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Exhibit 10.1

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made and dated as of August 1, 2016 and is entered into by and among EDGE THERAPEUTICS, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (collectively, referred to as “Lender”) and HERCULES CAPITAL, INC. formerly known as Hercules Technology Growth Capital, Inc., a Maryland corporation, in its capacity as administrative agent and collateral agent for itself and Lender (in such capacity, “Agent”).

 

RECITALS

 

A.          WHEREAS, Borrower, Lender, and Agent are party to that certain Loan and Security Agreement dated as of August 28, 2014 (the “Original Closing Date”), as amended by that certain Amendment No. 1 to Loan and Security Agreement dated as of January 23, 2015 (as the same may have been amended, modified, supplemented or restated and in effect from time to time, the “Existing Loan and Security Agreement”).

 

B.           WHEREAS, immediately prior to the effectiveness of this Agreement, there are Term Loan Advances outstanding under the Existing Loan and Security Agreement in the aggregate principal amount of $3,977,714.17 (the “Existing Term Loan Advances”);

 

C.           WHEREAS, Borrower desires to obtain financing to increase the aggregate amount of the Term Loan Advances up to an aggregate principal amount of $20,000,000 (inclusive of the Existing Term Loan Advances) for general corporate purposes permitted pursuant to the terms and conditions of this Agreement;

 

D.           WHEREAS, the parties hereto desire to amend and restate the Existing Loan and Security Agreement upon the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree that the Existing Loan and Security Agreement shall be amended and restated in its entirety to read as follows (it being agreed that this Agreement shall not be deemed to evidence or result in a novation or repayment or reborrowing of the Existing Term Loan Advances under the Existing Loan and Security Agreement):

 

SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION

 

1.1          Unless otherwise defined herein, the following capitalized terms shall have the following meanings:

 

“2016 End of Term Charge” shall have the meaning assigned to such term in Section 2.6.

 

“Account Control Agreement(s)” means any agreement entered into by and among Agent, Borrower and a third party Bank or other institution (including a Securities Intermediary) in which Borrower maintains a Deposit Account or an account holding Investment Property and which grants Agent a perfected first priority security interest in the subject account or accounts.

 

“ACH Authorization” means the ACH Debit Authorization Agreement in substantially the form of Exhibit I, which account numbers shall be redacted for security purposes if and when filed publicly by Borrower.

 

“ACH Failure” means the failure of the Automated Clearing House (ACH) system to effect a transfer of the funds due to an administrative error in connection with the institution and execution of the ACH Authorization.

 

“Advance(s)” means a Term Loan Advance.

 

“Advance Date” means the funding date of any Advance.

 

“Advance Request” means a request for an Advance submitted by Borrower to Agent in substantially the form of Exhibit A, which account numbers shall be redacted for security purposes if and when filed publicly by Borrower.

 

“Affiliate” means (a) any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question, (b) any Person directly or indirectly owning, controlling or holding with power to vote ten percent (10%) or more of the outstanding voting securities of another Person, (c) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held by another Person with power to vote such securities, or (d) any Person related by blood or marriage to any Person described in subsection (a), (b) or (c) of this paragraph.  As used in the definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

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

 

“Agreement” means this Amended and Restated Loan and Security Agreement, as amended, restated, supplemented or otherwise modified from time to time.

 

“Amortization Date” means March 1, 2018; provided however, if the First Interest Only Extension Conditions are satisfied, then September 1, 2018; and provided further however, if the Second Interest Only Extension Conditions are satisfied then March 1, 2019.

 

“Assignee” has the meaning given to it in Section 11.13.

 

“Board” means Borrower’s board of directors.

 

“Borrower Products” means all products, software, service offerings, technical data or technology currently being designed, manufactured or sold by Borrower or which Borrower intends to sell, license, or distribute in the future including any products or service offerings under development, collectively, together with all products, software, service offerings, technical data or technology that have been sold, licensed or distributed by Borrower since its incorporation.

 

“Business Day” means any day other than Saturday, Sunday and any other day on which banking institutions in the State of California are closed for business.

 

“Cash” means all cash, cash equivalents and liquid funds.

 

“Change in Control” means any reorganization, recapitalization, consolidation or merger (or similar transaction or series of related transactions) of Borrower, sale or exchange of outstanding shares (or similar transaction or series of related transactions) of Borrower in which the holders of Borrower’s outstanding shares immediately before consummation of such transaction or series of related transactions do not, immediately after consummation of such transaction or series of related transactions, retain shares representing more than fifty percent (50%) of the voting power of the surviving entity of such transaction or series of related transactions (or the parent of such surviving entity if such surviving entity is wholly owned by such parent), in each case without regard to whether Borrower is the surviving entity, provided that none of the following shall constitute a Change in Control: (i) any consolidation or merger effected exclusively to change the domicile of Borrower, or (ii) the sale and issuance by Borrower it its equity securities to investors in a bona fide equity financing.

 

“Claims” has the meaning given to it in Section 11.10.

 

“Closing Date” means the date of this Agreement.

 

“Collateral” means the property described in Section 3.

 

“Confidential Information” has the meaning given to it in Section 11.12.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any Indebtedness, lease, dividend, letter of credit or other obligation of another, including any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

 

 “Copyright License” means any written agreement granting any right to use any Copyright or Copyright registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

 

“Copyrights” means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States, any State thereof, or of any other country.

 

 

“Due Diligence Fee” means $25,000, which fee is due to Lender on or prior to the Closing Date, and shall be deemed fully earned on such date regardless of the early termination of this Agreement.

 

“Eligible Foreign Subsidiary” means any Foreign Subsidiary whose execution of a Joinder Agreement would not result in a Tax Impact to Borrower.

 

“End of Term Charge” shall have the meaning assigned to such term in Section 2.6.

 

“Equity Event” means any sale or issuance of Borrower securities for financing purposes (whether in a private placement, registered offering or otherwise).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

 

“Event of Default” has the meaning given to it in Section 9.

 

“Facility Charge” means 0.85% percent of the Maximum Term Loan Amount.

 

“Financial Statements” has the meaning given to it in Section 7.1.

 

“First Interest Only Extension Conditions” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; and (b) delivery by Borrower to Agent of a written communication to Borrower from the data monitoring committee or body performing a similar function that Borrower’s pivotal study of EG-1962 can continue.

 

“Foreign Subsidiary” means any Subsidiary other than a Subsidiary organized under the laws of any state within the United States.

