurs, will not result in a reduction of the “Net Worth” of Tenant as hereinafter defined, by an amount equal to such Net Worth of Tenant as it is represented to Landlord at the time of the execution by Landlord of this Lease, or as it exists immediately prior to said transaction or transactions constituting such reduction, at whichever time said Net Worth of Tenant was or is greater.  “Net Worth” of Tenant for purposes of this section shall be the net worth and liquidity of Tenant (excluding any guarantors) established under generally accepted accounting principles consistently applied.  In addition, the public offering of shares or other ownership interest in Tenant or any private equity financing of Tenant shall not be

 

31

 

deemed an assignment within the meaning of this Article requiring prior consent of Landlord provided Tenant complies with the provisions of subparagraphs (1), (3), (4) and (5) above.

 

If Tenant is an individual who uses and/or occupies the Premises with partners, or if Tenant is a partnership, then:

 

(i)            Each present and future partner shall be personally bound by and upon all of the covenants, agreements, terms, provisions and conditions set forth in this Lease on the part of Tenant to be performed; and

 

(ii)           In confirmation of the foregoing, Landlord may (but without being required to do so) request (and Tenant shall duly comply) that Tenant, at the time that Tenant admits any new partner to its partnership, shall require each such new partner to execute an agreement in form and substance satisfactory to Landlord whereby such new partner shall agree to be personally bound by and upon all of the covenants, agreements, terms, provisions and conditions of this Lease on the part of Tenant to be performed, without regard to the time when such new partner is admitted to partnership or when any obligations under any such covenants, etc., accrue.

 

The listing of any name other than that of Tenant, whether on the doors of the Premises or on the Building directory, or otherwise, shall not operate to vest in any such other person, firm or corporation any right or interest in this Lease or in the Premises or be deemed to effect or evidence any consent of Landlord, it being expressly understood that any such listing is a privilege extended by Landlord revocable at will by written notice to Tenant.

 

If this Lease be assigned, or if the Premises or any part thereof be sublet or occupied by anybody other than Tenant, Landlord may, at any time and from time to time, collect rent and other charges from the assignee, subtenant or occupant, and apply the net amount collected to the rent and other charges herein reserved then due and thereafter becoming due, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, subtenant or occupant as a tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained.  Any consent by Landlord to a particular assignment or subletting shall not in any way diminish the prohibition stated in the first sentence of this Article 16 or the continuing liability of the Tenant named on Exhibit 1 as the party Tenant under this Lease.  No assignment or subletting shall affect the purpose for which the Premises may be used as stated in Exhibit 1.

 

17.                               MISCELLANEOUS COVENANTS

 

Tenant covenants and agrees as follows:

 

17.1        Rules and Regulations.  Tenant will faithfully observe and comply with the Rules and Regulations, if any, annexed hereto and such other and further reasonable Rules and Regulations as Landlord hereafter at any time or from time to time may make and may communicate in writing to Tenant, which in the reasonable judgment of Landlord shall be necessary for the reputation, safety, care or appearance of the Building, or the preservation of good order therein, or the operation or maintenance of the Building, or the equipment thereof, or the

 

32

 

comfort of tenants or others in the Building, provided, however, that in the case of any conflict between the provisions of this Lease and any such regulations, the provisions of this Lease shall control, and provided further that nothing contained in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations or the terms, covenants or conditions in any other lease as against any other tenant and Landlord shall not be liable to Tenant for violation of the same by any other tenant or such other tenant’s servants, employees, agents, contractors, visitors, invitees or licensees.

 

17.2        Access to Premises-Shoring.  Tenant shall: (i) permit Landlord to erect, use and maintain pipes, ducts and conduits in and through the Premises, provided the same do not materially reduce the floor area or materially adversely affect the appearance thereof; (ii) upon prior oral notice (except that no notice shall be required in emergency situations), permit Landlord and any mortgagee of the Building or the Building and land or of the interest of Landlord therein, and any lessor under any ground or underlying lease, and their representatives, to have free and unrestricted access to and to enter upon the Premises at all reasonable hours for the purposes of inspection or of making repairs, replacements or improvements in or to the Premises or the Building or equipment (including, without limitation, sanitary, electrical, heating, air conditioning or other systems) or of complying with all laws, orders and requirements of governmental or other authority or of exercising any right reserved to Landlord by this Lease (including the right during the progress of any such repairs, replacements or improvements or while performing work and furnishing materials in connection with compliance with any such laws, orders or requirements to take upon or through, or to keep and store within, the Premises all necessary materials, tools and equipment); and (iii) permit Landlord, at reasonable times, to show the Premises during ordinary business hours to any existing or prospective mortgagee, ground lessor, space lessee, purchaser, or assignee of any mortgage, of the Building or of the Building and the land or of the interest of Landlord therein, and during the period of twelve (12) months next preceding the Termination Date to any person contemplating the leasing of the Premises or any part thereof.  If, during the last month of the term, Tenant shall have removed all or substantially all of Tenant’s property therefrom, Landlord may immediately enter and alter, renovate and redecorate the Premises, without elimination or abatement of rent, or incurring liability to Tenant for any compensation, and such acts shall have no effect upon this Lease.  If Tenant shall not be personally present to open and permit an entry into the Premises at any time when for any reason an entry therein shall be necessary or permissible, Landlord or Landlord’s agents may enter the same by a master key, or may forcibly enter the same, without rendering Landlord or such agents liable therefor (if during such entry Landlord or Landlord’s agents shall accord reasonable care to Tenant’s property), and without in any manner affecting the obligations and covenants of this Lease.  Provided that Landlord shall incur no additional expense thereby, Landlord shall exercise its rights of access to the Premises permitted under any of the terms and provisions of this Lease in such manner as to minimize to the extent practicable interference with Tenant’s use and occupation of the Premises.  If an excavation shall be made upon land adjacent to the Premises or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the Premises for the purpose of doing such work as said person shall deem necessary to preserve the Building from injury or damage and to support the same by proper foundations without any claims for damages or indemnity against Landlord, or diminution or abatement of rent.

 

33

 

17.3        Accidents to Sanitary and Other Systems.  Tenant shall give to Landlord prompt notice of any fire or accident in the Premises or in the Building and of any damage to, or defective condition in, any part or appurtenance of the Building including, without limitation, sanitary, electrical, ventilation, heating and air conditioning or other systems located in, or passing through, the Premises.  Except as otherwise provided in Articles 18 and 20, and subject to Tenant’s obligations in Article 14, such damage or defective condition shall be remedied by Landlord with reasonable diligence, but if such damage or defective condition was caused by Tenant or by the employees, licensees, contractors or invitees of Tenant, the cost to remedy the same shall be paid by Tenant.  In addition, all reasonable costs incurred by Landlord in connection with the investigation of any notice given by Tenant shall be paid by Tenant if the reported damage or defective condition was caused by Tenant or by the employees, licensees, contractors, or invitees of Tenant.  Tenant shall not be entitled to claim any eviction from the Premises or any damages arising from any such damage or defect unless the same (i) shall have been occasioned by the negligence of the Landlord, its agents, servants or employees and (ii) shall not, after notice to Landlord of the condition claimed to constitute negligence, have been cured or corrected within a reasonable time after such notice has been received by Landlord; and in case of a claim of eviction unless such damage or defective condition shall have rendered the Premises untenantable and they shall not have been made tenantable by Landlord within a reasonable time.

 

17.4        Signs, Blinds and Drapes.  Tenant shall put no signs in any part of the Building except, at Tenant’s sole cost and subject to Landlord’s prior reasonable approval, on the entrance to the Premises.  No signs or blinds may be put on or in any window or elsewhere if visible from the exterior of the Building, nor may the building standard drapes or blinds be removed by Tenant.  Landlord shall provide, at its cost, Building standard signage on all tenant directories within the Complex including the three (3) exterior kiosks located at the pedestrian level entries to the Complex and the Garage and elevator lobby directories for the Building.  Tenant may hang its own drapes, provided that they shall not in any way interfere with the building standard drapery or blinds or be visible from the exterior of the Building and that such drapes are so hung and installed that when drawn, the building standard drapery or blinds are automatically also drawn.  Any signs or lettering in the public corridors or on the doors shall conform to Landlord’s building standard design.  Neither Landlord’s name, nor the name of the Building or Complex of which the Building is a part, or the name of any other structure erected therein shall be used without Landlord’s consent in any advertising material (except on business stationery or as an address in advertising matter), nor shall any such name, as aforesaid, be used in any undignified, confusing, detrimental or misleading manner.

 

17.5        Estoppel Certificate and Financial Statements.  Tenant shall at any time and from time to time upon not less than ten (10) days’ prior notice by Landlord to Tenant, execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as modified and stating the modifications), and the dates to which the Yearly Rent and other charges have been paid in advance, if any, stating whether or not Landlord is in default in performance of any covenant, agreement, term, provision or condition contained in this Lease and, if so, specifying each such default and such other facts as Landlord may reasonably request, it being intended that any such statement delivered pursuant hereto may be relied upon by any prospective purchaser of the Building or of the Building and the land or of any interest of Landlord therein, any mortgagee or prospective mortgagee thereof, any lessor or prospective lessor thereof,

 

34

 

any lessee or prospective lessee thereof, or any prospective assignee of any mortgage thereof.  Time is of the essence in respect of any such requested certificate, Tenant hereby acknowledging the importance of such certificates in mortgage financing arrangements, prospective sale and the like.  Tenant hereby appoints Landlord Tenant’s attorney-in-fact in its name and behalf to execute such statement if Tenant shall fail to execute such statement within such ten (10) day period.  Within 120 days after the end of Tenant’s fiscal years during the term of this Lease, Tenant agrees to furnish to Landlord copies of Tenant’s most recent annual, quarterly and monthly financial statements, audited if available (if such audited financial statement is not available, such financial statement may be certified by an officer (vice president or higher) of Tenant).  The financial statements shall be prepared in accordance with generally accepted accounting principles, consistently applied.  The financial statements shall include a balance sheet and a statement of profit and loss, and the annual financial statement shall also include a statement of changes in financial position and appropriate explanatory notes.  Landlord may deliver the financial statements to any prospective or existing mortgagee or purchaser of the Building and/or Complex provided that such entities are advised to maintain the confidential nature of such financial statements.

 

17.6        Prohibited Materials and Property.  Except as provided in Section 29.11 of this Lease, Tenant shall not bring or permit to be brought or kept in or on the Premises or elsewhere in the Building (i) any inflammable, combustible or explosive fluid, material, chemical or substance including, without limitation, any hazardous substances as defined under Massachusetts General Laws chapter 21E, the Federal Comprehensive Environmental Response Compensation and Liability Act (CERCLA), 42 USC ·9601 et seq., as amended, under Section 3001 of the Federal Resource Conservation and Recovery Act of 1976, as amended, or under any regulation of any governmental authority regulating environmental or health matters (except for standard office supplies stored in proper containers), (ii) any materials, appliances or equipment (including, without limitation, materials, appliances and equipment selected by Tenant for the construction or other preparation of the Premises and furniture and carpeting) which pose any danger to life, safety or health or may cause damage, injury or death; (iii) any unique, unusually valuable, rare or exotic property, work of art or the like unless the same is fully insured under all-risk coverage, or (iv) any data processing, electronic, optical or other equipment or property of a delicate, fragile or vulnerable nature unless the same are housed, shielded and protected against harm and damage, whether by cleaning or maintenance personnel, radiations or emanations from other equipment now or hereafter installed in the Building, or otherwise.  Nor shall Tenant cause or permit any potentially harmful air emissions, odors of cooking or other processes, or any unusual or other objectionable odors or emissions to emanate from or permeate the Premises.

 

17.7        Requirements of Law-Fines and Penalties.  Tenant at its sole expense shall comply with all laws, rules, orders and regulations, including, without limitation, all energy-related requirements, of Federal, State, County and Municipal Authorities and with any direction of any public officer or officers, pursuant to law, which shall impose any duty upon Landlord or Tenant with respect to or arising out of Tenant’s use or occupancy of the Premises.  Tenant shall reimburse and compensate Landlord for all expenditures made by, or damages or fines sustained or incurred by, Landlord due to nonperformance or noncompliance with or breach or failure to observe any item, covenant, or condition of this Lease upon Tenant’s part to be kept, observed, performed or complied with.  If Tenant receives notice of any violation of law,

 

35

 

ordinance, order or regulation applicable to the Premises, it shall give prompt notice thereof to Landlord.

 

17.8        Tenant’s Acts—Effect on Insurance.  Tenant shall not do or permit to be done any act or thing upon the Premises or elsewhere in the Building which will invalidate or be in conflict with any insurance policies covering the Building and the fixtures and property therein; and shall not do, or permit to be done, any act or thing upon the Premises which shall subject Landlord to any liability or responsibility for injury to any person or persons or to property by reason of any business or operation being carried on upon said Premises or for any other reason.  Landlord hereby acknowledges that, to the best of its knowledge and based upon the list of Hazardous Materials provided by Tenant prior to execution of this Lease, Tenant’s use of the Premises for laboratory and office use in compliance with its obligations under this Lease and in compliance with all applicable laws and regulations shall not invalidate or be in conflict with any insurance policies covering the Building and the fixtures and property therein.  Tenant at its own expense shall comply with all rules, orders, regulations and requirements of the Board of Fire Underwriters, or any other similar body having jurisdiction, and shall not (i) do, or permit anything to be done, in or upon the Premises, or bring or keep anything therein, except as now or hereafter permitted by the Fire Department, Board of Underwriters, Fire Insurance Rating Organization, or other authority having jurisdiction, and then only in such quantity and manner of storage as will not increase the rate for any insurance applicable to the Building, or (ii) use the Premises in a manner which shall increase such insurance rates on the Building, or on property located therein, over that applicable when Tenant first took occupancy of the Premises hereunder.  If by reason of the failure of Tenant to comply with the provisions hereof the insurance rate applicable to any policy of insurance shall at any time thereafter be higher than it otherwise would be, the Tenant shall reimburse Landlord for that part of any insurance premiums thereafter paid by Landlord, which shall have been charged because of such failure by Tenant.

 

17.9        Miscellaneous.  Tenant shall not suffer or permit the Premises or any fixtures, equipment or utilities therein or serving the same, to be overloaded, damaged or defaced, nor permit any hole to be drilled or made in any part thereof.  Tenant shall not suffer or permit any employee, contractor, business invitee or visitor to violate any covenant, agreement or obligations of the Tenant under this Lease.

