UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Name of exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
Accelerated filer ☐ |
Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 7, 2023, there were
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
SOCIETAL CDMO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(amounts in thousands, except share and per share data) |
June 30, 2023 |
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December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable, net |
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Contract assets |
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Inventory |
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Prepaid expenses and other current assets |
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Assets held for sale |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease asset |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total assets |
$ |
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$ |
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Accounts payable |
$ |
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$ |
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Current portion of debt |
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Current portion of operating lease liability |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Debt, net of current portion |
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Operating lease liability, net of current portion |
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Other liabilities |
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Total liabilities |
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Shareholders’ equity: |
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Convertible preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
$ |
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$ |
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See accompanying notes to consolidated financial statements.
1
SOCIETAL CDMO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
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Three months ended June 30, |
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Six months ended June 30, |
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(amounts in thousands, except share and per share data) |
2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Cost of sales |
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Selling, general and administrative |
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Amortization of intangible assets |
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Total operating expenses |
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Operating (loss) income |
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( |
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( |
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Interest expense |
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( |
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( |
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( |
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Interest income |
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Loss before income taxes |
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( |
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( |
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Income tax expense |
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Net loss |
$ |
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$ |
( |
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$ |
( |
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$ |
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Loss per share, basic and diluted |
$ |
( |
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$ |
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$ |
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$ |
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Weighted average shares outstanding, basic and diluted |
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See accompanying notes to consolidated financial statements.
2
SOCIETAL CDMO, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity or Deficit
(Unaudited)
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Convertible preferred stock |
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Common stock |
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Additional paid-in |
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Accumulated |
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(amounts in thousands, except share data) |
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Shares |
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Amount |
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Shares |
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Amount |
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capital |
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deficit |
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Total |
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Balance, December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of stock, net of costs |
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— |
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( |
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— |
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— |
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( |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units, net |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Conversion of preferred stock |
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( |
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( |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units, net |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance, June 30, 2023 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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Balance, December 31, 2021 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of stock, net of costs |
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— |
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— |
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( |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options, net |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units, net |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance, March 31, 2022 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock, net of costs |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units, net |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance, June 30, 2022 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying notes to consolidated financial statements.
3
SOCIETAL CDMO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
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Six months ended June 30, |
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(amounts in thousands) |
2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Non-cash interest expense |
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Depreciation expense |
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Amortization of intangible assets |
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Deferred income tax expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Contract assets |
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( |
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Inventory |
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( |
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Prepaid expenses and other assets |
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Accrued interest |
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( |
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Accounts payable, accrued expenses and other liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Payment of costs for issuance of stock |
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( |
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( |
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Payment of debt principal |
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( |
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Payment of financing costs |
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( |
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( |
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Net payments related to vesting of restricted stock units |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
$ |
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$ |
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Purchases of property, plant and equipment included in accrued expenses and accounts payable |
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Deferred financing costs included in accounts payable and accrued expenses |
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See accompanying notes to consolidated financial statements.
4
SOCIETAL CDMO, INC. AND SUBSIDIARIES
Notes to consolidated financial statements
(amounts in thousands, except share and per share data)
(Unaudited)
(1) Background
Societal CDMO, Inc. (the “Company”) was incorporated in the Commonwealth of Pennsylvania on
Liquidity and capital resources
The Company has incurred net losses since inception, including net losses for the three and six months ended June 30, 2023, and has an accumulated deficit of $
The Company’s credit agreement with Royal Bank of Canada contains certain financial and other covenants, including a minimum liquidity requirement applicable to certain quarter-ends of $
The pharmaceutical industry is experiencing a slowdown in clinical development activities resulting from reduced cash funding and other liquidity resources and the Company is experiencing higher rates of customer attrition and development program delays that caused management to revise its 2023 earnings and cash projections during the second quarter of 2023. As a result of these factors, management took actions to amend its debt agreements to align financial covenants and other terms of the indebtedness with its revised projections (see note 16). Absent these amendments, management would not have been able to conclude that it was probable of complying with the provisions of its debt agreements through August 14, 2024.
The Company believes that its results of operations will allow it to comply with the financial and other covenants and contractual requirements of the agreements for at least the next twelve months. The Company’s ability to comply is subject to the Company’s success in implementing certain cost control measures, reducing capital expenditures and managing working capital in order to improve its ongoing financial performance and its liquidity position.
The Company may extend and or supplement the actions it is taking if it continues to experience adverse conditions described above, among others, that might impact the forecasted performance. If the Company is unable to achieve the results required to comply with the terms of its credit agreement in one or more quarters over the next twelve months, the Company may be required to take specific actions in addition to those described above, including but not limited to, additional cost control measures, or alternatively, seeking an amendment or waiver from its lenders. Obtaining a waiver or an amendment is not within the Company’s control, and if unsuccessful, the lenders may exercise the rights available to them under the credit agreement.
5
(2) Summary of significant accounting principles
Basis of presentation and principles of consolidation
The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. In accordance with Securities and Exchange Commission’s (“SEC”) rules for interim financial statements, certain information required by U.S. GAAP may be condensed or omitted. The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s results for the interim periods. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The Company has determined that it operates in a single segment.
The accompanying unaudited interim consolidated financial statements should be read in conjunction with the annual audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Use of estimates
The preparation of financial statements and the notes to the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates.
Cash and cash equivalents
Cash and cash equivalents represent cash in banks and highly liquid short-term investments that have maturities of three months or less when acquired. These highly liquid short-term investments are both readily convertible to known amounts of cash and so near to their maturity that they present insignificant risk of changes in value due to changes in interest rates.
Accounts receivable, net
Accounts receivable generally represent amounts billed for services provided under our customer contracts and are recorded at the invoiced amount net of an allowance for credit losses, if necessary. We apply judgment in assessing the ultimate realization of our receivables, and we estimate an allowance for credit losses based on various factors, such as the aging of our receivables, historical experience, and the financial condition of our customers. The allowance for credit losses was not material as of the balance sheet dates presented.
Inventory
Inventory is stated at the lower of cost or net realizable value. Included in inventory are raw materials and work-in-process used in the production of commercial products. Items are issued out of inventory using the first-in, first-out method.
Adjustments to inventory are determined at the raw materials, work-in-process, and finished good levels to reflect obsolescence or impaired balances. Factors influencing inventory obsolescence include changes in demand, product life cycle, product pricing, physical deterioration and quality concerns.
Property, plant and equipment, net
Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which are as follows: to
6
The Company considers assets to be held for sale when (i) management commits to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) the asset is actively being marketed for sale at a price that is reasonable given the estimate of current market value; and (iv) the sale is probable and will be completed within one year. Upon designation of an asset as held for sale, the Company records the asset’s value at the lower of its carrying value plus selling costs or its estimated net realizable value.
Goodwill and intangible assets
Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company in a business combination. Goodwill is not amortized but assessed for impairment on an annual basis or more frequently if impairment indicators exist.
The impairment analysis for goodwill consists of an optional qualitative assessment potentially followed by a quantitative analysis. If the Company determines that the carrying value of its reporting unit exceeds its fair value, an impairment charge is recorded for the excess.
The Company performs its annual goodwill impairment test as of November 30th, or whenever an event or change in circumstance occurs that would require reassessment of the impairment of goodwill. In performing the evaluation, the Company assesses qualitative factors such as overall financial performance, actual and anticipated changes in industry and market conditions, and competitive environments. As a result of the most recent annual goodwill impairment test, the Company determined that there was no impairment of goodwill.
Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful life. The Company is required to review the carrying value of definite-lived intangible assets for recoverability whenever events occur or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.
Contingencies
The Company’s business exposes it to various contingencies including compliance with regulations, legal exposures and other matters. Loss contingencies are reflected in the financial statements based on management’s assessments of their expected outcome or resolution:
Significant judgment is required to determine probability and whether the amount can be reasonably estimated. Due to uncertainties related to these matters, accruals are based only on the information available at the time. As additional information becomes available, the Company reassesses potential liabilities and may revise previous estimates.
Revenue recognition
The Company generates revenues from manufacturing, profit-sharing and development services for multiple pharmaceutical companies.
Manufacturing
Manufacturing, packaging and other related services revenue is recognized upon transfer of control of a product to a customer, generally upon shipment, based on a transaction price that reflects the consideration the Company expects to be entitled to as specified in the agreement with the commercial partner, which could include variable consideration such as pricing and volume-based adjustments.
7
Profit-sharing
In addition to manufacturing and packaging revenue, certain customers who use our technologies are subject to agreements that provide us intellectual property sales-based profit-sharing and/or royalties consideration, collectively referred to as profit-sharing, computed on the net product sales of the commercial partner. Profit-sharing revenues are generally recognized under the terms of the applicable license, development and/or supply agreement. The Company has determined that, in its arrangements, the license for intellectual property is not the predominant item to which the profit-sharing relates, so the Company recognizes revenue upon transfer of control of the manufactured product. In these cases, significant judgment is required to calculate the estimated variable consideration from such profit-sharing using the expected value method based on historical commercial partner pricing and deductions. Estimated variable consideration is partially constrained due to the uncertainty of price adjustments made by the Company’s commercial partners, which are outside of the Company’s control. Factors causing price adjustments by the Company’s commercial partners include increased competition in the products’ markets, mix of volume between the commercial partners’ customers, and changes in government pricing.
Development
Development revenue includes services associated with formulation, process development, clinical trial materials services, as well as custom development of manufacturing processes and analytical methods for a customer’s non-clinical, clinical and commercial products. Such revenues are recognized at a point in time or over time depending on the nature and particular facts and circumstances associated with the contract terms.
In contracts that specify milestones, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments related to arrangements under which the Company has continuing performance obligations are deferred and recognized over the period of performance. Milestone payments that are not within the Company’s control, such as submission for approval to regulators by a commercial partner or approvals from regulators, are not considered probable of being achieved until those submissions are submitted by the customer or approvals are received.
In contracts that require revenue recognition over time, the Company utilizes input or output methods, depending on the specifics of the contract, that compare the cumulative work-in-process to date to the most current estimates for the entire performance obligation. Under these contracts, the customer typically owns the product details and process, which have no alternative use. These projects are customized to each customer to meet its specifications, and typically only one performance obligation is included. Each project represents a distinct service that is sold separately and has stand-alone value to the customer. The customer also retains control of its product as the product is being created or enhanced by the Company’s services and can make changes to its process or specifications upon request.
Contract assets represent revenue recognized for performance obligations completed or in process before an unconditional right to payment exists, and therefore invoicing or associated reporting from the customer regarding the computation of the net product sales has not yet occurred. Contract liabilities represent payments received from customers prior to the completion of associated performance obligations.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company manages its cash and cash equivalents based on established guidelines relative to diversification and maturities to maintain safety and liquidity.
The Company’s accounts receivable balances are primarily concentrated among
The Company is dependent on its relationships with a small number of commercial partners. The Company’s three largest customers generated
Stock-based compensation expense
The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. The Company accounts for forfeitures as they occur.
8
Determining the appropriate fair value of stock options requires the use of subjective assumptions, including the expected life of the option and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and/or management uses different assumptions, stock-based compensation expense could be materially different for future awards.
The expected life of stock options was estimated using the “simplified method,” which is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses the historical volatility of its publicly traded stock in order to estimate future stock price trends. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option.
Upon exercise of stock options or vesting of restricted stock units, the holder may elect to cover tax withholdings by forfeiting shares of an equivalent value. In such cases, the Company issues net new shares to the holder, pays the tax withholding on behalf of the participant and presents the payment similar to a capital distribution: a reduction to additional paid-in-capital and a financing cash outflow in the consolidated financial statements.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
In assessing the realizability of net deferred tax assets, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. A full valuation allowance was recorded as of June 30, 2023 and December 31, 2022.
Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the consolidated financial statements. The Company recognizes the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company does not anticipate significant changes in the amount of unrecognized income tax benefits over the next year.
Leases
The Company determines under U.S. GAAP if an arrangement is a lease at inception. The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Options to extend the lease are included in the lease term if the options are reasonably certain to be exercised. Operating lease expense is recognized on a straight-line basis over the lease term.
In a sale-leaseback transaction, the Company determines if it relinquished control of the assets to the buyer-lessor. If control is not relinquished, it does not derecognize the asset and does not apply the lease accounting model.
Operating lease balances are presented as separate captions on the balance sheets. Finance lease assets are included in property, plant and equipment. Finance lease liabilities are included in other liabilities.
Income or loss per share
Basic income or loss per share is determined by dividing net income or loss (the numerator) by the weighted average common shares outstanding during the period (the denominator).
To calculate diluted income or loss per share, the numerator and denominator are adjusted to eliminate the income or loss and the dilutive effects on shares, respectively, caused by outstanding common stock options, warrants and unvested restricted stock units, using the treasury stock method, if the inclusion of such instruments would be dilutive.
9
For all periods presented, the Company incurred a net loss. In periods of net loss, the inclusion of dilutive securities would be antidilutive because it would reduce the amount of loss incurred per share. As a result, no additional dilutive shares were included in diluted loss per share, and there were no differences between basic and diluted loss per share.
The following table presents the potentially dilutive securities that were excluded from the computations of diluted loss per share:
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
Amounts in the table above reflect the common stock equivalents of the noted instruments.
(3) Inventory
The following table presents the components of inventory:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Raw materials |
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
||
Inventory |
$ |
|
|
$ |
|
(4) Intangible assets, net
The following table presents the components of other intangible assets:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
Gross value |
|
|
Accumulated amortization |
|
|
Carrying value |
|
|
Gross value |
|
|
Accumulated amortization |
|
|
Carrying value |
|
||||||
Customer relationships |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Backlog |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trademarks and tradenames |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The following table presents estimated future amortization of other intangible assets:
Twelve months ending June 30, |
|
|
|
2024 |
$ |
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
Thereafter |
|
|
|
Total |
$ |
|
10
(5) Property, plant and equipment, net
The following table presents the components of property, plant and equipment:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Land |
$ |
|
|
$ |
|
||
Building and improvements |
|
|
|
|
|
||
Furniture, office and computer equipment |
|
|
|
|
|
||
Manufacturing equipment |
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
||
Property, plant and equipment, gross |
|
|
|
|
|
||
Less: accumulated depreciation |
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
$ |
|
|
$ |
|
Interest expense capitalized to construction in process was $
The Company is party to a sale and purchase agreement to sell approximately
(6) Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Payroll and related costs |
$ |
|
|
$ |
|
||
Contract liabilities (see note 11) |
|
|
|
|
|
||
Accrued transaction costs |
|
|
|
|
|
||
Property, plant and equipment |
|
|
|
|
|
||
Other |
|
|
|
|
|
||
Total |
$ |
|
|
$ |
|
Accrued transaction costs include costs incurred related to the refinancing completed in December 2022 which included the sale and subsequent leaseback of the Company’s commercial manufacturing campus located in Gainesville, Georgia (see note 9), the issuance of common and preferred stock, a borrowing of $
(7) Commitments and contingencies
Litigation
The Company is involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. The Company is not currently a party to any such claims or proceedings that, if decided adversely to it, would either individually or in the aggregate have a material adverse effect on its business, financial condition or results of operations.
On July 2, 2022, a product liability lawsuit was filed against the Company and various other defendants in the State Court of Cobb County, Georgia that claimed injuries and damages caused by Plaintiff Jakob Cuble’s alleged ingestion of, among other things, Focalin XR. The complaint sought compensatory and punitive damages. On April 14, 2023, Plaintiff's counsel withdrew the case.
Purchase commitments
As of June 30, 2023, the Company had outstanding cancelable and non-cancelable purchase commitments in the aggregate amount of $
11
Employment agreements and certain other contingencies
The Company has entered into employment agreements with each of its executive officers that provide for, among other things, severance commitments of up to $
(8) Debt
The following table presents the components and classification of debt:
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Debt principal: |
|
|
|
|
|
||
Term loan under Credit Agreement |
$ |
|
|
$ |
|
||
Note with former equity holder of IriSys |
|
|
|
|
|
||
Other |
|
|
|
|
|
||
Debt principal |
|
|
|
|
|
||
Debt adjustments: |
|
|
|
|
|
||
Unamortized deferred issuance costs |
|
( |
) |
|
|
( |
) |
Unamortized original discount |
|
( |
) |
|
|
( |
) |
Carrying value of debt |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Current portion of debt |
$ |
|
|
$ |
|
||
Debt, net of current portion |
|
|
|
|
|
||
Carrying value of debt |
$ |
|
|
$ |
|
The following table presents the future maturity of debt principal:
Twelve months ending June 30, |
|
|
|
2024 |
$ |
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
Thereafter |
|
|
|
Total debt principal |
$ |
|
Term loan under Credit Agreement
See note 16 for information about an amendment to the Credit Agreement that occurred subsequent to June 30, 2023.
The Company is currently party to a credit agreement (as amended from time to time, the “Credit Agreement”) with Royal Bank of Canada. The Credit Agreement has been fully drawn in the form of a term loan of $
The Credit Agreement also includes certain financial covenants that the Company will need to satisfy on a quarterly basis. As of June 30, 2023, the Company was in compliance with its covenants under the Credit Agreement.
12
In connection with the Credit Agreement, the Company has paid financing costs. These costs are being recognized in interest expense using the effective interest method over the term of the Credit Agreement, resulting in non-cash interest expense of $
The Credit Agreement bears
Historical term loans with Athyrium
The Company was previously party to a credit agreement with Athyrium Opportunities III Acquisition LP (“Athyrium Credit Agreement”). The Athyrium Credit Agreement included $
During the term of Athyrium Credit Agreement, the Company paid financing costs and accreted an exit fee. These costs were recognized in interest expense using the effective interest method, resulting in non-cash interest expense of $
Note with former equity holder of IriSys
See note 16 for information about an amendment to the Note that occurred subsequent to June 30, 2023.
In connection with the acquisition of IriSys, LLC (“IriSys”), the Company issued a subordinated promissory note to a former equity holder of IriSys in the aggregate principal amount of $
The Note was initially recognized at fair value as part of the consideration paid for the acquisition of IriSys, resulting in an original discount recognized of $
(9) Other liabilities
At June 30, 2023, other liabilities include a sale-leaseback liability of $
Sale-leaseback liability
The Company determined that it did not relinquish control of the assets to the buyer-lessor. Therefore, the assets were not derecognized, and the selling price was recorded as a financial liability. As of June 30, 2023, the carrying value of the liability was $
13
(10) Shareholders’ equity or deficit
Common stock
On May 17, 2023, the Company's shareholders approved an amendment to the articles of incorporation to increase the number of authorized shares of common stock from
Convertible preferred stock
In December 2022, the Company issued
Warrants
See note 16 for information about warrants that were issued subsequent to June 30, 2023.
At June 30, 2023, warrants to purchase
(11) Revenue recognition
The following table presents changes in contract assets and liabilities:
|
Contract assets |
|
|
Contract liabilities |
|
||
Balance at December 31, 2022 |
$ |
|
|
$ |
( |
) |
|
Changes to the beginning balance arising from: |
|
|
|
|
|
||
Reclassification to receivables as the result of rights to consideration becoming unconditional |
|
( |
) |
|
|
— |
|
Reclassification to revenue as the result of performance obligations satisfied |
|
|
|
|
|
||
Changes in estimate |
|
|
|
|
— |
|
|
Net change to contract balance recognized since beginning of period due to recognition of revenue, amounts billed and changes in estimate |
|
|
|
|
( |
) |
|
Balance at June 30, 2023 |
$ |
|
|
$ |
( |
) |
Contract assets and contract liabilities are reported at the contract level. Contracts with multiple performance obligation are reported as a net contract asset or contract liability on the consolidated balance sheet. The reclassification to revenue appearing in the contract assets column results from the recognition of revenue on contract liabilities that are presented as a net contract asset at the beginning of the year.
The following table disaggregates revenue by timing of revenue recognition:
|
Three months ended June 30, |
|
|
Six months ended June 30, |
||||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
||||
Point in time |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Over time |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
The Company’s payment terms for manufacturing revenue and development services are typically 30 to 45 days. Profit-sharing revenue is recorded to accounts receivable in the quarter that the product is sold by the commercial partner upon reporting from the commercial partner and payment terms are generally 45 days after quarter end.
14
(12) Stock-based compensation
In October 2013, the Company established an equity incentive plan that has been subsequently amended and restated to become the 2018 Amended and Restated Equity Incentive Plan (the “A&R Plan”). At June 30, 2023, a total of
Stock options
Stock options are exercisable generally for a period of
The following table presents information about the fair value of stock options granted:
|
Six months ended June 30, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Weighted average grant date fair value |
$ |
|
|
$ |
|
||
Assumptions used to determine fair value: |
|
|
|
|
|
||
Range of expected option life |
|
|
|
||||
Expected volatility |
|
|
|
||||
Risk-free interest rate |
|
|
|
||||
Expected dividend yield |
|
|
|
|
|
The following table presents information about stock option balances and activity:
|
Number of shares |
|
|
Weighted average exercise price |
|
|
Aggregate intrinsic value |
|
|
Weighted average remaining contractual life |
|||
Balance, December 31, 2022 |
|
|
|
$ |
|
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|||
Forfeited or expired |
|
( |
) |
|
|
|
|
|
|
|
|
||
Balance, June 30, 2023 |
|
|
|
|
|
|
$ |
|
|
||||
Exercisable |
|
|
|
|
|
|
|
|
|
Included in the table above are
Restricted stock units
Restricted stock units (“RSUs”) vest over
The following table presents information about recent RSU activity:
|
Number of shares |
|
|
Weighted average grant date fair value |
|
||
Balance, December 31, 2022 |
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
||
Vested |
|
( |
) |
|
|
|
|
Forfeited |
|
( |
) |
|
|
|
|
Balance, June 30, 2023 |
|
|
|
|
|
Included in the table above are
15
Other information
The following table presents the classification of stock-based compensation expense:
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of sales |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
As of June 30, 2023, there was $
(13) Income taxes
The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings before taxes, adjusted for the impact of discrete quarterly items.
