Form 8-K CTI BIOPHARMA CORP For: Jun 09

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 10, 2015 (June 9, 2015)

 

 

CTI BIOPHARMA CORP.

(Exact name of registrant as specified in its charter)

 

 

 

3101 Western Avenue West, Suite 600

Seattle, Washington 98121

(Address of principal executive offices)

Registrant’s telephone number, including area code: (206) 282-7100

Not applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

 

 

 

---

Item 1.01 Entry into a Material Definitive Agreement.

 

On June 9, 2015, CTI BioPharma Corp. (the “Company”) and its wholly-owned subsidiary, Systems Medicine LLC (together with the Company, the “Borrower”), entered into a Third Amendment (the “Amendment”) to the Loan and Security Agreement dated March 26, 2013, as amended (as amended prior to the Amendment, the “Original Loan Agreement”, and the Original Loan Agreement as amended by the “Amendment”, the “Facility”) with Hercules Technology Growth Capital, Inc. and certain of its affiliates (collectively, the “Lender”). Pursuant to the Amendment, the Lender agreed to provide term loans in an aggregate principal amount of up to $25.0 million under the Facility, inclusive of amounts outstanding immediately prior to closing of the Third Amendment (collectively, any such amounts outstanding from time to time, the “Term Loan Borrowings”). On June 9, 2015, approximately $6.2 million (less fees and expenses) was funded, thereby resulting in a current outstanding principal balance under the Facility of $20.0 million. The remaining $5.0 million is available for borrowing at the Borrower’s option through June 30, 2016, subject to no event of default under the Facility and the satisfaction of the following two conditions: (1) receipt by the Lender on or prior to December 31, 2015 of satisfactory evidence that the Borrower has achieved full patient enrollment for the PERSIST-2 Phase III clinical trial for pacritinib (the “Milestone Event No. 1”) and (2) receipt by the Lender on or prior to June 30, 2016 of satisfactory evidence that the Borrower has achieved positive phase III data in connection with such clinical trial (the “Milestone Event No. 2”).

 

The interest rate on the Term Loan Borrowings floats at a rate per annum equal to 10.95% plus the amount by which the prime rate exceeds 3.25%.  The Borrower is initially required to make interest payments only on a monthly basis, and the principal amount of the Term Loan Borrowings is repayable over 36 monthly installments commencing on January 1, 2016.  The interest-only period may be extended, at the Borrower’s option, by three months if the Borrower satisfies the Milestone Event No. 1 prior to January 1, 2016 and by an additional three months if the Borrower satisfies the Milestone Event No. 2 prior to April 1, 2016 (and, if the Milestone Event No. 2 does not occur prior to April 1, 2016 but occurs prior to July 1, 2016, the monthly principal installments required under the Facility shall stop for the first three months occurring after the completion of the Milestone Event No. 2). The Term Loan Borrowings will mature on December 1, 2018. The Borrower may elect to prepay some or all of the Term Loan Borrowings at any time subject to a prepayment fee, if any, pursuant to the terms of the Facility. Under certain circumstances, the Borrower may be required to prepay the Term Loan Borrowings with proceeds of asset dispositions. The Term Loan Borrowings are secured by a first priority security interest on substantially all of the Company’s personal property except its intellectual property and subject to certain other exceptions.

 

The Borrower paid a facility charge of $250,000 in connection with the Amendment. The provision under the Original Loan Agreement requiring the Borrower to pay a fee to the Lender of $1,275,000 on the date of repayment of the borrowings thereunder was amended pursuant to the Amendment, such that the fee will now be payable on the earliest to occur of (1) October 1, 2016, (2) the date on which the Term Loan Borrowings are prepaid in full or (3) the date on which the Term Loan Borrowings become due and payable in full.  

 

The Facility contains certain representations and warranties, covenants and conditions that are customarily required for similar financings and certain events of default (subject, in certain instances, to specified grace periods) including, but not limited to, the failure to make requisite payments of interest or premium, if any, on, or principal, the failure to comply with certain covenants and agreements, the occurrence of a material adverse effect, defaults in respect of certain other indebtedness and certain events of insolvency. If any event of default occurs, all monetary obligations owing under the Facility may become due and payable immediately.

 

The foregoing descriptions of the Facility do not purport to be complete and are subject to, and qualified in their entirety by, the full texts of the Original Loan Agreement (as previously filed with the Securities and Exchange Commission (the “SEC”) and the Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated by reference herein.

 

Item 2.03. Creation of a Direct Financial Obligation.

 

The information provided in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

 

 

---

Item 3.02. Unregistered Sales of Equity Securities.

 

In connection with the Amendment, the Company issued the Lender a warrant (the “Warrant”) exercisable in whole or in part for up to 292,398 shares of common stock of the Company (“Warrant Shares”) at any time prior to June 9, 2020 at an initial exercise price per share of $1.71. If, within six months after closing, the Company issues shares of common stock or securities that are exercisable or convertible into shares of common stock in transactions not registered under the Securities Act of 1933, as amended (the “Securities Act”) to one or more investors for cash for financing purposes at an effective price per share of common stock that is less than the then-effective exercise price, then the exercise price shall automatically be reduced to equal the price per share of common stock in such transaction. The exercise price under the Warrant and the number of shares for which the Warrant is exercisable are each subject to certain customary adjustments as set forth in the agreement representing the Warrant (the “Warrant Agreement”).

 

The Company shall not be obligated to issue any shares of common stock if such issuance, together with all prior issuances that are deemed to be aggregated under the rules of the NASDAQ Stock Market, in the aggregate would equal or exceed 19.9% of the shares of the Company outstanding as of the date prior to the execution and delivery the Warrant Agreement or such issuance would otherwise violate the Company’s obligations under the rules or regulations of the NASDAQ Capital Market.

 

In the event that, prior to the expiration or earlier termination of the Warrant, the Company registers with the SEC the resale of any shares of its common stock, the Warrant holder may require the Company to also register with the SEC the resale of any or all of the Warrant Shares.

 

The Warrant was issued in a private transaction exempt from registration under the Securities Act, pursuant to Section 4(2) thereof.

 

The foregoing descriptions of the Warrant do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the associated Warrant Agreement, a copy of which is filed as Exhibit 4.1 to this Current Report on Form 8-K and incorporated by reference herein.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

---

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

---

EXHIBIT INDEX

 

 

 

Exhibit 4.1

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.