 

18.                               DAMAGE BY FIRE, ETC.

 

(a)           If the Premises or the Building are damaged in whole or in part by any fire or other casualty (a “casualty”), the Tenant shall immediately give notice thereof to the Landlord.  Unless this Lease is terminated as provided herein, the Landlord, at its own expense (except for any insurance deductibles, which shall be deemed Operating Costs), and proceeding with due diligence and all reasonable dispatch, but subject to delays beyond the reasonable control of Landlord, shall repair and reconstruct the same so as to restore the Premises (but not any alterations or additions made by or for Tenant or any trade fixtures, equipment or personal property of Tenant except for Tenant’s Improvements) to substantially the same condition they were in prior to the casualty, subject to zoning, building and other laws then in effect.  Notwithstanding the foregoing, in no event shall Landlord be obligated either to repair or rebuild if the damage or destruction results from an uninsured casualty or if the costs of such repairing or rebuilding exceeds the amount of the insurance proceeds (net of all costs and expenses incurred in

 

36

 

obtaining same) received by Landlord on account thereof.  Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting from delays in repairing such damage.

 

(b)           Landlord shall, within forty-five (45) days after the occurrence of a casualty, provide Tenant with a good faith estimate of the time required to repair the damage to the Premises or the Building, as provided herein; if such estimate is for a period of more than two hundred seventy (270) days from the occurrence of the casualty (or during the last eighteen (18) months of the term, for a period of more than ninety (90) days), the Premises shall be deemed “substantially damaged”.  If the Premises or the Building are substantially damaged, Landlord may elect to terminate this Lease by giving Tenant written notice of such termination within sixty (60) days of the date of such casualty; and if the Premises or the Building are substantially damaged, and if as a result the Premises are rendered completely untenantable or inaccessible for the uses permitted under this Lease, then Tenant may terminate this Lease by giving Landlord written notice of such termination within sixty (60) days of the date of such casualty.  Landlord shall not have the right to terminate this Lease as provided in this subsection (b) unless all similarly affected tenants are also terminated by Landlord.

 

(c)           For so long as such damage results in material interference with the operation of Tenant’s use of the Premises which material interference causes Tenant to be unable to use the Premises, the Yearly Rent payable by Tenant shall abate or be reduced proportionately for the period, commencing on the day following such material interference and continuing until the Premises has been substantially restored.  Notwithstanding the foregoing, if such casualty was due to the fault or neglect of Tenant or Tenant’s employees, contractors, invitees or agents, such abatement or reduction shall be made only if and to the extent of any proceeds of rental interruption insurance actually received by Landlord and allocated to the Premises.

 

(d)           If the Premises are damaged by a casualty, and the Lease is not terminated as provided herein, the Tenant, at its own expense, and proceeding with all reasonable dispatch, shall repair and reconstruct all of the improvements, alterations and additions made to the Premises by or for Tenant, including and any trade fixtures, equipment or personal property of Tenant which shall have been damaged or destroyed (other than Tenant’s Improvements).

 

Any dispute between the parties relating to the provisions or obligations in this Article 18 shall be submitted to arbitration pursuant to Article 29.5 hereof.

 

19.                               WAIVER OF SUBROGATION

 

In any case in which Tenant shall be obligated to pay to Landlord any loss, cost, damage, liability, or expense suffered or incurred by Landlord, Landlord shall allow to Tenant as an offset against the amount thereof (i) the net proceeds of any insurance collected by Landlord for or on account of such loss, cost, damage, liability or expense, provided that the allowance of such offset does not invalidate or prejudice the policy or policies under which such proceeds were payable, and (ii) if such loss, cost, damage, liability or expense shall have been caused by a peril against which Landlord has agreed to procure insurance coverage under the terms of this Lease, the amount of such insurance coverage, whether or not actually procured by Landlord.

 

37

 

In any case in which Landlord or Landlord’s managing agent shall be obligated to pay to Tenant any loss, cost, damage, liability or expense suffered or incurred by Tenant, Tenant shall allow to Landlord or Landlord’s managing agent, as the case may be, as an offset against the amount thereof (i) the net proceeds of any insurance collected by Tenant for or on account of such loss, cost, damage, liability, or expense, provided that the allowance of such offset does not invalidate the policy or policies under which such proceeds were payable and (ii) the amount of any loss, cost, damage, liability or expense caused by a peril covered by fire insurance with the broadest form of property insurance generally available on property in buildings of the type of the Building, whether or not actually procured by Tenant.

 

The parties hereto shall each procure an appropriate clause in, or endorsement on, any property insurance policy covering the Premises and the Building and personal property, fixtures and equipment located thereon and therein, pursuant to which the insurance companies waive subrogation or consent to a waiver of right of recovery in favor of either party, its respective agents or employees.  Having obtained such clauses and/or endorsements, each party hereby agrees that it will not make any claim against or seek to recover from the other or its agents or employees for any loss or damage to its property or the property of others resulting from fire or other perils covered by such property insurance.

 

20.                               CONDEMNATION-EMINENT DOMAIN

 

(a)           In the event of any condemnation or taking in any manner for public or quasi-public use, which shall be deemed to include a voluntary conveyance in lieu of a taking (a “taking”) of the whole of the Building, this Lease shall forthwith terminate as of the date when Tenant is required to vacate the Premises.

 

(b)           Unless this Lease is terminated as provided herein, the Landlord, at its own expense, and proceeding with due diligence and all reasonable dispatch, but subject to delays beyond the reasonable control of Landlord, shall restore the remaining portion of the Premises (but not any alterations or improvements made by or for Tenant, but including Tenant’s Improvements, or any trade fixtures, equipment or personal property of Tenant) and the necessary portions of the Building as nearly as practicable to the same condition as it was prior to such taking, subject to zoning and building laws then in effect.  Notwithstanding the foregoing, Landlord’s obligation to restore the remaining portion of the Premises shall be limited to the extent of the condemnation proceeds (net of all costs and expenses incurred in connection with same) received by Landlord on account thereof.  Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting from delays in restoring the Premises.

 

(c)           In the event that only a part of the Premises or the Building shall be taken, then, if such taking is a substantial taking (as hereinafter defined), either Landlord or Tenant may by delivery of notice in writing to the other within sixty (60) days following the date on which Landlord’s title has been divested by such authority, terminate this Lease, effective as of the date when Tenant is required to vacate any portion of the Premises or appurtenant rights.  A “substantial taking” shall mean a taking which: requires restoration and repair of the remaining portion of the Building that cannot in the ordinary course be reasonably expected to be repaired within one hundred eighty (180) days; results in the loss of reasonable access to the Premises or

 

38

 

results in the loss of more than twenty-five percent (25%) of the rentable floor area of the Premises.

 

(d)           If this Lease is not terminated as aforesaid, then this Lease shall continue in full force and effect, provided if as a result of which there is material interference with the operation of Tenant’s use of the Premises, then the Yearly Rent and additional rent payable by Tenant shall be justly and equitably abated and reduced according to the nature and extent of the loss of use thereof suffered by Tenant.

 

(e)           Landlord shall have and hereby reserves and excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover for damages to the Building, the Complex, and the leasehold interest hereby created (including any award made for the value of the estate vested by this Lease in Tenant), and to compensation accrued or hereafter to accrue by reason of such taking, and by way of confirming the foregoing, Tenant hereby grants and assigns, and covenants with Landlord to grant and assign, to Landlord all rights to such damages of compensation.  Nothing contained herein shall be construed to prevent Tenant from prosecuting in any condemnation proceedings a separate claim for the value of any of Tenant’s personal property and for relocation expenses and business losses, provided that such action shall not affect the amount of compensation otherwise recoverable by Landlord from the taking authority.

 

Any dispute between the parties relating to the provisions or obligations in this Article 20 shall be submitted to arbitration pursuant to Article 29.5 hereof.

 

21.                               DEFAULT

 

21.1        Conditions of Limitation-Re-Entry-Termination.  This Lease and the herein term and estate are, upon the condition that if (a) subject to Article 21.7, Tenant shall neglect or fail to perform or observe any of the Tenant’s covenants or agreements herein, including (without limitation) the covenants or agreements with regard to the payment when due of rent, additional charges, reimbursement for increase in Landlord’s costs, or any other charge payable by Tenant to Landlord (all of which shall be considered as part of Yearly Rent for the purposes of invoking Landlord’s statutory or other rights and remedies in respect of payment defaults); or (b) Tenant shall vacate, desert or abandon the Premises or the same shall become, or shall appear to have become, vacant (whether or not the keys shall have been surrendered or the rent shall have been paid); or (c) Tenant shall be involved in financial difficulties as evidenced by an admission in writing by Tenant of Tenant’s inability to pay its debts generally as they become due, or by the making or offering to make a composition of its debts with its creditors; or (d) Tenant shall make an assignment or trust mortgage, or other conveyance or transfer of like nature, of all or a substantial part of its property for the benefit of its creditors, or (e) an attachment on mesne process, on execution or otherwise, or other legal process shall issue against Tenant or its property and a sale of any of its assets shall be held thereunder; or (f) any judgment of $50,000 or more, final beyond appeal or any lien, attachment or the like shall be entered, recorded or filed against Tenant in any court, registry, etc. and Tenant shall fail to pay such judgment within thirty (30) days after the judgment shall have become final beyond appeal or to discharge or secure by surety bond such lien, attachment, etc. within thirty (30) days of such entry, recording or filing, as the case may be; or (g) the leasehold hereby created shall be taken on execution or by other process of law and shall not be revested in Tenant within thirty (30) days thereafter; or (h) a receiver, sequesterer,

 

39

 

trustee or similar officer shall be appointed by a court of competent jurisdiction to take charge of all or any part of Tenant’s property and such appointment shall not be vacated within thirty (30) days; or (i) any proceeding shall be instituted by or against Tenant pursuant to any of the provisions of any Act of Congress or State law relating to bankruptcy, reorganizations, arrangements, compositions or other relief from creditors, and, in the case of any proceeding instituted against it, if Tenant shall fail to have such proceedings dismissed within thirty (30) days or if Tenant is adjudged bankrupt or insolvent as a result of any such proceeding, or (j) any event shall occur or any contingency shall arise whereby this Lease, or the term and estate thereby created, would (by operation of law or otherwise) devolve upon or pass to any person, firm or corporation other than Tenant, except as expressly permitted under Article 16 hereof - then, and in any such event Landlord may, by notice to Tenant, elect to terminate this Lease; and thereupon (and without prejudice to any remedies which might otherwise be available for arrears of rent or other charges due hereunder or preceding breach of covenant or agreement and without prejudice to Tenant’s liability for damages as hereinafter stated), upon the giving of such notice, this Lease shall terminate as of the date specified therein as though that were the Termination Date as stated in Section 3.2.  Without being taken or deemed to be guilty of any manner of trespass or conversion, and without being liable to indictment, prosecution or damages therefor, Landlord may, forcibly if necessary, enter into and upon the Premises (or any part thereof in the name of the whole); repossess the same as of its former estate; and expel Tenant and those claiming under Tenant.  Wherever “Tenant” is used in subdivisions (c), (d), (e), (f), (g), (h) and (i) of this Article 21.1, it shall be deemed to include any one of (i) any corporation of which Tenant is a controlled subsidiary and (ii) any guarantor of any of Tenant’s obligations under this Lease.  The words “re-entry” and “re-enter” as used in this Lease are not restricted to their technical legal meanings.

 

21.2        Intentionally Omitted.

 

21.3        Damages-Termination.  Upon the termination of this Lease under the provisions of this Article 21, Tenant shall pay to Landlord the rent and other charges payable by Tenant to Landlord up to the time of such termination, shall continue to be liable for any preceding breach of covenant, and in addition, shall pay to Landlord as damages, at the election of Landlord

 

either:

 

(x)           the amount by which, at the time of the termination of this Lease (or at any time thereafter if Landlord shall have initially elected damages under subparagraph (y), below), (i) the aggregate of the rent and other charges projected over the period commencing with such termination and ending on the Termination Date as stated in Exhibit 1 exceeds (ii) the aggregate projected fair market rental value of the Premises for such period;

 

or:

 

(y)           amounts equal to the rent and other charges which would have been payable by Tenant had this Lease not been so terminated, payable upon the due dates therefor specified herein following such termination and until the Termination Date as specified in Exhibit 1, provided, however, if Landlord shall re-let the Premises during such period, that Landlord shall credit Tenant with the net rents received by Landlord from such re-letting, such net rents to be determined by first deducting from the gross rents as and when received by Landlord from such

 

40

 

re-letting the expenses incurred or paid by Landlord in terminating this Lease, as well as the expenses of re-letting, including altering and preparing the Premises for new tenants, brokers’ commissions, and all other similar and dissimilar expenses properly chargeable against the Premises and the rental therefrom, it being understood that any such re-letting may be for a period equal to or shorter or longer than the remaining term of this Lease; and provided, further, that (i) in no event shall Tenant be entitled to receive any excess of such net rents over the sums payable by Tenant to Landlord hereunder and (ii) in no event shall Tenant be entitled in any suit for the collection of damages pursuant to this Subparagraph (y) to a credit in respect of any net rents from a re-letting except to the extent that such net rents are actually received by Landlord prior to the commencement of such suit.  If the Premises or any part thereof should be re-let in combination with other space, then proper apportionment on a square foot area basis shall be made of the rent received from such re-letting and of the expenses of re-letting.

 

In calculating the rent and other charges under Subparagraph (x), above, there shall be included, in addition to the Yearly Rent, Tax Share and Operating Expense Share and all other considerations agreed to be paid or performed by Tenant, on the assumption that all such amounts and considerations would have remained constant (except as herein otherwise provided) for the balance of the full term hereby granted.

 

Suit or suits for the recovery of such damages, or any installments thereof, may be brought by Landlord from time to time at its election, and nothing contained herein shall be deemed to require Landlord to postpone suit until the date when the term of this Lease would have expired if it had not been terminated hereunder.

 

Nothing herein contained shall be construed as limiting or precluding the recovery by Landlord against Tenant of any sums or damages to which, in addition to the damages particularly provided above, Landlord may lawfully be entitled by reason of any default hereunder on the part of Tenant.  Notwithstanding anything to the contrary, Landlord shall be entitled to recover, in addition to the rent and other charges under Subparagraph (x) or (y) above, any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant’s failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, the cost of recovering possession of the Premises, reasonable attorneys’ fees, any real estate commissions actually paid by Landlord and the unamortized value of any free rent, reduced rent, tenant improvement allowance or other economic concessions provided by Landlord.