The provision for income taxes was $
(14) Fair value of financial instruments
The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” for fair value measurement recognition and disclosure purposes for its financial assets and financial liabilities that are remeasured and reported at fair value each reporting period. The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, short-term investments and certain warrants. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. Categorization is based on a three-tier valuation hierarchy, which prioritizes the inputs used in measuring fair value, as follows:
Items measured at fair value on a recurring basis
Cash equivalents of $
Fair value disclosures
The Company follows the disclosure provisions of FASB ASC Topic 825, “Financial Instruments” (ASC 825), for disclosure purposes for financial assets and financial liabilities that are not measured at fair value. As of June 30, 2023, the financial assets and liabilities recorded on the consolidated balance sheets that are not measured at fair value on a recurring basis include accounts receivable, accounts payable and accrued expenses. The carrying values of these financial assets and liabilities approximate fair value due to their short-term nature.
16
The fair value of long-term debt, where a quoted market price is not available, is evaluated based on, among other factors, interest rates currently available to the Company for debt with similar terms, remaining payments and considerations of the Company’s creditworthiness. The Company determined that the recorded book value of its debt, a level 2 measurement, approximated fair value at June 30, 2023 due to the recent issuances of those instruments and taking into consideration management’s current evaluation of market conditions.
(15) Leases
The Company is party to
Undiscounted future lease payments for the
Twelve months ended June 30, |
|
|
|
2024 |
$ |
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
Thereafter |
|
|
|
Total lease payments |
|
|
|
Less imputed interest |
|
( |
) |
Total operating lease liabilities |
$ |
|
At June 30, 2023, the weighted average remaining lease term was
(16) Subsequent events
Amendment to Seller Note
In August 2023, the Company and IriSys, Inc. (the “Seller”) entered into a First Amendment to Subordinated Promissory Note (the “Note Amendment”) pursuant to which the parties agreed to defer the due date of the payment due to the Seller on August 12, 2023 of $
17
Amendment to the RBC Credit Agreement
In August 2023, the Company amended its Credit Agreement with Royal Bank of Canada pursuant to a Second Amendment and Waiver to Credit Agreement (the “Credit Agreement Amendment”).
18
Item 2. Management’s discussion and analysis of financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and notes thereto in Part I, Item 1 of this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited consolidated financial statements and notes thereto for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023, or Annual Report.
In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Our actual results may differ materially from those discussed below. Please see “Forward-Looking Statements” and “Risk Factors” included in Part I, Item 1A of our Annual Report for factors that could cause or contribute to such differences.
Cautionary note regarding forward-looking statements
This Quarterly Report and the documents incorporated by reference herein contain forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report or the documents incorporated by reference herein regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” “could,” “should,” “potential,” “seek,” “evaluate,” “pursue,” “continue,” “design,” “impact,” “affect,” “forecast,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.
The forward-looking statements in this Quarterly Report and the documents incorporated herein by reference include, among other things, statements about:
19
We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly under “Item 1A. Risk Factors,” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments we may make. You should read this Quarterly Report and the documents that we incorporate by reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements.
Solely for convenience, tradenames referred to in this Quarterly Report appear without the ® symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these tradenames. All trademarks, service marks and tradenames included or incorporated by reference in this Quarterly Report are the property of their respective owners.
Overview
Societal CDMO, Inc. is a bi-coastal contract development and manufacturing organization, or CDMO, with capabilities spanning pre-investigational new drug development to commercial manufacturing and packaging for a wide range of therapeutic dosage forms with a primary focus on small molecules. With an expertise in solving complex manufacturing problems, Societal is a leading CDMO providing development, end-to-end regulatory support, clinical and commercial manufacturing, aseptic fill/finish, lyophilization, packaging and logistics services to the global pharmaceutical market. In addition to our experience in handling DEA-controlled substances and developing and manufacturing modified-release dosage forms, Societal has the expertise to deliver on our clients’ pharmaceutical development and manufacturing projects, regardless of complexity level. We do all of this in our state-of-the-art facilities that, in the aggregate, total 145,000 square feet, in Gainesville, Georgia and San Diego, California.
We currently manufacture the following key products with our key commercial partners: Ritalin LA®, Focalin XR®, Verelan PM®, Verelan SR®, Verapamil PM, Verapamil SR and Donnatal liquids and tablets. We also support numerous development stage products. During the first quarter of 2023, the FDA approved the Company as a manufacturer of a commercial tablet product. This FDA approval represents the first commercial tablet that Societal CDMO has been approved to manufacture, and the Company began commercial manufacturing of the product at its Gainesville, Georgia facilities in the middle of 2023.
Our manufacturing and development capabilities include product development from formulation through clinical trial and commercial manufacturing, and specialized capabilities for solid oral dosage forms, with specialization in modified release technologies and facilities to handle high potent compounds and controlled substances, liposomes and nano/microparticles, topicals and oral liquids. In September 2022, Societal announced a new state-of-the-art, aseptic fill/finish and lyophilization suite in our San Diego facility to further our goal of offering end-to-end solutions to our clients. In addition to providing manufacturing capabilities, we offer our customers clinical trial support including over-encapsulation, comparator sourcing, packaging, labeling, storage and distribution. We have a bi-coastal footprint from which to better serve clients within the U.S., as well as globally. In a typical collaboration between us and our commercial partners, we continue to work with our partners to develop product candidates or new formulations of existing product candidates. We also typically exclusively manufacture and supply clinical and commercial supplies of these proprietary products and product candidates.
We use cash flow generated by our business primarily to fund the growth of our CDMO business and to make payments under our credit facility. We believe our business will continue to contribute cash to fund our growth, to make payments under our credit facility and for other general corporate purposes.
Global economic and supply conditions
Global economic conditions, logistics and supply chain issues continue to present obstacles to our business.
20
We rely on third-party manufacturers to supply our manufacturing components, supplies and related materials, which in some instances are supplied from a single source. Prolonged disruptions in the supply of any of our third-party materials, difficulty implementing new sources of supply or significant price increases could have an adverse effect on our results. We are experiencing a higher level of residual supply chain disruptions that we are actively managing to meet our production timelines and that may constrain our ability to capture additional growth opportunities, beyond our established projections, from customers who would otherwise want to increase their safety stock of the products that we produce.
We also continue to closely monitor global economic developments and geopolitical conflicts, such as the conflict between Russia and Ukraine, which continue to have adverse effects on the U.S. and global markets and supply chain.
We have begun to see the effects of a general slowdown in clinical development activity as a result of clinical failures and/or a lack of adequate funding to go forward. We are making efforts to adapt to these market changes, including a reconfiguration of our business development team to be better positioned in the longer-term by focusing on account management roles and replacing lost positions in strategic focus areas. The slowdown has caused us to experience reductions to our backlog during the first half of 2023. Going forward, the slowdown and/or the reconfiguration may cause us to experience additional reductions to our backlog and/or a reduction in the number of business development opportunities that we will be able to pursue or close in 2023.
We also expect to face continuing inflationary pressures on raw materials, labor and logistics during 2023. Finally, we were impacted by higher variable base interest rates on our borrowings under credit agreements during the second half of 2022, and while we believe that we have been able to capture overall interest savings as a result of the December 2022 refinancing, we expect those improvements could be partially offset by that sustained variable base interest rate increases from 2022.
Financial overview
Revenues
We recognize three types of revenue: manufacturing, profit-sharing and development.
As previously disclosed, in May 2023, Lannett, which represented 16% of our revenue in 2022, commenced prepackaged Chapter 11 cases in the United States Bankruptcy Court for the District of Delaware and entered into a restructuring support agreement with certain of its lenders. On June 8, 2023, Lannett emerged from the Chapter 11 bankruptcy as a privately-held company under the ownership of its prepetition lenders. While our agreement with Lannett remains in place, at this time we do not know whether Lannett's performance with sales of Verapamil PM will be impacted by these events or might otherwise impact our economics going forward.
Manufacturing
We recognize manufacturing revenue from the sale of products we manufacture for our commercial partners. Manufacturing revenues are recognized upon transfer of control of a product to a customer, generally upon shipment, based on a transaction price that reflects the consideration we expect to be entitled to as specified in the agreement with the commercial partner, which could include pricing and volume-based adjustments.
Profit-sharing
In addition to manufacturing revenue, certain customers who use our technologies are subject to agreements that provide us intellectual property sales-based profit-sharing and/or royalties consideration, collectively referred to as profit-sharing, computed on the net product sales of the commercial partner. Profit-sharing revenues are generally recognized under the terms of the applicable license, development and/or supply agreement. We have determined, that in our arrangements, the license for intellectual property is not the predominant item to which the profit-sharing relates, so we recognize revenue upon transfer of control of the manufactured product. In these cases, significant judgment is required to calculate the estimated variable consideration from such profit-sharing using the expected value method based on historical commercial partner pricing and deductions. Estimated variable consideration is partially constrained due to the uncertainty of price adjustments made by our commercial partners, which are outside of our control. Factors causing price adjustments by our commercial partners include increased competition in the products’ markets, mix of volume between the commercial partners’ customers, and changes in government pricing.
21
Development
Development revenue includes services associated with formulation, process development, clinical trial materials services, as well as custom development of manufacturing processes and analytical methods for a customer’s non-clinical, clinical and commercial products. Such revenues are recognized at a point in time or over time depending on the nature and particular facts and circumstances associated with the contract terms.
In contracts that specify milestones, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. Milestone payments related to arrangements under which we have continuing performance obligations are deferred and recognized over the period of performance. Milestone payments that are not within our control, such as submission for approval to regulators by a commercial partner or approvals from regulators, are not considered probable of being achieved until those submissions are submitted by the customer or approvals are received.
In contracts that require revenue recognition over time, we utilize input or output methods, depending on the specifics of the contract, that compare the cumulative work-in-process to date to the most current estimates for the entire performance obligation. Under these contracts, the customer typically owns the product details and process, which have no alternative use. These projects are customized to each customer to meet its specifications, and typically only one performance obligation is included. Each project represents a distinct service that is sold separately and has stand-alone value to the customer. The customer also retains control of its product as the product is being created or enhanced by our services and can make changes to its process or specifications upon request.
Cost of sales and selling, general and administrative expenses
Cost of sales consists of inventory costs, including production wages, material costs and overhead, and other costs related to the recognition of revenue. Selling, general and administrative expenses consist of salaries and related costs for administrative, public company and business development functions as well as legal fees, patent-related expenses and consulting fees. Public company costs include compliance, audit, tax, insurance and investor relations.
Amortization of intangible assets
We are recognizing amortization expense related to acquired customer relationships, backlog and trademarks and trade names on a straight-line basis over estimated useful lives of 7.0, 2.4, and 1.5 years, respectively.
Interest expense
Interest expense for the current period presented primarily relates to our new term loan borrowing with Royal Bank of Canada originally funded at $36.9 million and the financial liability related to the sale and leaseback of our commercial manufacturing campus in Gainesville, Georgia for gross proceeds of $39.0 million. Interest expense for the prior period presented primarily relates to the $100.0 million senior secured term loans with Athyrium Opportunities III Acquisition LP and the amortization of related financing costs.
As a result of these changes, interest expense was lower in the first half of 2023 and will continue to be lower in future periods due to the lower amount of aggregate principal and lower variable interest margins as compared to the Athyrium borrowings.
Net operating losses and tax carryforwards
As of December 31, 2022, we had federal net operating loss, or NOL, carry forwards of approximately $125.6 million, substantially all of which are subject to annual limitations following a December 2022 change in control and have an indefinite carry forward period. We also had $135.4 million of state NOL carry forwards available to offset future taxable income that will begin to expire at various dates beginning in 2028 if not utilized. We believe that it is more likely than not that our deferred income tax assets will not be realized, and as such, there is a full valuation allowance.
Key indicators of performance
To evaluate our performance, we monitor a number of industry-standard key indicators such as:
22
EBITDA, as adjusted, is a non-GAAP measure that we discuss and reconcile to its nearest GAAP measure elsewhere in our public financial reporting. We believe that supplementing our financial results presented in accordance with GAAP with non-GAAP measures is useful to investors, creditors and others in assessing our performance. These measurements should not be considered in isolation or as a substitute for reported GAAP results because they may include or exclude certain items as compared to similar GAAP-based measurements, and such measurements may not be comparable to similarly-titled measurements reported by other companies. Rather, these measurements should be considered as an additional way of viewing aspects of our operations and gaining an understanding of our business.
Results of operations
Comparison of second quarters 2023 and 2022
|
Three months ended June 30, |
|
|||||
(in millions) |
2023 |
|
|
2022 |
|
||
Revenue |
$ |
21.8 |
|
|
$ |
23.2 |
|
Operating expenses: |
|
|
|
|
|
||
Cost of sales |
|
17.3 |
|
|
|
17.5 |
|
Selling, general and administrative |
|
5.3 |
|
|
|
5.2 |
|
Amortization of intangible assets |
|
0.2 |
|
|
|
0.2 |
|
Total operating expenses |
|
22.8 |
|
|
|
22.9 |
|
Operating (loss) income |
|
(1.0 |
) |
|
|
0.3 |
|
Interest expense |
|
(2.3 |
) |
|
|
(3.4 |
) |
Interest income |
|
0.1 |
|
|
|
— |
|
Loss before income taxes |
|
(3.2 |
) |
|
|
(3.1 |
) |
Income tax expense |
|
— |
|
|
|
— |
|
Net loss |
$ |
(3.2 |
) |
|
$ |
(3.1 |
) |
Revenue. The decrease of $1.4 million was primarily driven by a decrease in revenue from our largest commercial customer, Teva, due to a scheduled shutdown of our packaging line to implement the upgrades required to comply with new serialization aggregation compliance standards. In addition, the manufacturing revenue associated with then new customer, InfectoPharm’s, inventory-build during the second quarter of 2022, was greater than the normalized quarterly revenue recorded in the second quarter of 2023. These reductions in revenue were partially offset by increased pre-commercial development revenues from our clinical trial materials and technology transfer projects.
Cost of sales. The decrease of $0.2 million was primarily due to lower commercial manufacturing revenue based on the timing of the serialization aggregation compliance project offset by higher fixed costs primarily to support the newly installed aseptic fill/finish line that has expanded our capabilities.
Selling, general and administrative. Selling, general and administrative expenses were relatively consistent for the periods presented.
Amortization of intangible assets. The amortization related to the acquisition of IriSys for acquired customer relationships, backlog and trademarks and trade names.
Interest expense. The decrease of $1.1 million was primarily due to a significantly reduced amount of aggregate principal and lower interest rates under the company's refinanced debt as compared to the borrowings outstanding during the period ended June 30, 2022.
23
Comparison of six months ended 2023 and 2022
|
Six months ended June 30, |
|
|||||
(in millions) |
2023 |
|
|
2022 |
|
||
Revenue |
$ |
43.3 |
|
|
$ |
44.3 |
|
Operating expenses: |
|
|
|
|
|
||
Cost of sales |
|
36.6 |
|
|
|
33.6 |
|
Selling, general and administrative |
|
9.9 |
|
|
|
10.9 |
|
Amortization of intangible assets |
|
0.4 |
|
|
|
0.4 |
|
Total operating expenses |
|
46.9 |
|
|
|
44.9 |
|
Operating loss |
|
(3.6 |
) |
|
|
(0.6 |
) |
Interest expense |
|
(4.4 |
) |
|
|
(6.8 |
) |
Interest income |
|
0.2 |
|
|
|
— |
|
Loss before income taxes |
|
(7.8 |
) |
|
|
(7.4 |
) |
Income tax expense |
|
0.1 |
|
|
|
— |
|
Net loss |
$ |
(7.9 |
) |
|
$ |
(7.4 |
) |
Revenue. The decrease of $1.0 million was primarily driven by the decreases in revenues from Teva and InfectoPharm, which were partially offset by an increase in pre-commercial development revenues, as described above.
Cost of sales. The increase of $3.0 million was primarily due to mix of revenue and related fixed cost absorption, including increased costs associated with the new aseptic fill/finish line that has expanded our capabilities and increased material costs..
Selling, general and administrative. The decrease of $1.0 million was primarily related to lower public company costs and administrative costs than the prior year.
Amortization of intangible assets. The amortization related to the acquisition of IriSys for acquired customer relationships, backlog and trademarks and trade names.
Interest expense. The decrease of $2.4 million was primarily due to a significantly reduced amount of aggregate principal and lower interest rates under the company's refinanced debt as compared to the borrowings outstanding during the period ended June 30, 2022.
Liquidity and capital resources
At June 30, 2023, we had $4.7 million in cash and cash equivalents. Our credit agreement with Royal Bank of Canada, as amended, contains a quarterly minimum liquidity requirement of $4.0 million through June 30, 2024. Our ability to continue to comply with the minimum liquidity requirement is subject to our success in implementing certain cost control measures, reducing capital expenditures and managing working capital in order to improve our ongoing financial performance and our liquidity position.
Since our inception, we have financed our operations and capital expenditures primarily from results of operations, from the issuance of equity and debt, and recently, to a lesser extent, from real estate transactions. During the first half of 2023, our capital expenditures were $5.5 million to maintain, scale and support expansion of our capabilities.
See Part II, Item 5 for information about an amendment to the Credit Agreement that occurred subsequent to June 30, 2023.
We are currently party to a credit agreement with Royal Bank of Canada, or the Credit Agreement, for a term loan originally funded at $36.9 million. The principal is being repaid in quarterly amounts, including $2.3 million, $3.2 million and $0.9 million to be paid during the twelve months ending June 30, 2024, 2025 and 2026, respectively. The final payment of all remaining outstanding principal is due on December 16, 2025.
Subject to certain exceptions, we are required to make mandatory prepayments with the cash proceeds received in respect of asset sales, certain equity sales, extraordinary receipts, debt issuances, upon a change of control and specified other events. Additionally, we are obligated by December 14, 2023 to complete the sale of certain real property adjacent to our Gainesville, Georgia manufacturing campus. If that property is not sold by December 14, 2023, we will be required to pay a fee of $0.4 million and increase each of our quarterly principal payments by $0.2 million until that property is sold and any mandatory principal prepayment is made.
24
In September 2022, we signed a sales and purchase agreement to sell approximately 121 acres of land adjacent to our Gainesville, Georgia manufacturing campus for expected proceeds of $9.1 million, which we are obligated to use to repay outstanding balances on the Credit Agreement. The land sale is expected to close in the first half of 2024. Until closing, the sale of the land is subject to customary closing conditions for transactions of this type, including completion of title and environmental due diligence and receipt of certain zoning approvals and permits.
The pharmaceutical industry is experiencing a slowdown in clinical development activities resulting from reduced cash funding and other liquidity resources and we are experiencing higher rates of customer attrition and development program delays that caused us to revise our 2023 earnings and cash projections during the second quarter of 2023. As a result of these factors, we took actions to amend our debt agreements to align financial covenants and other terms of the indebtedness with our revised projections. Absent these amendments, we would not have been able to conclude that it was probable that we would comply with the provisions of our debt agreements through August 14, 2024.
We believe that our results of operations will allow us to comply with the financial and other covenants and contractual requirements of the agreements for at least the next twelve months. Our ability to comply is subject to our success in implementing certain cost control measures, reducing capital expenditures and managing working capital in order to improve our ongoing financial performance and our liquidity position.
We may extend and or supplement the actions we are taking if we continue to experience adverse conditions described above, among others, that might impact the forecasted performance. If we are unable to achieve the results required to comply with the terms of our credit agreement in one or more quarters over the next twelve months, we may be required to take specific actions in addition to those described above, including but not limited to, additional cost control measures, or alternatively, seeking an amendment or waiver from our lenders. Obtaining a waiver or an amendment is not within our control, and if unsuccessful, the lenders may exercise the rights available to them under the credit agreement.
We may require additional financing or choose to refinance certain of these instruments, which could include strategic development, licensing activities and/or marketing arrangements, public or private sales of equity or debt securities or debt refinancing. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely impact our growth plans and our financial condition or results of operations. Further, our ability to access capital market or otherwise raise capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide, including as a result of diseases, geopolitical conflicts, recent liquidity constraints or failures and instability in U.S. and international financial banking systems on the global financial markets. Additional debt or equity financing, if available, may be dilutive to the holders of our common stock and may involve significant cash payment obligations and covenants that restrict our ability to operate our business or to access capital, and may further restrict dividend payments.
Sources and uses of cash
|
Six months ended June 30, |
|
|||||
(amounts in millions) |
2023 |
|
|
2022 |
|
||
Net cash used in: |
|
|
|
|
|
||
Operating activities |
$ |
(1.6 |
) |
|
$ |
(6.1 |
) |
Investing activities |
|
(5.5 |
) |
|
|
(3.3 |
) |
Financing activities |
|
(3.1 |
) |
|
|
(0.3 |
) |
Total |
$ |
(10.2 |
) |
|
$ |
(9.7 |
) |
Cash flows from operating activities represents our net loss as adjusted for stock-based compensation expense, non-cash interest expense, depreciation expense, amortization of intangible assets and deferred income tax expense as well as changes in operating assets and liabilities. The $4.5 million decrease in cash flows used for operating activities in 2023 compared to 2022 was primarily due to favorable working capital changes, partially offset by a decrease in earnings exclusive of non-cash items.
Net cash used in investing activities for each period includes capital expenditures to scale and support our expansion of capabilities.
Net cash used in financing activities increased $2.8 million primarily due to debt repayments of $0.9 million and payments of $2.0 million related to the December 2022 debt refinancing.
25
Forward-looking factors
Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:
We may use existing cash and cash equivalents on hand, additional debt, equity financing, sale of real-estate or other assets or out-licensing revenue or a combination thereof to fund our operations or acquisitions. If we increase our debt levels, we might be restricted in our ability to raise additional capital and might be subject to financial and restrictive covenants. If we issue additional equity in future periods, our shareholders may experience dilution. This dilution may be significant depending upon the amount of equity or debt securities that we issue and the prices at which we issue any securities.