 

WARRANT AGREEMENT

 

To Purchase Shares of the Common Stock of

 

CTI Biopharma Corp.

 

Dated as of June 9, 2015 (the “Effective Date”)

 

WHEREAS, CTI Biopharma Corp., a Washington corporation (the “Company”), has entered into a certain Third Amendment (the “Third Amendment”), of even date herewith, to that certain Loan and Security Agreement dated March 26, 2013, as amended (collectively, and as may be further amended and in effect from time to time, the “Loan Agreement”) with Hercules Technology Growth Capital, Inc., a Maryland corporation (the “Warrantholder”);

 

WHEREAS, pursuant to the Third Amendment and as additional consideration to the Warrantholder for, among other things, its agreements therein, the Company has agreed to issue to the Warrantholder this Warrant Agreement, evidencing the right to purchase shares of the Company’s Common Stock (this “Warrant” or this “Agreement”);

NOW, THEREFORE, in consideration of the Warrantholder having executed and delivered the Third Amendment and provided the financial accommodations contemplated therein, and in consideration of the mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:

SECTION 1.GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.  

(a)For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from the Company, up to such number of shares of Common Stock (as defined below) as determined in Section 1(b) below, at a purchase price per share equal to the Exercise Price (as defined below).  The number and Exercise Price of such shares are subject to adjustment as provided in Section 8.  As used herein, the following terms shall have the following meanings:

“Act” means the Securities Act of 1933, as amended.

“Charter” means the Company’s Articles of Incorporation or other constitutional document, as may be amended and in effect from time to time.

1

 

---

 

“Common Stock” means the Company’s common stock, no par value per share, as presently constituted under the Charter, and any class and/or series of Company capital stock for or into which such common stock may be converted or exchanged in a reorganization, recapitalization or similar transaction.

“Effective Price” shall mean the quotient determined by dividing (i) the aggregate gross cash consideration received, or deemed to have been received, by the Company, for the issuance of additional shares of Common Stock by the Company (including, without limitation, shares of Common Stock issuable upon the conversion or exercise of Convertible Securities (as defined below) issued by the Company) for cash for financing purposes in a single transaction or series of related transactions not registered under the Act (including, without limitation, a so-called PIPE transaction) after the Effective Date, by (ii) the total number of such additional shares of Common Stock issued or deemed to be issued in such transaction.  In the event the Company issues any Convertible Securities (as defined below) in such transaction, then the calculation of “Effective Price” shall be adjusted as follows: (a) the amount of cash consideration included in the numerator in clause (i) above shall include the amount determined by multiplying the conversion or exercise price, as applicable, of any shares of Common Stock issuable upon conversion or exercise of any such Convertible Securities (the “Conversion Shares”) by the number of Conversion Shares; and (b) the number of Conversion Shares shall be included in the denominator in clause (ii) above.

 

“Exercise Price”  means $1.71, subject to adjustment from time to time in accordance with the provisions of this Warrant; provided, that, if at any time and from time to time on or after the Effective Date and on or before the date that is six (6) months following the issuance date hereof, the Company shall sell and issue shares of Common Stock, and/or securities, instruments or other rights exercisable for, convertible into or otherwise representing the right to acquire shares of Common Stock, whether separately or as units consisting of more than one type of security (collectively, “Convertible Securities”) to one or more investors for cash for financing purposes, in a single transaction or series of related transactions not registered under the Act (including, without limitation, a so-called PIPE transaction), at an Effective Price per share of Common Stock less than the Exercise Price in effect as of immediately prior to the consummation of such sale and issuance, then from and after such consummation, the Exercise Price shall equal such lower Effective Price, subject to adjustment thereafter from time to time in accordance with the provisions of this Warrant.

“Merger Event” means any of the following: (i) a sale, lease or other transfer of all or substantially all assets of the Company, (ii) any merger or consolidation involving the Company in which the Company is not the surviving entity or in which the outstanding shares of the Company’s capital stock are otherwise converted into or exchanged for shares of preferred stock, other securities or property of another entity, or (iii) any sale by holders of the outstanding voting equity securities of the Company in a single transaction or series of related transactions of shares constituting a majority of the outstanding combined voting power of the Company.  

“Purchase Price” means, with respect to any exercise of this Warrant, an amount equal to the then-effective Exercise Price multiplied by the number of shares of Common Stock as to which this Warrant is then exercised.

 

2

 

---

 

(b)Number of Shares.Subject to Section 13, this Warrant shall be exercisable for: (i) 292,398 shares of Common Stock, as such number may be adjusted from time to time in accordance with the provisions of this Warrant.

 

SECTION 2.TERM OF THE AGREEMENT.  

Except as otherwise provided for herein, the term of this Agreement and the right to purchase Common Stock as granted herein shall commence on the Effective Date and shall be exercisable for a period ending upon the fifth (5^th) anniversary of the Effective Date.

SECTION 3.EXERCISE OF THE PURCHASE RIGHTS.  

(a)Exercise.  The purchase rights set forth in this Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed and executed.  Promptly upon receipt of the Notice of Exercise and the payment of the Purchase Price in accordance with the terms set forth below, and in no event later than three (3) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Common Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”) indicating the number of shares which remain subject to future purchases under this Warrant, if any.

 

The Purchase Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii) by surrender of all or a portion of the Warrant  for shares of Common Stock to be exercised under this Agreement and, if applicable, an amended Agreement setting forth the remaining number of shares purchasable hereunder, as determined below (“Net Issuance”).  If the Warrantholder elects the Net Issuance method, the Company will issue shares of Common Stock in accordance with the following formula:

 

 

Y =     the number of shares of Common Stock requested to be exercised under this Agreement.

A =     the then-current fair market value of one (1) share of Common Stock at the time of exercise.

B =     the then-effective Exercise Price.

For purposes of the above calculation, the current fair market value of shares of Common Stock shall mean with respect to each share of Common Stock:

 

(i)at all times when the Common Stock shall be traded on a national securities exchange, inter-dealer quotation system or over-the-counter bulletin board service, the average of the closing prices over a five (5) day period ending three days before the day the current fair market value of the securities is being determined;

 

(ii)if the exercise is in connection with a Merger Event, the fair market value of a share of Common Stock shall be deemed to be the per share value received by

3

 

---

 

the holders of the outstanding shares of Common Stock pursuant to such Merger Event as determined in accordance with the definitive transaction documents executed among the parties in connection therewith; or

 

(iii)in cases other than as described in the foregoing clauses (i) and (ii), the current fair market value of a share of Common Stock shall be determined in good faith by the Company’s Board of Directors.