 

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

 

“Indebtedness” means indebtedness of any kind, including (a) all indebtedness for borrowed money or the deferred purchase price of property or services (excluding trade credit entered into in the ordinary course of business due (i) one hundred twenty (120) days for Evonik Industries, MPI Research, Nature America, Whitehouse Laboratories, and Dechert LLP, and (ii) sixty (60) days for all other creditors), including reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations as defined by GAAP on the date hereof, and (d) all Contingent Obligations.

 

 

“Investment” means any beneficial ownership (including stock, partnership or limited liability company interests) of or in any Person, or any loan, advance or capital contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person.

 

“Joinder Agreements” means for each Qualified Subsidiary, a completed and executed Joinder Agreement in substantially the form attached hereto as Exhibit G.

 

“Key Intellectual Property” means any material Intellectual Property necessary in Borrower’s business as presently conducted, or anticipated to be conducted.

 

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

 

“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, and any lease in the nature of a security interest.

 

“Loan” means the Advances made under this Agreement.

 

“Loan Documents” means this Agreement, the Notes (if any), the ACH Authorization, the Account Control Agreements, the Joinder Agreements, all UCC Financing Statements, the Warrant, any subordination agreement, and any other documents executed in connection with the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented or restated.

 

“Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties, assets or financial condition of Borrower and its Subsidiaries taken as a whole; or (ii) the ability of Borrower to perform or pay the Secured Obligations in accordance with the terms of the Loan Documents, or the ability of Agent or Lender to enforce any of its rights or remedies with respect to the Secured Obligations; or (iii) the Collateral or Agent’s Liens on the Collateral or the priority of such Liens.

 

“Maximum Term Loan Amount” means Twenty Million Dollars ($20,000,000).

 

“Maximum Rate” shall have the meaning assigned to such term in Section 2.3.

 

 

“Permitted Indebtedness” means: (i) Indebtedness of Borrower in favor of Lender or Agent arising under this Agreement or any other Loan Document; (ii) Indebtedness existing on the Closing Date which is disclosed in Schedule 1A; (iii) Indebtedness of up to $500,000 outstanding at any time secured by a Lien described in clause (vii) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the lesser of the cost or fair market value of the Equipment financed with such Indebtedness (determined as of the date on which such Equipment is financed); (iv) Indebtedness to trade creditors incurred in the ordinary course of business, including Indebtedness incurred in the ordinary course of business with corporate credit cards; (v) Indebtedness consisting of capitalized lease obligations or other leasehold interests required by GAAP as in effect on the date thereof to be reflected as a liability on Borrower’s balance sheet; (vi) Indebtedness that also constitutes a Permitted Investment; (vii) Subordinated Indebtedness; (viii) reimbursement obligations in connection with letters of credit that are secured by Cash and issued on behalf of Borrower or a Subsidiary thereof in an amount not to exceed $500,000 at any time outstanding, (ix) other Indebtedness in an amount not to exceed $500,000 at any time outstanding, (x) intercompany Indebtedness as long as either (A) each of the Subsidiary obligor and the Subsidiary obligee under such Indebtedness is a Qualified Subsidiary that has executed a Joinder Agreement; (B) Indebtedness incurred as a result of an Investment permitted under clause (x) of the defined term “Permitted Investments,” or (C) such amount does not exceed $1,000,000 in the aggregate during any fiscal year, (xi) Indebtedness consisting solely of fees, royalties, advances for research and development activities, and other amounts paid by third parties to Borrower, in each case in the ordinary course of Borrower’s business and which, by the express terms of the applicable agreement, license, contract or other instrument to which they relate, are payable in advance, and with respect to the payment of which Borrower may have contingent liabilities; provided that the Indebtedness of Borrower to such third parties shall not exceed $500,000 in the aggregate, (xii) Indebtedness consisting solely of pre-paid fees, royalties, advances for research and development activities, and other amounts payable by or obligations of Borrower to third parties, in each case in the ordinary course of Borrower’s business and in an amount not to exceed $1,000,000 in the aggregate under in-bound and out-bound licenses of Intellectual Property used to improve Borrower’s product portfolio and competitive position; (xiii) lease obligations for real property including obligations in connection with leasehold improvements in an amount not to exceed $1,000,000 at any time outstanding; and (xiv) extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose materially more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investment” means: (i) Investments existing on the Closing Date which are disclosed in Schedule 1B; (ii) (a) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof, (b) commercial paper maturing no more than one year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (c) certificates of deposit issued by any bank with assets of at least $500,000,000 maturing no more than one year from the date of investment therein, and (d) money market accounts; (iii) repurchases of stock from former employees, directors, or consultants of Borrower under the terms of applicable repurchase agreements at the original issuance price of such securities in an aggregate amount not to exceed $250,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases; (iv) Investments accepted in connection with Permitted Transfers; (v) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s business; (vi) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subparagraph (vi) shall not apply to Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans not involving the net transfer on a substantially contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of Borrower pursuant to employee stock purchase plans or other similar agreements approved by Borrower’s Board; (viii) Investments consisting of travel advances and Investments consisting of employee relocation loans and other employee loans and advances not to exceed $50,000 in the aggregate, and in each case in the ordinary course of business; (ix) Investments in newly-formed Domestic Subsidiaries, provided that each such Domestic Subsidiary enters into a Joinder Agreement promptly after its formation by Borrower and execute such other documents as shall be reasonably requested by Agent; (x) Investments in Foreign Subsidiaries, so long as an Event of Default does not existing at the time of such Investment and would not exist after giving effect to such Investment: (A) to pay fees and current ordinary and necessary operating expenses of such Foreign Subsidiary and provided that: (1) such Investments are actually used to pay the applicable fees and current ordinary and necessary operating expenses and not for any other purpose, (2) Agent shall have received notice of the amount of such Investment at least two (2) Business Days prior to the making of such Investment and (3) such Investment shall be promptly returned to Borrower in the event it is not used to pay such fees and current ordinary and necessary operating expenses within ten (10) Business Days following the making of such investment, or (B) in an amount not to exceed $1,000,000 in the aggregate; (xi) joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the nonexclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower do not exceed $500,000 in the aggregate in any fiscal year; (xii) Investments consisting of Permitted Subsidiary Transactions; (xiii) expenditures of Cash in a manner that is not prohibited by the terms of this Agreement; and (xiv) additional Investments that do not exceed $500,000 in the aggregate.