Contractual commitments
The table below reflects our contractual commitments as of June 30, 2023:
|
Payments due by period |
|
|||||||||||||||||
(in millions) |
Total |
|
|
Less than |
|
|
1-3 years |
|
|
3-5 years |
|
|
More than |
|
|||||
Debt obligations (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Principal |
$ |
40.4 |
|
|
$ |
7.1 |
|
|
$ |
33.0 |
|
|
$ |
0.1 |
|
|
$ |
0.2 |
|
Interest |
|
8.3 |
|
|
|
3.5 |
|
|
|
4.7 |
|
|
|
0.1 |
|
|
|
— |
|
Purchase obligations (2) |
|
8.0 |
|
|
|
7.4 |
|
|
|
0.6 |
|
|
|
— |
|
|
|
— |
|
Operating leases (3) |
|
8.9 |
|
|
|
1.2 |
|
|
|
2.3 |
|
|
|
2.3 |
|
|
|
3.1 |
|
Other long-term liabilities (4)(5) |
|
92.8 |
|
|
|
3.6 |
|
|
|
7.5 |
|
|
|
7.9 |
|
|
|
73.8 |
|
Total |
$ |
158.4 |
|
|
$ |
22.8 |
|
|
$ |
48.1 |
|
|
$ |
10.4 |
|
|
$ |
77.1 |
|
In August 2022, we amended our credit agreeement and note issued to the former members of IriSys, which resulted in no changes to the presentation of the table. See Part II, Item 5 of this Quarterly Report on Form 10-Q.
26
Critical accounting policies and estimates
Our critical accounting policies and estimates are disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report.
Item 3. Quantitative and qualitative disclosures about market risk
There has been no material change in our assessment of our sensitivity to market risk described in the Annual Report.
Item 4. Controls and procedures
Evaluation of disclosure controls and procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of June 30, 2023. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.
A control system, no matter how well conceived and operated, can provide only reasonable, and not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in internal control over financial reporting
There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
27
PART II. OTHER INFORMATION
Item 1. Legal proceedings.
Information regarding legal and regulatory proceedings is set forth in note 7 to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report, and is incorporated by reference herein.
We are also engaged in various other legal actions arising in the ordinary course of our business (such as, for example, proceedings relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights) and, while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
Item 1A. Risk factors.
Investing in our securities involves certain risks. In addition to any risks and uncertainties described elsewhere in this Quarterly Report, investors should carefully consider the risks and uncertainties discussed in Part I, Item 1A. “Risk Factors” in our Annual Report. These risks are not the only risks that could materialize. Other than as set forth below, there have been no material changes in our risk factors from those previously disclosed in our Annual Report and Quarterly Report for the quarter ended March 31, 2023.
Our revenues are dependent on a small number of commercial partners, and the loss of any one of these partners, or a decline in their orders, may adversely affect our business.
We are dependent on a small number of commercial partners, with our four largest customers (Teva Pharmaceutical Industries, Inc., or Teva, Novartis Pharma AG, or Novartis, Lannett Company, Inc., or Lannett, and InfectoPharm Arzneimittel und Consilium GmbH, or InfectoPharm) having generated 77% of our revenues for the year ended December 31, 2022, of which Teva generated 34%, Novartis generated 18%, Lannett generated 16%, and InfectoPharm generated 9%. In May 2023, Lannett, which represented 16% of our revenue in 2022, commenced prepackaged Chapter 11 cases in the United States Bankruptcy Court for the District of Delaware and entered into a restructuring support agreement with certain of its lenders. On June 8, 2023, Lannett emerged from the Chapter 11 bankruptcy as a privately-held company under the ownership of its prepetition lenders. While our agreement with Lannett remains in place, at this time we do not know whether Lannett's performance with sales of Verapamil PM post-bankruptcy will impact our economics going forward. In addition, Novartis has provided us notice it intends to assign our agreement to Sandoz, its generic division, as part of the public spin-off of Sandoz. Such developments with Lannett and Novartis, as well as any increases in competition in the market, pricing adjustments, significantly reduced purchasing volume or financial difficulties (for example, the Lannett bankruptcy) with any one or more of our key commercial partners could adversely affect our revenue.
Our profit sharing, royalty, and manufacturing revenues also depend on the ability of our commercial partners to effectively market and sell their products to their customers. A commercial partner may choose to devote its efforts to its other products or reduce or fail to devote the necessary resources to provide effective sales and marketing support for the products we manufacture and supply. Furthermore, the acquisition of or change in strategy by one of our customers could impact projects we are currently working on or planning to work on in the future. Our commercial partners face competition from other pharmaceutical companies for sales of products to end users. Competition from sellers of generic drugs is a major challenge for our commercial partners, and the loss or expiration of intellectual property rights for the products we manufacture can have a significant adverse effect on their sales volume and price. Our commercial partners have also experienced difficulties in recent years as the pharmaceutical industry was impacted by the COVID-19 pandemic, labor shortages, supply chain shortages, inflationary pressures and geopolitical turmoil. Similar pressures could lead a partner to discontinue a product, make pricing changes or change ordering patterns. In addition, as pharmaceutical product pricing faces scrutiny by governments, legislative bodies and enforcement agencies, our commercial partners may lower their prices or adopt cost-savings measures which could be passed on to us or otherwise impact our profit-sharing revenues. Further, any commercial partner may divest the product we manufacture for them in whole or in certain markets, which may involve termination of our contract with such partner or the assignment of such contract to a new partner who may not be as effective at selling or commercializing such product. Pricing changes and any significant reduction, delay or cancellation of orders from our commercial partners could adversely affect our revenues.
28
We are currently listed on the Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our shareholders to sell their securities.
Although our common stock is currently listed on the Nasdaq Capital Market, we may not be able to continue to meet the exchange’s minimum listing requirements or those of any other national exchange. On May 23, 2023, we received a deficiency letter from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC notifying us that, for the 30 consecutive business day period preceding the date of the letter, the closing bid price for our common stock was below the minimum $1.00 per share required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The Nasdaq deficiency letter only pertains to our stock price, and there are no other deficiencies related to our ongoing listing on the Nasdaq Capital Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been given 180 calendar days, or until November 20, 2023, to regain compliance with Rule 5550(a)(2). If at any time before November 20, 2023, the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Nasdaq Listing Qualifications Department will provide written confirmation that we have achieved compliance.
If we do not regain compliance with Rule 5550(a)(2) by November 20, 2023, we may be afforded a second 180 calendar day period to regain compliance. To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, except for the minimum bid price requirement.
The delisting of our common stock from the Nasdaq Capital Market may make it more difficult for us to raise capital on favorable terms in the future. Such a delisting would likely a result in a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders and may impair your ability to sell or purchase our common stock when you wish to do so:
Further, if we were to be delisted from the Nasdaq Capital Market and we are unable to obtain listing on another national securities exchange, our common stock would cease to be recognized as covered securities and we would be subject to regulation in each state in which we offer our securities. Moreover, there is no assurance that any actions that we take to restore our compliance with the minimum bid price requirement would stabilize the market price or improve the liquidity of our common stock, prevent our common stock from falling below the minimum bid price required for continued listing again, or prevent future non-compliance with Nasdaq’s listing requirements.
29
Item 2. Unregistered sales of equity securities and use of proceeds.
None.
Item 3. Defaults upon senior securities.
None.
Item 4. Mine safety disclosures.
Not applicable.
Item 5. Other information.
Amendment to Seller Note
On August 13, 2023, the Company and IriSys, Inc. (the “Seller”) entered into a First Amendment to Subordinated Promissory Note (the “Note Amendment”) pursuant to which the parties agreed to defer the due date of the payment due to the Seller on August 13, 2023 of approximately $2.0 million of principal, plus accrued interest, under the Subordinated Promissory Note to the earlier of (i) June 24, 2024; and (ii) the date on which the Company completes its previously announced sale of certain land at its Gainesville, Georgia location. In addition, the Note Amendment provides that the Company will pay up to $1.0 million of the deferred payment upon completion of certain financings. In consideration of Seller’s entry into the Note Amendment, the Company paid the Seller a $150,000 amendment fee, agreed to pay up to $50,000 of Seller’s legal fees in connection with the Note Amendment and issued the Seller a warrant to purchase 100,000 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) at an exercise price of $1.00 with a term of three years (the “Warrant”).
Amendment to the RBC Credit Agreement
On August 13, 2023, the Company amended its Credit Agreement with Royal Bank of Canada pursuant to a Second Amendment and Waiver to Credit Agreement (the “Credit Agreement Amendment”). Pursuant to the terms of the Credit Agreement Amendment: (i) the Company is obligated to make a $7.5 million mandatory principal prepayment upon the sale of the Company’s real property located adjacent to its Gainesville, Georgia manufacturing campus; (ii) effective for the fiscal quarter ending September 30, 2023 through the quarter ending March 31, 2024, the net leverage ratio is permitted to be no greater than 3.75:1.00, stepping down to 2.75:1.00 for each quarter thereafter; (iii) effective for the quarter ending September 30, 2023, the permitted fixed charge coverage ratio was decreased to 1.00:1.00, which increases to 1.05:1.00 for each quarter thereafter; (iv) the permitted quarterly minimum liquidity amount of $4.0 million was extended through June 30, 2024, after which the quarterly minimum liquidity amount increases to $4.5 million through September 30, 2024, and increases to $5.0 million through September 30, 2025; (v) a new permitted monthly minimum liquidity amount was established applicable to all month-end dates, other than quarter-end dates, and equal to $1.5 million; and (vi) beginning with the quarter ending December 31, 2023, funded capital expenditures, as defined, cannot exceed $9.0 million in the aggregate for the preceding twelve-month period. In connection with the amendment, the Company paid an amendment fee of $90,000.
The foregoing description of the Note Amendment, the Credit Agreement Amendment and the Warrant does not purport to be complete and is qualified in its entirety by reference to the Note Amendment, the Amendment and the Warrant, copies of which are filed as Exhibits 10.1, 10.2 and 4.2 hereto and are hereby incorporated herein by reference.
Item 6. Exhibits.
EXHIBIT INDEX
30
Exhibit No. |
|
Description |
|
Method of filing |
4.1 |
|
Common Stock Purchase Warrant in favor of Warberg WF XI LP (as assigned by OTA LLC) |
|
Filed herewith |
4.2 |
|
|
Filed herewith |
|
10.1 |
|
|
Filed herewith |
|
10.2 |
|
|
Filed herewith |
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) certification of Principal Executive Officer |
|
Filed herewith |
31.2 |
|
Rule 13a-14(a)/15d-14(a) certification of Principal Financial and Accounting Officer |
|
Filed herewith |
32.1 |
|
Section 1350 certification, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
Filed herewith |
101 INS |
|
XBRL Instance Document |
|
Filed herewith |
101 SCH |
|
XBRL Taxonomy Extension Schema |
|
Filed herewith |
101 CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
|
Filed herewith |
101 DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
|
Filed herewith |
101 LAB |
|
XBRL Taxonomy Extension Label Linkbase |
|
Filed herewith |
101 PRE |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
|
Filed herewith |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
SOCIETAL CDMO, INC. |
|
|
|
|
|
Date: August 14, 2023 |
|
By: |
/s/ J. David Enloe, Jr. |
|
|
|
J. David Enloe, Jr. |
|
|
|
President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
Date: August 14, 2023 |
|
By: |
/s/ Ryan D. Lake |
|
|
|
Ryan D. Lake |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial and Accounting Officer) |
32
Exhibit 4.1
THIS WARRANT AND THE SECURITIES PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
SOCIETAL CDMO, Inc.
COMMON STOCK PURCHASE WARRANT
dated as of November 17, 2017
THIS CERTIFIES THAT, for value received, Warberg WF XI LP or its successors or permitted assigns (such Person and such successors and assigns each being the “Warrant Holder” with respect to the Warrant held by it), at any time and from time to time on any Business Day on or prior to 5:00 p.m. (New York City time) on the Expiration Date (as herein defined), is entitled (a) to purchase from Societal CDMO, Inc., a Pennsylvania corporation (the “Company”), 348,664 Shares at a price per Share equal to the Exercise Price (as herein defined), and (b) to the other rights set forth herein; provided that the number of Shares issuable upon any exercise of this Warrant and the Exercise Price shall be adjusted and readjusted from time to time in accordance with Section 5. By accepting delivery of this Common Stock Purchase Warrant (this “Warrant”), the Warrant Holder agrees to be bound by the provisions hereof.
This Warrant has been issued by the Company to the Warrant Holder following the assignment, dated as of July 10, 2023 (the “Assignment Date”), to the Warrant Holder by OTA LLC of its rights to purchase 174,332 Warrant Shares under each of those certain Common Stock Purchase Warrants issued by the Company on November 17, 2017 (the “Original Warrants”) pursuant to Section 6 of the Original Warrants. This Warrant replaces the Original Warrants in their entirety.
IN FURTHERANCE THEREOF, the Company irrevocably undertakes and agrees for the benefit of Warrant Holder as follows:
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person.
“Appraised Value” means at any time the fair market value thereof determined in good faith by the Board of Directors of the Company as of a date which is within ten (10) days of the date as of which the determination is to be made, subject to the rights of the Requisite Holders pursuant to Section 5(m).
“Asset Sale” has the meaning set forth in Section 2(h)(iii).
“Assignment Date” has the meaning set forth in the preamble hereto.
“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.
“Cash/Public Sale Transaction” has the meaning set forth in Section 2(h)(i).
“Closing Price” means, for any trading day with respect to a Share, (a) the last reported bid price on such day on the Principal Trading Market, as reported by Bloomberg, or (b) if no bid price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported by OTC Markets Group.
“Commission” means the Securities and Exchange Commission or any other federal agency administering the Securities Act at the time.
“Company” has the meaning set forth in the preamble hereto.
“Convertible Securities” has the meaning set forth in Section 5(c)(ii).
“Corporate Reorganization” means the occurrence of any of the following: (i) a capital reorganization; (ii) a reclassification of the capital stock of the Company; (iii) a merger, consolidation or reorganization or other similar transaction or series of related transactions which results in the voting securities of the Company outstanding immediately prior thereto representing immediately thereafter (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) less than 50% of the combined voting power of the voting securities of or economic interests in the Company or such surviving or acquiring entity outstanding immediately after such merger, consolidation or reorganization; (iv) the sale, lease, license, transfer, conveyance or other disposition of all or substantially all of the assets of the Company; (v) the sale of shares of capital stock of the Company, in a single transaction or series of related transactions, representing at least 50% of the voting power of the voting securities of or economic interests in the Company; or (vi) the acquisition by any “person” (together with his, her or its Affiliates) or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) acquires, directly or indirectly, the beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) of outstanding shares of capital stock and/or other equity securities of the Company, in a single transaction or series of related transactions (including, without limitation, one or more tender offers or exchange offers), representing at least 50% of the voting power of or economic interests in the then outstanding shares of capital stock of the Company.
“Distributed Property” has the meaning set forth in Section 5(b).
“Exchange Act” means the Securities Exchange Act of 1934, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
“Exercise Amount” means for any number of Warrant Shares as to which this Warrant is being exercised the product of (i) such number of Warrant Shares multiplied by (ii) the Exercise Price.
2
“Exercise Price” means $8.6043, as adjusted from time to time pursuant to Section 5.
“Expiration Date” means November 17, 2024.
“Fair Market Value” means the Closing Price on the trading day immediately prior to the date of such exercise (or if there is no such Closing Price, then based on the Appraised Value as of such day). Notwithstanding the foregoing if the determination of Fair Market Value is in connection with a Corporate Reorganization, then the Fair Market Value per share shall be the value per Warrant Share to be realized in such pending transaction (including any contingent consideration receivable in connection therewith).
“Liquid Securities” shall mean a class of securities registered under Section 12(b) of the Exchange Act, which are (i) listed or quoted for trading on a Trading Market, and (ii) have a sufficiently liquid market such that the Warrant Shares that are received by the Warrant Holder upon a Cash/Public Sale Transaction could be sold by the Warrant Holder in their entirety for cash within ten (10) trading days after the Cash/Public Sale Transaction, without a material adverse impact on the Market Price thereof.
“Market Price” on any day means the unweighted average of the daily Closing Prices per Share for the twenty (20) consecutive trading days prior to such date. If the Closing Price cannot be calculated for a security on a particular date pursuant to the definition of “Closing Price,” the Closing Price of such security on such date shall be the Appraised Value.
“Options” has the meaning set forth in Section 5(c)(ii).
“Original Warrants” has the meaning set forth in the preamble hereto.
“Person” means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Principal Trading Market” means the Trading Market on which the Shares are primarily listed and quoted for trading, which, as of the date of this Warrant, is the NASDAQ Capital Market.
“Pro-Rata Distribution” has the meaning set forth in Section 5(b).
“Requisite Holders” means at any time holders of Warrant Shares and Warrants representing at least a majority of the Warrant Shares outstanding or issuable upon the exercise of all the outstanding Warrants.
“Securities Act” means the Securities Act of 1933, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
“Share Distribution” has the meaning set forth in Section 5(c).
“Share Reorganization” has the meaning set forth in Section 5(a).
3
“Shares” means the Company’s currently authorized common stock, $0.01 par value, and stock of any other class or other consideration into which such currently authorized capital stock may hereafter have been changed.
“Trading Market” means whichever of the New York Stock Exchange, the NYSE Alternext, the NASDAQ Global Select Market, the NASDAQ Global Market, or the NASDAQ Capital Market on which the Shares are listed or quoted for trading on the date in question.
“Warrant” has the meaning set forth in the preamble hereto and, as the context requires, includes any successor warrant or warrants issued upon a whole or partial exercise, transfer or assignment of this warrant or of any such successor warrant.
“Warrant Holder” has the meaning set forth in the preamble hereto.
“Warrant Securities” means this Warrant and the Warrant Shares, collectively.
“Warrant Shares” means Shares issued or issuable upon exercise of this Warrant as set forth in the preamble hereto.
4
The Company acknowledges that the provisions of clause (ii) are intended, in part, to ensure that a full or partial exchange of this Warrant pursuant to such clause (ii) will qualify as a conversion, within the meaning of paragraph (d)(3)(iii) of Rule 144 under the Securities Act. At the request of any Warrant Holder, the Company will accept reasonable modifications to the exchange procedures provided for in this Section in order to accomplish such intent. For all purposes of this Warrant (other than this Section 2(a)), any reference herein to the exercise of this Warrant shall be deemed to include a reference to the exchange of this Warrant into Shares in accordance with the terms of clause (ii). If any portion of this Warrant is being exercised in accordance with clause (ii) and there is no applicable Closing Price, the Board of Directors shall notify the Warrant Holder within five (5) Business Days of a request by the Warrant Holder of its determination of the Appraised Value and the number of Warrant Shares issuable in accordance with clause (B) thereof (which determination shall be subject to Section 5(m) hereof).
5
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Any certificate for Warrant Shares issued at any time in exchange or substitution for any certificate bearing such legend (unless at that time such Warrant Shares are registered under the Securities Act) shall also bear such legend unless, in the written opinion of counsel selected by the holder of such certificate (who may be an employee of such holder), which counsel and opinion shall be reasonably acceptable to the Company, the Warrant Shares represented thereby need no longer be subject to restrictions on resale under the Securities Act.
6
7
8
9
10
11
12
(A) The Exercise Price shall be reduced to an amount equal to the product of (A) the Exercise Price in effect immediately prior to such issuance or sale multiplied by (B) a fraction, (I) the numerator of which shall be (x) the product of (1) the Market Price for the Shares as of the Determination Date multiplied by (2) the number of Shares outstanding immediately following the consummation of the Repurchase less (y) the Repurchase Premium (as defined below), and (II) the denominator of which shall be (x) the product of (1) the Market Price for the Shares as of the Determination Date multiplied by (2) the number of Shares outstanding immediately following the consummation of the Repurchase.
13
(B) The number of Warrant Shares issuable upon exercise of this Warrant shall be increased to the number of Shares determined by multiplying (x) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such distribution times (y) a fraction (1) the numerator of which shall be the Exercise Price in effect immediately prior to the adjustment in clause (A) of this Section 5(d) and (2) the denominator of which shall be the Exercise Price in effect immediately after such adjustment.
The amount by which the aggregate repurchase price for all securities repurchased in any Repurchase (including for such purposes any fees or other direct or indirect consideration payable in connection therewith) exceeds the aggregate Market Price for such securities is referred to as the “Repurchase Premium.” The provisions of this Section 5(d) shall not operate to increase the Exercise Price or reduce the number of Shares subject to purchase upon exercise of this Warrant.
14
15
16
17
18
The information requirements set forth in Sections 9(a)(i)-(iv) shall be deemed to be satisfied upon filing of such information via EDGAR with the Commission.
19
20
the Company will send to the Warrant Holder a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, or other Corporate Reorganization, or dissolution, liquidation or winding-up is to take place, (iii) the time, if any such time is to be fixed, as of which the holders of record of Shares (or other securities under Section 5(d)) shall be entitled to exchange their Shares (or other securities under Section 5(d)) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, or other Corporate Reorganization, or dissolution, liquidation or winding-up and a description in reasonable detail of the transaction and (iv) the date of such issuance, together with a description of the security so issued and the consideration received by the Company therefor. Such notice shall be mailed at least ten (10) days prior to the date therein specified.
21
22
23
[signature page follows]
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized signatory as of the day and year first above written.
SOCIETAL CDMO, INC., a Pennsylvania
corporation
By: /s/ Ryan D. Lake
Name: Ryan D. Lake
Title: Chief Financial Officer
Address for Notices:
Ryan Lake
Chief Financial Officer
Societal CDMO, Inc.
1 E. Uwchlan Ave., Suite 112
Exton, Pennsylvania 19341
Email: ryan.lake@societalcdmo.com
Phone: (770) 531-8365
With a copy to:
Jennifer Porter
Goodwin Procter LLP
2929 Arch Street
Suite 1700
Philadelphia, PA 19104
Email: JPorter@goodwinlaw.com
Phone: (445) 207-7806
25
Exhibit A to Warrant
Form of Notice of Exercise
_________________,20___
To: [ ]
Reference is made to the Warrant dated July [_], 2023. Terms defined therein are used herein as therein defined.
The undersigned, pursuant to the provisions set forth in the Warrant, hereby irrevocably elects and agrees to purchase Shares, and makes payment herewith in full therefor at the Exercise Price of $______________ in the following form: __________________.