 

Upon partial exercise by either cash or, upon request by the Warrantholder and surrender of all or a portion of this Warrant, Net Issuance, prior to the expiration or earlier termination hereof, the Company shall promptly issue an amended Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof.

 

(b)Exercise Prior to Expiration.  To the extent this Warrant is not previously exercised as to all shares subject hereto, and if the then-current fair market value of one share of Common Stock is greater than the Exercise Price then in effect, this Agreement shall be deemed automatically exercised on a Net Issuance basis pursuant to Section 3(a) (even if not surrendered) as of immediately before its expiration determined in accordance with Section 2.  For purposes of such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to Section 3(a).  To the extent this Warrant or any portion hereof is deemed automatically exercised pursuant to this Section 3(b), the Company agrees to promptly notify the Warrantholder of the number of shares of Common Stock if any, the Warrantholder is to receive by reason of such automatic exercise, and to issue a certificate to Warrantholder evidencing such shares.

 

SECTION 4.RESERVATION OF SHARES.  

During the term of this Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase Common Stock as provided for herein.

SECTION 5.NO FRACTIONAL SHARES OR SCRIP.  

No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Agreement, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.

SECTION 6.NO RIGHTS AS SHAREHOLDER/STOCKHOLDER.

Without limitation of any provision hereof, Warrantholder agrees that this Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder/stockholder of the Company prior to the exercise of any of the purchase rights set forth in this Agreement.

SECTION 7.WARRANTHOLDER REGISTRY.  

The Company shall maintain a registry showing the name and address of the registered holder of this Agreement.  Warrantholder's initial address, for purposes of such registry, is set forth in Section 12(g) below.  Warrantholder may change such address by giving written notice of such changed address to the Company.

4

 

---

 

SECTION 8.ADJUSTMENT RIGHTS.  

The Exercise Price and the number of shares of Common Stock purchasable hereunder are subject to adjustment from time to time, as follows:

(a)Merger Event.  If at any time there shall be a Merger Event, then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of this Agreement, the number of shares of preferred stock or other securities or property (collectively, “Reference Property”) that the Warrantholder would have received in connection with such Merger Event if Warrantholder had exercised this Agreement immediately prior to the Merger Event.  In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors and reasonably acceptable to the Warrantholder) shall be made in the application of the provisions of this Agreement with respect to the rights and interests of the Warrantholder after the Merger Event to ensure that the provisions of this Agreement (including adjustments of the Exercise Price and  adjustments to ensure that the provisions of this Section 8 shall thereafter be applicable, as nearly as possible, to the purchase rights under this Agreement in relation to any Reference Property thereafter acquirable upon exercise of such purchase rights) shall continue to be applicable in their entirety, and to the greatest extent possible.  Without limiting the foregoing, in connection with any Merger Event, upon the closing thereof, the successor or surviving entity shall assume the obligations of the Company under this Agreement; provided that if the Reference Property includes shares of stock or other securities and assets of an entity other than the successor or purchasing company, as the case may be, in such Merger Event, then such other entity shall assume the obligations of the Company under this Agreement and any such assumption shall contain such additional provisions to protect the interests of the Warrantholder as reasonably necessary by reason of the foregoing (as determined in good faith by the Company’s Board of Directors and reasonably acceptable to the Warrantholder).  In connection with a Merger Event and upon Warrantholder’s written election to the Company, this Warrant Agreement shall be exchanged for the consideration that Warrantholder would have received if Warrantholder had chosen to exercise its right to have shares issued pursuant to the Net Issuance provisions of this Warrant Agreement without actually exercising such right, acquiring such shares and exchanging such shares for such consideration. The provisions of this Section 8(a) shall similarly apply to successive Merger Events.

(b)Reclassification of Shares.  Except for Merger Events subject to Section 8(a), if the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Agreement exist into the same or a different number of securities of any other class or classes of securities, this Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. The provisions of this Section 8(b) shall similarly apply to successive combination, reclassification, exchange, subdivision or other change.

(c)Subdivision or Combination of Shares.  If the Company at any time shall combine or subdivide its Common Stock, (i) in the case of a subdivision, the Exercise Price shall be proportionately decreased and the number of shares for which this Warrant is exercisable shall be proportionately increased, or (ii) in the case of a combination, the Exercise Price shall be proportionately increased and the number of shares for which this Warrant is exercisable shall be proportionately decreased.

5

 

---

 

(d)Stock Dividends.  If the Company at any time while this Agreement is outstanding and unexpired shall:

(i)pay a dividend with respect to the outstanding shares of Common Stock payable in additional shares of Common Stock, then the Exercise Price shall be adjusted, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution, and the number of shares of Common Stock for which this Warrant is exercisable shall be proportionately increased; or

(ii)make any other dividend or distribution on or with respect to Common Stock, except any dividend or distribution (A) in cash, or (B) specifically provided for in any other clause of this Section 8, then, in each such case, provision shall be made by the Company such that the Warrantholder shall receive upon exercise or conversion of this Warrant a proportionate share of any such distribution as though it were the holder of the Common Stock (or other stock for which the Common Stock is convertible) as of the record date fixed for the determination of the shareholders of the Company entitled to receive such distribution.

(e)Notice of Adjustments.  If: (i) the Company shall declare any dividend or distribution upon its outstanding Common Stock, payable in stock, cash, property or other securities (provided that Warrantholder in its capacity as lender under the Loan Agreement consents to such dividend); (ii) the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; or (iv) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall give the Warrantholder notice thereof at the same time and in the same manner as it gives notice thereof to the holders of Common Stock.

 

SECTION 9.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

(a)Reservation of Common Stock.  The Company covenants and agrees that all shares of Common Stock, if any, that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and non-assessable. The Company further covenants and agrees that the Company will, at all times during the term hereof, have authorized and reserved, free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant.  If at any time during the term hereof the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant in full, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

(b)Due Authority.  The execution and delivery by the Company of this Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Common Stock, have been duly authorized by all necessary corporate action on the part of the Company.  This Agreement: (1) does not violate the Company's Charter or current bylaws; (2) does not contravene any law or

6

 

---

 

governmental rule, regulation or order applicable to it; and (3) except as could not reasonably be expected to have a Material Adverse Effect (as defined in the Loan Agreement), does not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound.  This Agreement constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally (including, without limitation, fraudulent conveyance laws) and by general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(c)Consents and Approvals.  No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Agreement, except for the filing of notices pursuant to Regulation D under the Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby.