 

21.4        Fees and Expenses.

 

(a)           If Tenant shall default in the performance of any covenant on Tenant’s part to be performed as in this Lease contained, Landlord may immediately, or at any time thereafter, without notice, perform the same for the account of Tenant.  If Landlord at any time is compelled to pay or elects to pay any sum of money, or do any act which will require the payment of any sum of money, by reason of the failure of Tenant to comply with any provision hereof, or if Landlord is compelled to or does incur any expense, including reasonable attorneys’ fees, in instituting, prosecuting, and/or defending any action or proceeding instituted by reason of any default of Tenant hereunder, Tenant shall on demand pay to Landlord by way of reimbursement the sum or

 

41

 

sums so paid by Landlord with all costs and damages, plus interest computed as provided in Article 6 hereof.

 

(b)           Tenant shall pay Landlord’s cost and expense, including reasonable attorneys’ fees, incurred (i) in enforcing any obligation of Tenant under this Lease or (ii) as a result of Landlord, without its fault, being made party to any litigation pending by or against Tenant or any persons claiming through or under Tenant.

 

21.5        Waiver of Redemption.  Tenant does hereby waive and surrender all rights and privileges which it might have under or by reason of any present or future law to redeem the Premises or to have a continuance of this Lease for the term hereby demised after being dispossessed or ejected therefrom by process of law or under the terms of this Lease or after the termination of this Lease as herein provided.

 

21.6        Landlord’s Remedies Not Exclusive.  The specified remedies to which Landlord may resort hereunder are cumulative and are not intended to be exclusive of any remedies or means of redress to which Landlord may at any time be lawfully entitled, and Landlord may invoke any remedy (including the remedy of specific performance) allowed at law or in equity as if specific remedies were not herein provided for.

 

21.7        Grace Period.  Notwithstanding anything to the contrary in this Article contained, Landlord agrees not to take any action to terminate this Lease (a) for default by Tenant in the payment when due of any sum of money, if Tenant shall cure such default within five (5) days after written notice thereof is given by Landlord to Tenant, provided, however, that no such notice need be given and no such default in the payment of money shall be curable if on two (2) prior occasions within any one (1) year period there had been a default in the payment of money which had been cured after notice thereof had been given by Landlord to Tenant as herein provided or (b) for default by Tenant in the performance of any covenant other than a covenant to pay a sum of money, if Tenant shall cure such default within a period of thirty (30) days after written notice thereof given by Landlord to Tenant (the “Non-Monetary Grace Period”) (except where the nature of the default is such that remedial action should appropriately take place sooner, as indicated in such written notice), or within such additional period as may reasonably be required to cure such default if (because of governmental restrictions or any other cause beyond the reasonable control of Tenant) the default is of such a nature that it cannot be cured within such thirty (30) day period, provided, however, (1) that there shall be no extension of time beyond such thirty (30) day period for the curing of any such default unless, not more than ten (10) days after the receipt of the notice of default, Tenant in writing (i) shall specify the cause on account of which the default cannot be cured during such period and shall advise Landlord of its intention duly to institute all steps necessary to cure the default and (ii) shall, as soon as reasonably practicable, duly institute and thereafter diligently prosecute to completion all steps necessary to cure such default and, (2) that no notice of the opportunity to cure a default need be given, and no grace period whatsoever shall be allowed to Tenant, if the default is incurable or if the covenant or condition the breach of which gave rise to default had, by reason of a breach on a prior occasion, been the subject of a notice hereunder to cure such default.  Notwithstanding the foregoing, Tenant shall have no right to notice or the Non-Monetary Grace Period relating to its failure to (v) maintain all insurance as required in Article 15 above; (w) deliver to Landlord the Security Deposit as required by Section 29.13 below; (x) provide Landlord with Estoppel Certificates as required pursuant to Section 17.5

 

42

 

above; (y) provide Landlord with subordination agreements as required pursuant to Article 23 below; or (z) provide Landlord with the certificates of insurance required pursuant to Article 15 above.

 

Notwithstanding anything to the contrary in this Article 21.7 contained, except to the extent prohibited by applicable law, any statutory notice and grace periods provided to Tenant by law are hereby expressly waived by Tenant.

 

22.                               END OF TERM-ABANDONED PROPERTY

 

Upon the expiration or other termination of the term of this Lease, Tenant shall peaceably quit and surrender to Landlord the Premises and all alterations and additions thereto, broom clean, in good order, repair and condition (except as provided herein and in Articles 8.7, 18 and 20) excepting only ordinary wear and use (as defined in Article 14.1 hereof) and damage by fire or other casualty for which, under other provisions of this Lease, Tenant has no responsibility of repair or restoration.  Tenant shall remove all of its property, including, without limitation, all telecommunication, computer and other cabling installed by Tenant in the Premises or elsewhere in the Building, and, to the extent specified by Landlord and subject to Section 12 of this Lease, all alterations and additions made by Tenant and all partitions made by Tenant wholly within the Premises, and shall repair any damages to the Premises or the Building caused by their installation or by such removal.  Tenant’s obligation to observe or perform this covenant shall survive the expiration or other termination of the term of this Lease.

 

Tenant will remove any personal property from the Building and the Premises upon or prior to the expiration or termination of this Lease and any such property which shall remain in the Building or the Premises thereafter shall be conclusively deemed to have been abandoned, and may either be retained by Landlord as its property or sold or otherwise disposed of in such manner as Landlord may see fit.  If any part thereof shall be sold, Landlord may receive and retain the proceeds of such sale and apply the same, at its option, against the expenses of the sale, the cost of moving and storage, any arrears of Yearly Rent, additional or other charges payable hereunder by Tenant to Landlord and any damages to which Landlord may be entitled under Article 21 hereof or pursuant to law.

 

If Tenant or anyone claiming under Tenant shall remain in possession of the Premises or any part thereof after the expiration or prior termination of the term of this Lease without any agreement in writing between Landlord and Tenant with respect thereto, then, prior to the acceptance of any payments for rent or use and occupancy by Landlord, the person remaining in possession shall be deemed a tenant-at-sufferance.  Whereas the parties hereby acknowledge that Landlord may need the Premises after the expiration or prior termination of the term of the Lease for other tenants and that the damages which Landlord may suffer as the result of Tenant’s holding-over cannot be determined as of the Execution Date hereof, in the event that Tenant so holds over, Tenant shall pay to Landlord in addition to all rental and other charges due and accrued under the Lease prior to the date of termination, charges (based upon fair market rental value of the Premises) for use and occupation of the Premises thereafter and, in addition to such sums and any and all other rights and remedies which Landlord may have at law or in equity, an additional use and occupancy charge in the amount of fifty percent (50%) of either the Yearly Rent and other charges calculated (on a daily basis) at the highest rate payable under the terms of this Lease, but

 

43

 

measured from the day on which Tenant’s hold-over commenced and terminating on the day on which Tenant vacates the Premises or the fair market value of the Premises for such period, whichever is greater.  In addition, Tenant shall save Landlord, its agents and employees, harmless and will exonerate, defend and indemnify Landlord, its agents and employees, from and against any and all damages which Landlord may suffer on account of Tenant’s hold over in the Premises after the expiration or prior termination of the term of the Lease.

 

23.                               SUBORDINATION

 

(a)           Subject to any mortgagee’s or ground lessor’s election, as hereinafter provided for, this Lease is subject and subordinate in all respects to all matters of record (including, without limitation, deeds and land disposition agreements), ground leases and/or underlying leases, and all mortgages, any of which may now or hereafter be placed on or affect such leases and/or the real property of which the Premises are a part, or any part of such real property, and/or Landlord’s interest or estate therein, and to each advance made and/or hereafter to be made under any such mortgages, and to all renewals, modifications, consolidations, replacements and extensions thereof and all substitutions therefor.  This Article 23 shall be self-operative and no further instrument or subordination shall be required.  In confirmation of such subordination, Tenant shall execute, acknowledge and deliver promptly any certificate or instrument that Landlord and/or any mortgagee and/or lessor under any ground or underlying lease and/or their respective successors in interest may request, subject to Landlord’s, mortgagee’s and ground lessor’s right to do so for, on behalf and in the name of Tenant under certain circumstances, as hereinafter provided.  Tenant acknowledges that, where applicable, any consent or approval hereafter given by Landlord may be subject to the further consent or approval of such mortgagee and/or ground lessor; and the failure or refusal of such mortgagee and/or ground lessor to give such consent or approval shall, notwithstanding anything to the contrary in this Lease contained, constitute reasonable justification for Landlord’s withholding its consent or approval.

 

(b)           Any such mortgagee or ground lessor may from time to time subordinate or revoke any such subordination of the mortgage or ground lease held by it to this Lease.  Such subordination or revocation, as the case may be, shall be effected by written notice to Tenant and by recording an instrument of subordination or of such revocation, as the case may be, with the appropriate registry of deeds or land records and to be effective without any further act or deed on the part of Tenant.  In confirmation of such subordination or of such revocation, as the case may be, Tenant shall execute, acknowledge and promptly deliver any certificate or instrument that Landlord, any mortgagee or ground lessor may request, subject to Landlord’s, mortgagee’s and ground lessor’s right to do so for, on behalf and in the name of Tenant under certain circumstances, as hereinafter provided.

 

(c)           Without limitation of any of the provisions of this Lease, if any ground lessor or mortgagee shall succeed to the interest of Landlord by reason of the exercise of its rights under such ground lease or mortgage (or the acceptance of voluntary conveyance in lieu thereof) or any third party (including, without limitation, any foreclosure purchaser or mortgage receiver) shall succeed to such interest by reason of any such exercise or the expiration or sooner termination of such ground lease, however caused, then such successor may, upon notice and request to Tenant (which, in the case of a ground lease, shall be within thirty (30) days after such expiration or sooner termination), succeed to the interest of Landlord under this Lease, provided,

 

44

 

however, that such successor shall not: (i) be liable for any previous act or omission of Landlord under this Lease; (ii) be subject to any offset, defense, or counterclaim which shall theretofore have accrued to Tenant against Landlord; (iii) have any obligation with respect to any security deposit unless it shall have been paid over or physically delivered to such successor; or (iv) be bound by any previous modification of this Lease or by any previous payment of Yearly Rent for a period greater than one (1) month, made without such ground lessor’s or mortgagee’s consent where such consent is required by applicable ground lease or mortgage documents.  In the event of such succession to the interest of the Landlord — and notwithstanding that any such mortgage or ground lease may antedate this Lease — the Tenant shall attorn to such successor and shall ipso facto be and become bound directly to such successor in interest to Landlord to perform and observe all the Tenant’s obligations under this Lease without the necessity of the execution of any further instrument.  Nevertheless, Tenant agrees at any time and from time to time during the term hereof to execute a suitable instrument in confirmation of Tenant’s agreement to attorn, as aforesaid, subject to Landlord’s, mortgagee’s and ground lessor’s right to do so for, on behalf and in the name of Tenant under certain circumstances, as hereinafter provided.

 

(d)                                 The term “mortgage(s)” as used in this Lease shall include any mortgage or deed of trust.  The term “mortgagee(s)” as used in this Lease shall include any mortgagee or any trustee and beneficiary under a deed of trust or receiver appointed under a mortgage or deed of trust.  The term “mortgagor(s)” as used in this Lease shall include any mortgagor or any grantor under a deed of trust.

 

(e)                                  Tenant hereby irrevocably constitutes and appoints Landlord or any such mortgagee or ground lessor, and their respective successors in interest, acting singly, Tenant’s attorney-in-fact to execute and deliver any such certificate or instrument for, on behalf and in the name of Tenant, but only if Tenant fails to execute, acknowledge and deliver any such certificate or instrument within ten (10) days after Landlord or such mortgagee or such ground lessor has made written request therefor.

 

(f)                                   Notwithstanding anything to the contrary contained in this Article 23, if all or part of Landlord’s estate and interest in the real property of which the Premises are a part shall be a leasehold estate held under a ground lease, then: (i) the foregoing subordination provisions of this Article 23 shall not apply to any mortgages of the fee interest in said real property to which Landlord’s leasehold estate is not otherwise subject and subordinate; and (ii) the provisions of this Article 23 shall in no way waive, abrogate or otherwise affect any agreement by any ground lessor (x) not to terminate this Lease incident to any termination of such ground lease prior to its term expiring or (y) not to name or join Tenant in any action or proceeding by such ground lessor to recover possession of such real property or for any other relief.

 

(g)                                  In the event of any failure by Landlord to perform, fulfill or observe any agreement by Landlord herein, in no event will the Landlord be deemed to be in default under this Lease permitting Tenant to exercise any or all rights or remedies under this Lease until the Tenant shall have given written notice of such failure to any mortgagee (ground lessor and/or trustee) of which Tenant shall have been advised and until a reasonable period of time shall have elapsed following the giving of such notice, during which such mortgagee (ground lessor and/or trustee) shall have the right, but shall not be obligated, to remedy such failure.

 

45

 

(h)                                 Upon execution and delivery of this Lease, Landlord agrees to use best efforts to obtain a subordination, non-disturbance and attornment agreement (“SNDA”) from its present mortgagee and agrees to use commercially reasonable efforts to obtain an SNDA from any of Landlord’s future mortgagees in a form reasonably acceptable to Tenant, Landlord and Landlord’s mortgagee.  Tenant acknowledges that Landlord’s inability to obtain such an SNDA, despite having exercised the requisite efforts to obtain, in no way affects Tenant’s obligations under this Lease (except as expressly provided otherwise in Section 29.19 and in no way constitutes a default by Landlord under this Lease.

 

24.                               QUIET ENJOYMENT

 

Landlord covenants that if, and so long as, Tenant keeps and performs each and every covenant, agreement, term, provision and condition herein contained on the part and on behalf of Tenant to be kept and performed, Tenant shall quietly enjoy the Premises from and against the claims of all persons claiming by, through or under Landlord subject, nevertheless, to the covenants, agreements, terms, provisions and conditions of this Lease and to the mortgages, ground leases and/or underlying leases to which this Lease is subject and subordinate, as hereinabove set forth.