 

“Permitted Liens” means any and all of the following: (i) Liens in favor of Agent or Lender; (ii) Liens existing on the Closing Date which are disclosed in Schedule 1C; (iii) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings; provided, that Borrower maintains adequate reserves therefor in accordance with GAAP; (iv) Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like Persons arising in the ordinary course of Borrower’s business and imposed without action of such parties; provided, that the payment thereof is not yet delinquent; (v) Liens arising from judgments, decrees or attachments in circumstances which do not constitute an Event of Default hereunder; (vi) the following deposits, to the extent made in the ordinary course of business:  deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than Liens arising under ERISA or environmental Liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds; (vii) Liens on Equipment or software or other intellectual property constituting purchase money Liens and Liens in connection with capital leases securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness” with respect to such Equipment with a fair market value (determined as of the date on which such Equipment is financed) not in excess of $500,000 outstanding at any time;  (viii) Liens incurred in connection with Subordinated Indebtedness; (ix) leasehold interests in leases or subleases and licenses granted in the ordinary course of business and not interfering in any material respect with the business of the licensor; (x) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become due; (xi) Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets); (xii) statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutions and brokerage firms; (xiii) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or marketability of the related property; (xiv) (A) Liens on Cash securing obligations permitted under clause (vii) of the definition of Permitted Indebtedness and (B) security deposits in connection with real property leases, the combination of (A) and (B) in an aggregate amount not to exceed $500,000 at any time; (xv) Liens limited to leasehold improvements, that do not constitute Collateral, made to Borrower’s and its Subsidiaries’ facilities permitted under subsection (xiii) of Permitted Indebtedness; and (xvi) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clauses (i) through (xi) above; provided, that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.

 

“Permitted Subsidiary Transactions” means any transaction pursuant to which Borrower (i) forms a Foreign Subsidiary and (ii) provides such Foreign Subsidiary with a license or sublicense of Borrower’s Intellectual Property, which does not result in the assignment, sale, disposition or other legal transfer of title of the licensed Intellectual Property, for the sole purpose of researching, developing, manufacturing, commercialization and/or marketing of one or more of Borrower’s Products; provided that the aggregate value of the property and assets (including Cash, but excluding the license or sublicense and the Intellectual Property covered by such license or sublicense) maintained with such Foreign Subsidiaries, individually and in the aggregate (for (i) and (ii)), shall not at any such time exceed ten percent (10%) of Borrower’s property and assets.

 

“Permitted Transfers” means (i) sales of Inventory in the ordinary course of business, (ii) (x) licenses, sublicenses and similar arrangements for the use of Intellectual Property and related assets owned or controlled by Borrower or any Subsidiary and/or (y) provision of a right of reference to regulatory filings and applications with governmental health authorities, and/or (z) provision of rights with respect to pre-clinical and clinical data, in each case ((x), (y) or (z)) to one or more third parties in connection with research, clinical development, regulatory activities, manufacturing, commercialization and/or marketing of one or more Borrower’s or any Subsidiary’s products or product candidates provided that such arrangements are in the ordinary course of business and that could not result in the assignment, sale, disposition or other legal transfer of title of the licensed property, (iii) dispositions of worn-out, obsolete or surplus Equipment at fair market value in the ordinary course of business, (iv) other transfers of assets having a fair market value of not more than $500,000 in the aggregate in any fiscal year, (v) dispositions of the type described in and expressly permitted under Section 7.7, (vi) dispositions arising from the abandonment of fixtures and other similar tenant improvements in connection with office relocations in the ordinary course of business, (vii) abandonment of Intellectual Property that is not Key Intellectual Property in the exercise of Borrower’s reasonable business judgment, (viii) Permitted Investments; and (ix) sales by Borrower of its equity securities in an Equity Event.  For the avoidance of doubt, any action described in clause (ii) above for purposes of granting rights outside of the United States shall be deemed to be “in the ordinary course of business”.

 

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, other entity or government.

 

“Prepayment Charge” shall have the meaning assigned to such term in Section 2.5.

 

“Prime Rate” means the “prime rate” as reported in The Wall Street Journal, and if not reported, then the prime rate most recently reported in The Wall Street Journal.

 

“Qualified Subsidiary” means any direct or indirect Domestic Subsidiary or Eligible Foreign Subsidiary.

 

“Required Lenders” means at any time, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loan Advances then outstanding.

 

“SEC” means the Securities and Exchange Commission.

 

“Second Interest Only Extension Conditions” shall mean satisfaction of each of the following events:  (a) no default or Event of Default shall have occurred; and (b) Lender elects, in its sole and absolute discretion and based upon Lender’s then-existing underwriting criteria and approval, to extend the Amortization Date.

 

“Secured Obligations” means Borrower’s obligations under this Agreement and any Loan Document (other than the Warrant), including any obligation to pay any amount now owing or later arising (including, without limitation, the 2016 End of Term Charge, the End of Term Charge and the Prepayment Charge).  Notwithstanding the foregoing, the “Secured Obligations” shall not include any of Borrower’s obligations, liabilities or duties under the Warrant.

 

 

“Term Commitment” means as to any Lender, the obligation of such Lender, if any, to make a Term Loan Advance to Borrower in a principal amount not to exceed the amount set forth under the heading “Term Commitment” opposite such Lender’s name on Schedule 1.1.

 

“Term Loan Advance” and “Term Loan Advances” means the Existing Term Loan Advances and any term loan funds advanced under this Agreement.

 

“Term Loan Interest Rate” means for any day a per annum rate of interest equal to the greater of either (i) the sum of (a) 9.15%, plus (b) Prime Rate minus 4.50% and (ii) 9.15%.

 

 “Term Loan Maturity Date” means February 3, 2020; provided however, that if the First Interest Only Extension Conditions are satisfied, then August 3, 2020.

 

 “Trademark License” means any written agreement granting any right to use any Trademark or Trademark registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

 

“Trademarks” means all trademarks (registered, common law or otherwise) and any applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof.

 

“UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of New York; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdiction other than the State of California, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

 

 

2.2          Term Loan.

 

(a)          Advances.  Subject to the terms and conditions of this Agreement, (i) Lender made and Borrower drew the Existing Term Loan Advances on August 28, 2014 and January 30, 2015 (which Existing Term Loan Advances remain outstanding on the Closing Date), (ii) Lender will severally (and not jointly) make, and Borrower agrees to draw on the Closing Date, a Term Loan Advance (exclusive of the Existing Term Loan Advances) of $11,022,285.85, and (iii) beginning on the Closing Date and continuing through June 15, 2017, Borrower may request and Lender will severally (and not jointly) make one (1) additional Term Loan Advance in the amount of $5,000,000.  The aggregate outstanding Term Loan Advances may be up to the Maximum Term Loan Amount. Proceeds of any Term Loan Advance shall be deposited into an account that is subject to a first priority perfected security interest in favor of Agent perfected by an Account Control Agreement.