(d)[Intentionally Omitted].  

(e)[Intentionally Omitted].

(f)Exempt Transaction.  Subject to the accuracy of the Warrantholder's representations in Section 10, the issuance of the Common Stock upon exercise of this Agreement will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.

(g)Registration Rights.  The Company covenants and agrees with Warrantholder that if the Company, at any time and from time to time on or after the Effective Date and on or before the expiration or earlier termination of this Warrant, proposes to register under the Act any shares of Common Stock held by one or more stockholders of the Company for resale by such stockholders, whether on a Form S-3 registration statement or otherwise, the Company shall give written notice thereof to Warrantholder and permit Warrantholder to include any or all of the shares of Common Stock issuable upon exercise of this Warrant (and any or all shares previously issued to Warrantholder upon any prior exercise(s) hereof) in such registration on a pari passu basis with such other stockholder(s) and on the same terms and conditions applicable to such other stockholder(s).

(h)Information Rights.  At all times (if any) prior to the earlier to occur of (x) the date on which all shares of Common Stock issued on exercise of this Warrant have been sold, or (y) the expiration or earlier termination of this Warrant, when (i) the Company shall not be required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and/or (ii) the Common Stock is not traded on a national securities exchange, inter-dealer quotation system or over-the-counter bulletin board service, Warrantholder shall be entitled to the information rights contained in Section 7.1(b) – (f) of the Loan Agreement, and in any such event Section 7.1(b) – (f) of the Loan Agreement is hereby incorporated into this Agreement by this reference as though fully set forth herein, provided, however, that the Company shall not be required to deliver a Compliance Certificate once all Indebtedness (as defined in the Loan Agreement) owed by the Company to Warrantholder has been repaid.

7

 

---

 

(i)Rule 144 Compliance.  The Company shall, at all times prior to later to occur of (i) expiration hereof, and (ii) the sale or other disposition by Warrantholder in full of this Warrant or all shares of Common Stock issued on exercise in full of this Warrant, use all commercially reasonable efforts to timely file all reports required under the 1934 Act and otherwise timely take all actions necessary to permit the Warrantholder to sell or otherwise dispose of this Warrant and the shares of Common Stock issued on exercise hereof pursuant to Rule 144 promulgated under the Act as amended and in effect from time to time.  If the Warrantholder proposes to sell Common Stock issuable upon the exercise of this Agreementin compliance with Rule 144, then, upon Warrantholder’s written request to the Company, the Company shall furnish to the Warrantholder, within five (5) days after receipt of such request, a written statement confirming the Company’s compliance with the filing and other requirements of such Rule.

SECTION 10.REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.  

This Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:

(a)Investment Purpose.  This Warrant and the shares issued on exercise hereof will be acquired for investment and not with a view to the sale or distribution of any part thereof in violation of applicable federal and state securities laws, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption.

(b)Private Issue.  The Warrantholder understands (i) that the Common Stock issuable upon exercise of this Agreement is not, as of the Effective Date, registered under the Act or qualified under applicable state securities laws, and (ii) that the Company's reliance on exemption from such registration is predicated on the representations set forth in this Section 10.

(c)Financial Risk.  The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment.

(d)Accredited Investor.  Warrantholder is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Act, as presently in effect.

(e)No Short Sales. Warrantholder has not at any time on or prior to the Effective Date engaged in any short sales or equivalent transactions in the Common Stock. Warrantholder agrees that at all times from and after the Effective Date and on or before the expiration or earlier termination of this Warrant, it shall not engage in any short sales or equivalent transactions in the Common Stock.

SECTION 11.TRANSFERS.

Subject to compliance with applicable federal and state securities laws, this Agreement and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes) upon surrender of this Agreement properly endorsed.  Each taker and holder of this Agreement, by taking or holding the same, consents and agrees that this Agreement, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Agreement shall have been so endorsed and its transfer recorded on the Company’s books, shall be treated by the Company and all other persons dealing with this Agreement as the

8

 

---

 

absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Agreement.  The transfer of this Agreement shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer.  Until the Company receives such Transfer Notice, the Company may treat the registered owner hereof as the owner for all purposes.

 

SECTION 12.MISCELLANEOUS.

(a)Effective Date.  The provisions of this Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof.  This Agreement shall be binding upon any successors or assigns of the Company.

(b)Remedies.  In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable.

(c)No Impairment of Rights.  The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment.

(d)[Intentionally Omitted]

(e)Attorneys’ Fees.  In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to attorneys’ fees and expenses and all costs of proceedings incurred in enforcing this Agreement.  For the purposes of this Section 12(e), attorneys’ fees shall include without limitation fees incurred in connection with the following: (i) contempt proceedings; (ii) discovery; (iii) any motion, proceeding or other activity of any kind in connection with an insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v) post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment.  

(f)Severability.  In the event any one or more of the provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.

(g)Notices.  Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication that is required, contemplated, or permitted under this Agreement or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (a) personal delivery to the party to be notified, (b) when sent by confirmed telex, electronic transmission or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered

9

 

---

 

or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt, and shall be addressed to the party to be notified as follows:

If to Warrantholder:

Hercules Technology GROWTH CAPITAL, INC.

Legal Department

Attention:  Chief Legal Officer and Manuel Henriquez

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

Facsimile:  650-473-9194

Telephone:  650-289-3060

 

 

 

If to the Company:

CTI BIOPHARMA CORP.

Attention: Chief Financial Officer

3101 Western Avenue, Suite 600

Seattle, WA 98121

Facsimile: 206-284-6206

Telephone: 206-282-7100

 

or to such other address as each party may designate for itself by like notice.

(h)Entire Agreement; Amendments.  This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, and supersedes and replaces in their entirety any prior proposals, term sheets, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof.  None of the terms of this Agreement may be amended except by an instrument executed by each of the parties hereto.

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

(j)Advice of Counsel.  Each of the parties represents to each other party hereto that it has discussed (or had an opportunity to discuss) with its counsel this Agreement and, specifically, the provisions of Sections 12(n), 12(o), 12(p), 12(q) and 12(r).

(k)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.