 

Without incurring any liability to Tenant, Landlord may permit access to the Premises and open the same, whether or not Tenant shall be present, upon any demand of any receiver, trustee, assignee for the benefit of creditors, sheriff, marshal or court officer entitled to, or reasonably purporting to be entitled to, such access for the purpose of taking possession of, or removing, Tenant’s property or for any other lawful purpose (but this provision and any action by Landlord hereunder shall not be deemed a recognition by Landlord that the person or official making such demand has any right or interest in or to this Lease, or in or to the Premises), or upon demand of any representative of the fire, police, building, sanitation or other department of the city, state or federal governments.

 

25.                               ENTIRE AGREEMENT-WAIVER-SURRENDER

 

25.1                        Entire Agreement.  This Lease and the Exhibits made a part hereof contain the entire and only agreement between the parties and any and all statements and representations, written and oral, including previous correspondence and agreements between the parties hereto, are merged herein.  Tenant acknowledges that all representations and statements upon which it relied in executing this Lease are contained herein and that the Tenant in no way relied upon any other statements or representations, written or oral.  Any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of this Lease in whole or in part unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought.

 

25.2                        Waiver by Landlord.  The failure of Landlord to seek redress for violation, or to insist upon the strict performance, of any covenant or condition of this Lease, or any of the Rules and Regulations promulgated hereunder, shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation.  The receipt by Landlord of rent with knowledge of the breach of any covenant of this Lease shall not be deemed a waiver of such breach.  The failure of Landlord to enforce any of such Rules and

 

46

 

Regulations against Tenant and/or any other tenant in the Building shall not be deemed a waiver of any such Rules and Regulations.  No provisions of this Lease shall be deemed to have been waived by Landlord unless such waiver be in writing signed by Landlord.  No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this Lease provided.

 

25.3                        Surrender.  No act or thing done by Landlord during the term hereby demised shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid, unless in writing signed by Landlord.  No employee of Landlord or of Landlord’s agents shall have any power to accept the keys of the Premises prior to the termination of this Lease.  The delivery of keys to any employee of Landlord or of Landlord’s agents shall not operate as a termination of the Lease or a surrender of the Premises.  In the event that Tenant at any time desires to have Landlord underlet the Premises for Tenant’s account, Landlord or Landlord’s agents are authorized to receive the keys for such purposes without releasing Tenant from any of the obligations under this Lease, and Tenant hereby relieves Landlord of any liability for loss of or damage to any of Tenant’s effects in connection with such underletting.

 

26.                               INABILITY TO PERFORM-EXCULPATORY CLAUSE

 

(a)                                 Except as provided in Articles 4.1 and 4.2 hereof, this Lease and the obligations of Tenant to pay rent hereunder and perform all the other covenants, agreements, terms, provisions and conditions hereunder on the part of Tenant to be performed shall in no way be affected, impaired or excused because Landlord is unable to fulfill any of its obligations under this Lease or is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make or is delayed in making any repairs, replacements, additions, alterations, improvements or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of strikes or labor troubles or any other similar or dissimilar cause whatsoever beyond Landlord’s reasonable control, including but not limited to, governmental preemption in connection with a national emergency or by reason of any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the conditions of supply and demand which have been or are affected by war, hostilities or other similar or dissimilar emergency.  In each such instance of inability of Landlord to perform, Landlord shall exercise reasonable diligence to eliminate the cause of such inability to perform.

 

(b)                                 Tenant shall neither assert nor seek to enforce any claim against Landlord, or Landlord’s agents or employees, or the assets of Landlord or of Landlord’s agents or employees, for breach of this Lease or otherwise, other than against Landlord’s interest in the Building of which the Premises are a part and in the uncollected rents, issues and profits thereof, and Tenant agrees to look solely to such interest for the satisfaction of any liability of Landlord under this Lease, it being specifically agreed that in no event shall Landlord or Landlord’s agents or employees (or any of the officers, trustees, directors, partners, beneficiaries, joint venturers, members, stockholders or other principals or representatives, and the like, disclosed or undisclosed, thereof) ever be personally liable for any such liability.  This paragraph shall not

 

47

 

limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord or to take any other action which shall not involve the personal liability of Landlord to respond in monetary damages from Landlord’s assets other than the Landlord’s interest in said real estate, as aforesaid.  In no event shall Landlord or Landlord’s agents or employees (or any of the officers, trustees, directors, partners, beneficiaries, joint venturers, members, stockholders or other principals or representatives and the like, disclosed or undisclosed, thereof) ever be liable for consequential or incidental damages.  Without limiting the foregoing, in no event shall Landlord or Landlord’s agents or employees (or any of the officers, trustees, directors, partners, beneficiaries, joint venturers, members, stockholders or other principals or representatives and the like, disclosed or undisclosed, thereof) ever be liable for lost profits of Tenant.  If by reason of Landlord’s failure to acquire title to the real property of which the Premises are a part or to complete construction of the Building or Premises, Landlord shall be held to be in breach of this Lease, Tenant’s sole and exclusive remedy shall be a right to terminate this Lease.

 

(c)                                  Landlord shall not be deemed to be in default of its obligations under the Lease unless Tenant has given Landlord written notice of such default, and Landlord has failed to cure such default within thirty (30) days after Landlord receives such notice or such longer period of time as Landlord may reasonably require to cure such default.  Except as otherwise expressly provided in this Lease, in no event shall Tenant have the right to terminate the Lease nor shall Tenant’s obligation to pay Yearly Rent or other charges under this Lease abate based upon any default by Landlord of its obligations under the Lease.

 

27.                               BILLS AND NOTICES

 

Any notice, consent, request, bill, demand or statement hereunder by either party to the other party shall be in writing and, if received at Landlord’s or Tenant’s address, shall be deemed to have been duly given when either delivered or served personally or sent via overnight mail (via nationally recognized courier) or mailed by first class mail postage paid certified or registered mail return receipt requested, addressed to Landlord at its address as stated in Exhibit 1 with a copy to Landlord, c/o Beal and Company, Inc., One Kendall Square, Building 400, 2nd Floor, Cambridge, Massachusetts 02139; ATTN: General Manager and a copy to Sherin and Lodgen LLP, 101 Federal Street, Boston, Massachusetts 02110, ATTN: Robert M. Carney, and to Tenant at the Premises (or at Tenant’s address as stated in Exhibit 1, if mailed prior to Tenant’s occupancy of the Premises), and a copy to Faber Daeufer & Rosenberg PC, 950 Winter Street, Suite 4500, Waltham, MA 02451, ATTN: Joseph L. Faber or if any address for notices shall have been duly changed as hereinafter provided, if mailed as aforesaid to the party at such changed address.  Either party may at any time change the address or specify an additional address for such notices, consents, requests, bills, demands or statements by delivering or mailing, as aforesaid, to the other party a notice stating the change and setting forth the changed or additional address, provided such changed or additional address is within the United States.

 

If Tenant is a partnership, Tenant, for itself, and on behalf of all of its partners, hereby appoints Tenant’s Service Partner, as identified on Exhibit 1, to accept service of any notice, consent, request, bill, demand or statement hereunder by Landlord and any service of process in any judicial proceeding with respect to this Lease on behalf of Tenant and as agent and attorney-in-fact for each partner of Tenant.

 

48

 

All bills and statements for reimbursement or other payments or charges due from Tenant to Landlord hereunder shall be due and payable in full ten (10) days, unless herein otherwise provided, after submission thereof by Landlord to Tenant.  Tenant’s failure to make timely payment of any amounts indicated by such bills and statements, whether for work done by Landlord at Tenant’s request, reimbursement provided for by this Lease or for any other sums properly owing by Tenant to Landlord, shall be treated as a default in the payment of rent, in which event Landlord shall have all rights and remedies provided in this Lease for the nonpayment of rent.

 

28.                               PARTIES BOUND-SEIZING OF TITLE

 

The covenants, agreements, terms, provisions and conditions of this Lease shall bind and benefit the successors and assigns of the parties hereto with the same effect as if mentioned in each instance where a party hereto is named or referred to, except that no violation of the provisions of Article 16 hereof shall operate to vest any rights in any successor or assignee of Tenant and that the provisions of this Article 28 shall not be construed as modifying the conditions of limitation contained in Article 21 hereof.

 

If, in connection with or as a consequence of the sale, transfer or other disposition of the real estate (land and/or Building, either or both, as the case may be) of which the Premises are a part, Landlord ceases to be the owner of the reversionary interest in the Premises, Landlord shall be entirely freed and relieved from the performance and observance thereafter of all covenants and obligations hereunder on the part of Landlord to be performed and observed, it being understood and agreed in such event (and it shall be deemed and construed as a covenant running with the land) that the person succeeding to Landlord’s ownership of said reversionary interest shall thereupon and thereafter assume, and perform and observe, any and all of such covenants and obligations of Landlord.

 

29.                               MISCELLANEOUS

 

29.1                        Separability.  If any provision of this Lease or portion of such provision or the application thereof to any person or circumstance is for any reason held invalid or unenforceable, the remainder of the Lease (or the remainder of such provision) and the application thereof to other persons or circumstances shall not be affected thereby.

 

29.2                        Captions, etc.  The captions are inserted only as a matter of convenience and for reference, and in no way define, limit or describe the scope of this Lease nor the intent of any provisions thereof.  References to “State” shall mean, where appropriate, the Commonwealth of Massachusetts.

 

29.3                        Broker.  Tenant represents and warrants that it has not directly or indirectly dealt, with respect to the leasing of office space in the Building or the Complex of which it is a part (called “Building, etc.” in this Article 29.3) with any broker or had its attention called to the Premises or other space to let in the Building, etc. by anyone other than the broker, person or firm, if any, designated in Exhibit 1.  Tenant agrees to defend, exonerate and save harmless and indemnify Landlord and anyone claiming by, through or under Landlord against any claims for a commission arising out of the execution and delivery of this Lease or out of negotiations between

 

49

 

Landlord and Tenant with respect to the leasing of other space in the Building, etc., provided that Landlord shall be solely responsible for the payment of brokerage commissions to the broker, person or firm, if any, designated in Exhibit 1.

 

29.4                        Modifications.  If in connection with obtaining financing for the Building, a bank, insurance company, pension trust or other institutional lender shall request reasonable modifications in this Lease as a condition to such financing, Tenant will not withhold, delay or condition its consent thereto, provided that such modifications do not increase the obligations of Tenant hereunder or materially adversely affect the leasehold interest hereby created.

 

29.5                        Arbitration.  Any disputes relating to the provisions or obligations contained in Articles 2.1, 18 and 20 of this Lease as to which a specific provision for a reference to arbitration is made herein shall be submitted to arbitration in accordance with the provisions of applicable state law (as identified on Exhibit 1), as from time to time amended.  Arbitration proceedings, including the selection of an arbitrator, shall be conducted pursuant to the rules, regulations and procedures from time to time in effect as promulgated by the American Arbitration Association.  Prior written notice of application by either party for arbitration shall be given to the other at least ten (10) days before submission of the application to the said Association’s office in the City wherein the Building is situated (or the nearest other city having an Association office).  The arbitrator shall hear the parties and their evidence.  The decision of the arbitrator shall be binding and conclusive, and judgment upon the award or decision of the arbitrator may be entered in the appropriate court of law (as identified on Exhibit 1); and the parties consent to the jurisdiction of such court and further agree that any process or notice of motion or other application to the Court or a Judge thereof may be served outside the State wherein the Building is situated by registered mail or by personal service, provided a reasonable time for appearance is allowed.  The costs and expenses of each arbitration hereunder and their apportionment between the parties shall be determined by the arbitrator in his award or decision.  No arbitrable dispute shall be deemed to have arisen under this Lease prior to the expiration of the period of twenty (20) days after the date of the giving of written notice by the party asserting the existence of the dispute together with a description thereof sufficient for an understanding thereof.

 

29.6                        Governing Law.  This Lease is made pursuant to, and shall be governed by, and construed in accordance with, the laws of the State wherein the Building is situated and any applicable local municipal rules, regulations, by-laws, ordinances and the like.

 

29.7                        Assignment of Rents.  With reference to any assignment by Landlord of its interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to or held by a bank, trust company, insurance company or other institutional lender holding a mortgage or ground lease on the Building, Tenant agrees:

 

(a)                                 that the execution thereof by Landlord and the acceptance thereof by such mortgagee and/or ground lessor shall never be deemed an assumption by such mortgagee and/or ground lessor of any of the obligations of the Landlord hereunder, unless such mortgagee and/or ground lessor shall, by written notice sent to the Tenant, specifically otherwise elect; and

 

(b)                                 that, except as aforesaid, such mortgagee and/or ground lessor shall be treated as having assumed the Landlord’s obligations hereunder only upon foreclosure of such

 

50

 

mortgagee’s mortgage or deed of trust or termination of such ground lessor’s ground lease and the taking of possession of the demised Premises after having given notice of its exercise of the option stated in Article 23 hereof to succeed to the interest of the Landlord under this Lease.

 

29.8                        Representation of Authority.  By his or her execution hereof each of the signatories on behalf of the respective parties hereby warrants and represents to the other that he is duly authorized to execute this Lease on behalf of such party.  If Tenant is a corporation, Tenant hereby appoints the signatory whose name appears below on behalf of Tenant as Tenant’s attorney-in-fact for the purpose of executing this Lease for and on behalf of Tenant.

 

29.9                        Expenses Incurred by Landlord Upon Tenant Requests.  Tenant shall, upon demand, reimburse Landlord for all reasonable expenses, including, without limitation, legal fees, incurred by Landlord in connection with all requests by Tenant for consents, approvals or execution of collateral documentation related to this Lease, including, without limitation, costs incurred by Landlord in the review and approval of Tenant’s plans and specifications in connection with proposed alterations to be made by Tenant to the Premises, requests by Tenant to sublet the Premises or assign its interest in the Lease, the execution by Landlord of estoppel certificates requested by Tenant, and requests by Tenant for Landlord to execute waivers of Landlord’s interest in Tenant’s property in connection with third party financing by Tenant.  Such costs shall be deemed to be additional rent under the Lease.

 

29.10                 Survival.  Without limiting any other obligation of the Tenant which may survive the expiration or prior termination of the term of the Lease, all obligations on the part of Tenant to indemnify, defend, or hold Landlord harmless, as set forth in this Lease (including, without limitation, Tenant’s obligations under Articles 13(d), 15.3, and 29.3) shall survive the expiration or prior termination of the term of the Lease.

 

29.11                 Hazardous Materials.  Landlord and Tenant agree as follows with respect to the existence or use of “Hazardous Material” in or on the Premises, the Building or the Complex.