 

(b)          Advance Request.  To obtain a Term Loan Advance, Borrower shall complete, sign and deliver to Agent an Advance Request (at least three (3) Business Days before the Advance Date provided that for the Term Loan Advance to be made on the Closing Date, Borrower need only deliver an Advance Request one (1) Business Day prior to such date).  Lender shall fund the Term Loan Advance in the manner requested by the Advance Request provided that each of the conditions precedent to such Term Loan Advance is satisfied as of the requested Advance Date.

 

(c)          Interest.  The principal balance of each Term Loan Advance shall bear interest thereon from such Advance Date at the Term Loan Interest Rate based on a year consisting of 360 days, with interest computed daily based on the actual number of days elapsed.  The Term Loan Interest Rate will float and change on the day the Prime Rate changes from time to time.

 

 

2.4          Default Interest.  In the event any payment is not paid on the scheduled payment date (other than due to an ACH Failure), an amount equal to five percent (5%) of the past due amount shall be payable on demand. In addition, upon the occurrence and during the continuation of an Event of Default hereunder, all Secured Obligations, including principal, interest, compounded interest, and Lender’s and Agent’s fees and expenses set forth in Section 11.11, shall bear interest at a rate per annum equal to the rate set forth in Section 2.2(c), as applicable, plus five percent (5%) per annum.  In the event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded at the rate set forth in Section 2.2(c) or Section 2.4, as applicable.

 

2.5          Prepayment.  At Borrower’s option upon at least seven (7) Business Days prior notice to Agent, Borrower may prepay all, or any portion, of the outstanding Advances by paying the entire principal balance, or any portion thereof, all accrued and unpaid interest on the portion prepaid, all unpaid Agent’s and Lender’s fees and expenses accrued to the date of the repayment (including the End of Term Charge), together with a prepayment charge on the portion prepaid equal to the following percentage of the Advance amount being prepaid: if such Advance amounts are prepaid in any of the first twelve (12) months following the Closing Date, two percent (2.00%); after twelve (12) months but prior to twenty four (24) months, one percent (1.00%); and thereafter, one half a percent (0.50%) (each, a “Prepayment Charge”).  Borrower agrees that the Prepayment Charge is a reasonable calculation of Lender’s lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early repayment of the Advances.  Upon the occurrence of a Change in Control, Borrower shall prepay the outstanding amount of all principal and accrued interest through the prepayment date and all unpaid Agent’s and Lender’s fees and expenses accrued to the date of the repayment (including the 2016 End of Term Charge and the End of Term Charge) together with the applicable Prepayment Charge. Notwithstanding the foregoing, Agent and Lender agree to waive the Prepayment Charge if Agent and Lender (in its sole and absolute discretion) agree in writing to refinance the Advances prior to the Term Loan Maturity Date.

 

2.6          End of Term Charge.  On the earliest to occur of (i) March 1, 2018, (ii) the date that Borrower prepays all of the outstanding Secured Obligations (other than any inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) in full, or (iii) the date that the Secured Obligations become due and payable, Borrower shall pay Lender a charge equal to one and one-half of one percent (1.50%) of the aggregate original principal amount of the Existing Term Loan Advances (i.e. 1.50% of $6,000,000 ($90,000)) (the “End of Term Charge”).  In addition, on the earliest to occur of (i) Term Loan Maturity Date, (ii) the date that Borrower prepays all of the outstanding Secured Obligations (other than any inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) in full, or (iii) the date that the Secured Obligations become due and payable, Borrower shall pay Lender a charge equal to four and one-half of one percent (4.50%) of the Maximum Term Loan Amount (i.e. 4.50% of $20,000,000 ($900,000)) (the “2016 End of Term Charge”). Notwithstanding the required payment date of such charge, it shall be deemed earned by Lender as of the Closing Date.

 

2.7          Notes.  If so requested by Lender by written notice to Borrower, then Borrower shall execute and deliver to Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of Lender pursuant to Section 11.13) (promptly after Borrower’s receipt of such notice) a Note or Notes to evidence Lender’s Loans.

 

2.8          Pro Rata Treatment. Each payment (including prepayment) on account of any fee and any reduction of the Term Loan Advances shall be made pro rata according to the Term Commitments of the relevant Lender.

 

SECTION 3. SECURITY INTEREST

 

3.1          As security for the prompt and complete payment when due (whether on the payment dates or otherwise) of all the Secured Obligations, Borrower grants to Agent a security interest in all of Borrower’s right, title, and interest in and to the following personal property whether now owned or hereafter acquired (collectively, the “Collateral”):  (a) Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles (other than Intellectual Property); (e) Inventory; (f) Investment Property; (g) Deposit Accounts; (h) Cash; (i) Goods; and all other tangible and intangible personal property of Borrower whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and any of Borrower’s property in the possession or under the control of Agent; and, to the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing; provided, however, that the Collateral shall include all Accounts and General Intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in, the Intellectual Property (the “Rights to Payment”).  Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of the date of this Agreement, include the Intellectual Property to the extent necessary to permit perfection of Agent’s security interest in the Rights to Payment.

 

 

 

(a)          executed copies of the Loan Documents, Account Control Agreements, and all other documents and instruments reasonably required by Agent to effectuate the transactions contemplated hereby or to create and perfect the Liens of Agent with respect to all Collateral, in all cases in form and substance reasonably acceptable to Agent;

 

(b)          certified copy of resolutions of Borrower’s Board evidencing approval of the Loan and other transactions evidenced by the Loan Documents;

 

(c)          certified copies of the Certificate of Incorporation and the Bylaws, as amended through the Closing Date, of Borrower;

 

(d)          a certificate of good standing for Borrower from its state of incorporation and similar certificates from all other jurisdictions in which it does business and where the failure to be qualified would have a Material Adverse Effect;

 

(e)          payment of the Due Diligence Fee (receipt of which is hereby acknowledged by Agent), the Facility Charge and reimbursement of Agent’s and Lender’s current expenses reimbursable pursuant to this Agreement, which amounts may be deducted from the initial Advance; and

 

 

 

SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER

 

Borrower represents and warrants that:

 

5.1          Corporate Status.  Borrower is a corporation duly organized, legally existing and in good standing under the laws of the State of Delaware, and is duly qualified as a foreign corporation in all jurisdictions in which the nature of its business or location of its properties require such qualifications and where the failure to be qualified could reasonably be expected to have a Material Adverse Effect.  Borrower’s present name, former names (if any), locations, place of formation, tax identification number, organizational identification number and other information are correctly set forth in Exhibit C, as may be updated by Borrower in a written notice (including any Compliance Certificate) provided to Agent after the Closing Date.