(l)No Waiver.  No omission or delay by Warrantholder at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by Warrantholder at any time designated, shall be a waiver of any

10

 

---

 

such right or remedy to which Warrantholder is entitled, nor shall it in any way affect the right of Warrantholder to enforce such provisions thereafter during the term of this Agreement.

(m)Survival.  All agreements, representations and warranties contained in this Agreement or in any document delivered pursuant hereto shall be for the benefit of Warrantholder and shall survive the execution and delivery of this Agreement and the expiration or other termination of this Agreement.

(n)Governing Law.  This Agreement have been negotiated and delivered to Warrantholder in the State of California, and shall have been accepted by Warrantholder in the State of California.  Delivery of Common Stock to Warrantholder by the Company under this Agreement is due in the State of California.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

(o)Consent to Jurisdiction and Venue.  All judicial proceedings arising in or under or related to this Agreement may be brought in any state or federal court of competent jurisdiction located in the State of California.  By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to personal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement.  Service of process on any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 12(g), and shall be deemed effective and received as set forth in Section 12(g).  Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.

(p)Mutual Waiver of Jury Trial.  Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws.  EACH OF THE COMPANY AND WARRANTHOLDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY THE COMPANY AGAINST WARRANTHOLDER OR ITS ASSIGNEE OR BY WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY.  This waiver extends to all such Claims, including Claims that involve persons or entities other the Company and Warrantholder; Claims that arise out of or are in any way connected to the relationship between the Company and Warrantholder; and any Claims for damages, breach of contract, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement.

(q)Arbitration.  If the Mutual Waiver of Jury Trial set forth in Section 12(p) is ineffective or unenforceable, the parties agree that all Claims shall be submitted to binding arbitration in accordance with the commercial arbitration rules of JAMS (the “Rules”), such arbitration to occur before one arbitrator, which arbitrator shall be a retired California state judge or a retired Federal court judge.  Such proceeding shall be conducted in Santa Clara County, State of California, with California rules of evidence and discovery applicable to such arbitration.  The decision of the arbitrator shall be binding on the parties, and shall be final and nonappealable to the maximum extent permitted by law.  Any judgment rendered by the arbitrator may be entered

11

 

---

 

in a court of competent jurisdiction and enforced by the prevailing party as a final judgment of such court.    

(r)Pre-arbitration Relief.  In the event Claims are to be resolved by arbitration, either party may seek from a court of competent jurisdiction identified in Section 12(o), any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by binding arbitration.

(s)Counterparts.  This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.

(t)Specific Performance.  The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to Warrantholder by reason of the Company’s failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable by Warrantholder.  If Warrantholder institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that Warrantholder has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

(u)Lost, Stolen, Mutilated or Destroyed Warrant.  If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.  Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.

(v)Legends.  To the extent required by applicable laws, this Warrant and the shares of Common Stock issuable hereunder (and the securities issuable, directly or indirectly, upon conversion of such shares of Common Stock, if any) may be imprinted with a restricted securities legend in substantially the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO RULE 144 OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

ACCEPTANCE OF THIS SECURITY IMPOSES OBLIGATIONS ON THE HOLDER.

 

SECTION 13.NASDAQ COMPLIANCE.

The Company shall not be obligated to issue any shares of Common Stock if such issuance, together with all prior issues that are deemed to be aggregated under the rules of the Nasdaq Stock Market, in the aggregate would equal or exceed 19.9% of the shares of the Company outstanding as of the date prior to the execution and delivery of the Loan Agreement or

12

 

---

 

(iii) such issuance would otherwise violate the Company’s obligations under the rules or regulations of the Nasdaq Capital Market.

 

 

 

[Remainder of Page Intentionally Left Blank]

 

 

13

 

---

 

IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.

 

 

 

14

 

---

 

EXHIBIT  I

 

NOTICE  OF  EXERCISE

 

 

 

15

 

---

 

EXHIBIT II

The undersigned [____________________________________], hereby acknowledge receipt of the “Notice of Exercise” from Hercules Technology Growth Capital, Inc., to purchase [____] shares of the Common Stock of [_________________], pursuant to the terms of the Agreement, and further acknowledges that [______] shares remain subject to purchase under the terms of the Agreement.

 

 

 

 

16

 

---

 

EXHIBIT III

 

TRANSFER NOTICE

 

(To transfer or assign the foregoing Agreement execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Agreement and all rights evidenced thereby are hereby transferred and assigned to

 

 

NOTE:The signature to this Transfer Notice must correspond with the name as it appears on the face of the Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Agreement.

 

17

 

 

Exhibit 10.1

THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of June 9, 2015 (the “Third Amendment Date”), is by and among CTI BIOPHARMA CORP., a Washington corporation formerly known as, CELL THERAPEUTICS, INC., (“CTI”), and SYSTEMS MEDICINE LLC, a Delaware limited liability company (“Systems Medicine”; CTI and Systems Medicine are hereinafter referred to individually and collectively, jointly and severally, as “Borrower”), HERCULES TECHNOLOGY GROWTH CAPITAL INC., a Maryland corporation (“HTGC”), in its capacity as administrative agent for itself and the Lender (in such capacity, the “Agent”), the Lenders otherwise a party hereto from time to time including HTGC in its capacity as a Lender, HERCULES CAPITAL FUNDING TRUST 2012-1 (“Trust”), assignee of HERCULES CAPITAL FUNDING 2012-1 LLC, assignee of HTGC, and HERCULES CAPITAL FUNDING TRUST 2014 (“2014 Trust”), assignee of HERCULES CAPITAL FUNDING 2014-1 LLC, assignee of HTGC (Trust, 2014 Trust, and HTGC collectively, referred to as, “Lender”).  

WHEREAS, Borrower and Lender are parties to a certain Loan and Security Agreement, dated as of March 26, 2013, as amended by a certain First Amendment to the Loan and Security Agreement, dated as of March 25, 2014, and as further amended by a certain Second Amendment to the Loan and Security Agreement, dated as of October 22, 2014 (as the same may from time to time be amended, modified or supplemented in accordance with its terms, the “Loan Agreement”); and

WHEREAS, Borrower and Lender wish to enter into 2015 Term Loan Advances, in an aggregate principal amount of up to Eleven Million One Hundred Eighty-Four Thousand Seven Hundred Eighteen Dollars and 42/100 ($11,184,718.42).