 

(a)                                 Tenant, at its sole cost and expense, shall comply with the Emergency Planning and Community Right to Know Act (EPCRTKA) 42 U.S.C. § 11001-11050, and all other laws, statutes, ordinances, rules and regulations of any local, state or federal governmental authority having jurisdiction concerning environmental, health and safety matters (collectively, “Environmental Laws”), including, but not limited to, any discharge into the air, surface, water, sewers, soil or groundwater of any Hazardous Material (as defined in Article 29.11(c)), whether within or outside the Premises within the Complex.  Tenant shall comply with all terms, conditions and guidelines contained in the MWRA permit applicable to the Premises and agrees to acknowledge such agreement to so comply in writing upon request of Landlord.  Notwithstanding the foregoing, nothing contained in this Lease requires, or shall be construed to require, Tenant to incur any liability related to or arising from environmental conditions (i) for which the Landlord is responsible pursuant to the terms of this Lease, or (ii) which existed within the Premises or the Complex prior to the date Tenant takes possession of the Premises.

 

(b)                                 Tenant shall not cause or permit any Hazardous Material to be brought upon, kept or used in or about the Premises or otherwise in the Complex by Tenant, its agents, employees, contractors or invitees, without the prior written consent of Landlord, except for

 

51

 

Hazardous Materials which are typically used in the operation of offices or laboratories, provided that such materials are stored, used and disposed of in strict compliance with all applicable Environmental Laws and with good scientific and medical practice.  Within five (5) days of Landlord’s request, Tenant shall provide Landlord with a list of all Hazardous Materials, including quantities used and such other information as Landlord may reasonably request, used by Tenant in the Premises or otherwise in the Complex.  Notwithstanding the foregoing, with respect to any of Tenant’s Hazardous Material which Tenant does not properly handle, store or dispose of in compliance with all applicable Environmental Laws and good scientific and medical practice.  Tenant shall, upon written notice from Landlord, no longer have the right to bring such material into the Premises.  Building of which the Premises is a part or the Complex until Tenant has demonstrated, to Landlord’s reasonable satisfaction, that Tenant has implemented programs to thereafter properly handle, store or dispose of such material.

 

(c)                                  As used herein, the term “Hazardous Material” means any hazardous or toxic substance, material or waste or petroleum derivative which is or becomes regulated by any Environmental Law, specifically including live organisms, viruses and fungi, medical waste, and so-called “biohazard” materials.  The term “Hazardous Material” includes, without limitation, any material or substance which is(i)  designated as a “hazardous substance” pursuant to Section 1311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317), (ii) defined as a “hazardous waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. Section 6903), (iii) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601), (iv) defined as “hazardous substance” or “oil” under Chapter 21E of the General Laws of Massachusetts, or (v) a so-called “biohazard” or medical waste, or is contaminated with blood or other bodily fluids; and “Environmental Laws” include, without limitation, the laws listed in the preceding clauses (i) through (iv).

 

(d)                                 Any increase in the premium for necessary insurance on the Premises or the Complex which arises from Tenant’s use and/or storage of these Hazardous Materials shall be solely at Tenant’s expense.  Tenant shall procure and maintain at its sole expense such additional insurance as may be necessary to comply with any requirement of any federal, state or local government agency with jurisdiction.

 

(e)                                  Tenant hereby covenants and agrees to indemnify, defend and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses (collectively “Losses”) which Landlord may reasonably incur arising out of contamination of real estate, the Complex or other property not a part of the Premises, which contamination arises as a result of: (i) the presence of Hazardous Material in the Premises, the presence of which is caused or permitted by Tenant, or (ii) from a breach by Tenant of its obligations under this Article 29.11.  This indemnification of Landlord by Tenant includes, without limitation, reasonable costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of Hazardous Material present in the soil or ground water on or under the Premises based upon the circumstances identified in the first sentence of this Article 29.11(e).  The indemnification and hold harmless obligations of Tenant under this Article 29.11(e) shall survive any termination of this Lease.  Without limiting the

 

52

 

foregoing, if the presence of any Hazardous Material in the Building or otherwise in the Complex caused or permitted by Tenant results in any contamination of the Premises, Tenant shall promptly take all actions at its sole expense as are necessary to return the Premises to a condition which complies with all Environmental Laws; provided that Landlord’s approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions, in Landlord’s reasonable discretion, would not potentially have any materially adverse long-term or short-term effect on the Premises, and, in any event, Landlord shall not withhold its approval of any proposed actions which are required by applicable Environmental Laws.

 

(f)                                   On or before the date that Tenant, and anyone claiming by, through or under Tenant, vacates the Premises, and immediately prior to the time that Tenant delivers the Premises to Landlord, Tenant shall:

 

(1)                                 Cause the Premises to be decommissioned in accordance with the regulations of the U.S. Nuclear Regulatory Commission and/or the Massachusetts Department of Public Health for the control of radiation, cause the Premises to be released for unrestricted use by the Radiation Control Program of the Massachusetts Department of Public Health for the control of radiation, and deliver to Landlord the report of a certified industrial hygienist stating that he or she has examined the Premises (including visual inspection, Geiger counter evaluation and airborne and surface monitoring) and found no evidence that such portion contains Hazardous Materials, as defined in this Article 29.11, or is otherwise in violation of any Environmental Law, as defined in this Article 29.11 hereof.

 

(2)                                 Provide to Landlord a copy of its most current chemical waste removal manifest and a certification from Tenant executed by an officer of Tenant that no Hazardous Materials or other potentially dangerous or harmful chemicals brought onto the Premises from and after the date that Tenant first took occupancy of the Premises remain in the Premises.

 

29.12                 Patriot Act.

 

Tenant represents and warrants to Landlord that:

 

(A)                               Tenant is not in violation of any Anti-Terrorism Law

 

(B)                               Tenant is not, as of the date hereof:

 

(i)                                     conducting any business or engaging in any transaction or dealing with any Prohibited Person (as hereinafter defined), including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Prohibited Person;

 

(ii)                                  dealing in, or otherwise engaging in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224; or

 

53

 

(iii)                               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; and

 

(C)                               Neither Tenant nor any of its affiliates, officers, directors, shareholders, members or lease guarantor, as applicable, is a Prohibited Person.

 

If at any time any of these representations becomes false, then it shall be considered a material default under this Lease.

 

As used herein, “Anti-Terrorism Law” is defined as any law relating to terrorism, anti-terrorism, money-laundering or anti-money laundering activities, including without limitation the United States Bank Secrecy Act, the United States Money Laundering Control Act of 1986, Executive Order No. 13224, and Title 3 of the USA Patriot Act, and any regulations promulgated under any of them.  As used herein “Executive Order No. 13224” is defined as Executive Order No. 13224 on Terrorist Financing effective September 24, 2001, and relating to “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism”, as may be amended from time to time.  “Prohibited Person” is defined as (i) a person or entity that is listed in the Annex to Executive Order No. 13224, or a person or entity owned or controlled by an entity that is listed in the Annex to Executive Order No. 13224; (ii) a person or entity with whom Landlord is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; or (iii) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/ofac/tllsdn.pdf or at any replacement website or other official publication of such list.  “USA Patriot Act” is defined as the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (Public Law 107-56), as may be amended from time to time.

 

29.13                 Security Deposit/Letter of Credit.  In order to secure Tenant’s obligations to Landlord under this Lease, Tenant shall deliver to Landlord, on the date that Tenant executes and delivers the Lease to Landlord, an Irrevocable Standby Letter of Credit (“Letter of Credit”) which shall be (1) in the form attached hereto as Exhibit 5A, (2) issued by a bank reasonably acceptable to Landlord with minimum assets of Ten Billion Dollars ($10,000,000,000.00), upon which presentment may be made in Boston, Massachusetts, (3) in an amount equal to One Hundred Thirteen Thousand and Ninety-Eight and 06/100 ($113,098.06) Dollars, and (4) for a term of not less than one (1) year, subject to extension in accordance with the terms of the Letter of Credit.  In the event of a change of circumstance relating to the bank issuing the Letter of Credit, or if Landlord otherwise believes that the financial condition of the issuing bank has been degraded, Landlord reserves the right to require Tenant to replace the Letter of Credit from time to time with a similar letter of credit issued by another bank satisfactory to Landlord.  Tenant shall, on or before the date thirty (30) days prior to the expiration of the term of such Letter of Credit, deliver to Landlord a new Letter of Credit satisfying the foregoing conditions (“Substitute Letter of Credit”) in lieu of the Letter of Credit then being held by Landlord.  Such Letter of Credit shall be automatically renewable provided that if the issuer of such Letter of Credit gives notice of its election not to renew such Letter of Credit for any additional period pursuant thereto, Tenant shall be required to deliver a Substitute Letter of Credit satisfying the conditions hereof, on or before the

 

54

 

date thirty (30) days prior to the expiration of the term of such Letter of Credit.  Tenant agrees that it shall from time to time, as necessary, whether as a result of a draw on the Letter of Credit by Landlord pursuant to the terms hereof or as a result of the expiration of the Letter of Credit then in effect, renew or replace the original and any subsequent Letter of Credit so that a Letter of Credit, in the amount required hereunder, is in effect throughout term of this Lease, including any extensions thereof, or in the event that Tenant remains in possession of the Premises following the expiration of the term, or if Tenant has obligations hereunder to Landlord that remain unsatisfied following the expiration of the term (as may be extended), and for ninety (90) days after the latest to occur of the foregoing (i.e., the expiration of the term (as may be extended), the date on which Tenant vacates and yields up the premises, etc.).  If Tenant fails to furnish such renewal or replacement at least 30 days prior to the stated expiration date of the Letter of Credit then held by Landlord, Landlord may draw upon such Letter of Credit and hold the proceeds thereof (and such proceeds need not be segregated) as a security deposit pursuant to the terms of this Article 29.13.

 

In the event that Tenant is in default of its obligations under the Lease beyond applicable notice and cure periods, then the Landlord shall have the right, at any time after such event, without giving any further notice to Tenant, to draw down from said Letter of Credit (Substitute Letter of Credit or Additional Letter of Credit, as defined below, as the case may be) (a) the amount necessary to cure such default or (b) if such default cannot reasonably be cured by the expenditure of money, to exercise all rights and remedies Landlord may have on account of such default, the amount which, in Landlord’s opinion, is necessary to satisfy Tenant’s liability on account thereof.  In the event of any such draw by the Landlord, Tenant shall, within fifteen (15) business days of written demand therefor, deliver to Landlord an additional Letter of Credit satisfying the foregoing conditions (“Additional Letter of Credit”), except that the amount of such Additional Letter of Credit shall be the amount of such draw.  In addition, in the event of a termination based upon the default of Tenant under the Lease, or a rejection of the Lease pursuant to the provisions of the Federal Bankruptcy Code, Landlord shall have the right to draw upon the Letter of Credit (from time to time, if necessary) to cover the full amount of damages and other amounts due from Tenant to Landlord under the Lease.  Any amounts so drawn shall, at Landlord’s election, be applied first to any unpaid rent and other charges which were due prior to the filing of the petition for protection under the Federal Bankruptcy Code.  Tenant hereby covenants and agrees not to oppose, contest or otherwise interfere with any attempt by Landlord to draw down from said Letter of Credit including, without limitation, by commencing an action seeking to enjoin or restrain Landlord from drawing upon said Letter of Credit.  Tenant also hereby expressly waives any right or claim it may have to seek such equitable relief.  In addition to whatever other rights and remedies it may have against Tenant if Tenant breaches its obligations under this paragraph, Tenant hereby acknowledges that it shall be liable for any and all damages which Landlord may suffer as a result of any such breach.

 

Upon request of Landlord or any (prospective) purchaser or mortgagee of the Building, Tenant shall, at its expense, cooperate with Landlord in obtaining an amendment to or replacement of any Letter of Credit which Landlord is then holding so that the amended or new Letter of Credit reflects the name of the new owner of the Building or mortgagee, as the case may be.

 

To the extent that Landlord has not previously drawn upon any Letter of Credit, Substitute Letter of Credit, Additional Letter of Credit or Security Proceeds (collectively “Collateral”) held by the Landlord, and to the extent that Tenant is not otherwise in default of its obligations under

 

55

 

the Lease as of the termination date of the Lease, Landlord shall return such Collateral to Tenant on the termination of the term of the Lease.

 

In no event shall the proceeds of any Letter of Credit be deemed to be a prepayment of rent nor shall it be considered as a measure of liquidated damages.

 

29.14                 Parking.  Commencing as of the Term Commencement Date and continuing thereafter throughout the term of the Lease, the Landlord will make available to Tenant nine (9) monthly parking passes for use in the One Kendall Square Garage (the “Garage”) which Landlord represents and warrants is owned in fee by it.  Tenant shall have no right to sublet, assign, or otherwise transfer said parking passes except in connection with an assignment of this Lease or sublease of the Premises which is permitted pursuant to the provisions of this Lease.  Said parking passes shall be paid for by Tenant at the then current prevailing rate in the Garage, as such rate may vary from time to time.  The current rate for such passes as of the Execution Date of this Lease is $220.00 per month.  Subject to availability, Tenant shall have the option to obtain additional passes at such rate on a month-to-month basis.  If, for any reason, Tenant shall fail timely to pay the charge for said parking passes, Landlord shall have the same rights against Tenant as Landlord has with respect to the timely payment of Yearly Rent hereunder.  Said parking passes will be on an unassigned, non-reserved basis, and shall be subject to reasonable rules and regulations from time to time in force.  Tenant shall have the right, from time to time upon at least thirty (30) days prior written notice to Landlord, to surrender one or more of such parking passes, and upon such surrender, Tenant shall have no further rights or obligations with respect to such surrendered passes.

 

29.15                 Tenant’s Option to Extend the Term of the Lease.

 

A.                                    On the conditions, which conditions Landlord may waive, at its election, by written notice to Tenant at any time, that Tenant is not in default beyond all applicable cure periods of its covenants and obligations under the Lease, and that Catabasis Pharmaceuticals, Inc., itself, or an Assignee (as defined in Article 16), is occupying at least fifty percent (50%) of the Premises then demised to Tenant, both as of the time of option exercise and as of the commencement of the hereinafter described additional term, Tenant shall have the option to extend the term of this Lease for one (1) additional five (5) year term, such additional term commencing as of the next day following the expiration of the initial term of this Lease.  Tenant may exercise such option to extend by giving Landlord written notice on or before the date that is not less than nine (9) full calendar months prior to the last day of the initial term of this Lease.  Upon the timely giving of such notice, the term of this Lease shall be deemed extended upon all of the terms and conditions of this Lease, except that Landlord shall have no obligation to construct or renovate the Premises and that the Yearly Rent during such additional term shall be as hereinafter set forth.  If Tenant fails to give timely notice, as aforesaid, Tenant shall have no further right to extend the term of this Lease, time being of the essence of this Article 29.15.  If Tenant fails to timely exercise its rights hereunder, then within seven (7) days of Landlord’s request therefor, Tenant shall execute and deliver to Landlord a certification, in recordable form, confirming the Tenant’s failure to exercise (or waiver of) such right, and Tenant’s failure to so execute and deliver such certification shall (without limiting Landlord’s remedies on account thereof) entitle Landlord to execute and deliver to any third party, and record, an affidavit confirming the failure or waiver, which affidavit shall be binding on Tenant and may be conclusively relied on by third parties.