 

5.2          Collateral.  Borrower owns the Collateral and the Intellectual Property, free of all Liens, except for Permitted Liens.  Borrower has the power and authority to grant to Agent a Lien in the Collateral as security for the Secured Obligations.

 

5.3          Consents.  Borrower’s execution, delivery and performance of the Note(s) (if any), this Agreement and all other Loan Documents (i) have been duly authorized by all necessary corporate action of Borrower, (ii) will not result in the creation or imposition of any Lien upon the Collateral, other than Permitted Liens and the Liens created by this Agreement and the other Loan Documents, (iii) do not violate any provisions of Borrower’s Certificate or Articles of Incorporation (as applicable), bylaws, or any, law, regulation, order, injunction, judgment, decree or writ to which Borrower is subject and (iv) except as described on Schedule 5.3, do not violate any contract or agreement or require the consent or approval of any other Person which has not already been obtained.  The individual or individuals executing the Loan Documents and the Warrant are duly authorized to do so.

 

5.7          Information Correct and Current.  No information, report, Advance Request, financial statement, exhibit or schedule furnished, by or on behalf of Borrower to Agent in connection with any Loan Document or included therein or delivered pursuant thereto when taken as a whole, contains or will contain any material misstatement of fact or, when taken together with all other such information or documents, omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not materially misleading at the time such statement was made or deemed made. Additionally, any and all financial or business projections provided by Borrower to Agent, whether prior to or after the Closing Date, shall be (i) provided in good faith and based on the most current data and information available to Borrower, and (ii) the most current of such projections provided to Borrower’s Board of Directors (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the control of Borrower, that no assurance is given that any particular projections will be realized, and that actual results may differ).

 

5.8          Tax Matters.  Except as described on Schedule 5.8 and except those being contested in good faith with adequate reserves under GAAP, (a) Borrower has filed all material federal, state and local tax returns that it is required to file except with respect to taxes that do not exceed Fifty Thousand Dollars ($50,000) in the aggregate, (b) Borrower has duly paid or fully reserved for all taxes or installments thereof (including any interest or penalties) as and when due, which have or may become due pursuant to such returns, except with respect to taxes that do not exceed Fifty Thousand Dollars ($50,000) in the aggregate, and (c) Borrower has paid or fully reserved for any tax assessment received by Borrower for the three (3) years preceding the Closing Date.

 

 

5.11        Borrower Products.  Except as described on Schedule 5.11, no Intellectual Property owned by Borrower or Borrower Product has been or is subject to any actual or, to the knowledge of Borrower, threatened litigation, proceeding (including any proceeding in the United States Patent and Trademark Office or any corresponding foreign office or agency) or outstanding decree, order, judgment, settlement agreement or stipulation that restricts in any manner Borrower’s use, transfer or licensing thereof or that may affect the validity, use or enforceability thereof. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision entered into in connection with any litigation or proceeding that obligates Borrower to grant licenses or ownership interest in any future Intellectual Property related to the operation or conduct of the business of Borrower or Borrower Products.  Borrower has not received any written notice or claim, or, to the knowledge of Borrower, oral notice or claim, challenging or questioning Borrower’s ownership in any Intellectual Property (or written notice of any claim challenging or questioning the ownership in any licensed Intellectual Property of the owner thereof) or suggesting that any third party has any claim of legal or beneficial ownership with respect thereto nor, to Borrower’s knowledge, is there a reasonable basis for any such claim.  To Borrower’s knowledge, neither Borrower’s use of its Intellectual Property nor the production and sale of Borrower Products infringes any valid claim of any Intellectual Property or other rights of others.

 

 

 

6.2          Certificates.  Borrower shall deliver to Agent certificates of insurance that evidence Borrower’s compliance with its insurance obligations in Section 6.1 and the obligations contained in this Section 6.2.  Borrower’s insurance certificate shall state Agent is an additional insured for commercial general liability, a loss payee for all risk property damage insurance, subject to the insurer’s approval, and a loss payee for property insurance and additional insured for liability insurance for any future insurance that Borrower may acquire from such insurer.  Attached to the certificates of insurance will be additional insured endorsements for liability and lender’s loss payable endorsements for all risk property damage insurance.  Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Five Hundred Thousand Dollars ($500,000) in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Agent has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Agent or Lender, be payable to Lender on account of the Obligations.  All certificates of insurance will provide for a minimum of thirty (30) days advance written notice to Agent of cancellation (other than cancellation for non-payment of premiums, for which ten (10) days’ advance written notice shall be sufficient) or any other change adverse to Agent’s interests.  Any failure of Agent to scrutinize such insurance certificates for compliance is not a waiver of any of Agent’s rights, all of which are reserved.

 

6.3          Indemnity.  Borrower agrees to indemnify and hold Agent, Lender and their officers, directors, employees, agents, in-house attorneys, representatives and shareholders (each, an “Indemnified Person”) harmless from and against any and all claims, costs, expenses, damages and liabilities (including such claims, costs, expenses, damages and liabilities based on liability in tort, including strict liability in tort), including reasonable attorneys’ fees and disbursements and other costs of investigation or defense (including those incurred upon any appeal) (collectively, “Liabilities”), that may be instituted or asserted against or incurred by such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents or the administration of such credit, or in connection with or arising out of the transactions contemplated hereunder and thereunder, or any actions or failures to act in connection therewith, or arising out of the disposition or utilization of the Collateral, excluding in all cases Liabilities to the extent resulting solely from any Indemnified Person’s gross negligence or willful misconduct. Borrower agrees to pay, and to save Agent and Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all excise, sales or other similar taxes (excluding taxes imposed on or measured by the net income of Agent or Lender) that may be payable or determined to be payable with respect to any of the Collateral or this Agreement.  In no event shall any Indemnified Person be liable on any theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings).  This Section 6.3 shall survive the repayment of indebtedness under, and otherwise shall survive the expiration or other termination of, the Agreement.