WHEREAS, in accordance with Section 11.3 of the Loan Agreement, Borrower and Lender desire to amend the Loan Agreement as provided herein.

NOW THEREFORE, in consideration of the mutual agreements contained in the Loan Agreement and herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Defined Terms.  Terms not otherwise defined herein which are defined in the Loan Agreement shall have the same respective meanings herein as therein.

2.Amendments to Loan Agreement.  Subject to the satisfaction of the conditions set forth in Section 3 of this Amendment, as of the Third Amendment Date, the Loan Agreement is hereby amended as follows:

(a)CTI acknowledges, confirms, and agrees that all references in the Loan Agreement to “Cell Therapeutics, Inc.” and “Cell” shall hereinafter be deemed to be references to “CTI BIOPHARMA CORP.”

(b)The recitals to the Loan Agreement are hereby amended in their entirety and replaced with the following:

A.Borrower has requested Lender to make available to Borrower, and Lender is willing to make, in an amount not to exceed its respective Term Loan Commitment, term loans (each a “2015 Term Loan Advance” and collectively, the

1

---

 

“2015 Term Loan Advances”) in an aggregate principal amount of up to Eleven Million One Hundred Eighty-Four Thousand Seven Hundred Eighteen Dollars and 42/100 ($11,184,718.42)(the “Maximum 2015 Term Loan Amount”) on the terms and conditions set forth in this Agreement.

(c)The Loan Agreement shall be amended by inserting the following new definitions to appear alphabetically in Section 1.1 thereof:

“2015 Amortization Date” means January 1, 2016; provided however, if the 2015 Milestone Event No. 1 occurs prior to January 1, 2016, at the request of Borrower, the 2015 Amortization Date shall be April 1, 2016; provided further, however, if the 2015 Milestone Event No. 2 occurs prior to April 1, 2016, at the request of the Borrower, the 2015 Amortization Date shall be July 1, 2016.

“2015 Commitment Fee” means Fifteen Thousand Dollars ($15,000.00), which fee Lender received prior to the Third Amendment Date, and shall be deemed fully earned on such date regardless of the early termination of this Agreement, and which shall be applied to Lender’s non-legal costs and expenses on or prior to the Third Amendment Date.

“2015 Draw Period” means the period commencing upon the occurrence of both the 2015 Milestone Event No. 1 and 2015 Milestone Event No. 2 and ending on the earlier to occur of (i) June 30, 2016, and (ii) an Event of Default.

“2015 Facility Charge” means Two Hundred Fifty Thousand Dollars ($250,000.00).

“2015 Milestone Event No. 1” means receipt by Lender of evidence satisfactory to Lender in its sole and absolute discretion, after the Third Amendment Date, but on or before December 31, 2015 that Borrower has achieved one hundred percent (100%) patient enrollment of its PERSIST-2 Phase III trial.

“2015 Milestone Event No. 2” means Borrower has achieved the 2015 Milestone Event No. 1 and receipt by Lender of evidence satisfactory to Lender in its sole and absolute discretion, after the Third Amendment Date, but on or before June 30, 2016 that Borrower has achieved positive phase III data in connection with its PERSIST-2 Phase III trial.

“2015 Term A Loan Advance” shall have the meaning assigned to such term in Section 2.1.2 hereof.

“2015 Term B Loan Advance” shall have the meaning assigned to such term in Section 2.1.2 hereof.

“2015 Term Loan Advance” and “2015 Term Loan Advances” are defined in Recital A.

“2015 Term Loan Interest Rate” means for any day, a floating rate per annum rate equal to the greater of either (i) 10.95% or (ii) the sum of (A) 10.95% plus (B) the Prime Rate minus three and one quarter of one percent (3.25%).

2

---

 

“2015 Term Loan Maturity Date” means December 1, 2018.

“Maximum 2015 Term Loan Amount” is defined in Recital A hereof.

“Term Loan Commitment” means as to any Lender, the obligation of such Lender, if any, to make an 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.  

“Third Amendment Date” means June 9, 2015.

(d)The following terms and their respective definitions set forth in Section 1.1 of the Loan Agreement are amended in their entirety and replaced with the following:

“2014 Term Loan Advance” mean a loan made pursuant to Section 2.1.1 hereof.

“2014 Term Loan Interest Rate” means for any day, (A) prior to the Third Amendment Date, a floating rate per annum rate equal to the greater of either (i) ten percent (10.00%), or (ii) the sum of (x) ten percent (10.00%), plus (y) the Prime Rate minus three and one quarter of one percent (3.25%) and (B) on and after the Third Amendment Date, a floating rate per annum rate equal to the greater of either (a) 10.95% or (b) the sum of (x) 10.95% plus (y) the Prime Rate minus three and one quarter of one percent (3.25%).  The Term Loan Interest Rate will change from time to time on the day the Prime Rate changes.

“2014 Term Loan Maturity Date” means December 1, 2018.

“Advances(s)” means a Term Loan Advance, 2014 Term Loan Advance, and/or 2015 Term Loan Advance.

“Term Loan Advance” means a loan made pursuant to Section 2.1 hereof.

“Term Loan Interest Rate” means for any day, (A) prior to the Third Amendment Date, a floating rate per annum rate equal to the greater of either (i) twelve and one-quarter of one percent (12.25%), or (ii) the sum of (x) twelve and one-quarter of one percent (12.25%), plus (y) the Prime Rate minus three and one quarter of one percent (3.25%) (which interest rate shall be reduced to greater of either (i) eleven and one-quarter of one percent (11.25%), or (ii) the sum of (x) eleven and one-quarter of one percent (11.25%), plus (y) the Prime Rate minus three and one quarter of one percent (3.25%) upon the occurrence of the Milestone Event), and (B) on and after the Third Amendment Date, a floating rate per annum rate equal to the greater of either (a) 10.95% or (b) the sum of (x) 10.95% plus (y) the Prime Rate minus three and one quarter of one percent (3.25%).  The Term Loan Interest Rate will change from time to time on the day the Prime Rate changes.  

“Term Loan Maturity Date” means December 1, 2018.

3

---

 

(e)Section 2.1(d) of the Loan and Security Agreement (Payment) is hereby amended in its entirety and placed with the following:

(d)Payment.   

(i) Borrower will pay interest on each Term Loan Advance on the first business day of each month, beginning the month after the Advance Date.  