 

56

 

B.                                    Yearly Rent.  The Yearly Rent during the additional term shall be based upon the Fair Market Rental Value, as defined in Article 29.16, as of the commencement of the additional term, of the Premises then demised to Tenant.

 

C.                                    Tenant shall have no further option to extend the term of the Lease other than the one (1) additional five (5) year extension term herein provided.

 

D.                                    Notwithstanding the fact that, upon Tenant’s exercise of the herein option to extend the term of the Lease, such extension shall be self executing, as aforesaid, the parties shall promptly execute a lease amendment reflecting such additional term after Tenant exercises the herein option, except that the Yearly Rent payable in respect of such additional term may not be set forth in said amendment.  Subsequently, after such Yearly Rent is determined, the parties shall execute a written agreement confirming the same.  The execution of such lease amendment shall not be deemed to waive any of the conditions to Tenant’s exercise of its rights under this Article 29.15, unless otherwise specifically provided in such lease amendment.

 

29.16                 Definition of Fair Market Rental Value.

 

A.                                    “Fair Market Rental Value” shall be computed as of the date in question at the then current Yearly Rent, including provisions for subsequent increases and other adjustments for leases or agreements to lease then currently being negotiated, or executed in comparable space located in the Complex, or if no such leases or agreements to lease are then currently being negotiated or executed in the Complex, the Fair Market Rental Value shall be determined by reference to leases or agreements to lease then currently being negotiated or executed for comparable space located elsewhere in first-class office buildings located in East Cambridge, Massachusetts.  In determining Fair Market Rental Value, all relevant factors shall be taken into account and given effect, including, without limitation: size, location and condition of Premises, lease term, including renewal options, tenant’s obligations with respect to operating expenses and taxes, tenant improvement allowances, condition of building, and services and amenities provided by the Landlord.

 

B.                                    Dispute as to Fair Market Rental Value:

 

Landlord shall initially designate Fair Market Rental Value and Landlord shall furnish data in support of such designation.  If Tenant disagrees with Landlord’s designation of a Fair Market Rental Value, Tenant shall notify Landlord, by written notice given within thirty (30) days after Tenant has been notified of Landlord’s designation, of its disagreement whereupon the parties shall negotiate in good faith to arrive at a mutually agreeable Fair Market Rental Value.  If the parties are unable to agree within thirty (30) days after Tenant’s notice to Landlord, the parties shall submit such Fair Market Rental Value to arbitration.  Fair Market Rental Value shall be submitted to arbitration as follows: Fair Market Rental Value shall be determined by impartial arbitrators, one to be chosen by the Landlord, one to be chosen by Tenant, and a third to be selected, if necessary, as below provided.  The unanimous written decision of the two first chosen, without selection and participation of a third arbitrator, or otherwise, the written decision of a majority of three arbitrators chosen and selected as aforesaid, shall be conclusive and binding upon Landlord and Tenant.  Landlord and Tenant shall each notify the other of its chosen arbitrator within ten (10) days following the call for arbitration and, unless such two arbitrators

 

57

 

shall have reached a unanimous decision within thirty (30) days after their designation, they shall so notify the President of the Boston Bar Association (or such organization as may succeed to said Boston Bar Association) and request him or her to select an impartial third arbitrator.  All arbitrators shall have at least ten (10) years of professional experience as an office building owner, real estate manager or real estate broker dealing with like types of properties, to determine Fair Market Rental Value as herein defined.  Such third arbitrator and the first two chosen shall, subject to commercial arbitration rules of the American Arbitration Association, hear the parties and their evidence and render their decision within thirty (30) days following the conclusion of such hearing and notify Landlord and Tenant thereof.  Landlord and Tenant shall bear the expense of the third arbitrator (if any) equally.  The decision of the arbitrators shall be binding and conclusive, and judgment upon the award or decision of the arbitrators may be entered in the appropriate court of law (as identified on Exhibit 1); and the parties consent to the jurisdiction of such court and further agree that any process or notice of motion or other application to the Court or a Judge thereof may be served outside the Commonwealth of Massachusetts by registered mail or by personal service, provided a reasonable time for appearance is allowed.  If the dispute between the parties as to a Fair Market Rental Value has not been resolved before the commencement of Tenant’s obligation to pay rent based upon such Fair Market Rental Value, then Tenant shall pay Yearly Rent and other charges under the Lease in respect of the Premises in question based upon the Fair Market Rental Value designated by Landlord until either the agreement of the parties as to the Fair Market Rental Value, or the decision of the arbitrators, as the case may be, at which time Tenant shall pay any underpayment of rent and other charges to Landlord, or Landlord shall refund any overpayment of rent and other charges to Tenant.

 

29.17                 Right of First Refusal to Lease.  Provided this Lease is in full force and effect and Tenant is not in default hereunder beyond all applicable cure periods, if at any time during the term of this Lease, Landlord shall receive a bona fide offer (the “Offer”) from any third party to lease the approximate 4,692 rentable square feet of space of the first (1st) floor of the Building as shown on the plan attached hereto as Exhibit 6 (the “ROFR Space”), and which Offer Landlord is prepared to accept, Landlord shall notify Tenant (the “Right of First Refusal Notice”) of Landlord’s intent to accept such Offer.  The Right of First Refusal Notice shall specify (i) the location and rentable area of the space which Landlord intends to lease; (ii) the date upon which such space shall be available for occupancy; (iii) the annual rate of base rent per square foot of rentable area which Landlord intends to charge for such space, including all fixed and/or indexed adjustments to said rate; (iv) the proposed lease term for such space; and (v) all other economic terms which Landlord intends to offer with respect to such space.  Tenant shall have the right (the “Right of First Refusal”), exercisable by Tenant in writing, within five (5) business days of Tenant’s receipt of the Right of First Refusal Notice, to elect to lease the ROFR Space and within five (5) business days thereafter Landlord and Tenant shall enter into a supplemental agreement to this Lease pursuant to which Tenant shall lease the ROFR space on the same terms and conditions specified in the Offer.

 

Should Tenant decline the Right of First Refusal or fail to accept its right to lease the ROFR Space in writing within five (5) business days of receipt of the Right of First Refusal Notice, then Landlord shall be free to lease such space to the offering third party on terms substantially the same as those set forth in the Offer and the Right of First Refusal under this Section 29.17 shall become null and void.  If, within six (6) months of the date on which Tenant either declines the Right of First Refusal or fails to accept its right to lease the ROFR Space, the

 

58

 

Landlord does not enter into a definitive lease agreement with the third party making the Offer on terms that are substantially similar to those set forth in the Offer, the rights and obligations of this Section 29.17 shall again be of full force and effect and Landlord must follow the procedures set forth herein if and when it receives a subsequent Offer from a third party to lease the ROFR Space.

 

If Tenant exercises its Right of First Refusal, then Landlord shall tender the ROFR Space, as provided above, to Tenant in its then “as is” condition (or otherwise in accordance with the terms set forth on the Right of First Refusal Notice) within the time frame for availability for occupancy set forth in the Right of First Refusal Notice and the term of the Lease with regard to the ROFR Space shall be as set forth in the Right of First Refusal Notice.  If the term of the existing Premises expires before the term of the ROFR Space as set forth in the Right of First Refusal Notice then the term of the existing Premises shall be extended to run conterminously with the term of the ROFR Space and the Yearly Rent on the existing Premises after the expiration of term shall be the same as the Yearly Rent on the ROFR Space (excluding any portion of said rent based upon a tenant improvement allowance or work to be completed by Landlord).

 

The foregoing Right of First Refusal under this Section 29.17 is personal to and may only be exercised by Catabasis Pharmaceuticals, Inc., the original named tenant under this Lease, while Catabasis Pharmaceuticals, Inc. continues to occupy the Premises.  The foregoing Right of First Refusal under this Section 29.17 shall not be exercisable by an assignee under this Lease or subleasee of all or a portion of the Premises except for an Assignee as defined in Article 16 of this Lease.

 

Tenant understands that its right under this Section are and shall be subject to and subordinate to any extension rights contained in the lease of the tenant of the offered space and the right of Landlord to extend the term of the lease with the tenant of the offered space even if its lease has no such extension right, and any expansion rights, options to lease or any rights of first negotiation, first offer or first refusal to lease granted to other tenants in the Building or Complex prior to the date of execution and delivery of this Lease.

 

29.18                 Confidentiality.

 

(a)                                 In connection with the activities contemplated by this Lease, it is anticipated that Tenant may disclose or deliver to Landlord, or provide access to Landlord, to scientific or technical information, and business or financial information, possessed or obtained by, developed for or given to Tenant which is treated by Tenant as confidential or proprietary (“Confidential Information”).  Tenant will, to the extent practical, use commercially reasonable efforts, consistent with reasonable business practices, to label or identify as “CONFIDENTIAL” all the Confidential Information.  Confidential Information will, however, include all information which due to its nature would cause a reasonable person to know that it is confidential and proprietary to Tenant.

 

(b)                                 Landlord agrees that it will hold in confidence and not publish, disseminate or otherwise disclose, or deliver or make available to any third party outside its organization any Confidential Information, except as otherwise contemplated herein or as specifically authorized in writing by Tenant.  Landlord agrees to use the Confidential Information solely in connection with the activities contemplated by this Lease and not exploit the Confidential Information for its own

 

59

 

benefit or the benefit of another without the prior written consent of Tenant.  Landlord will exercise commercially reasonable precautions to physically protect the integrity and confidentiality of the Confidential Information.  Landlord may disseminate the Confidential Information only to its employees and consultants, and to its prospective and existing lenders and purchasers of the Building and/or Complex, on a need-to-know basis in connection with the activities contemplated by this Lease or for the purpose of evaluating the Complex and only if they are advised to protect the Confidential Information under terms substantially similar to those in this Lease.  Landlord will have no obligation of confidentiality with respect to any portion of Confidential Information disclosed to it which:

 

(1)                                 is or later becomes generally available to the public by use, publication or the like, through no fault of Landlord;

 

(2)                                 is obtained from a third party without restriction who had the legal right to disclose the same to Landlord;

 

(3)                                 Landlord already possesses, as evidenced by its written records, predating receipt thereof from Tenant (whether as a result of disclosure or delivery by Tenant or of Tenant providing access);

 

(4)                                 is independently developed by Landlord without the use of Confidential Information, as evidenced by Landlord’s written records; or

 

(5)                                 is disclosed by Landlord pursuant to a requirement of law.

 

If required, Landlord may disclose the Confidential Information to a governmental authority or by order of a court of competent jurisdiction, provided that the disclosure is subject to all applicable governmental or judicial protection available for like material (provided, however, that the cost and expense to obtain any such protection shall be borne by Tenant) and reasonable advance written notice is given to Tenant.

 

Confidential Information will not be deemed to be in the public domain or in the possession of Landlord merely because it is embraced by generalized disclosures in the public domain nor will a combination of Confidential Information be deemed to fall within any of the exceptions set forth above simply because each of the elements is itself included within an exception if the significance of the combination does not fall within any of the exceptions.

 

(c)                                  It is understood that all Confidential Information, and any information derived from it by Landlord, will remain the property of Tenant, and that no patent right or license is hereby granted by Tenant to Landlord by this Agreement.  Nothing in this Agreement will be deemed an obligation of Tenant to grant Landlord any rights in and to the subject matter of the Confidential Information.

 

(d)                                 Upon expiration of the term of this Lease and after written request by Tenant, or sooner upon Tenant’s request, Landlord will promptly return to Tenant all tangible Confidential Information, then in Landlord’s possession, including all copies and reproductions thereof, except for one (1) copy that may be retained by Landlord solely for archival purposes.

 

60

 

Landlord agrees that money damages would not be a sufficient remedy for any breach of this Section and that, in addition to all other remedies, Tenant will be entitled to injunctive or other equitable relief as a remedy for any such breach by Landlord.

 

29.19                 Termination Right.

 

Tenant shall have the option, but not the obligation, to terminate this Lease by providing five (5) business days written notice of such termination to Landlord, upon the occurrence of any of the following:

 

(a)                                 Landlord no longer owns, possesses or controls the Building or Premises pursuant to a foreclosure action or Landlord’s surrender of the Premises to Landlord’s mortgagee(s) and such mortgagee(s) have not provided Tenant with an SNDA pursuant to Section 23(h) of this Lease; or

 

(b)                                 Landlord still owns, possesses or controls the Building and Premises, Landlord’s mortgagee(s) have not provided Tenant with an SNDA pursuant to Section 23( h) of this Lease and an uncured Landlord TI Default exists.

 

Tenant’s exercise of the foregoing termination right may be nullified if, within the five (5) business day notice period, the conditions giving rise to the termination right are remedied.  In the event that Tenant terminates this Lease pursuant to this Section 29.19 this Lease shall be null and void and Tenant shall have no further obligations under this Lease.

 

61

 

IN WITNESS WHEREOF the parties hereto have executed this Indenture of Lease in multiple copies, each to be considered an original hereof, as a sealed instrument on the day and year noted in Exhibit 1 as the Execution Date.

	
 
    	
 
    
	
LANDLORD:
    	
TENANT:
    
	
 
    	
 
    
	
RB KENDALL FEE,   LLC
    	
CATABASIS PHARMACEUTICALS.
    
	
INC.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ Robert L. Beal
    	
 
    	
By:
    	
/s/ Jill C. Milne
    	
 
    
	
Name:
    	
Robert L. Beal
    	
 
    	
(Name)
    	
Jill C. Milne
    	
 
    
	
Title:
    	
Its Authorized Signatory
    	
(Title)
    	
CEO
    
	
 
    	
Hereunto Duly Authorized
    
	
 
    	
 
    

IF TENANT IS A CORPORATION, A SECRETARY’S OR CLERK’S CERTIFICATE OF THE AUTHORITY AND THE INCUMBENCY OF THE PERSON SIGNING ON BEHALF OF TENANT SHOULD BE ATTACHED.