[If the number of Shares as to which the Warrant is being exercised is less than all of the Shares purchasable thereunder, the undersigned hereby requests that a new Warrant representing the remaining balance of the Shares be registered in the name of __________________, whose address is: __________________.]
The undersigned hereby represents that it is exercising the Warrant for its own account or the account of an Affiliate for investment purposes and not with the view to any sale or distribution and that the Warrant Holder will not offer, sell or otherwise dispose of the Warrant or any underlying Warrant Shares in violation of applicable securities laws.
[NAME OF WARRANT HOLDER]
By:______________________________
Name:
Title:
[ADDRESS OF WARRANT HOLDER]
26
Exhibit B to Warrant
Form of Warrant Assignment
Reference is made to the Warrant dated March [ ], 2023, issued by Societal CDMO, Inc. Terms defined therein are used herein as therein defined.
FOR VALUE RECEIVED (the “Assignor”) hereby sells, assigns and transfers all of the rights of the Assignor as set forth in such Warrant, with respect to the number of Warrant Shares covered thereby as set forth below, to the Assignee(s) as set forth below:
|
|
|
|
|
Name(s) of Assignee(s) |
|
Address(es) |
|
Number of Warrant Shares |
All notices to be given by the Company to the Assignor as Warrant Holder shall be sent to the Assignee(s) at the above listed address(es), and, if the number of Shares being hereby assigned is less than all of the Shares covered by the Warrant held by the Assignor, then also to the Assignor.
In accordance with Section 7 of the Warrant, the Assignor requests that the Company execute and deliver a new Warrant or Warrants in the name or names of the assignee or assignees, as is appropriate, or, if the number of Shares being hereby assigned is less than all of the Shares covered by the Warrant held by the Assignor, new Warrants in the name or names of the assignee or the assignees, as is appropriate, and in the name of the Assignor.
The undersigned represents that the Assignee has represented to the Assignor that the Assignee is acquiring the Warrant for its own account or the account of an Affiliate for investment purposes and not with the view to any sale or distribution, and that the Assignee will not offer, sell or otherwise dispose of the Warrant or the Warrant Shares except under circumstances as will not result in a violation of applicable securities laws.
Dated: _______________, 20___
[NAME OF ASSIGNOR]
By:______________________________
Name:
Title:
[ADDRESS OF WARRANT HOLDER]
27
Exhibit 4.2
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
SOCIETAL CDMO, INC.
Warrant Shares: 100,000 |
Initial Exercise Date: August 13, 2023 |
|
|
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, IriSys, Inc., a California corporation, or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after August 13, 2023 (the “Initial Exercise Date”) and on or prior to 5:00 p.m. New York City time on August 12, 2026 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Societal CDMO, Inc., a Pennsylvania corporation (the “Company”), up to 100,000 shares ((as subject to adjustment hereunder), the “Warrant Shares”) of the Company’s common stock, par value $0.01 per share (the “Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions.
“Business Day” means any day that is not: (a) a Saturday or a Sunday, or (b) a day on which banking institutions in New York are authorized or obligated by law or regulation to close.
“Fair Market Value” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the closing stock price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P., (b) if the Common Stock is then listed or quoted on OTCQB or OTCQX, and OTCQB or OTCQX, as applicable, is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on a Trading Market or OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by the Board of Directors of the Company (the “Appraised Value”) in its reasonable good faith judgment. If the Holder shall disagree with such Appraised Value, then the Holder shall, by giving written notice to the Company (an “Appraisal Notice”) within ten (10) days after the Company notifies the Holder of such determination, elect to dispute such determination. The Company shall, within ten (10) days after an Appraisal Notice is received, engage an independent appraiser (the “Appraiser”) that is mutually agreeable to the Company and the Holder to make an independent determination of the Appraised Value. The fees and expenses of the Appraiser shall be shared equally between the Company and the Holder.
“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.
“Standard Settlement Period” means the standard settlement period, expressed in a number of Business Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
“Trading Market” means The Nasdaq Stock Market, the New York Stock Exchange, or any other national securities exchange (without regard to market tier).
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or pdf copy sent via e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of: (i) two Business Days, and (ii) the number of Business Days comprising the Standard Settlement Period following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer unless the cashless exercise procedure specified in Section 2(c) below is permitted and specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until (a) the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Business Days of the date the final Notice of Exercise is delivered to the Company, or (b) the Termination Date, if the Holder has not purchased all of the Warrant Shares available hereunder. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $1.00, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. At any time after the Initial Exercise Date and prior to the Termination Date, this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the Fair Market Value on the Business Day immediately preceding the date of the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the applicable Notice of Exercise if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be issued to the Holder in book entry form with
the transfer agent for the Common Stock or, if requested by the Holder, by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise. Such Warrant Shares shall be delivered to the Holder pursuant to the instructions set forth in the Notice of Exercise by the date that is the earlier of: (i) two Business Days after the delivery to the Company of the Notice of Exercise, and (ii) the number of Business Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”), provided that the Company shall not be obligated to deliver Warrant Shares hereunder unless (i) this Warrant is exercised via cashless exercise or (ii) the Company has received the aggregate Exercise Price at least one Business Day prior to the Warrant Share Delivery Date. Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares; provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received at least one Business Day prior to the Warrant Share Delivery Date. If payment of the aggregate Exercise Price is not received by such date, the exercise of the Warrant shall be considered null and void. The Company agrees to use its commercially reasonable efforts to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the transfer agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any such failure that is solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the
immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company shall require, as a condition to issuance of the Warrant Shares, either the payment of a sum sufficient to reimburse it for any and all taxes or governmental charges incidental thereto, or reasonable evidence of the payment of any such taxes or charges. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person or any stock sale to, or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, share exchange or scheme of arrangement) with or into another Person (other than such a transaction in which the Company is the surviving or continuing entity and its Common Stock is not exchanged for or converted into other securities, cash or property), (ii) the Company effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which more than 50% of the Common Stock not held by the Company or such Person is exchanged for or converted into other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant (other than as a result of a dividend, subdivision or combination covered by Section 3(a) above) to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each a “Fundamental Transaction”), then the Company shall use its commercially reasonable efforts to ensure that the Holder shall have the right thereafter to receive, upon exercise of this Warrant, in lieu of the Warrant Shares the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant. If any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity does not agree to assume this Warrant in connection with a Fundamental Transaction, then the Holder may exercise this Warrant at any time prior to the consummation of such Fundamental Transaction (and such exercise may be made contingent upon the consummation of such Fundamental Transaction), and any portion of this Warrant that has not been exercised prior to the consummation of such Fundamental Transaction shall terminate and expire, and shall no longer be outstanding. The provisions of this Section 3(b) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the exercise of this Warrant. In the event of a Fundamental Transaction, the Company shall notify the Holder at least ten (10) days prior to the consummation of the Fundamental Transaction.
c) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If during the period in which this Warrant is outstanding (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (D) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 4. Transfer of Warrant.
a) Transferability. Subject to the Holder’s compliance with the restrictive legend on this Warrant and the transfer restrictions set forth herein, at any time after the Initial Exercise Date, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three Business Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be: (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, (ii) eligible for resale without volume or manner of sale restrictions or current public information requirement pursuant to Rule 144, or (iii) eligible for resale under Rule 4(a)(7) under the Securities Act, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide to the Company an opinion of counsel selected by the Holder and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Warrant under the Securities Act.
e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is an “accredited investor” under Rule 501 promulgated pursuant to the Securities Act and that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Registration of Warrant Shares.
a) With respect to the first registration statement (either on Form S-3, S-1 or otherwise) filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) covering the re-sale of shares of capital stock of the Company sold by the Company following the Initial Exercise Date (the “Registration Statement”), the Company shall cause such Registration Statement to cover the re-sale of all of the Warrant Shares. The Company shall use its reasonable best efforts to, as soon as reasonably practicable following the filing of the Registration Statement, but in no event later than 20 days following the filing of the Registration Statement (or 90 days following the filing of the Registration Statement solely in the event of a full review of the Registration Statement by the SEC), cause the Registration Statement to be declared effective by the SEC.
b) After the Registration Statement has been declared effective by the SEC, the Company shall use its reasonable best efforts to keep the Registration Statement continuously effective until the date that all Warrant Shares covered by the Registration Statement are sold or are able to be sold by the holders thereof by relying on Rule 144 under the Securities Act without any restriction, including volume limitation. Without limiting the foregoing, the Company shall (i) prepare and file with the SEC such amendments to the Registration Statement and amendments or supplements to the prospectus used in connection therewith as may be reasonably necessary to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Warrant Shares included in the Registration Statement and (ii) register or qualify the Warrant Shares included in the Registration Statement under the applicable state securities or blue sky laws.
c) The Company will pay all expenses associated with the Registration Statement and any amendments or supplements thereto, and any actions or filings necessary to maintain the effectiveness of the Registration Statement, including filing and printing fees, the fees and expenses of the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws and listing fees, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Warrant Shares being sold.
d) The Company shall indemnify and hold harmless, the Holders, from and against any losses to which any Holder may become subject (under the Securities Act or otherwise) to the extent such losses arise out of, directly or indirectly, any untrue statement of a material fact contained in the Registration Statement or any other document filed in accordance with this Section 5, or any omission to state therein a fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such losses arising out of, directly or indirectly, any untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use in the preparation of the Registration Statement.
e) In addition, the Company covenants that it will file the reports required to be filed by it under the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations adopted by the SEC thereunder in accordance with the requirements of the Securities Act and the Exchange Act and it will take such further action as the Holders may reasonably request to make available adequate current public information with respect to the Company meeting the current public information requirements of Rule 144(c) under the Securities Act, to the extent required to enable the Holders to sell all Warrant Shares without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule 144 may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of the Holders, the Company will deliver to the Holders a written statement as to whether it has complied with such information and requirements. In addition, the Company agrees, at its sole expense, to cause its legal counsel to provide a legal opinion to the Company’s transfer agent that is in form and substance sufficient for such transfer agent to remove all applicable legends in connection with, and to otherwise facilitate, the sale of Warrant Shares under Rule 144 under the Securities Act.
The term (i) “Holders” for purposes of this section 5 shall mean (A) the Holder (as defined above) and (B) any transferee of this Warrant or the Warrant Shares pursuant to section 4, and who shall have third-party beneficiary rights under this section; and (ii) “Warrant Shares” for purposes of this section shall mean (A) the shares of Common Stock issued to the Holder under this Warrant and (B) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing in Section 3.
Section 6. Miscellaneous.
a) Acknowledgment. The Company hereby acknowledges and agrees that notwithstanding anything to the contrary in that certain Confidentiality and Non-Disclosure Agreement by and between the Company and the Holder, dated as of July 12, 2023, the Holder shall have the right to be issued this Warrant and exercise the purchase rights represented by this Warrant (and purchase the Warrant Shares), in whole or in part, at any time or times in accordance with this Warrant.
b) No Rights as Stockholder Until Exercise. This Warrant (in respect of the shares underlying this Warrant) does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
c) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
e) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges
created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
f) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.
g) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
h) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
i) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of that certain Subordinated Promissory Note, dated as of August 13, 2021, by and among the Company and the Holder.
j) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
k) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to seek specific performance of its rights under this Warrant. The Company agrees that monetary damages may not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
l) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
m) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the parties hereto.
n) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
o) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
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(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
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SOCIETAL CDMO, INC. |
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By: |
/s/ J. David Enloe, Jr. |
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Name: J. David Enloe, Jr. |
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Title: President & Chief Executive Officer |
NOTICE OF EXERCISE
TO: SOCIETAL CDMO, INC.
(1) The undersigned hereby elects to purchase ______________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
Please check one of the following boxes:
Partial exercise: ☐
Exercise in full/exercise of remaining Warrant Shares: ☐
Exercise Price: _____
Warrant Shares remaining following exercise: _________________
(2) Payment shall take the form of (check applicable box):
*Please provide calculation for shares issuable upon net exercise below:
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery if a certificate to:
(5) Accredited Investor: The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
(signature must conform in all respect to name of the Holder specified on the face of the Warrant)
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ASSIGNMENT FORM
(To assign all or a portion of the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
Number of Warrant Shares Being Assigned: ___________
Number of Warrant Shares Remaining Following Assignment: ___________
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to:
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NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever.
Exhibit 10.1
FIRST Amendment to SUBORDINATED PROMISSORY NOTE
This FIRST Amendment TO SUBORDINATED PROMISSORY NOTE (this “Amendment”) is entered into as of August 13, 2023 (the “Effective Date”), by and between IRISYS, INC., a California corporation (the “Seller”), and SOCIETAL CDMO, INC. (f/k/a Recro Pharma, Inc.), a Pennsylvania corporation (the “Borrower).
Recitals
B. The parties desire to amend the Note in accordance with the terms of this Amendment.
Agreement
Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
“Payment Date” means each of (i) the first anniversary of the Issue Date, (ii) the earlier of (x) June 24, 2024 and (y) the date on which the Specified Asset Sale occurs (the earlier of such dates, the “Second Installment Date”), and (iii) the Maturity Date.
“Net Cash Proceeds” means the aggregate cash or cash equivalents proceeds received by the Borrower or any subsidiary of the Borrower in respect of a Qualified Financing, net of (a) direct costs incurred in connection therewith (including, without limitation, reasonable legal, accounting and investment banking fees, and sales commissions) and (b) taxes paid or payable as a result thereof.
“Qualified Financing” is a transaction or series of related transactions pursuant to which the Borrower and/or any subsidiary of the Borrower issues and sells shares of its capital stock with the principal purpose of
raising capital, the Net Cash Proceeds of which are in excess of $15,000,000.
“Second Installment” means the second equal installment due under this Note, in the principal amount of $2,038,891, together with interest accrued on this Note, due on the Second Installment Date.
“Specified Asset Sale” means the sale of the property comprised of approximately one hundred twenty-one (121) acres of raw land located at 1300 Gould Drive, Gainesville, Georgia 30504 which is subject to that certain Purchase and Sale Agreement and Joint Escrow Instruction entered into as of August 11, 2022 by and between Societal CDMO Gainesville, LLC and Weekley Homes LLC, as may be amended, restated and//or amended and restated.
(e) Notwithstanding anything to the contrary contained herein, if a Qualified Financing occurs following the date of this Amendment and prior to the Second Installment Date, within three (3) business days following such occurrence, the Borrower shall pay to the Seller 50% of the Net Cash Proceeds of such Qualified Financing that are in in excess of $15,000,000, provided, that: (i) in no event shall such payment amount exceed $1,000,000; and (ii) such payment shall be applied to the principal portion of the Second Installment due hereunder.
[SIGNATURES ON FOLLOWING PAGE]
In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.
BORROWER:
SOCIETAL CDMO, INC.
By: /s/ Ryan D. Lake
Name: Ryan D. Lake
Title: Chief Financial Officer
SELLER:
IRISYS, INC.
By: /s/ Brooke Yakatan
Name: Brooke Yakatan
Title: Chairman
EXHIBIT A
Form of Warrant
EXHIBIT B
SUBORDINATION AGREEMENT (SELLER NOTE)
THIS SUBORDINATION AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this “Agreement”) is made and entered into, effective as of August 12, 2023, by and among SOCIETAL CDMO, INC. (f/k/a Recro Pharma, Inc.), a Pennsylvania corporation (“Borrower”), IRISYS, INC., a California corporation, (“Subordinated Lender”), and ROYAL BANK OF CANADA, as administrative agent (in such capacity, the “Agent”) and as lender (in such capacity, together with its respective successors and assigns, the “Senior Lender”) under the Credit Agreement (defined below). Capitalized terms used in this Agreement and not otherwise defined herein shall have the meaning ascribed to such term as set forth in the Credit Agreement.
RECITALS
PROVISIONS
NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows:
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provided, notwithstanding any provision to the contrary in this Agreement, Subordinated Lender may (i) file any pleadings, objections, motions or agreements which assert rights or interests available to unsecured creditors of the Borrower arising under either a Proceeding or applicable non-bankruptcy law, in each case not inconsistent with the terms of this Agreement, including without limitation, Section 9 of this Agreement, provided that the Subordinated Lender agrees not to oppose or object to, or support any other party in opposing or objecting to, a sale of assets consented to by the Agent, (ii) take any action to the extent necessary to prevent the running of any applicable statute of limitation or similar restriction on claims, or to assert a compulsory cross‑claim or counterclaim against the Borrower, (iii) vote on any plan of reorganization, file any proof of claim, make other filings and make any arguments and motions with respect to the Subordinated Indebtedness that are, in each case, not inconsistent with Section 4 or this Agreement and provided that the Subordinated Creditor may not vote in favor of a plan of reorganization which does not pay the Senior Indebtedness in full in cash on the effective date unless such plan has been accepted by the Senior Lenders, (iv) declare an event of default under the Subordinated Note and, if Senior Lenders have elected to accelerate the Loans under the Credit Agreement, the Subordinated Indebtedness may be accelerated, provided that if the Senior Lenders elect to withdraw the acceleration of the Loans, any cross-acceleration of the Subordinated Indebtedness shall automatically be revoked and will no longer be effective, and (v) defend or otherwise contest any attempt to object to or disallow any portion of the Subordinated Indebtedness.
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[The Remainder of this Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have executed this agreement as of the date and year first written above.
Address for Notices: |
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IriSys, Inc. c/o Brooke Yakatan 3360 Via Alicante |
SUBORDINATED LENDER: |
La Jolla, CA 92037 |
IRISYS, INC., |
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By: _______________________________
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With a copy to: |
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Wilson Sonsini Goodrich & Rosati, PC 12235 El Camino Real San Diego, CA 92130 Attention: Martin J. Waters and Jason Skolink Fax: (858) 350-2399 Email: mwaters@wsgr.com; jskolnik@wsgr.com |
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BORROWER: |
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Address for Notices to Borrower: |
SOCIETAL CDMO, INC., a Pennsylvania corporation |
Ryan Lake |
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Chief Financial Officer |
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1 E. Uwchlan Ave, Suite 112 |
By: _______________________________ |
Exton, PA 19341 |
Print Name: Ryan Lake |
Email: ryan.lake@recrocdmo.com |
Title: Chief Financial Officer |
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With a copy to: |
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Kathryn Nordick |
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Troutman Pepper Hamilton Sanders LLP |
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Eighteenth and Arch Streets |
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Email: kathryn.nordick@troutman.com |
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Jennifer Porter Goodwin Procter LLP One Commerce Square 2005 Market St., 32nd Floor Philadelphia, PA 19103 Email: jporter@goodwinlaw.com Phone: 445.207.7806 |
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AGENT: |
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Address for notices to Agent: |
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ROYAL BANK OF CANADA |
Royal Bank of Canada 8th Floor, 155 Wellington Street W. Toronto, ON M5V 3K7 Attn: Manager, Agency Services Group rbcmagnt@rbccm.com |
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By: _______________________________ |
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With a copy to: |
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Orrick, Herrington & Sutcliffe LLP 51 W 52nd Street New York, New York 10019 Attn: Laura Metzger, lmetzger@orrick.com Robert Trust, rtrust@orrick.com
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7Exhibit 10.2
SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this “Second
Amendment”), dated as of August 13, 2023, by and among Societal CDMO, Inc., a Pennsylvania corporation (the “Borrower”), the guarantors party hereto (the “Guarantors”), the Lenders party hereto (collectively, constituting the Required Lenders), and Royal Bank of Canada (“RBC”), as Administrative Agent (as defined below). Capitalized terms not otherwise defined in this Second Amendment have the same meanings as specified in the Credit Agreement (as defined below).
RECITALS
WHEREAS, the Borrower, the Lenders from time to time party thereto, the Guarantors from time to time party thereto and RBC, as administrative agent for the Lenders and collateral agent for the Secured Parties (in such capacities, the “Administrative Agent”) have entered into that certain Credit Agreement, dated as of December 12, 2022, as amended by that certain First Amendment to Credit Agreement, dated as of April 4, 2023 (as so amended, the “Existing Credit Agreement” and, as further amended, restated, amended and restated, supplemented or otherwise modified from time to time, including as amended by this Second Amendment, the “Credit Agreement”);
WHEREAS, the Borrower has acknowledged that an Event of Default has occurred under Section 9.01(m) of the Existing Credit Agreement as a result of the assertion that the Subordination Agreement, dated as of December 15, 2022 (the “Subordination Agreement”), by and among the Borrower, the Subordinated Lender (as defined therein), the Administrative Agent and RBC, as the Senior Lender (as defined therein), is invalid (such Event of Default, the “Existing Default”);
WHEREAS, the Borrower has requested, and the Administrative Agent and the Lenders party hereto (collectively constituting the Required Lenders) have agreed, to waive the Existing Default and amend the Existing Credit Agreement upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements contained herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendments to Existing Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 4:
SECTION 2. Limited Waiver. Subject to the satisfaction of the conditions precedent set forth in Section 4, the Lenders hereby agree to waive the Existing Default. The foregoing waiver is limited to the matters expressly set forth in this Section 2 and is not a waiver of any Default or Event of Default other than as expressly provided herein.
SECTION 3. Reaffirmation.
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(ii) such Obligations are payable in accordance with the terms of the Loan Documents and (iii) the Borrower and each Guarantor waive any defense, offset, counterclaim or recoupment with respect thereto.
SECTION 4. Conditions to Effectiveness of the Second Amendment. The amendments set forth in Section 1 and the waivers set forth in Section 2 shall become effective on the date hereof (the “Second Amendment Effective Date”) upon satisfaction of the following conditions:
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and
Date.
SECTION 5. Conditions Subsequent.
SECTION 6. Representations and Warranties. To induce the Administrative Agent and the Lenders party hereto to enter into this Second Amendment, each Loan Party hereby represents and warrants to the Administrative Agent and each of the Lenders party hereto as follows:
(x) are within such Loan Party’s corporate or other organizational power and (y) have been duly authorized by all necessary corporate or other organizational action of such Loan Party;
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SECTION 7. Effects on Loan Documents; Acknowledgements and Consents of the Parties.