 

SECTION 7. COVENANTS OF BORROWER

 

Borrower agrees as follows:

 

7.1           Financial Reports.  Borrower shall furnish to Agent the financial statements and reports listed hereinafter (the “Financial Statements”):

 

(a)          as soon as practicable (and in any event within 30 days) after the end of each month, unaudited interim and year-to-date financial statements as of the end of such month (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or any other occurrence that would reasonably be expected to have a Material Adverse Effect, all certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, (ii) that they are subject to normal year-end adjustments, and (iii) they do not contain certain non-cash items that are customarily included in quarterly and annual financial statements;

 

 

(g)          As soon as practicable following Board approval (and in any event within thirty (30) days after Board approval), copies of the minutes of each meeting of the Board, provided that in all cases Borrower may redact from such copies information that (i) presents a potential conflict of interest with Lender, (ii) relates to executive sessions, (iii) is an attorney-client communication, (iv) relates to confidential compensation information, or (v) is subject to confidentiality agreements; and

 

(h)          financial and business projections promptly following their approval by Borrower’s Board, and in any event, within 30 days following approval by the Board of the budget of Borrower, but at least annually, as well as budgets, operating plans and other financial information reasonably requested by Agent.

 

 

 

7.3          Further Assurances.  Borrower shall from time to time execute, deliver and file, alone or with Agent, any financing statements, security agreements, collateral assignments, notices, control agreements, or other documents to perfect or give the highest priority to Agent’s Lien on the Collateral.  Borrower shall from time to time procure any instruments or documents as may be reasonably requested by Agent, and take all further action that may be necessary, or that Agent may reasonably request, to perfect and protect the Liens granted hereby and thereby.  In addition, and for such purposes only, Borrower hereby authorizes Agent to execute and deliver on behalf of Borrower and to file such financing statements (including an indication that the financing statement covers “all assets or all personal property (other than Intellectual Property)” of Borrower in accordance with Section 9-504 of the UCC), collateral assignments, notices, control agreements, security agreements and other documents without the signature of Borrower either in Agent’s name or in the name of Agent as agent and attorney-in-fact for Borrower.  Borrower shall protect and defend Borrower’s title to the Collateral and Agent’s Lien thereon against all Persons claiming any interest adverse to Borrower or Agent other than Permitted Liens.

 

 

7.7          Distributions.  Borrower shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other equity interest other than pursuant to employee, director or consultant repurchase plans or other similar agreements, provided, however, in each case the repurchase or redemption price does not exceed the original consideration paid for such stock or equity interest, or (b) declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest, except that a Subsidiary may pay dividends or make distributions to Borrower, or (c) lend money to any employees, officers or directors or guarantee the payment of any such loans granted by a third party in excess of $250,000 in the aggregate or (d) waive, release or forgive any Indebtedness owed by any employees, officers or directors in excess of $250,000 in the aggregate.

 

 

7.12        Deposit Accounts. Neither Borrower nor any Qualified Subsidiary shall maintain any Deposit Accounts (other than Deposit Accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Agent by Borrower as such), or accounts holding Investment Property, except with respect to which Agent has an Account Control Agreement.

 

 

If to Agent:	HERCULES CAPITAL, INC.
	Legal Department
	Attention:  Chief Legal Officer and
	Mr. Bryan Jadot
	400 Hamilton Avenue, Suite 310
	Palo Alto, CA  94301
	Email :  legal@herculestech.com and
	bjadot@herculestech.com
	Telephone:  650-289-3060

If to Lender:	HERCULES CAPITAL, INC.
	Legal Department
	Attention:  Chief Legal Officer and
	Mr. Bryan Jadot
	400 Hamilton Avenue, Suite 310
	Palo Alto, CA  94301
	Email :  legal@herculestech.com and
	bjadot@herculestech.com
	Telephone:  650-289-3060

 

If to Borrower:	EDGE THERAPEUTICS, INC.
	Attention: Andrew Einhorn and W. Bradford Middlekauff
	300 Connell Drive, Suite 1600
	Berkeley Heights, New Jersey 07922
	Facsimile:  (908) 790-1212
	Telephone:  (800) 208-3343
	Email: aeinhorn@edgetherapeutics.com and bmiddlekauff@edgetherapeutics.com

 

 

 

 

 

IN WITNESS WHEREOF, Borrower, Agent and Lender have duly executed and delivered this Loan and Security Agreement as of the day and year first above written.

 

	BORROWER:
	EDGE THERAPEUTICS, INC.
	Signature:
	Print Name:
	Title:

Accepted in Palo Alto, California:

	AGENT:
	HERCULES CAPITAL, INC.
	Signature:
	Print Name:
	Title:
	LENDER:
	HERCULES CAPITAL, INC.
	Signature:
	Print Name:
	Title:

 

Table of Exhibits and Schedules

Exhibit A:	Advance Request
	Attachment to Advance Request
Exhibit B:	Term Note
Exhibit C:	Name, Locations, and Other Information for Borrower
Exhibit D:	Borrower’s Patents, Trademarks, Copyrights and Licenses
Exhibit E:	Borrower’s Deposit Accounts and Investment Accounts
Exhibit F:	Compliance Certificate
Exhibit G:	Joinder Agreement
Exhibit H:	Borrowing Base Certificate
Exhibit I:	ACH Debit Authorization Agreement
Exhibit J:	Conversion Election Notice

Schedule 1	Subsidiaries
Schedule 1.1	Commitments
Schedule 1A	Existing Permitted Indebtedness
Schedule 1B	Existing Permitted Investments
Schedule 1C	Existing Permitted Liens
Schedule 5.3	Consents, Etc.
Schedule 5.5	Actions Before Governmental Authorities
Schedule 5.8	Tax Matters
Schedule 5.9	Intellectual Property Claims
Schedule 5.10	Intellectual Property
Schedule 5.11	Borrower Products
Schedule 5.14	Capitalization

 

EXHIBIT A

ADVANCE REQUEST

 

To:	Agent:	Date:	__________, 2016
	Hercules Capital, Inc. (the “Agent”)
	400 Hamilton Avenue, Suite 310
	Palo Alto, CA 94301
	Email: legal@herculestech.com
	Attn:

 

Edge Therapeutics, Inc. (“Borrower”) hereby requests from Hercules Capital, Inc. (“Lender”) an Advance in the amount of _____________________ Dollars ($________________) on ______________, _____ (the “Advance Date”) pursuant to the Loan and Security Agreement among Borrower, Agent and Lender (the “Agreement”). Capitalized words and other terms used but not otherwise defined herein are used with the same meanings as defined in the Agreement.