 

62

 

EXHIBIT 2
 LEASE PLAN

 

 

63

 

Exhibit 2A
 SPACE PLANS

 

 

64

 

EXHIBIT 3
 PLAN OF COMPLEX

 

 

65

 

EXHIBIT 4
 TERM COMMENCEMENT DATE AGREEMENT

 

                                   (“Tenant”) hereby certifies that it has entered into a lease with RB KENDALL FEE, LLC (“Landlord”) dated         20   [, as amended by              dated         , 20     ,] and verifies the following information as of the      day of, 200  :

 

	
Address of   Building:
    	
 
    	
Building      , One   Kendall
   Square, Cambridge, MA 02139
    
	
 
    	
 
    	
 
    
	
Number of Rentable   Square Feet in Premises:
    	
 
    	
         r.s.f.
    
	
Term Commencement Date:
    	
 
    	
                ,   20    
    
	
Rent Commencement Date:
    	
 
    	
                ,   20    
    
	
Lease Termination Date:
    	
 
    	
                ,   20    
    
	
Tenant’s Proportionate   Common Share:
    	
 
    	
          %
    
	
Tenant’s Proportionate   Building Share:
    	
 
    	
          %
    

 

Tenant acknowledges and agrees that all improvements Landlord is obligated to make to the Premises, if any, have been completed to Tenant’s satisfaction, that Tenant has accepted possession of the Premises, and that as of the date hereof, there exist no offsets or defenses to the obligations of Tenant under the Lease.

 

	
TENANT:
    	
LANDLORD:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
RB   KENDALL FEE, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
By:
    	
 
    
	
Title:
    	
 
    	
 
    	
Name:   
    	
Robert   L. Beal
    
	
 
    	
Hereunto   duly authorized
    	
 
    	
Title:   
    	
Its   Authorized Signatory
    

 

66

 

EXHIBIT 5

 

FORM OF LETTER OF CREDIT

 

IRREVOCABLE STANDBY LETTER OF CREDIT NO.

 

DATE:

 

BENEFICIARY:

RB KENDALL FEE, LLC

c/o Beal and Company, Inc.

177 Milk Street

Boston, MA 02109

AS “LANDLORD”

 

APPLICANT:

 

                                                    

Building              

One Kendall Square, MA 02139

AS “TENANT”

 

AMOUNT: US $                (                                                    AND 00/100 U.S. DOLLARS)

 

EXPIRATION DATE:                       

 

LOCATION: AT OUR COUNTERS IN BOSTON, MASSACHUSETTS

 

DEAR SIR/MADAM:

 

WE  HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO.              IN YOUR FAVOR AVAILABLE BY YOUR DRAFT DRAWN ON US AT SIGHT IN THE FORM OF EXHIBIT “B” ATTACHED AND ACCOMPANIED BY THE FOLLOWING DOCUMENTS:

 

1. THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT(S), IF ANY.

2. A DATED CERTIFICATION FROM THE BENEFICIARY SIGNED BY AN AUTHORIZED OFFICER OR AGENT, FOLLOWED BY ITS DESIGNATED TITLE, STATING THE FOLLOWING:

 

(A)          “THE AMOUNT REPRESENTS FUNDS DUE AND OWING TO US FROM APPLICANT PURSUANT TO THAT CERTAIN LEASE BY AND BETWEEN BENEFICIARY, AS LANDLORD, AND APPLICANT, AS TENANT.”

 

OR

 

(B)          “WE HEREBY CERTIFY THAT WE HAVE RECEIVED NOTICE FROM                     BANK THAT LETTER OF CREDIT NO.                WILL NOT BE RENEWED, AND THAT WE HAVE NOT RECEIVED A REPLACEMENT OF THIS LETTER OF CREDIT FROM APPLICANT SATISFACTORY TO US AT LEAST THIRTY (30) DAYS PRIOR TO THE EXPIRATION DATE OF THIS LETTER OF CREDIT.”

 

 

IRREVOCABLE STANDBY LETTER OF CREDIT NO.                         

DATED

 

THE LEASE AGREEMENT MENTIONED ABOVE IS FOR IDENTIFICATION PURPOSES ONLY AND IT IS NOT INTENDED THAT SAID LEASE AGREEMENT BE INCORPORATED HEREIN OR FORM PART OF THIS LETTER OF CREDIT.

 

OUR OBLIGATION UNDER THIS CREDIT SHALL NOT BE AFFECTED BY ANY  CIRCUMSTANCES, CLAIM OR DEFENSE, REAL OR PERSONAL, OF ANY PARTY AS TO THE ENFORCEABILITY OF THE LEASE BETWEEN YOU AND TENANT, IT BEING UNDERSTOOD THAT OUR OBLIGATION SHALL BE THAT OF A PRIMARY OBLIGOR AND NOT THAT OF A SURETY, GUARANTOR OR ACCOMMODATION MAKER.  IF YOU DELIVER THE WRITTEN CERTIFICATE REFERENCED ABOVE TO US, (I) WE SHALL HAVE NO OBLIGATION TO DETERMINE WHETHER ANY OF THE STATEMENTS THEREIN ARE TRUE, (II) OUR OBLIGATIONS HEREUNDER SHALL NOT BE AFFECTED IN ANY MANNER WHATSOEVER IF THE STATEMENTS MADE IN SUCH CERTIFICATE ARE UNTRUE IN WHOLE OR IN PART, AND (III) OUR OBLIGATIONS HEREUNDER SHALL NOT BE AFFECTED IN ANY MANNER WHATSOEVER IF TENANT DELIVERS INSTRUCTIONS OR CORRESPONDENCE TO WHICH EITHER (A) DENIES THE TRUTH OF THE STATEMENT SET FORTH IN THE CERTIFICATE REFERRED TO ABOVE, OR (B) INSTRUCTS US NOT TO PAY BENEFICIARY ON THIS CREDIT FOR ANY REASON WHATSOEVER.

 

PARTIAL AND MULTIPLE DRAWS ARE ALLOWED. EXCEPT AS EXPRESSLY SET FORTH HEREIN, THIS LETTER OF CREDIT MUST ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING AMOUNT AND WILL BE RETURNED TO THE BENEFICIARY UNLESS IT IS FULLY UTILIZED.

 

DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF CREDIT.

 

THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE NOTIFY YOU BY REGISTERED MAIL/OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESSES THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE CURRENT EXPIRATION DATE. IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND SIX (6) MONTHS BEYOND LEASE EXPIRATION.

 

THIS LETTER OF CREDIT MAY BE TRANSFERRED WITHOUT COST TO THE BENEFICIARY, ONE OR MORE TIMES BUT IN EACH INSTANCE TO A SINGLE BENEFICIARY AND ONLY IN THE FULL AMOUNT AVAILABLE TO BE DRAWN UNDER THE LETTER OF CREDIT AT THE TIME OF THE TRANSFER AND ONLY BY THE ISSUING BANK UPON OUR RECEIPT OF THE ATTACHED “EXHIBIT A” DULY COMPLETED AND EXECUTED BY THE BENEFICIARY AND ACCOMPANIED BY THE ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS, IF ANY.

 

ALL DEMANDS FOR PAYMENT SHALL BE MADE BY PRESENTATION OF  THE ORIGINAL APPROPRIATE DOCUMENTS PRIOR TO 10:00 A.M. E.S.T. TIME, ON A BUSINESS DAY AT OUR OFFICE (THE “BANK’S OFFICE”) AT:                                 

 

BOSTON, MASSACHUSETTS        , ATTENTION:                         OR BY FACSIMILE TRANSMISSION AT: (617)     -      ; AND SIMULTANEOUSLY UNDER TELEPHONE ADVICE TO: (617)      -       , ATTENTION:                   WITH ORIGINALS TO FOLLOW BY OVERNIGHT COURIER SERVICE.

 

 

IRREVOCABLE STANDBY LETTER OF CREDIT NO.                     

DATED

 

PAYMENT AGAINST CONFORMING PRESENTATIONS HEREUNDER SHALL BE MADE BY BANK DURING NORMAL BUSINESS HOURS OF THE BANK’S OFFICE WITHIN ONE (1) BUSINESS DAY AFTER PRESENTATION.

 

WE HEREBY AGREE WITH THE DRAWERS, ENDORSERS AND BONAFIDE HOLDERS THAT THE DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO THE DRAWEE, IF NEGOTIATED ON OR BEFORE THE EXPIRATION DATE OF THIS CREDIT.

 

THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500.

 

	
 
    	
 
    	
 
    
	
AUTHORIZED   SIGNATURE
    	
 
    	
AUTHORIZED   SIGNATURE
    

 

 

EXHIBIT “A”

 

	
DATE:
    	
 
    
	
 
    	
 
    
	
TO:
    	
 
    
	
 
    	
RE: STANDBY LETTER OF   CREDIT
    
	
 
    	
NO.
    	
ISSUED BY
    
	
 
    	
ATTN:
    	
 
    	
 
    
	
 
    	
L/C AMOUNT:
    	
 
    
					

 

LADIES AND GENTLEMEN:

 

FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:

 

(NAME OF TRANSFEREE)

(ADDRESS)

 

ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS TRANSFER.

 

BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS, WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECT TO THE TRANSFEREE WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.

 

THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER.

 

	
SINCERELY,
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
(BENEFICIARY’S   NAME)
    	
 
    
	
 
    	
 
    
	
SIGNATURE OF   BENEFICIARY
    	
 
    
	
 
    	
 
    
	
SIGNATURE   AUTHENTICATED
    	
 
    
	
 
    	
 
    
	
(NAME OF BANK)
    	
 
    
	
 
    	
 
    
	
AUTHORIZED   SIGNATURE
    	
 
    

 

 

EXHIBIT “B”

 

	
DATE:
    	
 
    	
 
    	
 
    	
REF. NO.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
AT SIGHT OF THIS DRAFT
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
PAY TO THE ORDER OF
    	
 
    	
 
    	
US$
    
	
 
    	
 
    	
 
    
	
USDOLLARS
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
							

DRAWN UNDER                         BANK, BOSTON, MASSACHUSETTS, STANDBY LETTER OF CREDIT NUMBER NO.                         DATED

 

	
TO:
    	
BANK
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
, MA
    	
(BENEFICIARY’S NAME)
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Authorized Signature
    
							

 

 

EXHIBIT 6

PLAN SHOWING ROFR SPACE

 

 

 

EXHIBIT 7

ESTIMATE DRAFT BUDGET FOR OPERATING YEAR 2011

 

 

 

 

 

 

 

 

 

FIRST AMENDMENT OF LEASE

 

THIS FIRST AMENDMENT OF LEASE (the “First Amendment”) is made effective as of  this December 21, 2011 by and between RB KENDALL FEE, LLC (“Landlord”) and CATABASIS PHARMACEUTICALS, INC.  having a mailing address at One Kendall Square, Building 1400, Suite B14202, Cambridge, Massachusetts 02139 (“Tenant”).

 

BACKGROUND:

 

A.                                    Reference is made to a certain Lease Agreement dated December 17, 2010, by and between Landlord and Tenant (the “Lease”), demising approximately 9,739  rentable square feet of space on a portion of the second (2nd) floor of Building 1400 (the “Existing Premises”) in One Kendall Square, Cambridge, Massachusetts (the “Complex”).  Capitalized terms used but not defined herein shall have the same meaning as in the Lease.

 

B.                                    Landlord and Tenant are the current holders, respectively, of the lessor’s and lessee’s interests in the Lease.

 

C.                                    Landlord and Tenant desire to expand the Leased Premises to include additional space within Building 1400 in the Complex , extend the term of the Lease, correct the square footage of the Existing Premises and to further to amend the Lease, all as set forth herein.

 

AGREEMENTS:

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree and amend the Lease as follows:

 

1.                                      Recalculation:  Landlord and Tenant acknowledge and agree that 33 rentable square feet of floor area was added to the Existing Premises during construction of same.  From and after the Expansion Premises Effective Date (as hereinafter defined), the Lease shall be amended to provide that the Total Rentable Area of the Existing Premises is 9,772 and the Tenant’s Proportionate Common Share and Building Share shall be adjusted to reflect such change in square footage.

 

2.                                      Extension.  Effective as of the Expansion Premises Effective Date, as hereinafter defined, the term of the Lease with respect to the Existing Premises is extended until June 30, 2017, upon all of the same terms and conditions of the Lease in effect as of the date hereof except as otherwise set forth herein.

 

3.                                      Expansion Premises.

 

(a)                                 Effective as of the Expansion Premises Effective Date (defined below),  approximately 5,045 rentable square feet of space on the second (2nd) floor of Building 1400 identified on the plan attached hereto as Exhibit 1 as the Expansion Premises (the “Expansion Premises”) shall be deemed added to and incorporated into the Premises.  The Expansion Premises Effective Date shall be the date upon which Landlord delivers the Expansion Premises to Tenant with Landlord’s Work (as hereinafter defined) Substantially Complete (as such term is hereinafter defined).  From and after the Expansion Premises Effective Date, all references to the Premises in the Lease shall include the Existing Premises and the Expansion Premises and all references to Exhibit A in the Lease shall be deemed to include and refer to Exhibit 1 as well, as applicable.  The Expansion  Premises  shall be delivered in broom clean condition, free of all occupants, personal property, trade fixtures and equipment, and, shall be accepted by

 

 

Tenant in “as-is”, “where-is” condition without any warranty of fitness for use or occupancy, expressed or implied, except as otherwise expressly set forth herein.  Tenant agrees that Landlord has no work to perform in or on the Expansion Premises to prepare same for Tenant’s use and occupancy except for the Landlord’s Work set forth below.

 

(b)                                 The “Expansion Premises Rent Commencement Date” shall be the date that is ninety (90) days following the Expansion Premises Effective Date and the Expansion Premises Effective Date is targeted to be April 6, 2012 (the “Target Completion Date”).  Prior to the Expansion Premises Rent Commencement Date Tenant shall continue to pay Yearly Rent, and or other amounts payable under the Lease for the Existing Premises  in the amounts provided for in the Lease.  If the Expansion Premises Rent Commencement Date shall not have occurred on or before June 5, 2012 (and such failure was not due to any act or omission of Tenant or its employees, agents or contractors which reasonably inhibits the Landlord from timely completing the Landlord’s Work, including, without limitation, any change orders requested by Tenant) then the Expansion Premises Rent Commencement Date shall be extended day for day by the number of days beyond the applicable June 6, 2012 that Landlord’s Work is not Substantially Complete.