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not make any principal payment in respect of the IRISYS Seller Note until the earlier of (i) the closing of the Specified Asset Sale and (ii) June 24, 2024.
SECTION 8. No Novation. This Second Amendment shall not extinguish the obligations for the payment of money outstanding under the Existing Credit Agreement or any other Loan Document or discharge or release any Lien or priority of any Collateral Document or any other security therefor. Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Existing Credit Agreement or instruments securing or guaranteeing the same, which shall remain in full force and effect, except to any extent modified hereby. Nothing in this Second Amendment or in any other document contemplated hereby shall be construed as a release or other discharge of any of the Loan Parties under any Loan Document from any of its obligations and liabilities as a borrower, guarantor, grantor or pledgor under any Loan Document.
SECTION 9. Amendments; Execution in Counterparts; Severability.
SECTION 10. Governing Law; Waiver of Jury Trial; Jurisdiction. THIS SECOND AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS SECOND AMENDMENT, WHETHER IN TORT, CONTRACT (AT LAW OR IN EQUITY) OR OTHERWISE, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The provisions of Sections 11.14(b), 11.14(c), 11.14(d) and 11.15 of the Credit Agreement are incorporated herein by reference, mutatis mutandis.
SECTION 11. Headings. Section headings in this Second Amendment are included herein for convenience of reference only, are not part of this Second Amendment and are not to affect the construction of, or to be taken into consideration in interpreting, this Second Amendment.
SECTION 12. Counterparts. This Second Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and each such counterpart, taken together, shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or PDF or other electronic means shall have the same force and effect as manual signatures delivered in person. It is understood and agreed that the words “execution”, “signed”, “signature”, “delivery” and words of like import in or relating to any Loan Document shall be deemed to include any Electronic Signature, delivery or the keeping of any record in electronic form, each of which shall have the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system to the extent and as provided for in any Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act or any similar state laws based on the Uniform Electronic Transactions Act.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written.
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SOCIETAL CDMO, INC., |
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as the Borrower |
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By: |
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/s/ Ryan D. Lake |
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Name: |
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Ryan D. Lake |
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Title: |
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Chief Financial Officer |
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SOCIETAL CDMO GAINESVILLE, LLC, |
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as a Guarantor |
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By: |
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/s/ Ryan D. Lake |
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Name: |
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Ryan D. Lake |
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Title: |
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Chief Financial Officer |
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SOCIETAL CDMO GAINESVILLE DEVELOPMENT, LLC, |
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as a Guarantor |
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By: |
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/s/ Ryan D. Lake |
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Name: |
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Ryan D. Lake |
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Title: |
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Chief Financial Officer |
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SOCIETAL CDMO SAN DIEGO, LLC, |
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as a Guarantor |
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By: |
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/s/ Ryan D. Lake |
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Name: |
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Ryan D. Lake |
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Title: |
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Chief Financial Officer |
[Signature Page to Second Amendment and Waiver to Credit Agreement]
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ROYAL BANK OF CANADA, |
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as Administrative Agent |
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By: |
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/s/ Annie Lee |
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Name: |
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Annie Lee |
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Title: |
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Manager, Agency Services |
[Signature Page to Second Amendment and Waiver to Credit Agreement]
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ROYAL BANK OF CANADA, |
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as a Lender |
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By: |
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/s/ Amy G. Josephson |
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Name: |
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Amy G. Josephson |
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Title: |
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Authorized Signatory |
[Signature Page to Second Amendment and Waiver to Credit Agreement]
Annex A
Amended Credit Agreement
[Attached]
CREDIT AGREEMENT
Dated as of December 12, 2022
as amended pursuant to the First Amendment to Credit Agreement, dated as of April 4, 2023, and the Second Amendment and Waiver to Credit Agreement, dated as of August 13, 2023
among
SOCIETAL CDMO, INC.,
as the Borrower,
CERTAIN DOMESTIC SUBSIDIARIES OF THE BORROWER,
as the Guarantors,
ROYAL BANK OF CANADA,
as the Administrative Agent and
THE LENDERS FROM TIME TO TIME PARTY HERETO
RBC CAPITAL MARKETS1,
as Sole Lead Arranger and Sole Bookrunner
1 RBC Capital Markets is a brand name for the capital markets activities of Royal Bank of Canada and its affiliates.
TABLE OF CONTENTS
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Page |
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ARTICLE I DEFINITIONS AND ACCOUNTING TERMS |
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1 |
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1.01 |
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Defined Terms. |
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1 |
1.02 |
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Other Interpretive Provisions |
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36 |
1.03 |
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Accounting Terms |
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37 |
1.04 |
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Times of Day |
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38 |
1.05 |
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Currency Generally |
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38 |
2.11 |
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Sharing of Payments by Lenders |
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3839 |
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ARTICLE II THE COMMITMENTS |
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39 |
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2.01 |
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Commitments and Warrants |
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39 |
2.02 |
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Borrowings. |
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3940 |
2.03 |
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Prepayments |
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40 |
2.04 |
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Termination of Commitments. |
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4243 |
2.05 |
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Repayment of Loans. |
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4243 |
2.06 |
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Interest |
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43 |
2.07 |
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Fees |
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4344 |
2.08 |
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Computation of Interest. |
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4445 |
2.09 |
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Evidence of Debt |
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4445 |
2.10 |
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Payments Generally. |
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4445 |
2.11 |
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Sharing of Payments by Lenders |
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4546 |
2.12 |
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Defaulting Lenders |
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46 |
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ARTICLE III TAXES, INCREASED COSTS AND YIELD PROTECTION |
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4748 |
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3.01 |
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Taxes |
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4748 |
3.02 |
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Increased Costs |
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5051 |
3.03 |
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Illegality |
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5152 |
3.04 |
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Inability to Determine Rates |
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5152 |
3.05 |
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Mitigation Obligations; Replacement of Lenders |
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5354 |
3.06 |
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Survival. |
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5455 |
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ARTICLE IV GUARANTY |
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5455 |
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4.01 |
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The Guaranty. |
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5455 |
4.02 |
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Obligations Unconditional |
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5455 |
4.03 |
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Reinstatement |
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5556 |
4.04 |
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Certain Additional Waivers |
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5556 |
4.05 |
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Remedies |
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5657 |
4.06 |
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Rights of Contribution |
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5657 |
4.07 |
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Guarantee of Payment; Continuing Guarantee |
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5657 |
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ARTICLE V CONDITIONS PRECEDENT TO COMMITMENTS AND BORROWINGS |
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5657 |
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5.01 |
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Conditions of Commitments. |
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5657 |
5.02 |
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Conditions of Initial Borrowings |
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5657 |
5.03 |
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Conditions to all Borrowings |
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6061 |
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ARTICLE VI REPRESENTATIONS AND WARRANTIES |
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6061 |
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6.01 |
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Existence, Qualification and Power |
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6061 |
6.02 |
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Authorization; No Contravention |
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6162 |
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6.03 |
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Governmental Authorization; Other Consents |
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6162 |
6.04 |
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Binding Effect |
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6162 |
6.05 |
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Financial Statements; No Material Adverse Effect |
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6162 |
6.06 |
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Litigation |
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6263 |
6.07 |
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No Default |
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6263 |
6.08 |
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Ownership of Property; Liens |
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6263 |
6.09 |
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Environmental Compliance |
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6264 |
6.10 |
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Insurance |
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6364 |
6.11 |
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Taxes |
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6465 |
6.12 |
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ERISA Compliance. |
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6465 |
6.13 |
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Subsidiaries and Capitalization |
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6465 |
6.14 |
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Margin Regulations; Investment Company Act |
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6566 |
6.15 |
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Disclosure |
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6566 |
6.16 |
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Compliance with Laws |
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6567 |
6.17 |
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Intellectual Property; Licenses, Etc. |
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6667 |
6.18 |
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Solvency |
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6869 |
6.19 |
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Perfection of Security Interests in the Collateral |
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6869 |
6.20 |
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Business Locations |
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6869 |
6.21 |
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Sanctions Concerns; Anti-Corruption Laws; PATRIOT Act |
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6870 |
6.23 |
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Registration Rights |
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6970 |
6.24 |
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Material Contracts. |
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6970 |
6.25 |
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Compliance of Products. |
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6970 |
6.26 |
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Labor Matters. |
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7375 |
6.27 |
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EEA Financial Institution. |
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7475 |
6.28 |
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Regulation H. |
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7475 |
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ARTICLE VII AFFIRMATIVE COVENANTS |
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7475 |
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7.01 |
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Financial Statements. |
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7475 |
7.02 |
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Certificates; Other Information |
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7576 |
7.03 |
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Notices |
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7778 |
7.04 |
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Payment of Obligations |
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7779 |
7.05 |
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Preservation of Existence, Etc. |
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7879 |
7.06 |
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Maintenance of Properties |
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7879 |
7.07 |
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Maintenance of Insurance |
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7880 |
7.08 |
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Compliance with Laws. |
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7980 |
7.09 |
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Books and Records |
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7980 |
7.10 |
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Inspection Rights |
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7981 |
7.11 |
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Use of Proceeds |
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7981 |
7.12 |
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Additional Subsidiaries |
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8081 |
7.13 |
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ERISA Compliance |
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8081 |
7.14 |
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Pledged Assets |
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8082 |
7.15 |
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Compliance with Material Contracts |
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8182 |
7.16 |
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Deposit Accounts |
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8182 |
7.17 |
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Products and Key Permits |
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8183 |
7.18 |
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Consent of Licensors |
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8283 |
7.19 |
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Anti-Corruption Laws |
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8283 |
7.20 |
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Maintenance of Regulatory Authorizations, Contracts, Intellectual Property, Etc. |
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8283 |
7.21 |
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Post-Closing Obligations |
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8385 |
7.22 |
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Second Amendment Obligations |
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ARTICLE VIII NEGATIVE COVENANTS |
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8485 |
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8.01 |
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Liens. |
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8485 |
8.02 |
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Investments |
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8687 |
8.03 |
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Indebtedness. |
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8789 |
8.04 |
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Fundamental Changes. |
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8990 |
8.05 |
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Dispositions |
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8991 |
8.06 |
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Restricted Payments |
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9091 |
8.07 |
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Change in Nature of Business |
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9092 |
8.08 |
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Transactions with Affiliates and Insiders |
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9092 |
8.09 |
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Burdensome Agreements |
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9192 |
8.10 |
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Use of Proceeds |
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9193 |
8.11 |
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Prepayment of Junior Debt |
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9193 |
8.12 |
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Organization Documents; Fiscal Year; Legal Name, State of Formation and Form of Entity; Certain Amendments |
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9193 |
8.13 |
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Ownership of Subsidiaries |
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9293 |
8.14 |
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Sale Leasebacks |
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9293 |
8.15 |
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Sanctions; Anti-Corruption Laws |
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9293 |
8.16 |
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Financial Covenants. |
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9294 |
8.17 |
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Capital Expenditures |
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94 |
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ARTICLE IX EVENTS OF DEFAULT AND REMEDIES |
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9395 |
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9.01 |
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Events of Default |
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9395 |
9.02 |
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Remedies Upon Event of Default |
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9597 |
9.03 |
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Application of Funds |
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9698 |
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ARTICLE X ADMINISTRATIVE AGENT |
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9798 |
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10.01 |
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Appointment and Authority. |
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9798 |
10.02 |
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Rights as a Lender |
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9799 |
10.03 |
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Exculpatory Provisions |
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9899 |
10.04 |
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Reliance by Administrative Agent |
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98100 |
10.05 |
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Delegation of Duties |
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99100 |
10.06 |
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Resignation of Administrative Agent |
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99101 |
10.07 |
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Non-Reliance on Administrative Agent and Other Lenders |
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99101 |
10.08 |
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Administrative Agent May File Proofs of Claim |
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100101 |
10.09 |
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Collateral and Guaranty Matters |
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100102 |
10.10 |
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Appointment of Administrative Agent as Security Trustee |
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101103 |
10.10 |
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Erroneous Payments |
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101103 |
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ARTICLE XI MISCELLANEOUS |
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104106 |
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11.01 |
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Amendments, Etc. |
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104106 |
11.02 |
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Notices and Other Communications; Facsimile Copies |
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106107 |
11.03 |
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No Waiver; Cumulative Remedies; Enforcement. |
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107109 |
11.04 |
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Expenses; Indemnity; and Damage Waiver |
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107109 |
11.05 |
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Payments Set Aside |
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109111 |
11.06 |
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Successors and Assigns |
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110112 |
11.07 |
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Treatment of Certain Information; Confidentiality |
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113115 |
11.08 |
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Set-off |
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114116 |
11.09 |
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Interest Rate Limitation |
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115117 |
11.10 |
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Counterparts; Integration; Effectiveness |
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115117 |
11.11 |
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Survival of Representations and Warranties |
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115117 |
11.12 |
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Severability |
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115117 |
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11.13 |
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Replacement of Lenders. |
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116118 |
11.14 |
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Governing Law; Jurisdiction; Etc. |
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116118 |
11.15 |
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Waiver of Right to Trial by Jury |
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118119 |
11.16 |
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Electronic Execution of Assignments and Certain Other Documents |
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118120 |
11.17 |
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USA PATRIOT Act |
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118120 |
11.18 |
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No Advisory or Fiduciary Relationship |
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118120 |
11.19 |
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Acknowledgement and Consent to Bail-In of Affected Financial Institutions |
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119121 |
11.20 |
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Collateral and Guaranty Release. |
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119121 |
11.21 |
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Acknowledgement Regarding Any Supported QFCs. |
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120122 |
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SCHEDULES |
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2.01 |
Commitments and Applicable Percentages |
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7.21 |
Post-Closing Obligations |
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11.02 |
Certain Addresses for Notices |
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EXHIBITS |
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A. |
Form of Loan Notice |
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B. |
Form of Note |
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C. |
Form of Joinder Agreement |
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D. |
Form of Assignment and Assumption |
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E. |
Form of Compliance Certificate |
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F. |
Form of Solvency Certificate |
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CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of December 12, 2022, by and among SOCIETAL CDMO, INC., a Pennsylvania corporation (the “Borrower”), the Guarantors (defined herein), the Lenders (defined herein) and ROYAL BANK OF CANADA, as the Administrative Agent.
The Borrower has requested that the Lenders make an investment in the Borrower in the form of term loan facilities, and the Lenders are willing to do so on the terms and conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
As used in this Agreement, the following terms shall have the meanings set forth below:
“Acquisition” means, with respect to any Person, the acquisition by such Person, in a single transaction or in a series of related transactions, of (a) assets of another person which constitute all or any significant portion of the assets of such Person, or of any division, line of business or other business unit of such Person, (b) non-exclusive or exclusive licenses of Intellectual Property of a Third Party to be used in connection with the development, manufacture, commercialization, and/or distribution of a Product, other than any such licenses entered into in the ordinary course of business of the Borrower and its Subsidiaries (it being understood and agreed that any such license which contemplates aggregate payments by the Borrower and its Subsidiaries in consideration for such license in excess of $5,000,000 to a Third Party licensor and its affiliates shall be deemed to be outside of the ordinary course of business of the Borrower and its Subsidiaries) or (c) at least a majority of the Voting Stock of another Person, in each case whether or not involving a merger or consolidation with such other Person and whether for cash, property, services, assumption of Indebtedness, securities or otherwise.
“Adjusted Daily Simple SOFR” means an interest rate per annum equal to (a) Daily Simple SOFR plus (b) 0.11448%.
“Administrative Agent” means Royal Bank of Canada in its capacity as administrative agent hereunder, or any successor administrative agent as provided in Section 10.06; provided that at any time that Royal Bank of Canada is the only Lender, any notices, payments, prepayments, repayments and approvals (except for waivers and amendments) shall be provided to, made by or to, as applicable, Royal Bank of Canada in its capacity as the sole Lender hereunder. Royal Bank of Canada, as the initial Lender shall provide the Administrative Agent five (5) Business Days’ prior written notice (or such other period as agreed to by the Administrative Agent) of the assignment by it of any or all of its Commitment to any additional Lender (such date, the “Syndication Date”). On and following the Syndication Date, all references to the Administrative Agent shall refer to Royal Bank of Canada, in its capacity as administrative agent hereunder; “Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 11.02 or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.
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“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“Agreement” means this Credit Agreement, as amended or otherwise modified from time to time. “Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act of 1977, the UK Bribery
Act 2010 and other anti-corruption laws and regulations of any jurisdiction.
“Anti-Money Laundering Laws” means the Bank Secrecy Act, as amended by the USA PATRIOT Act, and other anti-money laundering laws, rules, and regulations of any jurisdiction.
“APIL” means Alkermes Pharma Ireland Limited, a private company limited by shares incorporated in Ireland with number 448848.
“Applicable Percentage” means with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Facility represented by (i) on or prior to the Closing Date, such Lender’s Commitment at such time and (ii) thereafter, the outstanding principal amount of such Lender’s Loans at such time. The Applicable Percentage of each Lender in respect of each Facility is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
“Applicable Margin” means (a) from the Funding Date until the one (1) year anniversary of the Funding Date, 4.50% per annum; (b) from the one (1) year anniversary of the Funding Date until the two
(2) year anniversary of the Funding Date, 5.00% per annum; and (c) from the two (2) year anniversary of the Funding Date and thereafter, 5.50% per annum.
“Appropriate Lender” means, at any time, with respect to any Facility, a Lender that has a Commitment with respect to such Facility or holds a Loan under such Facility at such time.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit D or any other form (including electronic documentation generated by MarkitClear or other electronic platform) approved by the Administrative Agent.
“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease of any Person, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease and (c) in respect of any Securitization Transaction of any Person, the outstanding principal amount of such financing, after taking into account reserve accounts and making appropriate adjustments, determined by the Administrative Agent in its reasonable judgment.
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“Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2021, and the related consolidated statements of operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto, audited by independent public accountants of recognized national standing and prepared in conformity with GAAP.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, any tenor for such Benchmark or payment period for interest calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of an Interest Period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 3.04(e).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Base Rate” means, for any day, a rate per annum equal to the greatest of (i) the Prime Rate in effect on such day, (ii) the Federal Funds Rate in effect on such day plus ½ of 1.00% and (iii) Term SOFR for a three-month tenor in effect for such day plus 1.00%; provided that to the extent such highest rate as calculated above shall, at any time, be less than the Floor, such rate shall be deemed to be Floor for all purposes herein. Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or Term SOFR shall be effective on the opening of business on the day specified in the public announcement of such change in the Prime Rate, the Federal Funds Rate or Term SOFR, respectively.
“Benchmark” means, initially, Term SOFR; provided that if a Benchmark Transition Event has occurred with respect to Term SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.04(b).
“Benchmark Replacement” means with respect to any Benchmark Transition Event, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
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Dollar-denominated syndicated credit facilities and (ii) the related Benchmark Replacement Adjustment.
If the Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then- current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrowers giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities at such time.
“Benchmark Replacement Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of Section 3.04 and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as the Administrative Agent decides is necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Replacement Date” means a date and time determined by the Administrative Agent, which date shall be no later than, with respect to any Benchmark, the earliest to occur of the following events with respect to the then-current Benchmark:
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even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, with respect to any Benchmark, the occurrence of one or more of the following events with respect to such then-current Benchmark:
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
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“Benchmark Unavailability Period” means, with respect to any Benchmark, the period (if any)
(x) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.04 and (y) ending at the time that a Benchmark Replacement has replaced such then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 3.04.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Board of Directors” means (a) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board, (b) with respect to a partnership, the Board of Directors of the general partner of the partnership, (c) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof, and (d) with respect to any other Person, the board or committee of such Person serving a similar function.
“Borrower” has the meaning set forth in the introductory paragraph hereto.
“Borrowing” means a borrowing consisting of simultaneous Term A Loans made by each of the Lenders pursuant to Section 2.01 on a single date of a group of Loans having the same Interest Period.
“Business Day” means any day other than a Saturday or a Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in New York, New York; provided, that, when used in connection with a Term SOFR Loan, or any other calculation or determination involving SOFR, the term “Business Day” means any day that is only a U.S. Government Securities Business Day.
“Businesses” means, at any time, a collective reference to the businesses operated by the Borrower and its Subsidiaries at such time.
“Capital Lease” means, subject to Section 1.03(b), as applied to any Person, any lease of any property by that Person as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of that Person.
“Cash Equivalents” means, as at any date, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided, that, the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit of
(i) any domestic commercial bank of recognized standing having capital and surplus in excess of
$500,000,000 or (ii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank being an “Approved Bank”), in each case with maturities of not more than 270 days from the date of acquisition,
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no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940 which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing clauses (a) through (d), (f) other short term liquid investments approved in writing by the Administrative Agent (such approval not to be unreasonably withheld or delayed), and (g) solely with respect to any Foreign Subsidiary, investments equivalent to those referred to in clauses (a) through (f) above denominated in euro or any other foreign currency comparable in credit quality and tenor to those referred to above and customarily used by corporations for short-term cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by such Foreign Subsidiary.
“CFC” means any Subsidiary that is a “controlled foreign corporation” within the meaning of Section 957 of the Internal Revenue Code.
“cGCP” means the then current Good Clinical Practices that establish the ethical and scientific quality standards for designing, conducting, recording and reporting clinical trials that are promulgated or endorsed for the United States by the FDA (including through ICH E6 and 21 CFR Parts 50, 54, 56 and 312) and for outside the United States by comparable Governmental Authorities.
“cGMP” means the then current good manufacturing practices and regulatory requirements for manufacturing pharmaceutical or biological products (and components thereof) that are promulgated or endorsed for the United States by the FDA (including through 21 CFR Parts 210 and 211) and for outside the United States by comparable Governmental Authorities.
“Change in Law” means the occurrence, after the Closing Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided, that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Change of Control” means the occurrence of any of the following events:
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basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right);
“Closing Date” means December 12, 2022.
“CMS” means the U.S. Center for Medicare and Medicaid Services.
“Collateral” means a collective reference to all real and personal property with respect to which Liens in favor of the Administrative Agent, for the benefit of the Secured Parties, are purported to be granted pursuant to and in accordance with the terms of the Collateral Documents.