(ii)Commencing on the Amortization Date, and continuing on the first business day of each month thereafter through and including June 1, 2015, Borrower shall repay the aggregate principal balance of Term Loan Advances that are outstanding on the Amortization Date in twenty-four (24) equal monthly installments of principal and interest (mortgage style).  

(iii)The outstanding balance of the Term Loan Advance as of the Third Amendment Date shall re-amortize (it being understood that no principal payments shall be required to be made with respect to the Term Loan Advance on and after the Third Amendment Date until the 2015 Amortization Date) and beginning on the 2015 Amortization Date and continuing the first business day of each month thereafter, until the Secured Obligations are repaid, Borrower shall repay the aggregate principal balance of the Term Loan Advance that is outstanding on the day immediately preceding the 2015 Amortization Date in equal monthly installments of principal and interest (mortgage style) based upon an amortization schedule equal to thirty-six (36) consecutive months; provided, however, that, if the 2015 Milestone Event No. 2 does not occur prior to April 1, 2016 but occurs prior to July 1, 2016, then the monthly principal installments required hereunder shall stop for the first three (3) months occurring after the completion of the 2015 Milestone Event No. 2 (and such monthly principal installment shall resume on the first day of the fourth (4^th) month occurring after the completion of the 2015 Milestone Event No. 2).  The entire principal balance of the Term Loan Advances and all accrued but unpaid interest hereunder, and all other Secured Obligations then outstanding with respect to the Term Loan Advances, shall be due and payable on Term Loan Maturity Date.  Borrower shall make all payments under this Agreement without setoff, recoupment or deduction and regardless of any counterclaim or defense. Lender will initiate debit entries to the Borrower’s account as authorized on the ACH Authorization on each payment date of all periodic obligations payable to Lender under each Term Loan Advance.  Once repaid, a Term Loan Advance or any portion thereof may not be reborrowed.

(f)Section 2.1.1(d) of the Loan and Security Agreement (Payment) is hereby amended in its entirety and placed with the following:

(d)Payment.  

(i)Borrower will pay interest on each 2014 Term Loan Advance on the first business day of each month, beginning the month after the Advance Date.

(ii)Commencing on the Amortization Date, and continuing on the first business day of each month thereafter through and including June 1, 2015,

4

---

 

Borrower shall repay the aggregate principal balance of the 2014 Term Loan Advances that are outstanding on the Amortization Date in twenty-four (24) equal monthly installments of principal and interest (mortgage style).  

(iii)The outstanding balance of the 2014 Term Loan Advances as of the Third Amendment Date shall re-amortize (it being understood that no principal payments shall be required to be made with respect to the 2014 Term Loan Advance on and after the Third Amendment Date until the 2015 Amortization Date) and beginning on the 2015 Amortization Date and continuing the first business day of each month thereafter, until the Secured Obligations are repaid, Borrower shall repay the aggregate principal balance of the 2014 Term Loan Advances that are outstanding on the day immediately preceding the 2015 Amortization Date in equal monthly installments of principal and interest (mortgage style) based upon an amortization schedule equal to thirty-six (36) consecutive months; provided, however, that, if the 2015 Milestone Event No. 2 does not occur prior to April 1, 2016 but occurs prior to July 1, 2016, then the monthly principal installments required hereunder shall stop for the first three (3) months occurring after the completion of the 2015 Milestone Event No. 2 (and such monthly principal installment shall resume on the first day of the fourth (4^th) month occurring after the completion of the 2015 Milestone Event No. 2).  The entire principal balance of the 2014 Term Loan Advances and all accrued but unpaid interest hereunder, and all other Secured Obligations then outstanding with respect to the 2014 Term Loan Advances, shall be due and payable on 2014 Term Loan Maturity Date.  Borrower shall make all payments under this Agreement without setoff, recoupment or deduction and regardless of any counterclaim or defense. Lender will initiate debit entries to the Borrower’s account as authorized on the ACH Authorization on each payment date of all periodic obligations payable to Lender under each 2014 Term Loan Advance.  Once repaid, a 2014 Term Loan Advance or any portion thereof may not be reborrowed.

(g)The Loan Agreement is amended by inserting the following new provision to appear as Section 2.1.2 (2015 Term Loan) thereof:

2.1.22015 Term Loan.

(a)Advances.  On the Third Amendment Date, Borrower shall request an Advance from Lender, in an amount not to exceed its respective Term Commitment, in the amount of Six Million One Hundred Eighty-Four Thousand Seven Hundred Eighteen Dollars and 42/100 ($6,184,718.42) (the “2015 Term A Loan Advance”).  Subject to the terms and conditions of this Agreement, during the 2015 Draw Period, Borrower may request and Lender will make, in an amount not to exceed its respective Term Commitment, one (1) additional 2015 Term Loan Advance in an amount of Five Million Dollars ($5,000,000.00) (the “2015 Term B Loan Advance”). The aggregate outstanding 2015 Term Loan Advances shall not exceed the Maximum 2015 Term Loan Amount.  Proceeds of any 2015 Term Loan Advance shall be deposited into an account that is subject to a perfected security interest in favor of Lender perfected by an Account Control Agreement.

5

---

 

(b)Advance Request.  To obtain a 2015 Term Loan Advance, Borrower shall complete, sign and deliver to Lender an Advance Request (in the case of any 2015 Term B Loan Advance made after the Third Amendment Date, at least five (5) Business Days before the Advance Date).  Lender shall fund the 2015 Term Loan Advance in the manner requested by the Advance Request provided that each of the conditions precedent to such 2015 Term Loan Advance is satisfied as of the requested Advance Date.

(c)Interest.  The principal balance of each 2015 Term Loan Advance shall bear interest thereon from such Advance Date at the 2015 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 2015 Term Loan Interest Rate will float and change on the day the Prime Rate changes from time to time.