 

(c)                                  The term of the Lease with regard to the Expansion Premises shall commence on the Expansion Premises Effective Date  and thereafter shall be co-terminus with the term of the Lease, expiring on June 30, 2017, unless otherwise terminated pursuant to the terms and conditions of the Lease.

 

4.                                      Yearly Rent.  (a) Commencing on the Expansion Premises Rent Commencement Date, the Yearly Rent due under the Lease for  the Expansion Premises shall be as follows:

 

	
Period
    	
 
    	
Yearly Rent
    	
 
    	
Monthly
   Rent
    	
 
    	
Rent Per
   Rentable
   Square Foot
    	
 
    
	
Expansion   Premises Rent Commencement Date —June 30, 2012 *
    	
 
    	
$
    	
232,070.00
    	
 
    	
$
    	
19,339.17
    	
 
    	
$
    	
46.00
    	
 
    
	
July 1,   2012* — June 30, 2013
    	
 
    	
$
    	
237,115.00
    	
 
    	
$
    	
19,759.58
    	
 
    	
$
    	
47.00
    	
 
    
	
July 1,   2013 — June 30, 2014
    	
 
    	
$
    	
242,160.00
    	
 
    	
$
    	
20,180.00
    	
 
    	
$
    	
48.00
    	
 
    
	
July 1,   2014 — June 30, 2015
    	
 
    	
$
    	
247,205.00
    	
 
    	
$
    	
20,600.42
    	
 
    	
$
    	
49.00
    	
 
    
	
July 1,   2015 — June 30, 2016
    	
 
    	
$
    	
252,250.00
    	
 
    	
$
    	
21,020.83
    	
 
    	
$
    	
50.00
    	
 
    
	
July 1,   2016 — June 30, 2017
    	
 
    	
$
    	
257,295.00
    	
 
    	
$
    	
21,441.25
    	
 
    	
$
    	
51.00
    	
 
    

 

*As such dates may be adjusted based upon the actual Expansion Premises Rent Commencement Date.

 

(b)                                 Commencing as of July 1 2011, the Yearly Rent due under the Lease for the Existing Premises shall be as follows:

 

2

 

	
Period
    	
 
    	
Yearly Rent
    	
 
    	
Monthly
   Rent
    	
 
    	
Rent Per
   Rentable
   Square Foot
    	
 
    
	
July 1,   2011 —June 30, 2012
    	
 
    	
$
    	
472,378.48
    	
 
    	
$
    	
35,614.87
    	
 
    	
$
    	
48.34
    	
 
    
	
July 1,   2012 — June 30, 2013
    	
 
    	
$
    	
482,150.48
    	
 
    	
$
    	
40,179.21
    	
 
    	
$
    	
49.34
    	
 
    
	
July 1,   2013 — June 30, 2014
    	
 
    	
$
    	
491,922.48
    	
 
    	
$
    	
40,993.54
    	
 
    	
$
    	
50.34
    	
 
    
	
July 1,   2014 — June 30, 2015
    	
 
    	
$
    	
501,694.48
    	
 
    	
$
    	
41,807.87
    	
 
    	
$
    	
51.34
    	
 
    
	
July 1,   2015 — June 30, 2016
    	
 
    	
$
    	
511,466.48
    	
 
    	
$
    	
42,622.21
    	
 
    	
$
    	
52.34
    	
 
    
	
July 1,   2016 — June 30, 2017
    	
 
    	
498,372.00
    	
 
    	
$
    	
41,531.00
    	
 
    	
$
    	
51.00
    	
 
    

 

The Yearly Rent for the Existing Premises set forth above includes the amortized payment of a portion of the excess cost of the Tenant’s Improvements as set forth in Section 4.1(j) of the Lease.  The Yearly Rent for the entire Premises, including the Expansion Premises, shall be payable in accordance with the terms of the Lease and shall be in addition to all other amounts due and payable by Tenant pursuant to the Lease.

 

5.                                      Proportionate Shares.  Commencing on the Expansion Premises Effective Date, Tenant’s Proportionate Building Share shall be increased to 11.47% and Tenant’s Proportionate Common Area Share shall be increased to 2.32%.  In addition to the Yearly Rent, and other amounts payable under the Lease, Tenant shall be obligated to pay, when billed by Landlord, for its electricity and gas usage in the Premises, including the Expansion Premises, and for pro rate share of water usage.

 

6.                                      Tenant Improvement Balance.  Tenant acknowledges and agrees that, in addition to the amortized payment of a portion of the excess cost of the Tenant’s Improvement which are reflected in the rent schedule in paragraph 4(b) above, Tenant owes Landlord an additional $74,698.13 (the “Overage Amount”) toward the excess cost of the Tenant’s Improvements.  Landlord has agreed to allow Tenant to utilize a portion of the Expansion Allowance (as defined herein), to pay the Overage Amount and such payment shall be made simultaneously with the execution and delivery of this First Amendment.

 

7.                                      Landlord’s Work.     Landlord and Tenant have mutually agreed to the fit up plan attached hereto as Exhibit 2 (the “Fit Up Plan”) which sets forth the leasehold improvements to the Expansion Premises (the “Landlord’s Work”).  Any and all substantive deviations from the Fit Up Plan must be memorialized in change orders mutually agreed upon and executed by Landlord and Tenant.  Following the execution of this First Amendment, Landlord agrees to use commercially reasonable efforts to obtain good faith, arm’s length “not to exceed” estimates of the cost of completing the Landlord’s Work according to the Fit Up Plan from three (3) separate, qualified contractors.  Thereafter, Landlord and Tenant agree to work together in good faith, using these estimates, to agree upon an overall cost estimate for Landlord’s Work (the “Work Estimate”), which shall be signed by Landlord and Tenant and appended to this First Amendment as Exhibit 3.  Landlord shall use commercially reasonable speed and diligence to complete the Landlord’s Work by the Target Completion Date and at a cost that is less than or equal to the Work Estimate (assuming there are no approved changes orders impacting that cost); provided, however, in no event shall the Landlord incur expenses in connection with the Landlord’s Work

 

3

 

that, in the aggregate, are 10% or more in excess of the Work Estimate without first obtaining Tenant’s prior written consent.  In the event Tenant seeks changes to the scope of Landlord’s Work and/or the Fit Up Plan after the submission by Landlord to the three (3) contractors for estimates, and there is any delay in the Substantial Completion of the Landlord’s Work by Landlord due to such requested changes, then the Landlord’s Work shall be deemed Substantially Complete, for purposes of determining the Expansion Premises Commencement Date, on the date Landlord’s Work would have been Substantially Complete, if not for Tenant’s requested changes, as reasonably determined by Landlord (it being agreed that Landlord shall remain obligated to actually Substantially Complete the Landlord’s Work despite such delay).  For purposes of this First Amendment, the terms “Substantially Complete” and “Substantial Completion” shall mean the date the Landlord’s Work has been substantially completed in accordance with the final Fit Up Plan (subject to the completion of any Punchlist items) as certified in writing by Landlord’s architect.  Landlord shall complete the Landlord’s Work, at its sole cost and expense up to the Expansion Allowance as defined below; provided that any changes orders requested by Tenant will be paid for by Tenant.  Landlord shall pay the costs and expenses incurred by Landlord in connection with the performance and completion of Landlord’s Work up to a maximum amount not to exceed $807,200.00 ($160.00 per rentable square foot of the Expansion Premises) (the “Expansion Allowance”) (less the Overage Amount paid in accordance with paragraph 6 above).  Tenant shall be responsible for and promptly (but in no event longer than ten (10) business days after request therefore) pay directly or pay to Landlord for, as appropriate, and indemnify and reimburse Landlord from and against, any actual costs of Landlord’s Work that are in excess of the Expansion Allowance. Landlord shall have the same rights and remedies which Landlord has upon the nonpayment of Yearly Rent and other charges due under the Lease for nonpayment of any amounts which Tenant is required to pay to Landlord in excess of the Expansion Allowance and are incurred in compliance with this Section 7.   In the event the actual cost of Landlord’s Work is less than the total Expansion Allowance, Landlord agrees that Tenant may utilize any remaining Expansion Allowance as follows: (a) to pay down the amount being amortized in the Existing Premises Yearly Rent in accordance with Section 4.1(j) of the Lease (in which event the Yearly Rent for the Existing Premises shall be adjusted accordingly) and (b) to pay for future Tenant improvements in the Premises  provided such improvements are completed and reimbursement is sought no later than the date that is twenty-four (24) months prior to the expiration of the term of the Lease or, if Tenant has exercised its option to extend under Section 29.15 of the Lease, the date that is no later than twenty-four (24) months prior to the expiration of such extended term.  In the case of use of the excess Expansion Allowance for the purposes contained in (b) above, Landlord shall pay such excess to Tenant following Tenant’s completion of Tenant’s improvements and Landlord’s receipt of all of the following:  (a) a reasonably detailed statement, including requisitions from Tenant’s general contractor, third party invoices and other documentation reasonably requested by Landlord evidencing the total cost of, and payment for, actual work done which has been approved by Landlord to the extent required under the Lease (and Landlord shall have the right, upon reasonable advance notice to Tenant, to inspect Tenant’s books and records relating to such statement in order to verify the amount thereof); (b) all lien waivers relating to items, services and work performed in connection with all phases or portions of Tenant’s improvements; (c) reasonable evidence that Tenant’s improvements have been completed in accordance with all applicable laws, rules, regulations and ordinances.  Notwithstanding anything to the contrary contained herein:  (i) Landlord’s obligation to pay any unpaid balance of the Expansion Allowance to Tenant shall be conditioned upon there existing no default by Tenant in its obligations under the Lease beyond applicable notice and cure periods at the time that Landlord would be required to make such payment and that any improvements completed by Tenant have been completed in accordance with the terms of the Lease  and (ii) Landlord shall have no obligation to advance any funds or pay any amounts in excess of the Expansion Allowance.  Upon the written request of Tenant, such request to be given no later than thirty (30) days after Landlord’s Work is Substantially Complete, Landlord shall (at no cost to Landlord) make its books and records in connection with Landlord’s Work available to Tenant (or its designee) for audit to determine compliance with this Section 7.  The individual conducting any such 

 

4

 

audit shall be subject to Landlord’s reasonable approval.

 

8.                                      Parking.  Upon the Expansion Premises Effective Date and through the term of the Lease, Tenant shall be entitled to a total of five (5) additional monthly parking passes available to Tenant for use in the Garage pursuant to, and in accordance with, Article 29.14 of the Lease.

 

9.                                      Brokers.  Landlord and Tenant each warrant and represent to the other that they have dealt with no brokers in connection with the negotiation or consummation of this First Amendment other than CB Richard Ellis/New England and FHO Partners (collectively, the “Broker”) and in the event of any brokerage claim against either party by any person claiming to have dealt with either Landlord or Tenant in connection with this First Amendment, other than the Broker, the party with whom such person claims to have dealt shall defend and indemnify the other party against such claim.  Landlord shall pay any commission due the Broker pursuant to a separate agreement.

 

10.                               Ratification.  In all other respects the Lease shall remain unmodified and shall continue in full force and effect, as amended hereby.  Landlord and Tenant hereby ratify, confirm, and reaffirm all of the terms and conditions of the Lease, as amended hereby.

 

5

 

IN WITNESS WHEREOF the parties hereto have executed this First Amendment of Lease on the date first written above in multiple copies, each to be considered an original hereof, as a sealed instrument.

 

	
LANDLORD:
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
 
    
	
RB KENDALL FEE, LLC
    	
CATABAIS   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
By:  
    	
/s/   Robert L. Beal
    	
 
    	
By: 
    	
/s/ Jill C. Milne
    
	
 
    	
Robert   L. Beal, its authorized signatory
    	
 
    	
Name: 
    	
Jill C. Milne
    
	
 
    	
 
    	
Title: 
    	
CEO
    

 

6

 

EXHIBIT -1, FIRST AMENDMENT

LEASE PLAN FOR EXPANSION PREMISES

 

 

EXHIBIT -2, FIRST AMENDMENT

LANDLORD’S WORK

 

 

8

 

 

	
Property Management
    	
 
    	
 
    
	
Beal and Company, Inc.
    	
 
    	
 
    
	
One Kendall Square, Building 400, 2nd Floor
    	
 
    	
 
    	
Mailing Address:
    
	
Cambridge, MA 02139
    	
 
    	
 
    	
One Kendall Square, Suite B4201
    
	
617 252-3335 Fax 617 252-3338
    	
 
    	
 
    	
Cambridge, MA 02139-01659
    
	
 
    	
 
    	
 
    	
 
    

 

April 18, 2012

 

Christopher Thomajan
 Catabasis Pharmaceuticals, Inc.
 One Kendall Square, Suite B14202
 Cambridge, Massachusetts 02109

 

Re:                             Catabasis Pharmaceuticals, Inc. — One Kendall Square

 

Dear Chris:

 

With respect to your email dated February 27, 2012 regarding the mistake in the Existing Premises rent table on Page 3 of the First Amendment of Lease dated December 21, 2011, we agree that the Monthly Rent column should read $39,364.87 instead of $35,614.87.

 

If you are in agreement, please countersign the below to acknowledge Catabasis’ agreement to the above correction and send it back to me for our lease files.

 

Thank you and please do not hesitate to contact me with any questions.

 

 

 

	
 
    	
Sincerely,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Erin S. Orpik
    
	
 
    	
Erin   S. Orpik
    
	
 
    	
Senior   Property Manger
    
	
 
    	
 
    
	
ESO:dc
    	
 
    
	
 
    	
 
    
	
cc:   
    	
Deborah   Howitt Easton, Esquire
    	
 
    
	
 
    	
Jenna   Doherty, Assistant Property Manager
    	
 
    
	
 
    	
Deliris   Colon, Lease Administrator
    	
 
    
	
 
    	
 
    
	
CATABASIS   PHARMACEUTICALS, INC.
    	
 
    
	
 
    	
 
    
	
By:   
    	
/s/   Chris Thomajan
    	
 
    
	
Name:   
    	
Chris   Thomajan
    	
 
    
	
Title:   
    	
23-APR-2012

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00245-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00245-of-00352.parquet"}]]