“Collateral Access Agreement” means an agreement in form and substance reasonably satisfactory to the Administrative Agent pursuant to which a lessor of real property on which Collateral is stored or otherwise located, or a warehouseman, processor or other bailee of inventory or other property owned by any Loan Party, acknowledges the Liens of the Administrative Agent and waives (or, if approved by the Administrative Agent, subordinates) any Liens held by such Person on such property, and permits the Administrative Agent reasonable access to any Collateral stored or otherwise located thereon.
“Collateral Documents” means a collective reference to the Security Agreement, the U.S. Pledge Agreement, the Mortgages, the Deposit Account Control Agreements, the Collateral Questionnaire, the Collateral Access Agreements, the Real Property Security Documents and other security documents as may be executed and delivered by the Loan Parties pursuant to the terms of Section 7.14.
“Collateral Questionnaire” means that certain collateral questionnaire, in form and substance reasonably satisfactory to Administrative Agent, executed by the Borrower as of the Funding Date.
“Commitment” means, as to each Lender, its obligation to make a Loan to the Borrower pursuant to Section 2.01, in the principal amount set forth opposite such Lender’s name on Schedule 2.01. The aggregate principal amount of the Commitments of all of the Lenders as in effect on the Closing Date is up to $37,500,000, subject to the Final Funding Amount.
“Compliance Certificate” means a certificate substantially in the form of Exhibit E. “Consolidated EBITDA” means, for any period, for the Loan Parties on a consolidated basis, an
amount equal to the total of: (a) Consolidated Net Income for such period plus (b) the following (without
duplication), in each case (other than with respect to clause (b)(x)), to the extent deducted in calculating such Consolidated Net Income, all as determined in accordance with GAAP, (i) gross interest expense for
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such period in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets (but excluding, for the avoidance of doubt, any interest expense attributable to operating leases and Capital Leases or under the Master Lease Agreement), (ii) the provision for current and deferred federal, state, local and foreign income taxes paid or accrued for such period, (iii) depreciation and amortization expense for such period, (iv) unusual, infrequent or non-recurring losses, charges or expenses for such period (including without limitation any such losses, charges or expenses for such period resulting from the impact of the adoption by the Loan Parties of ASU 2014-09 for revenue recognition and similar timing impacts for the adoption of new accounting standards); provided, that, the aggregate amount added back to Consolidated EBITDA pursuant to this clause (b)(iv) for such period shall not exceed ten percent (10%) of Consolidated EBITDA (calculated prior to giving effect to the add backs permitted pursuant to this clause (b)(iv)) for such period, (v) non-cash charges (including, without limitation, stock-based compensation expense, contingent consideration expense and warrant mark-to-market adjustment expense (but excluding non-cash charges related to receivables)) for such period which do not represent a cash item in such period or any future period, (vi) any losses in such period resulting from any Disposition outside of the ordinary course of business, including any net loss from discontinued operations, (vii) all losses in such period with respect to foreign exchange transactions and, (viii) fees, costs and expenses of the Loan Parties incurred directly in connection with the Transactions and the Equity Raise, (ix) up to $1,000,000 of fees, costs and expenses of the Loan Parties incurred directly in connection with the Second Amendment and (x) restructuring expenses, including employee severance, fees of the Administrative Agent’s advisors, and other employee and professional fees directly pertaining to restructuring-related activities after the Second Amendment Effective Date; provided, that, the Borrower shall deliver a certificate executed by a Responsible Financial Officer of the Borrower providing evidence reasonably satisfactory to the Administrative Agent that all amounts added back pursuant to this clauseclauses (b)(viii), b(ix) and (b)(x) represent bona fide fees, costs and expenses of the Loan Parties that were actually incurred by the Loan Parties during such period, and minus (c) the following (without duplication), in each case, to the extent included in calculating such Consolidated Net Income, all as determined in accordance with GAAP, (i) federal, state, local and foreign income tax credits for such period, (ii) all non-cash income or gains for such period, (iii) all gains for such period in connection with any Disposition outside of the ordinary course of business, including any gains from discontinued operations and (iv) all gains in such period with respect to foreign exchange transactions. Notwithstanding the foregoing, for all purposes herein, Consolidated EBITDA for the fiscal quarters ending December 31, 2021, March 31, 2022, June 30, 2022 and September 30, 2022 shall be deemed to be an amount separately agreed in writing between the Administrative Agent and the Borrower prior to the Funding Date.
“Consolidated Net Income” means for any period, for the Loan Parties on a consolidated basis, net income (or loss) for such period, as determined in accordance with GAAP; provided, that, there shall not be included in such Consolidated Net Income any gains or losses that are both unusual and infrequent.
“Consolidated Funded Indebtedness” means Funded Indebtedness of the Borrower and its Subsidiaries on a consolidated basis determined in accordance with GAAP.
“Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) (i) Consolidated Funded Indebtedness as of such date minus (ii) Unrestricted Cash of the Borrower and its Subsidiaries held in Deposit Accounts for which the Administrative Agent shall have received a Deposit Account Control Agreement as of such date, in the case of this clause (ii), in an amount not to exceed
$7,500,000 to (b) Consolidated EBITDA for the period of the four fiscal quarters of the Borrower most recently ended.
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“Consolidated Revenues” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the sum (without duplication) of net revenues for such period of the Borrower and its Subsidiaries (including, for the avoidance of doubt, for any period, the applicable portion of any one-time upfront cash payment with respect to any such net revenues of the Borrower and its Subsidiaries for which GAAP required the recognition of revenue from such cash payment to be deferred over time), all as determined in accordance with GAAP.
“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto. Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.
“Controlled Investment Affiliate” means, with respect to any Person, any fund or investment vehicle that (a) is organized for the purposes of making equity investments in one or more companies and
(b) is controlled by, or under common control with, such Person. For purposes of this definition “control” means the power to direct or cause the direction of management and policies of a Person, whether by contract or otherwise.
“Controlled Substances Act” means the U.S. Controlled Substances Act (or any successor thereto) and the rules, regulations, guidelines, guidance documents and compliance policy guides issued or promulgated thereunder.
“Copyrights” means all copyrights, whether statutory or common law, along with any and all
(a) applications for registration, renewals, revisions, extensions, reversions, restorations, derivative works, enhancements, modifications, updates and new releases thereof, (b) income, royalties, damages, claims and payments now and hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (c) rights to sue for past, present and future infringements thereof, and (d) foreign copyrights and any other rights corresponding thereto throughout the world.
“Covered Agreements” means the Novartis Agreement, the Verapamil Agreement, and the Verelan Agreement.
“Covered Entity” means any of the following:
C.F.R. § 382.2(b).
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“Covered Party” has the meaning specified in Section 11.21.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal to SOFR for the day (such day, the “SOFR Determination Day”), that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website; provided, however, that if as of 5:00 p.m. (New York City time) on any SOFR Determination Day Daily Simple SOFR for the applicable tenor has not been published by the SOFR Administrator and a Benchmark Replacement Date with respect to Daily Simple SOFR has not occurred, then Daily Simple SOFR will be Daily Simple SOFR as published by the SOFR Administrator on the first preceding U.S. Government Securities Business Day for which Daily Simple SOFR was published by the SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such SOFR Determination Day; provided, that to the extent such rate as determined above shall, at any time, be less than the Floor, such rate shall be deemed to be Floor for all purposes herein.
“DEA” means the United States Drug Enforcement Administration and any successor administration thereto.
“Debt Issuance” means the issuance by any Loan Party or any Subsidiary of any Indebtedness other than Indebtedness permitted under Section 8.03.
“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Default Rate” has the meaning set forth in Section 2.06(b).
“Defaulting Lender” means, subject to Section 2.12(b), any Lender that (a) has failed to (i) fund all or any portion of its funding obligations hereunder within three (3) Business Days of the date required to be funded by it hereunder, (b) has notified the Borrower or the Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect, (c) has failed, within three (3) Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided, that, such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has,
(i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-In Action; provided, that, a Lender shall not be a Defaulting Lender solely
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by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.12(b)) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Borrower and each other Lender promptly following such determination.
“Deposit Account” means a “deposit account” (as defined in Article 9 of the Uniform Commercial Code), investment account (including securities accounts) or other account in which funds are held or invested to or for the credit or account of any Loan Party.
“Deposit Account Control Agreement” means any account control agreement by and among a Loan Party, the applicable depository bank (or securities intermediary, as the case may be) and the Administrative Agent, in each case in form and substance reasonably satisfactory to the Administrative Agent.
“Designated Jurisdiction” means any country or territory to the extent that such country or territory is the subject of any comprehensive Sanctions.
“Disclosure Letter” means, as the context may require, that certain disclosure letter dated as of the Funding Date or that certain disclosure letter dated as of the Second Amendment Effective Date, in each case containing certain schedules delivered by the Loan Parties to the Administrative Agent and the Lenders.
“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction or any issuance by any Subsidiary of its Equity Interests) of any property by any Loan Party or any Subsidiary, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, but excluding the following (the following referred to herein collectively, as the “Permitted Transfers”): (a) the sale, lease, license, transfer or other disposition of inventory in the ordinary course of business, (b) the sale, lease, license, transfer or other disposition in the ordinary course of business of surplus, obsolete or worn out property no longer used or useful in the conduct of business of any Loan Party and its Subsidiaries, (c) any sale, lease, license, transfer or other disposition of property to any Loan Party or any Subsidiary; provided, that, if the transferor of such property is a Loan Party, the transferee thereof must be a Loan Party, (d) the abandonment or other disposition of Intellectual Property that is not material and is no longer used or useful in any material respect in the business of the Borrower and its Subsidiaries, (e) licenses, sublicenses, leases or subleases (other than relating to intellectual property) granted to third parties in the ordinary course of business and not interfering with the business of the Borrower and its Subsidiaries, (f) any Involuntary Disposition, (g) dispositions of cash and Cash Equivalents in the ordinary course of business, (h) dispositions consisting of the sale, transfer, assignment or other disposition of unpaid and overdue accounts receivable in connection with the collection, compromise or settlement thereof in the ordinary course of business and not as part of a financing transaction, (i) Permitted Licenses, (j) the sale, transfer, issuance or other disposition of a de minimis number of shares of the Equity Interests of a Foreign Subsidiary in order to qualify members of the governing body of such Subsidiary if required by applicable Law, (k) any disposition or other transfer of any Product inventory, without the payment or provision of consideration to the Borrower or any of its Subsidiaries for such Product inventory (other than expense reimbursement), reasonably necessary for
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the conduct of any then on-going clinical trial or other development or regulatory activities associated with such Product, (l) to the extent constituting a sale, transfer, license, lease or other disposition, the granting, existence or creation of a Lien (but not the sale, transfer, license, lease or other disposition of the property subject to such Lien) permitted under Section 8.01, Investments permitted under Section 8.02, fundamental changes permitted under Section 8.04 and Restricted Payments permitted under Section 8.06 (in each case, other than by reference to Section 8.05 or this definition (or any sub-clause of either thereof)), (m) the termination of Swap Contracts permitted hereunder in the ordinary course of business, and (n) a disposition of property to the extent that (A) such property is exchanged for credit against the purchase price of similar replacement property or (B) the proceeds (determined on an after-tax basis) of such disposition are applied to the purchase price of such replacement.
“Disqualified Capital Stock” means any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, prior to the ninety-first (91st) day after the Maturity Date (other than (x) settlements, conversions, redemptions and payments solely in the form of Qualified Capital Stock and (y) cash in lieu of fractional shares), (b) requires the payment of any cash dividends at any time prior to the ninety-first (91st) day after the Maturity Date (other than the payment of cash in lieu of fractional shares), (c) contains any repurchase obligation at the option of the holder thereof, in whole or in part, which may come into effect prior to the ninety-first (91st) day following the Maturity Date (other than (x) any obligation for repurchases solely made with Qualified Capital Stock and (y) cash in lieu of fractional shares) or (d) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interests referred to in clause (a), (b) or (c) above, in each case at any time prior to the ninety-first (91st) day after the Maturity Date; provided, that, any Equity Interests that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem or repurchase such Equity Interests upon the occurrence of a change in control occurring prior to the ninety-first (91st) day after the Maturity Date shall not constitute Disqualified Capital Stock if such Equity Interests provide that the issuer thereof will not redeem or repurchase any such Equity Interests pursuant to such provisions prior to the termination of all unused Commitments and payment in full of all Obligations (other than contingent indemnification obligations for which no claim has been asserted) under the Loan Documents; provided, further, that, if such Equity Interests are issued pursuant to a plan for the benefit of employees or other service providers of the Borrower or any Subsidiary or by any such plan to such employees or other service providers, such Equity Interests shall not constitute Disqualified Capital Stock solely because they may be required to be repurchased by the Borrower or a Subsidiary in order to satisfy applicable statutory or regulatory obligations or in connection with such employee’s or other services provider’s termination, death or disability.
“Dollar” and “$” mean lawful money of the United States.
“Domestic Subsidiary” means any Subsidiary that is organized under the laws of any state of the United States or the District of Columbia.
“Duration Fee” has the meaning set forth in Section 2.07(cd).
“Earn Out Obligations” means, with respect to an Acquisition, all obligations of the Borrower or any Subsidiary to make earn out or other contingency payments (including purchase price adjustments, non-competition and consulting agreements, or other indemnity obligations) pursuant to the documentation relating to such Acquisition. For purposes of determining the aggregate consideration
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paid for an Acquisition at the time of such Acquisition, the amount of any Earn Out Obligations shall be deemed to be the maximum amount of the earn out payments in respect thereof as specified in the documents relating to such Acquisition. For purposes of determining the amount of any Earn Out Obligations to be included in the definition of Funded Indebtedness, the amount of Earn Out Obligations shall be deemed to be the aggregate liability in respect thereof, as determined in accordance with GAAP.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eligible Assets” means assets (other than current assets) that are used or useful in the same or a similar line of business as the Borrower and its Subsidiaries were engaged in on the Closing Date (or any reasonable extension or expansions thereof).
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 11.06 (subject to such consents, if any, as may be required under Section 11.06(b)(iii)).
“EMA” means the European Medicines Agency or any successor entity.
“Environmental Laws” means any and all federal, state, local, foreign and other applicable statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member, membership or trust interests therein),
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whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“Equity Issuance” means (a) any issuance by Borrower or any Subsidiary thereof to any Person that is not a Loan Party or a Subsidiary thereof, of (i) shares of its Qualified Capital Stock, (ii) any shares of its Qualified Capital Stock pursuant to the exercise of options or warrants, (iii) any shares of its Qualified Capital Stock pursuant to the conversion of any debt securities to equity and (iv) any preferred equity or other type of equity instrument and (b) any capital contribution from any Person that is not a Loan Party into any Loan Party or any Subsidiary thereof.
“Equity Raise” has the meaning set forth in Section 5.02(r).
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating to Section 412 of the Internal Revenue Code).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan, (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA, (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan, (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Sections 4041 or 4041A of ERISA, (e) the institution by the PBGC of proceedings to terminate a Pension Plan, (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Internal Revenue Code or Sections 303, 304 and 305 of ERISA, or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.
“Erroneous Payment” has the meaning assigned to it in Section 10.10(a).
“Erroneous Payment Deficiency Assignment” has the meaning assigned to it in Section 10.10(d)(i).
“Erroneous Payment Impacted Class” has the meaning assigned to it in Section 10.10(d)(i). “Erroneous Payment Return Deficiency” has the meaning assigned to it in Section 10.10(d)(i). “Erroneous Payment Subrogation Rights” has the meaning assigned to it in Section 10.10(e). “EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the
Loan Market Association (or any successor person), as in effect from time to time.
“Event of Default” has the meaning set forth in Section 9.01.
“Excluded Accounts” means Deposit Accounts (a) used exclusively for trust, payroll, payroll taxes and other employee wage or employee benefit payments to or for the benefit of any Loan Party’s employees, (b) that are zero balance accounts, (c) over which the grant of a Deposit Account Control
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Agreement is legally prohibited or which constitute cash collateral in respect of a Permitted Lien and
(d) in which the amount on deposit that constitute “Excluded Accounts” in reliance of this clause (d) does not exceed $150,000 in the aggregate for all such accounts at any time.
“Excluded Property” means, with respect to any Loan Party, including any Person that becomes a Loan Party after the Closing Date as contemplated by Section 7.12, (a) any owned or leased real or personal property which is located outside of the United States (other than, for the avoidance of doubt, any Equity Interests of a Foreign Subsidiary required to be pledged pursuant to Section 7.14), (b) with respect to any Loan Party that is organized under the laws of any state of the United States or the District of Columbia, any personal property (including, without limitation, motor vehicles) in respect of which perfection of a Lien is not either (x) governed by the Uniform Commercial Code or (y) effected by appropriate evidence of the Lien being filed in either the United States Copyright Office or the United States Patent and Trademark Office, unless requested by the Administrative Agent or the Required Lenders, (c) the Equity Interests of any Foreign Subsidiary or Foreign Subsidiary Holding Company, in each case, to the extent not required to be pledged to secure the Obligations pursuant to Section 7.14(a),
(d) any property which, subject to the terms of Section 8.09, is subject to a Lien of the type described in Section 8.01(i) pursuant to documents which prohibit such Loan Party from granting any other Liens in such property, (e) (i) any leasehold interest of any Loan Party in real property and (ii) any fee owned real property of any Loan Party with, in each case with respect to clauses (i) and (ii), a fair market value of less than $1,000,000, (f) any general intangible, permit, lease, license, contract or other instrument of a Loan Party if the grant of a security interest in such general intangible, permit, lease, license, contract or other instrument in the manner contemplated by the Collateral Documents, under the terms thereof or under applicable Law, is prohibited and would result in the termination thereof or give the other parties thereto the right to terminate, accelerate or otherwise alter such Loan Party’s rights, titles and interests thereunder (including upon the giving of notice or lapse of time or both); provided, that, (x) any such limitation described in this clause (f) on the security interests granted under the Collateral Documents shall only apply to the extent that any such prohibition would not be rendered ineffective pursuant to the Uniform Commercial Code or any other applicable Law or principles of equity and (y) in the event of the termination or elimination of any such prohibition or the requirement for any consent contained in any applicable Law, general intangible, permit, lease, license, contract or other instrument, to the extent sufficient to permit any such item to become Collateral, a security interest in such general intangible, permit, lease, license, contract or other instrument shall be automatically and simultaneously granted under the applicable Collateral Document and such general intangible, permit, lease, license, contract or other instrument shall no longer constitute “Excluded Property” and shall be considered Collateral, (g) those assets with respect to which the granting of security interests in such assets would be prohibited by applicable Law or regulation (other than to the extent that any such Law, regulation or prohibition would be rendered ineffective pursuant to the Uniform Commercial Code or any other applicable Law or principles of equity), or would require governmental consent (after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable Law or principles of equity); provided, that, immediately upon the ineffectiveness, lapse or termination of any such Law, regulation, prohibition or requirement for consent or the obtaining of any such consent, a security interest in such assets shall be automatically and simultaneously granted under the applicable Collateral Document and such assets shall no longer constitute “Excluded Property” and shall be considered Collateral, (h) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law; provided, that, upon submission and acceptance by the United States Patent and Trademark Office of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use trademark application shall no longer constitute “Excluded Property” and shall be considered Collateral, (i) “margin stock” (within the meaning of Regulation U issued by the FRB), (j) any real or personal property as to which the Administrative Agent and the Borrower agree in writing that the costs or other consequences
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of obtaining a security interest or perfection thereof are excessive in view of the benefits to be obtained by the Secured Parties therefrom, (k) Equity Interests in any Person (other than Wholly Owned Subsidiaries) to the extent the pledge thereof is not permitted by the terms of such Person’s Organization Documents and (l) any Excluded Accounts described in clauses (a) or (c) (solely to the extent constituting cash collateral in respect of a Permitted Lien of the type described in any of Sections 8.01(e), (f), (p), (r), (u), (v) and (w)) of the definition thereof.
“Excluded Taxes” has the meaning set forth in Section 3.01(a).
“Existing Credit Agreement” means that certain Credit Agreement, dated as of November 17, 2017, by and between Societal CDMO, Inc. (f/k/a Recro Pharma, Inc.), a Pennsylvania corporation, certain domestic subsidiaries of the Borrower and Athyrium Opportunities III Acquisition LP, as the Administrative Agent and the lenders party thereto from time to time, as amended or otherwise modified.
“Extraordinary Receipts” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance, condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments; provided, that, Extraordinary Receipts shall exclude (w) working capital adjustments in connection with any Acquisition, (x) indemnification payments to the extent constituting reimbursement for cash expenses incurred by any Loan Party with respect to the event giving rise to the related indemnity claims, (y) fees received from any out-licensing agreements permitted hereunder and
(z) proceeds from the issuance or sale of Qualified Capital Stock of the Borrower.
“Facilities” means, at any time, a collective reference to the facilities and real properties owned, leased or operated by any Loan Party or any Subsidiary.
“Facility” means, at any time, (a) on or prior to the Funding Date, the aggregate amount of the Term A Commitments at such time and (b) thereafter, the aggregate principal amount of the Term A Loans of all Term A Lenders outstanding at such time.
“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations thereunder, official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such sections of the Code.
“FDA” means the United States Food and Drug Administration and any successor entity. “FDCA” means the U.S. Food, Drug and Cosmetic Act (or any successor thereto) and the rules,
regulations, guidelines, guidance documents and compliance policy guides issued or promulgated
thereunder.
“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, that, if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day.
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“Fee Letter” means that certain letter agreement dated as of the Funding Date by and among the Borrower and the Administrative Agent, as amended or otherwise modified from time to time.
“Final Funding Amount” has the meaning specified in Section 2.01.