 

Please:

	(a)	Issue a check payable to Borrower
		or
	(b)	Wire Funds to Borrower’s account

		Bank:
		Address:
		ABA Number:
		Account Number:
		Account Name:
		Contact Person:
		Phone Number
		To Verify Wire Info:
		E-mail Address:

 

Borrower represents that the conditions precedent to the Advance set forth in the Agreement are satisfied and shall be satisfied upon the making of such Advance, including but not limited to:  (i) that no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing; (ii) that the representations and warranties set forth in the Agreement and in the Warrant are and shall be true and correct in all material respects on and as of the Advance Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date; (iii) that Borrower is in compliance with all the terms and provisions set forth in each Loan Document on its part to be observed or performed; and (iv) that as of the Advance Date, no fact or condition exists that would (or would, with the passage of time, the giving of notice, or both) constitute an Event of Default under the Loan Documents.  Borrower understands and acknowledges that Agent has the right to review the financial information supporting this representation and, based upon such review in its sole discretion, Lender may decline to fund the requested Advance.

 

Borrower hereby represents that Borrower’s corporate status and locations have not changed since the date of the Agreement or, if the Attachment to this Advance Request is completed, are as set forth in the Attachment to this Advance Request.

 

Borrower agrees to notify Agent promptly before the funding of the Loan if any of the matters which have been represented above shall not be true and correct on the Borrowing Date and if Agent has received no such notice before the Advance Date then the statements set forth above shall be deemed to have been made and shall be deemed to be true and correct as of the Advance Date.

 

Executed as of [              ], 20[   ].

 

	BORROWER:
	EDGE THERAPEUTICS, INC.
	SIGNATURE:
	TITLE:
	PRINT NAME:

 

ATTACHMENT TO ADVANCE REQUEST

 

Dated:

 

Borrower hereby represents and warrants to Agent that Borrower’s current name and organizational status is as follows:

 

Name:	Edge Therapeutics, Inc.
Type of organization:	Corporation
State of organization:	Delaware
Organization file number:

Borrower hereby represents and warrants to Agent that the street addresses, cities, states and postal codes of its current locations are as follows:

 

EXHIBIT B

SECURED TERM PROMISSORY NOTE

 

$[  ],000,000	Advance Date:  ___ __, 20[  ]
	Maturity Date:  ___ __, 20[  ]

 

FOR VALUE RECEIVED, Edge Therapeutics, Inc. a Delaware corporation, for itself and each of its Qualified Subsidiaries (the “Borrower”) hereby promises to pay to the order of Hercules Capital, Inc., a Maryland corporation or the holder of this Note (the “Lender”) at 400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301 or such other place of payment as the holder of this Secured Term Promissory Note (this “Promissory Note”) may specify from time to time in writing, in lawful money of the United States of America, the principal amount of [  ] Million Dollars ($[  ],000,000) or such other principal amount as Lender has advanced to Borrower, together with interest at a rate as set forth in Section 2.2(c) of the Agreement based upon a year consisting of 360 days, with interest computed daily based on the actual number of days in each month.

 

This Promissory Note is the Note referred to in, and is executed and delivered in connection with, that certain Loan and Security Agreement dated [              ], 2016, by and among Borrower, Hercules Capital, Inc., a Maryland corporation (the “Agent”) and the several banks and other financial institutions or entities from time to time party thereto as lender (as the same may from time to time be amended, modified or supplemented in accordance with its terms, the “Agreement”), and is entitled to the benefit and security of the Agreement and the other Loan Documents (as defined in the Agreement), to which reference is made for a statement of all of the terms and conditions thereof.  All payments shall be made in accordance with the Agreement.  All terms defined in the Agreement shall have the same definitions when used herein, unless otherwise defined herein.  An Event of Default under the Agreement shall constitute a default under this Promissory Note.

Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest under the UCC or any applicable law.   Borrower agrees to make all payments under this Promissory Note without setoff, recoupment or deduction and regardless of any counterclaim or defense.  This Promissory Note has been negotiated and delivered to Lender and is payable in the State of New York.  This Promissory Note shall be governed by and construed and enforced in accordance with, the laws of the State of New York, excluding any conflicts of law rules or principles that would cause the application of the laws of any other jurisdiction.

 

BORROWER FOR ITSELF AND
ON BEHALF OF ITS QUALIFIED SUBSIDIARIES:
	EDGE THERAPEUTICS, INC.
	By:
	TITLE:

 

EXHIBIT C

 

NAME, LOCATIONS, AND OTHER INFORMATION FOR BORROWER

 

1.  Borrower represents and warrants to Agent that Borrower’s current name and organizational status as of the Closing Date is as follows:

 

Name:	Edge Therapeutics, Inc.
Type of organization:	Corporation
State of organization:	Delaware
Organization file number:

 

2.  Borrower represents and warrants to Agent that for five (5) years prior to the Closing Date, Borrower did not do business under any other name or organization or form except the following:

 

Name:

Used during dates of:

Type of Organization:

State of organization:

Organization file Number:

Borrower’s fiscal year ends on _____

Borrower’s federal employer tax identification number is: _______________

 

3.  Borrower represents and warrants to Agent that its chief executive office is located at _______________.

 

EXHIBIT D

 

BORROWER’S PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

 

EXHIBIT E

 

BORROWER’S DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS

 

EXHIBIT F

 

COMPLIANCE CERTIFICATE

Hercules Capital, Inc. (as “Agent”)

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

 

Reference is made to that certain Loan and Security Agreement dated [               ], 2016 and the Loan Documents (as defined therein) entered into in connection with such Loan and Security Agreement all as may be amended from time to time (hereinafter referred to collectively as the “Agreement”) by and among Hercules Capital, Inc., as agent for Lender (the “Agent”), the several banks and other financial institutions or entities from time to time party thereto (collectively, the “Lender”) and Edge Therapeutics, Inc. (the “Borrower”) as Borrower. All capitalized terms not defined herein shall have the same meaning as defined in the Agreement.

 

The undersigned is an Officer of Borrower, knowledgeable of all Borrower financial matters, and is authorized to provide certification of information regarding Borrower; hereby certifies, in such capacity, that in accordance with the terms and conditions of the Agreement, Borrower is in compliance for the period ending ___________ of all covenants, conditions and terms and hereby reaffirms that all representations and warranties contained therein are true and correct on and as of the date of this Compliance Certificate with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, after giving effect in all cases to any standard(s) of materiality contained in the Agreement as to such representations and warranties.  Attached are the required documents supporting the above certification.  The undersigned further certifies that these are prepared in accordance with GAAP (except (i) for the absence of footnotes with respect to unaudited financial statements, (ii) that they are subject to normal year-end adjustments, and (iii) they do not contain certain non-cash items that are customarily included in quarterly and annual financial statements) and are consistent from one period to the next except as explained below.