(d)Payment.  Borrower will pay interest on each 2015 Term Loan Advance on the first (1^st) business day of each month, beginning the month after the Advance Date.  Commencing on the 2015 Amortization Date, and continuing on the first (1^st) business day of each month thereafter, until the Secured Obligations are repaid, Borrower shall repay the aggregate principal balance of 2015 Term Loan Advances that are outstanding on the day immediately preceding the 2015 Amortization Date in equal monthly installments of principal and interest (mortgage style) based upon an amortization schedule equal to thirty-six (36) consecutive months; provided, however, that, if the 2015 Milestone Event No. 2 does not occur prior to April 1, 2016 but occurs prior to July 1, 2016, then the monthly principal installments required hereunder shall stop for the first three (3) months occurring after the completion of the 2015 Milestone Event No. 2 (and such monthly principal installment shall resume on the first day of the fourth (4^th) month occurring after the completion of the 2015 Milestone Event No. 2).  The entire remaining principal balance of the 2015 Term Loan Advances and all accrued but unpaid interest thereon, and all other Secured Obligations then outstanding with respect to the 2015 Term Loan Advances, shall be due and payable on 2015 Term Loan Maturity Date.  Borrower shall make all payments under this Agreement without setoff, recoupment or deduction and regardless of any counterclaim or defense. Lender will initiate debit entries to the Borrower’s account as authorized on the ACH Authorization (i) on each payment date of all periodic obligations payable to Lender under each 2015 Term Loan Advance and (ii) documented out-of-pocket legal fees and costs incurred by Lender in connection with Section 11.11.  Once repaid, a 2015 Term Loan Advance or any portion thereof may not be reborrowed.

(h)The last sentence of Section 2.2 of the Loan Agreement (Maximum Interest Rate) is hereby amended by deleting the text “Term Loan Advances and/or 2014 Term Loan Advances” therein and inserting the text “Term Loan Advances, 2014 Term Loan Advances, and /or 2015 Term Loan Advances” in lieu thereof.

(i)Section 2.5 of the Loan Agreement (End of Term Charge) is hereby amended in its entirety and replaced with the following:

2.5 End of Term Charge. On the earliest to occur of (i) October 1, 2016, (ii) the date that Borrower prepays the outstanding Secured Obligations in full, or (iii) the date that the Secured Obligations become due and payable in full, Borrower shall pay Lender a charge of One

6

---

 

Million Two Hundred Seventy-Five Thousand Dollars ($1,275,000). Notwithstanding the required payment date of such charge, it shall be deemed earned by Lender as of the Closing Date.

(j)The first sentence of Section 11.17 of the Loan Agreement (Borrower Liability) is hereby amended in its entirety and replaced with the following:

Each Borrower hereunder shall be jointly and severally obligated to repay all Term Loan Advances, 2014 Term Loan Advances, and/or 2015 Term Loan Advances made hereunder, regardless of which Borrower actually receives said Term Loan Advance, 2014 Term Loan Advances and/or 2015 Term Loan Advances, as if each Borrower hereunder directly received all Term Loan Advances, 2014 Term Loan Advances, and/or 2015 Term Loan Advances.

(k)The Loan Agreement is amended by inserting the following new provision to appear as Section 12 thereof:

12.Agency.  Lender hereby irrevocably appoints HTGC to act on its behalf as Agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.”

(l)The Loan Agreement is amended by incorporating a new Schedule 1.1 attached as Exhibit A hereto.

3.Conditions to Effectiveness.  Lender and Borrower agree that this Amendment shall become effective upon the satisfaction of the following conditions precedent, each in form and substance satisfactory to Lender:

(a)Lender shall have received a fully-executed counterpart of this Amendment and the Warrant signed by Borrower;

(b)Lender shall have received certified resolutions of Borrower’s board of directors evidencing approval of this Amendment and the Warrant;

(c)Borrower shall have paid to Lender, for the account of Lender, the 2015 Commitment Fee and 2015 Facility Charge, which shall be deemed earned on the effective date of this Amendment; and

(d)Lender shall have received payment for all reasonable and documented out-of-pocket fees and expenses incurred by Lender in connection with this Amendment, including, but not limited to, all legal fees and expenses, payable pursuant to Section 11.11 of the Loan Agreement.

4.Representations and Warranties.  The Borrower hereby represents and warrants to Lender as follows:

(a)Representations and Warranties in the Agreement.  The representations and warranties of Borrower set forth in Section 4 of the Loan Agreement are true and correct in all material respects on and as of the Effective Date with the same effect as though made on and as

7

---

 

of such date, except to the extent such representations and warranties expressly relate to an earlier date.

(b)Authority, Etc.  The execution and delivery by Borrower of this Amendment and the performance by Borrower of all of its agreements and obligations under the Loan Agreement and the other Loan Documents, as amended hereby, are within the corporate or limited liability company authority, as applicable, of Borrower and have been duly authorized by all necessary corporate action on the part of Borrower.  With respect to Borrower, the execution and delivery by Borrower of this Amendment does not and will not require any registration with, consent or approval of, or notice to any Person (including any governmental authority).

(c)Enforceability of Obligations.  This Amendment, the Loan Agreement and the other Loan Documents, as amended hereby, constitute the legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their terms, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium, general equitable principles or other laws relating to or affecting generally the enforcement of, creditors’ rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.

(d)No Default.  Immediately after giving effect to this Amendment (i) 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, and (ii) no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing.

(e)Event of Default.  By its signature below, Borrower hereby agrees that it shall constitute an Event of Default if any representation or warranty made herein should be false or misleading in any material respect when made.

5.Reaffirmations.  Except as expressly provided in this Amendment, all of the terms and conditions of the Loan Agreement and the other Loan Documents remain in full force and effect.  Nothing contained in this Amendment shall in any way prejudice, impair or effect any rights or remedies of Lender under the Loan Agreement and the other Loan Documents.  Except as specifically amended hereby, Borrower hereby ratifies, confirms, and reaffirms all covenants contained in the Loan Agreement and the other Loan Documents.  The Loan Agreement, together with this Amendment, shall be read and construed as a single agreement.  All references in the Loan Documents to the Loan Agreement or any other Loan Document shall hereafter refer to the Loan Agreement or such other Loan Document as amended hereby.

6.Execution in Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but which together shall constitute one instrument.

7.Miscellaneous.  

(a)THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.  

(b)The captions in this Amendment are for convenience of reference only and shall not define or limit the provisions hereof.

8

---

 

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

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

 

 

 

9

---

 

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

 

 

 

Accepted in Palo Alto, California:

 

 

 

 

---

 

 

 

 

 

 

---

 

EXHIBIT A

 

SCHEDULE 1.1

 

COMMITMENTS

 

 

 

 

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• U.S. Federal Magistrate Judge Recommends Invalidation of Jetaire Patents in Lawsuit Against AerSale
• Biosenta Announces Private Placement Financing
• Good Natured Products Inc. Announces Extension of Non-Brokered Private Placement