“Fixed Charge Coverage Ratio” means, with respect to any Measurement Period, the ratio of (a) the sum of (i) Consolidated EBITDA for such Measurement Period plus (ii) expense attributed to obligations in respect of operating leases under GAAP or under the Master Lease Agreement paid during such Measurement Period minus (iii) capital expenditures required in connection with the ordinary course maintenance of any property of the Borrower and its Subsidiaries paid during such Measurement Period minus (iv) payments made in respect of any applicable federal and state income taxes paid in cash by the Borrower and its Subsidiaries during such Measurement Period (other than any taxes paid with in connection with the Specified Asset Sale) to (b) (i) cash interest expense, commitment and other fees (other than any Duration Fee) and scheduled principal amortization payments (if any) in respect of the Facility and any other Indebtedness (except for scheduled principal amortization payments paid or payable in respect of the IRISYS Seller Note and principal payments associated with the Specified Asset Sale) incurred by the Borrower for such Measurement Period plus (ii) expense attributed to obligations in respect of operating leases under GAAP or under the Master Lease Agreement paid during such Measurement Period.
“Flood Hazard Property” means any real property subject to a Mortgage that is in an area designated by the Federal Emergency Management Agency as having special flood or mudslide hazards.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to Term SOFR. For the avoidance of doubt, the initial Floor for Term SOFR and the Base Rate shall be 1.00%.
“Foreign Lender” has the meaning set forth in Section 3.01.
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
“Foreign Subsidiary Holding Company” means any Domestic Subsidiary all or substantially all of the assets of which consist of Equity Interests in one or more CFCs.
“FRB” means the Board of Governors of the Federal Reserve System of the United States. “Fund” means any Person (other than a natural Person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the
ordinary course of its activities.
“Funding Date” shall have the meaning assigned to such term in Section 5.02.
“Funding Period” means the period commencing on the Closing Date and ending on the earlier of the Funding Date or 5:00 p.m. (New York time) on December 30, 2022.
“Funded Capital Expenditures” shall mean, for any period, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its consolidated Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP, minus (b) any interest expenses that were appropriately reclassified from expenses to capital expenditures under GAAP, minus (c) any internal labor costs that were
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appropriately reclassified from expenses to capital expenditures under GAAP minus (d) any customer funded capital expenditures.
“Funded Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
For purposes hereof, (i) the amount of any direct obligation arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments shall be the maximum amount available to be drawn thereunder and (ii) for the avoidance of doubt, operating leases shall not be considered Funded Indebtedness for all purposes under this Agreement.
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“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, consistently applied and as in effect from time to time.
“Governmental Authority” means any national, supranational, federal, state, county, provincial, local, municipal or other government or political subdivision thereof (including any Regulatory Agency), whether domestic or foreign, and any agency, authority, commission, ministry, instrumentality, regulatory body, court, tribunal, arbitrator, central bank or other Person exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to any such government.
“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation,
(iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.
“Guarantors” means (a) each Wholly Owned Domestic Subsidiary identified as a “Guarantor” on the signature pages hereto and (b) each other Person that joins as a Guarantor pursuant to Section 7.12, together with their successors and permitted assigns.
“Guaranty” means the Guaranty made by the Guarantors in favor of the Secured Parties pursuant to Article IV.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“Illegality Notice” shall have the meaning set forth in Section 3.03.
“IND” means (a) (i) an investigational new drug application (as defined in the FDCA) that is required to be filed with the FDA before beginning clinical testing in human subjects, or any successor application or procedure; and (ii) any similar application or functional equivalent relating to any investigational new drug application applicable to or required by any country, jurisdiction or
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Governmental Authority other than the United States; and (b) all supplements and amendments that may be filed with respect to the foregoing.
“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
“Indemnified Taxes” has the meaning set forth in Section 3.01(b). “Indemnitee” has the meaning set forth in Section 11.04(b). “Information” has the meaning set forth in Section 11.07.
“Infringement” and “Infringes” mean the misappropriation or other violation of know-how, trade secrets, confidential information, and/or other Intellectual Property.
“Insurance Net Cash Proceeds” means Net Cash Proceeds that are the proceeds of insurance, received by any Loan Party or any Subsidiary in respect of any Involuntary Disposition or Extraordinary Receipt.
“Intellectual Property” means all (a) Patents; (b) Trademarks and all applications, registrations and renewals thereof; (c) Copyrights and other works of authorship (registered or unregistered), and all applications, registrations and renewals thereof; (d) Regulatory Authorizations; (e) Product Agreements;
(f) computer software, databases, websites and domain registrations, data and documentation; (g)
(i) trade secrets and confidential information, whether patentable or unpatentable and whether or not reduced to practice, (ii) know-how, (iii) inventions, (iv) manufacturing processes and techniques,
(v) research and development information, and (vi) data and other information included in or supporting Regulatory Authorizations; (h) other intellectual property or similar proprietary rights; (i) copies and tangible embodiments of any of the foregoing (in whatever form or medium); (j) any and all improvements to any of the foregoing; and (k) all exclusive and nonexclusive licenses from third parties to use any of the foregoing intellectual property or rights to use any intellectual property owned or licensed by such third parties.
“Interest Payment Date” means (a) the last Business Day of each March, June, September and December and (b) the Maturity Date.
“Interest Period” means, with respect to any Loan, (a) the period commencing on (and including) the applicable borrowing date of such Loan and ending on (and including) the last day of the fiscal quarter in which such borrowing date occurs; provided, that, if any such last day is not a Business Day, the applicable Interest Period shall end on the first Business Day immediately preceding such last day of
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such fiscal quarter, and (b) thereafter, the period beginning on (and including) the first day following the end of the preceding Interest Period and ending on the earlier of (and including) (x) the last day of the fiscal quarter following the fiscal quarter in which the preceding Interest Period ended; provided, that, if any such last day is not a Business Day, the applicable Interest Period shall end on the first Business Day immediately preceding such last day of such fiscal quarter, and (y) the Maturity Date.
“Interest Rate” means, for any Interest Period, a rate per annum equal to the sum of (a) the Applicable Margin plus (b) the Term SOFR for such Interest Period.
“Interim Financial Statements” means the unaudited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal quarter ended September 30, 2022, including balance sheets and statements of operations, shareholders’ equity and cash flows.
“Internal Revenue Code” means the United States Internal Revenue Code of 1986. “Internal Revenue Service” means the United States Internal Revenue Service. “Interpolated Term SOFR” means, for purposes of any calculation of Term SOFR for a
Term SOFR Loan, the rate which results from interpolating on a linear basis between:
“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person,
(b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) an Acquisition. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested (which, in the case of any Investment constituting the contribution of an asset or property, shall be based on such Person’s good faith estimate of the fair market value of such asset or property at the time such Investment is made), without adjustment for subsequent increases or decreases in the value of such Investment. For the avoidance of doubt, it is understood and agreed that to the extent that in the ordinary course of business the Borrower pays any bona fide trade payable on behalf of a Subsidiary and such Subsidiary reimburses the Borrower in cash in the amount of such bona fide trade payable paid by the Borrower within 30 days of such payment by the Borrower, such transaction shall not constitute an “Investment”.
“Involuntary Disposition” means any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any property of any Loan Party or any of its Subsidiaries.
“IRISYS Seller Note” means that certain Subordinated Promissory Note, dated as of August 13, 2021, by and among the Borrower and IRISYS, INC., in an original principal amount of $6,116,672.72, as amended in accordance with the terms of the Second Amendment.
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“Joinder Agreement” means a joinder agreement substantially in the form of Exhibit C executed and delivered by a Domestic Subsidiary in accordance with the provisions of Section 7.12.
“Junior Debt” means (a) any Indebtedness that is subordinated in right of payment to the Obligations, (b) any Indebtedness secured by Liens on any Collateral contractually junior to those created under the Collateral Documents, (c) any unsecured Indebtedness for borrowed money and (d) any Permitted Refinancing of any of the foregoing.
“Key Permits” means all Permits relating to the Products, including all Regulatory Authorizations, the loss of which could reasonably be expected to result in a material adverse effect on any Product Development and Commercialization Activities associated with any Product.
“Laws” means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
“Lender” means (a) at any time on or prior to the Funding Date, any Lender that has a Commitment at such time and (b) at any time after the Funding Date, any Lender that holds one or more Loans at such time.
“Lending Office” means, as to any Lender, the office address of such Lender and, as appropriate, account of such Lender set forth on Schedule 11.02 or such other address or account as such Lender may from time to time notify the Borrower and the Administrative Agent.
“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).
“Liquidity Decrease Notice” means, with respect to any Acquisition, a certificate, duly executed by a Responsible Financial Officer of the Borrower and delivered to the Administrative Agent on the date of such Acquisition, that (a) such Acquisition constitutes a Permitted Acquisition and (b) a Liquidity Decrease Period shall commence on the date of such Permitted Acquisition; provided, that, no more than three (3) Liquidity Decrease Notices shall be delivered during the term of this Agreement.
“Liquidity Decrease Period” has the meaning set forth in Section 8.16(a). “Loan” means an advance made by any Lender under the Facility.
“Loan Documents” means this Agreement, the Disclosure Letter, each Joinder Agreement, each Collateral Document and any other agreement, instrument or document designated by its terms as a “Loan Document”.
“Loan Notice” means a notice of a Borrowing of Loans pursuant to Section 2.02(a), which shall be substantially in the form of Exhibit A.
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“Loan Party” means, individually, the Borrower or a Guarantor and “Loan Parties” means, collectively, the Borrower and each Guarantor.
“Master Lease Agreement” shall mean that certain Master Lease Agreement, dated as of December 8, 2022, by and between Societal CDMO Gainesville, LLC, as lessor, and Tenet Equity, LP, as lessee, as amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms and conditions of the Loan Documents.
“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the business, assets, properties, liabilities (actual or contingent) or financial condition of the Borrower and its Subsidiaries taken as a whole, (b) a material impairment of the rights and remedies of the Administrative Agent or any Lender under any Loan Document to which it is a party or a material impairment in the perfection or priority of the Administrative Agent’s security interests in the Collateral,
(c) a material impairment of the ability of the Loan Parties, taken as a whole, to perform their material obligations under any Loan Document, or (d) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.
“Material Contracts” means (a) the Material Covered Agreements and (b) all other contracts or agreements to which the Borrower or any Subsidiary is a party and the breach, nonperformance or cancellation of which, or the failure to renew could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
“Material Covered Agreement” means, as of any date of determination, any Covered Agreement pursuant to which the Borrower and its Subsidiaries, for the four (4) fiscal quarter period most recently ended for which financial statements have been delivered pursuant to Section 7.01(a) or Section 7.01(b), generated revenues in excess of five percent (5%) of Consolidated Revenues for such four (4) fiscal quarter period. As of the Closing Date, each Covered Agreement is a Material Covered Agreement.
“Material Intellectual Property” means Intellectual Property (and/or the economics afforded by the licensing thereof) of the Borrower or any Subsidiary (a) that is material to the operations, business, property or financial condition of the Borrower or any Subsidiary or (b) the loss of which could reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.
“Material Regulatory Authorizations” means any Regulatory Authorizations where the failure to possess or maintain such Regulatory Authorization, or restrictions placed thereon, in either case, could reasonably be expected, either individually or in the aggregate, to result in either (a) a material adverse effect on any Product Development and Commercialization Activities associated with any Product or
(b) a Material Adverse Effect.
“Maturity Date” means the date that falls three (3) years after the Funding Date; provided, that, the Maturity Date hereunder shall in no event be later than December 30, 2025; provided further, that if such date is not a Business Day, the Maturity Date shall be the first Business Day immediately preceding such date.
“Maximum Rate” has the meaning set forth in Section 11.09.
“Measurement Period” means the most recently completed four fiscal quarter period of the Borrower.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
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“Mortgage” or “Mortgages” means, individually or collectively, as the context requires, each of the mortgages, deeds of trust, deeds to secure debt or similar instruments in form and substance reasonably satisfactory to the Administrative Agent executed by a Loan Party that purport to grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in the fee or leasehold interest of any Loan Party in real property (other than Excluded Property), in each case, as the same may from time to time be amended, restated, supplemented or otherwise modified.
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions or, during the preceding five plan years, has made or been obligated to make contributions.
“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
“NDA” means a new drug application filed with the FDA pursuant to Section 505(b) of the FDCA, along with all supplements and amendments thereto, and any similar application for marketing authorization required by any country, jurisdiction or Governmental Authority other than the United States.
“Net Cash Proceeds” means the aggregate cash or Cash Equivalents proceeds received by any Loan Party or any Subsidiary in respect of (i) with respect to Section 2.03(b)(ii), any Disposition, Debt Issuance, Involuntary Disposition or Extraordinary Receipt and (ii) with respect to Section 2.03(b)(i), in each case, net of (a) direct costs incurred in connection therewith (including, without limitation, reasonable legal, accounting and investment banking fees, and sales commissions), (b) taxes paid or payable as a result thereof, (c) in the case of any Disposition or Involuntary Disposition or any Extraordinary Receipt to the extent resulting from a Disposition or an Involuntary Disposition, the amount necessary to retire any Indebtedness secured by a Permitted Lien (ranking senior to any Lien of the Administrative Agent) on the related property and (d) in the case of any Extraordinary Receipt, direct costs incurred in connection with the collection of such proceeds, awards or other payments; it being understood that “Net Cash Proceeds” shall include, without limitation, any cash or Cash Equivalents received upon the sale or other disposition of any non-cash consideration received by any Loan Party or any Subsidiary in any Disposition, Debt Issuance, Involuntary Disposition or Extraordinary Receipt.
“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (a) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 11.01 and (b) has been approved by the Required Lenders.
“Note” has the meaning set forth in Section 2.09.
“Novartis Agreement” means the Manufacturing and Supply Agreement, effective as of January 1, 2019, by and between Novartis Pharma AG and Societal CDMO Gainesville LLC (f/k/a Recro Gainesville LLC), as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Obligations” means (a) all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan (including Erroneous Payment Subrogation Rights) and (b) all costs and expenses incurred in connection with enforcement and collection of the foregoing, including the fees, charges and disbursements of counsel, in each case, whether direct or indirect (including those acquired by assumption), absolute or contingent,
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due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed or allowable claims in such proceeding.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction), (b) with respect to any limited liability company, the certificate or articles of incorporation, formation or organization and operating agreement or limited liability company agreement (or equivalent or comparable documents with respect to any non-U.S. jurisdiction), and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
“Other Administrative Proceeding” means any administrative proceeding relating to a dispute involving a patent office or other relevant intellectual property registry which relates to validity, opposition, revocation, ownership or enforceability of the relevant Intellectual Property.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Outstanding Amount” means with respect to any Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of any Loans occurring on such date.
“Participant” has the meaning set forth in Section 11.06(d). “Participant Register” has the meaning set forth in Section 11.06(d).
“Patents” means any patent rights of any kind, including any and all: patents, patent applications or invention disclosures, as well as all divisions, continuations, continuations in-part, provisionals, continued prosecution applications, substitutions, reissues, reexaminations, inter partes review, renewals, extensions, adjustments, restorations, supplemental protection certificates and other additions in connection therewith, whether in or related to the United States or any foreign country or other jurisdiction, together with the right to claim the priority thereto and the right to sue for past infringement of any of the foregoing.
“Payment Recipient” has the meaning assigned to it in Section 10.10(a).
“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.
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“Pension Funding Rules” means the rules of the Internal Revenue Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in Section 412, 430, 431, 432 and 436 of the Internal Revenue Code and Sections 302, 303, 304 and
305 of ERISA.
“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to minimum funding standards under Section 412 of the Internal Revenue Code.
“Permits” means all Regulatory Authorizations, permits, licenses, registrations, certificates, accreditations, orders, approvals, authorizations, consents, waivers, franchises, variances and similar rights issued by or obtained from any Governmental Authority or any other Person, including, without limitation, those relating to Environmental Laws.
“Permitted Acquisition” means an Investment consisting of an Acquisition by a Loan Party; provided, that, (i) the property acquired (or the property of the Person acquired) in such Acquisition is used or useful in the same or a related line of business as the Borrower and its Subsidiaries were engaged in on the Closing Date (or any reasonable extensions or expansions thereof), (ii) no Default or Event of Default shall have occurred and be continuing or would result from such Acquisition, (iii) the Administrative Agent shall have received all items in respect of the Equity Interests or property acquired in such Acquisition as and when required to be delivered by the terms of Section 7.12 and/or Section 7.14, (iv) such Acquisition shall not be a “hostile” acquisition and shall have been approved by the Board of Directors and/or the shareholders (or equivalent) of the applicable Loan Party and the target of such Acquisition, (v) the Borrower shall have delivered to the Administrative Agent pro forma financial statements for the Borrower and its Subsidiaries after giving effect to such Acquisition for the twelve month period ending as of the most recent fiscal quarter end in a form reasonably satisfactory to the Administrative Agent, (vi) the Borrower shall have demonstrated to the reasonable satisfaction of the Administrative Agent that, after giving effect to such Acquisition on a Pro Forma Basis, the Loan Parties are in compliance with the covenants set forth in Section 8.16, (vii) the representations and warranties made by the Loan Parties in each Loan Document shall be true and correct in all material respects (and in all respects if any such representation or warranty is already qualified by materiality or reference to Material Adverse Effect) at and as if made as of the date of such Acquisition (assuming for such purposes that such Acquisition has been consummated), except to the extent any such representation and warranty expressly relates to an earlier date, in which case it shall be true and correct in all material respects (and in all respects if any such representation or warranty is already qualified by materiality or reference to Material Adverse Effect) as of such earlier date and (viii) the aggregate consideration (including any Earn Out Obligations) paid (or payable, as the case may be) in cash by the Borrower and its Subsidiaries shall not exceed an aggregate amount equal to $40,000,000 for all such Acquisitions made in reliance on this definition during the term of this Agreement. “Permitted Licenses” means, collectively, (a) licenses of over-the-counter software that is commercially available to the public, (b) non-exclusive or exclusive (as to geography other than the United States) licenses of Intellectual Property to Third Parties for the use of (or covenant not to sue with respect to) Intellectual Property for manufacture, commercialization, distribution, and/or co-promotion of Products, (c) intercompany licenses or other similar arrangements among the Loan Parties, (d) intercompany licenses between a Loan Party and a Subsidiary that is not a Loan Party; provided, that, any licenses of Intellectual Property may only be exclusive as to geography other than the United States and are solely for the use of Intellectual Property for manufacture, commercialization, distribution, development and/or co-promotion of Products, and (e) licenses of Intellectual Property existing as of the Closing Date and previously disclosed to the Administrative Agent. Notwithstanding the foregoing, any licenses or similar arrangements described in clauses (b) and (d) above shall not constitute a Permitted License hereunder
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unless: (i) no Event of Default has occurred or is continuing at the time of such license, (ii) the license constitutes an arms-length transaction, the terms of which, on their face, do not provide for a sale or assignment of any intellectual property and do not restrict the ability of the Borrower or any of its Subsidiaries, as applicable, to pledge, grant a Lien on, or assign or otherwise transfer any intellectual property to the Administrative Agent or the Lenders pursuant to the Loan Documents, (iii) in connection with an exclusive license, (A) the Borrower delivers ten (10) days’ prior written notice and a brief summary of the terms of the proposed license to the Administrative Agent and delivers to the Administrative Agent copies of the final executed licensing documents promptly upon consummation thereof, and (B) any such license could not result in a legal transfer of title of the licensed property, and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing agreement that are payable to the Borrower or any of its Subsidiaries are paid to a Deposit Account that is governed by a Deposit Account Control Agreement.
“Permitted Liens” means, at any time, Liens in respect of property of any Loan Party or any of its Subsidiaries permitted to exist at such time pursuant to the terms of Section 8.01.
“Permitted Refinancing” means, with respect to any Indebtedness or other obligations, any extensions, refinancings, renewals and replacements of such Indebtedness or other obligations; provided, that, such extension, refinancing, renewal or replacement (a) shall not increase the outstanding principal amount of such Indebtedness or other obligations (other than by an amount equal to unpaid interest and premium thereon, including tender premium, and any underwriting discounts, fees, commissions and expenses associated with such extension, refinancing, renewal or replacement), (b) contains terms relating to outstanding principal amount, amortization, maturity, collateral (if any) and subordination (if any), and other material terms taken as a whole no less favorable in any material respect to the Loan Parties and their respective Subsidiaries or the Secured Parties than the terms of any agreement or instrument governing such existing Indebtedness, (c) shall have an applicable interest rate or equivalent yield which does not exceed the interest rate or equivalent yield of the Indebtedness being extended, renewed or replaced, (d) shall not contain any new requirement to grant any Lien or to give any Guarantee that was not an existing requirement of the Indebtedness being extended, refinanced, renewed or replaced and (e) after giving effect to such extension, refinancing, renewal or replacement, no Default or Event of Default shall have occurred (or would reasonably be expected to occur) as a result thereof.
“Permitted Transfers” has the meaning set forth in the definition of “Disposition”.
“Person” means any natural person, corporation, limited liability company, trust, unincorporated organization, joint venture, association, company, partnership, Governmental Authority or any other legal entity, whether acting in an individual, fiduciary or other capacity.
“PHSA” means the Public Health Service Act (or any successor thereto), as amended from time to time, and the rules, regulations, guidelines, guidance documents and compliance policy guides issued or promulgated thereunder.
“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Borrower or any ERISA Affiliate or any such Plan to which the Borrower or any ERISA Affiliate is required to contribute on behalf of any of its employees.
“Pledge Agreement” means that certain U.S. pledge agreement dated as of the Funding Date executed in favor of the Administrative Agent, for the benefit of the Secured Parties, by each of the Loan Parties, as amended or modified from time to time in accordance with the terms hereof.
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“Prime Rate” means the rate of interest per annum determined by Royal Bank of Canada from time to time as its prime commercial lending rate for United States Dollar loans in the United States for such day. The Prime Rate is not necessarily the lowest rate that Royal Bank of Canada is charging any corporate customer.