 

REPORTING REQUIREMENT	REQUIRED	CHECK IF ATTACHED
Interim Financial Statements	Monthly within 30 days
Interim Financial Statements	Quarterly within 45 days
Audited Financial Statements	FYE within 90 days

The undersigned hereby also confirms the below disclosed accounts represent all depository accounts and securities accounts presently open in the name of each Borrower or Borrower Subsidiary/Affiliate, as applicable.

 

		Depository AC #	Financial Institution	Account Type  (Depository /  Securities)	Last Month Ending Account Balance	Purpose of Account
BORROWER Name/Address:
	1
	2
	3
	4
	5
	6
	7
BORROWER SUBSIDIARY / AFFILIATE COMPANY Name/Address
	1
	2
	3
	4
	5
	6
	7

	Very Truly Yours,
	EDGE THERAPEUTICS, INC.
	By:
	Name:
	Its:

 

EXHIBIT G

 

FORM OF JOINDER AGREEMENT

 

This Joinder Agreement (the “Joinder Agreement”) is made and dated as of [          ], 20[  ], and is entered into by and between__________________., a ___________ corporation (“Subsidiary”), and HERCULES CAPITAL, INC., a Maryland corporation (as “Agent”).

 

RECITALS

 

A.  Subsidiary’s Affiliate, Edge Therapeutics, Inc. (“Borrower”) has entered into that certain Loan and Security Agreement dated [         ], 2016, with the several banks and other financial institutions or entities from time to time party thereto as lender (collectively, the “Lender”) and Agent, as such agreement may be amended (the “Agreement”), together with the other agreements executed and delivered in connection therewith;

 

B.  Subsidiary acknowledges and agrees that it will benefit both directly and indirectly from Borrower’s execution of the Agreement and the other agreements executed and delivered in connection therewith;

 

AGREEMENT

 

NOW THEREFORE, Subsidiary and Agent agree as follows:

 

1.	The recitals set forth above are incorporated into and made part of this Joinder Agreement.  Capitalized terms not defined herein shall have the meaning provided in the Agreement.

 

2.

By signing this Joinder Agreement, Subsidiary shall be bound by the terms and conditions of the Agreement the same as if it were Borrower (as defined in the Agreement) under the Agreement, mutatis mutandis, provided however, that (a) with respect to (i) Section 5.1 of the Agreement, Subsidiary represents that it is an entity duly organized, legally existing and in good standing under the laws of [        ], (b) neither Agent nor Lender shall have any duties, responsibilities or obligations to Subsidiary arising under or related to the Agreement or the other agreements executed and delivered in connection therewith, (c) that if Subsidiary is covered by Borrower’s insurance, Subsidiary shall not be required to maintain separate insurance or comply with the provisions of Sections 6.1 and 6.2 of the Agreement, and (d) that as long as Borrower satisfies the requirements of Section 7.1 of the Agreement, Subsidiary shall not have to provide Agent separate Financial Statements.  To the extent that Agent or Lender has any duties, responsibilities or obligations arising under or related to the Agreement or the other agreements executed and delivered in connection therewith, those duties, responsibilities or obligations shall flow only to Borrower and not to Subsidiary or any other Person or entity.  By way of example (and not an exclusive list): (i) Agent’s providing notice to Borrower in accordance with the Agreement or as otherwise agreed among Borrower, Agent and Lender shall be deemed provided to Subsidiary; (ii) a Lender’s providing an Advance to Borrower shall be deemed an Advance to Subsidiary; and (iii) Subsidiary shall have no right to request an Advance or make any other demand on Lender.

 

3.	Subsidiary agrees not to certificate its equity securities without Agent’s prior written consent, which consent may be conditioned on the delivery of such equity securities to Agent in order to perfect Agent’s security interest in such equity securities.

 

4.

Subsidiary acknowledges that it benefits, both directly and indirectly, from the Agreement, and hereby waives, for itself and on behalf on any and all successors in interest (including without limitation any assignee for the benefit of creditors, receiver, bankruptcy trustee or itself as debtor-in-possession under any bankruptcy proceeding) to the fullest extent provided by law, any and all claims, rights or defenses to the enforcement of this Joinder Agreement on the basis that (a) it failed to receive adequate consideration for the execution and delivery of this Joinder Agreement or (b) its obligations under this Joinder Agreement are avoidable as a fraudulent conveyance.

 

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

[SIGNATURE PAGE TO JOINDER AGREEMENT]

 

SUBSIDIARY:

.

 

	By:
	Name:
	Title:
	Address:

 

	Telephone:
	Email:

 

AGENT:

 

HERCULES CAPITAL, INC.

By:
Name:
Title:

Address:

400 Hamilton Ave., Suite 310

Palo Alto, CA 94301

Email: legal@herculestech.com

Telephone:  650-289-3060

 

ACH DEBIT AUTHORIZATION AGREEMENT

Hercules Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, CA  94301

 

Re:  Loan and Security Agreement dated _______________  (the “Agreement”) by and among Edge Therapeutics, Inc. (“Borrower”) and Hercules Capital, Inc., as agent (“Agent”) and the lenders party thereto (collectively, the “Lender”)

 

In connection with the above referenced Agreement, Borrower hereby authorizes Agent to initiate debit entries for (i) the periodic payments due under the Agreement and (ii) out-of-pocket legal fees and costs incurred by Agent or Lender pursuant to Section 11.11 of the Agreement to Borrower’s account indicated below.  Borrower authorizes the depository institution named below to debit to such account.

 

DEPOSITORY NAME	BRANCH
CITY	STATE AND ZIP CODE
TRANSIT/ABA NUMBER	ACCOUNT NUMBER

 

This authority will remain in full force and effect so long as any amounts are due under the Agreement.

 

EDGE THERAPEUTICS, INC.
By:
Date:

 

Acknowledged and agreed to:

AGENT:

HERCULES CAPITAL, INC.

By:
Name:
Title:

LENDER:

HERCULES CAPITAL, INC.

By:
Name:
Title:

Address:

400 Hamilton Ave., Suite 310

Palo Alto, CA 94301

Facsimile: (650) 473-9194

Telephone: (650) 289-3060

 

SCHEDULE 1.1

 

COMMITMENTS

 

LENDER	TERM COMMITMENT
Hercules Capital, Inc.	$15,000,000 (Term Loan I)
Hercules Capital, Inc.	$5,000,000 (Term Loan II)
TOTAL COMMITMENTS	$20,000,000

 

 

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