“Pro Forma Basis” means, in respect of a Specified Transaction, that such Specified Transaction and the following transactions in connection therewith (to the extent applicable) shall be deemed to have occurred as of the first day of the applicable period of measurement for the applicable covenant or requirement: (a) (i) with respect to any Disposition, Involuntary Disposition or sale, transfer or other disposition that results in a Person ceasing to be a Subsidiary, income statement and cash flow statement items (whether positive or negative) attributable to the Person or property disposed of shall be excluded and (ii) with respect to any Acquisition or Investment, income statement and cash flow statement items (whether positive or negative) attributable to the Person or property acquired shall be included to the extent relating to any period applicable in such calculations to the extent (A) such items are not otherwise included in such income statement items for the Borrower and its Subsidiaries in accordance with GAAP or in accordance with any defined terms set forth in Section 1.01 and (B) such items are supported by financial statements or other information reasonably satisfactory to the Administrative Agent, (b) any retirement of Indebtedness and (c) any incurrence or assumption of Indebtedness by the Borrower or any Subsidiary (and if such Indebtedness has a floating or formula rate, such Indebtedness shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination); provided, that, Pro Forma Basis in respect of any Specified Transaction shall be calculated in a reasonable and factually supportable manner and certified by a Responsible Financial Officer of the Borrower.
“Product” means any current or future service or product researched, designed, developed, manufactured, licensed, marketed, advertised, sold, offered for sale, performed, distributed, tested, provided or commercialized by the Borrower or any Subsidiary, including any such product in development or which may be developed, including without limitation those products set forth on Schedule 1.01 to the Disclosure Letter (as updated from time to time in accordance with the terms of Section 6.24(o)).
“Product Agreement” means each agreement, license, document, instrument, interest (equity or otherwise) or the like under which one or more parties grants or receives any right, title or interest with respect to any Product Development and Commercialization Activities in respect of one or more Products specified therein or to exclude third parties from engaging in, or otherwise restricting any right, title or interest as to any Product Development and Commercialization Activities with respect thereto, including each contract or agreement with suppliers, manufacturers, pharmaceutical companies, distributors, clinical research organizations, hospitals, group purchasing organizations, wholesalers, pharmacies or any other Person related to any such entity.
“Product Authorizations” means any and all approvals, licenses, notifications, registrations or authorizations of any Governmental Authority for the testing, manufacture, development, distribution, use, storage, import, export, transport, promotion, marketing, sale or commercialization of a Product in any country or jurisdiction, including, without limitation, registration and listing, INDs, NDAs and similar applications.
“Product Development and Commercialization Activities” means, with respect to any Product, any combination of research, development, manufacture, import, use, sale, importation, storage, labeling, marketing, promotion, supply, distribution, testing, packaging, purchasing or other commercialization
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activities, receipt of payment in respect of any of the foregoing, or like activities the purpose of which is to develop or commercially exploit such Product.
“Purchase Agreement” shall mean that certain Purchase and Sale and Escrow Agreement, dated as of December 5, 2022, by and between Societal CDMO Gainesville, LLC, as seller, and Tenet Equity Funding SPE Gainesville, LLC, as purchaser.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” has the meaning specified in Section 11.21.
“Qualified Capital Stock” of any Person means any Equity Interests of such Person that are not Disqualified Capital Stock.
“Qualifying Insurance Net Cash Proceeds” means the first $15,000,000 of Insurance Net Cash Proceeds received by the Borrower and its Subsidiaries collectively during the term of this Agreement.
“Real Property Security Documents” means with respect to the fee or leasehold interest of any Loan Party in any real property (other than Excluded Property):
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“Recipient” means the Administrative Agent, any Lender, and any other recipient of any payment by or on account of any obligation of any Loan Party under any Loan Document.
“Register” has the meaning set forth in Section 11.06(c).
“Regulatory Agencies” means any Governmental Authority that is concerned with the use, control, safety, efficacy, reliability, manufacturing, marketing, distribution, sale or other Product Development and Commercialization Activities relating to any Product, including CMS, FDA, DEA, and all similar agencies in other jurisdictions, and includes Standards Bodies.
“Regulatory Authorizations” means all approvals, clearances, notifications, authorizations, orders, exemptions, registrations, certifications, licenses and permits granted by, submitted to, required by, or filed with any Regulatory Agencies related to the Products or Product Development and Commercialization Activities, including all Product Authorizations.
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“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors, sub-advisors and representatives of such Person and of such Person’s Affiliates.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the thirty-day notice period has been waived.
“Required Lenders” means, at any time, Lenders having Total Credit Exposures representing more than fifty percent (50%) of the Total Credit Exposures of all Lenders. The Total Credit Exposure of any Defaulting Lender shall be disregarded in determining Required Lenders at any time.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Financial Officer” means the chief executive officer, president, chief financial officer, treasurer or chief accounting officer of a Loan Party and, solely for purposes of the delivery of certificates pursuant to Sections 5.02 or 7.12(b), the secretary or any assistant secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Financial Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Financial Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, chief medical officer, senior vice president (development), senior vice president (regulatory affairs and quality assurance) or chief accounting officer of a Loan Party and, solely for purposes of the delivery of certificates pursuant to Sections 5.02 or 7.12(b), the secretary or any assistant secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
“Restricted” means, when referring to cash or Cash Equivalents of any Person, that such cash or Cash Equivalents (a) appear (or would be required to appear) as “restricted” on a consolidated balance sheet of such Person as determined in accordance with GAAP, or (b) are subject to any Lien in favor of any Person (other than bankers’ liens, rights of setoff or any non-consensual Lien permitted under Section 8.01) other than the Administrative Agent, for the benefit of the Secured Parties.
“Restricted Payment” means (a) any dividend or other distribution, direct or indirect, on account of any shares (or equivalent) of any class of Equity Interests of any Loan Party or any of its Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares (or equivalent) of any class of Equity Interests of any Loan Party or any of its Subsidiaries, now or hereafter outstanding, and (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Equity Interests of any Loan Party or any of its Subsidiaries, now or hereafter outstanding.
“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of McGraw-Hill Financial, Inc., and any successor thereto.
“Safety Notices” means any recalls, field notifications, safety alerts, corrections, withdrawals, warnings, “dear doctor” letters, investigator notices, “serious adverse event” reports, clinical holds,
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marketing suspensions, removals, label change requests, or the like conducted, undertaken or issued by any Person, whether or not at the request, demand or order of any Regulatory Agency or otherwise, with respect to any Product.
“Sale and Leaseback Transaction” means, with respect to any Loan Party or any Subsidiary, any arrangement, directly or indirectly, with any Person whereby the Loan Party or such Subsidiary shall sell or transfer any property used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.
“Sanctioned Person” means any Person that is (i) identified on the list of Specially Designated Nationals and Blocked Persons maintained by OFAC, the Consolidated List of Financial Sanctions Targets in the UK maintained by His Majesty’s Treasury, or any other Sanctions-related list of designated parties, (ii) domiciled, organized or resident in a Designated Jurisdiction, (iii) owned or controlled by any Persons described in clause (i) or (ii), or (iv) otherwise the subject or target of Sanctions.
“Sanctions” means any economic or financial sanctions administered or enforced by the United States (including OFAC and the U.S. Department of State), the United Nations Security Council, the European Union, the United Kingdom (including His Majesty’s Treasury), Canada, or other relevant sanctions authority.
“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“Second Amendment” means that certain Second Amendment and Waiver to the Credit Agreement, dated as of the Second Amendment Effective Date, by and among the Borrower, the Guarantors party thereto, the Lenders party thereto and the Administrative Agent.
“Second Amendment Effective Date” means August 13, 2023.
“Second Amendment Fee” shall have the meaning set forth in Section 2.07(b).
“Secured Parties” means, collectively, the Administrative Agent, the Lenders, the Indemnitees and each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 10.05.
“Securities Act” means the Securities Act of 1933.
“Securitization Transaction” means, with respect to any Person, any financing transaction or series of financing transactions (including factoring arrangements) pursuant to which such Person or any Subsidiary of such Person may sell, convey or otherwise transfer, or grant a security interest in, accounts, payments, receivables, rights to future lease payments or residuals or similar rights to payment to a special purpose subsidiary or affiliate of such Person.
“Security Agreement” means the security agreement dated as of the Funding Date executed in favor of the Administrative Agent, for the benefit of the Secured Parties, by each of the Loan Parties, as amended or modified from time to time in accordance with the terms hereof.
“SOFR” means a rate per annum equal to the secured overnight financing rate as administered by the SOFR Administrator.
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“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SOFR Determination Day” has the meaning set forth in the definition of “Daily Simple
SOFR”.
“SOFR Rate Day” has the meaning set forth in the definition of “Daily Simple SOFR”.
“Solvent” or “Solvency” means, with respect to any Person as of a particular date, that on such date (a) such Person is able to pay its debts and other liabilities as they become absolute and matured in the ordinary course of business, (b) such Person does not intend to incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities become absolute and matured in the ordinary course of business, (c) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is planning to engage and the transactions contemplated hereby and the Indebtedness related thereto,
(d) the fair value of the property of such Person is greater than the total amount of liabilities of such Person and (e) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured in the ordinary course of business.
“Specified Asset Sale” means the sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction or any issuance by any Subsidiary of its Equity Interests) of that certain real property located at 1300 Gould Drive, Gainesville, Georgia 30504.
“Specified Equity Raise” means the first Equity Issuance under clause (a)(i) of the definition thereof closed by the Borrower at any time after the Second Amendment Effective Date until December 31, 2023.
“Specified Equity Raise Threshold Amount” shall have the meaning set forth in Section 2.03(b)(i)(A).
“Specified Transaction” means any Acquisition, any Disposition, any sale, transfer or other disposition that results in a Person ceasing to be a Subsidiary, any Involuntary Disposition or any Investment that results in a Person becoming a Subsidiary, in each case, whether by merger, consolidation or otherwise.
“Standards Bodies” means any of the organizations that create, sponsor or maintain safety, quality or other standards, including ISO, ANSI, CEN and SCC and the like.
“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of Voting Stock is at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.
“Supported QFC” has the meaning specified in Section 11.21.
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“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and
(b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.
“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s) and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
“Synthetic Lease” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing arrangement whereby the arrangement is considered borrowed money indebtedness for tax purposes but is classified as an operating lease or does not otherwise appear on a balance sheet under GAAP.
“Taxes” has the meaning set forth in Section 3.01(a).
“Term SOFR” means for any Interest Period for a duration of three-months (in each case, subject to the availability thereof or as used for reference purposes only in determining Interpolated Term SOFR, as applicable) for a Term SOFR Loan, the greater of (i) the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (the “Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator and (ii) the Floor; provided, however, that if as of 5:00 p.m. (New York City time) on any Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Term SOFR Determination Day.
“Term SOFR Loan” means a Loan that bears interest at a rate based on Term SOFR.
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
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“Term SOFR Determination Day” has the meaning assigned to it under the definition of Term
SOFR.
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Third Party” means any entity other than the Borrower or any Subsidiary or Affiliate thereof. “Threshold Amount” means $1,000,000.
“Total Credit Exposure” means, as to any Lender at any time, the unused Commitments of such Lender and the Outstanding Amount of all Loans of such Lender at such time.
“Trademarks” means any statutory or common law trademark, service mark, trade name, logo, symbol, trade dress, domain name, corporate name or other indicator of source or origin that identifies the goods and services of one provider from another, and all applications and registrations therefor, together with all of the goodwill associated therewith.
“Transactions” means collectively, (a) the execution, delivery and performance by the Loan Parties of the Loan Documents to which they are a party and the borrowing of Loans hereunder, (b) the consummation of the Refinancing, the Equity Raise, the Purchase Agreement, and the Specified Asset Sale, and (c) the payment of the fees, premiums, expenses and other transaction costs (including original issue discount and upfront fees) payable or otherwise borne by the Borrower and its Subsidiaries in connection with the foregoing and the transactions contemplated thereby.
“Treasury Regulations” means the regulations, including temporary regulations, promulgated by the United States Treasury Department under the Internal Revenue Code, as such regulations may be amended from time to time (including the corresponding provisions of any future regulations).
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Special Resolution Regimes” has the meaning specified in Section 11.21.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Uniform Commercial Code” means the Uniform Commercial Code as in effect in the State of New York; provided, that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions
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hereof or of the other Loan Documents relating to such perfection, effect of perfection or non-perfection or priority.
“United States” and “U.S.” mean the United States of America.
“Unrestricted Cash” means, at any time, cash and Cash Equivalents that are not Restricted at such time.
“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
“Verapamil Agreement” means the Amended and Restated License and Supply Agreement by and between Watson Laboratories, Inc. and Elan Corporation plc, as predecessor in interest to Societal CDMO Gainesville LLC (f/k/a Recro Gainesville LLC), dated as of June 26, 2003, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Verelan Agreement” means the License and Supply Agreement by and between Kremers Urban Pharmaceuticals, Inc. and APIL, as predecessor in interest to Societal CDMO Gainesville LLC (f/k/a Recro Gainesville LLC), dated as of January 1, 2014, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Voting Stock” means, with respect to any Person, Equity Interests issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency.
“Wholly Owned Domestic Subsidiary” means each Wholly Owned Subsidiary that is a Domestic Subsidiary. Unless otherwise specified, all references herein to a “Wholly Owned Domestic Subsidiary” or to “Wholly Owned Domestic Subsidiaries” shall refer to a Wholly Owned Domestic Subsidiary or Wholly Owned Domestic Subsidiaries of the Borrower.
“Wholly Owned Subsidiary” means any Person 100% of whose Equity Interests are at the time owned by the Borrower directly or indirectly through other Persons 100% of whose Equity Interests are at the time owned, directly or indirectly, by the Borrower. Unless otherwise specified, all references herein to a “Wholly Owned Subsidiary” or to “Wholly Owned Subsidiaries” shall refer to a Wholly Owned Subsidiary or Wholly Owned Subsidiaries of the Borrower.
“Withholding Agent” means any Loan Party, the Administrative Agent and any other Person required by applicable Law to withhold or deduct amounts from a payment made by or on account of any obligation of any Loan Party under any Loan Document.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have
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effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
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Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
For purposes of determining compliance with Article VIII with respect to the amount of any Indebtedness or Investment in a currency other than Dollars, no Default or Event of Default shall be deemed to have occurred solely as a result of changes in rates of currency exchange occurring after the time such Indebtedness or Investment is incurred, made or acquired (so long as such Indebtedness or Investment, at the time incurred, made or acquired, was permitted hereunder).
The interest rate on a Loan denominated in Dollars may be derived from an interest rate benchmark that may be discontinued or is, or may in the future become, the subject of regulatory reform. Upon the occurrence of a Benchmark Transition Event, Section 3.04 provides a mechanism for determining an alternative rate of interest. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, (a) the continuation of, the administration of, submission of, calculation of, performance of or any other matter related to any interest rate used in this Agreement (including, without limitation, the Base Rate, Daily Simple SOFR, Adjusted Daily Simple SOFR, SOFR, the Term SOFR Reference Rate or Term SOFR) or any component definition thereof or rates referred to in the definition thereof, or with respect to any alternative or successor rate thereto, or replacement rate thereof (including any Benchmark Replacement), including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, or have the same value or economic equivalence of as the existing interest rate (or any component thereof) being replaced or have the same volume or liquidity as did any existing interest rate (or any component thereof) prior to its discontinuance or unavailability. The Administrative Agent and its affiliates and/or other related entities may engage in transactions that affect the calculation of any interest rate (or component thereof) used in this Agreement or any alternative, successor or alternative rate (including any Benchmark Replacement) and/or any relevant adjustments thereto, in each case, in a manner adverse to the Borrowers. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain any interest rate used in this Agreement, any component thereof, or rates referred to in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrowers, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
ARTICLE II
THE COMMITMENTS
Subject to the terms and conditions set forth herein, each Lender severally agrees to make a single loan to the Borrower, in Dollars, on the Funding Date in an aggregate amount equal to such Lender’s Commitment; provided that the Commitment of each Lender shall be reduced on a dollar-for-dollar basis by every dollar of the Equity Raise in excess of $32,5000,000 (but the aggregate
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Commitments shall not be reduced to less than $35,000,000 after giving effect to such reduction) (the amount of aggregate Commitments so funded after giving effect to such reduction, the “Final Funding Amount”). The Borrowing shall consist of Loans made simultaneously by the Lenders in accordance with their respective Commitments. Borrowings repaid or prepaid may not be reborrowed. The parties hereto acknowledge that the Commitments of each Lender will terminate upon the funding of the Loans on the Funding Date and if such Commitments remain undrawn, will terminate at 5:00 p.m. (New York time) on the Funding Date. To the extent the Funding Date has not occurred on or prior to expiration of the Funding Period, the Commitments of each Lender will terminate at such time. Any portion of the Commitment that is not funded pursuant to the Final Funding Amount shall be terminated on the Funding Date.
a.m. at least three (3) Business Days in advance of the requested date of the applicable Borrowing (or such period of fewer than three (3) Business Days as the Administrative Agent shall agree in its sole discretion). Each Loan Notice shall specify (i) the requested date of the Borrowing (which shall be a Business Day) and (ii) the principal amount of Loans to be borrowed. For the avoidance of doubt, the Borrowing shall be in a principal amount of the Final Funding Amount.
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notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein; provided, that, if such a notice expressly states that it is conditioned upon the effectiveness of other credit facilities or the closing of a specified transaction, such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any prepayment pursuant to this Section 2.03(a) shall be accompanied by (x) all accrued interest on the principal amount of the Loans prepaid, (y) compensation, if any, required under Section 2.03(d) and (z) all fees, costs, expenses, indemnities and other amounts due and payable hereunder at the time of prepayment. Each such prepayment shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages in respect of the Facility.
(iC) Equity Issuances. The Other than in connection with a Specified Equity Raise, the Borrower shall promptly (and, in any event, within three (3) Business Days) upon the receipt by any Loan Party or any Subsidiary of the Net Cash Proceeds of any Equity Issuance prepay the Loans in an aggregate amount equal to 100% of such Net Cash Proceeds. Any prepayment pursuant to this clause (i) shall be applied as set forth in clause (v) below.
(D) Any prepayment pursuant to this clause (i) shall be applied as set forth in clause (v) below.
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each case other than (A) so long as no Default or Event of Default exists at the time prepayment would otherwise be required pursuant to this Section 2.03(b)(ii), Net Cash Proceeds of Dispositions and Involuntary Dispositions not exceeding $1,000,000 in the aggregate during any fiscal year, and (B) Net Cash Proceeds (other than any Insurance Net Cash Proceeds) of Dispositions and Involuntary Dispositions that are reinvested in Eligible Assets within 180 days of the date of such Disposition or Involuntary Disposition (or such longer period as the Administrative Agent shall agree in its sole discretion). Any prepayment pursuant to this clause (ii) shall be applied as set forth in clause (v) below.
(A) so long as no Default or Event of Default exists at the time prepayment would otherwise be required pursuant to this Section 2.03(b)(iii), Net Cash Proceeds of Extraordinary Receipts not exceeding $1,000,000 in the aggregate during any fiscal year, and (B) Net Cash Proceeds (other than any Insurance Net Cash Proceeds that are not Qualifying Insurance Net Cash Proceeds) of any Extraordinary Receipt that are reinvested in Eligible Assets within 180 days of the date of the receipt of such Net Cash Proceeds (or such longer period as the Administrative Agent shall agree in its sole discretion). Any prepayment pursuant to this clause (iii) shall be applied as set forth in clause (v) below. For the avoidance of doubt, if the Borrower shall have made the prepayment required by, or reinvestment permitted by, clause (ii) above with the Net Cash Proceeds of any Disposition or Involuntary Disposition that also constitute the Net Cash Proceeds of an Extraordinary Receipt, the Borrower shall not be required to also make the prepayment required under this clause (iii) with respect to such Net Cash Proceeds.
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Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Each prepayment under this Section 2.03(c) shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages.
The Commitments under any Facility will be automatically and permanently reduced to zero upon the occurrence of any Borrowing under such Facility pursuant to Section 2.01.
Installment Dates |
Amortization Payment Percentage |
Each of the four consecutive Installment Dates to occur after the Funding Date commencing on March 31, 2023 |
1.25% |
Each of the four consecutive Installment Dates to occur after December 31, 2023 |
1.875% |
Each of the Installment Dates to occur after December 31, 2024 until the Maturity Date |
2.50% |
Maturity Date |
Outstanding Principal Balance of Loans |
provided, however, that, (a) the final principal repayment installment of the Loans shall be repaid on the Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of all Loans outstanding on such date and (b) if any principal repayment installment to be
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made by the Borrower shall come due on a day other than a Business Day, such principal repayment installment shall be due on the first preceding Business Day; provided further, that to the extent the Specified Asset Sale has not occurred and the Borrower has not repaid the outstanding principal amount of the Loans in an aggregate principal amount of
$10,000,0007,500,000 pursuant to Section 2.05(b), in each case, on or prior to the twelve (12) month anniversary of the Funding Date, the Amortization Payment Percentage set forth in the chart above shall be increased by an additional 0.625% for each Installment Date commencing after the last Business Day of December 2023 until such a time as the Specified Asset Sale has occurred and the Borrower has repaid the Loans in accordance with Section 2.05(b).
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notify the Borrower and the Lenders of the effectiveness of any Benchmark Replacement Conforming Changes in connection with the use or administration of SOFR or Term SOFR, as applicable.
(bc) Specified Asset Sale Fee. To the extent the Specified Asset Sale has not occurred on or prior to the twelve (12) month anniversary of the Funding Date, the Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders in accordance with the Applicable Percentage of Loans held by such Lender at such time, a fee equal to 1% of the original principal amount of the Loans funded on the Funding Date.
(cd) Duration Fees. If on the (i) one (1) year or (ii) two (2) year anniversary of the Funding Date, there remains any outstanding Loans, then, in each case, the Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders in accordance with the Applicable Percentage of Loans held by such Lender at such time, a duration fee (each, a “Duration Fee”) equal to the percentage set forth below of the aggregate amount of outstanding Loans as of such one (1) year or two (2) year anniversary of the Funding Date, as applicable:
Dates |
Percentage |
The first anniversary of the Funding Date |
1.00% |
The second anniversary of the Funding Date |
2.00% |
(de) Miscellaneous. The fees set forth herein shall be fully earned when paid and shall be non-refundable for any reason whatsoever. It is understood and agreed that the Administrative Agent and each Lender reserves the right to allocate, in whole or in part, to its Affiliates, the fees and original issue discount payable thereunder in such manner as the Administrative Agent, such Lenders and such Affiliates shall agree in their sole discretion.
All computations of interest shall be made on the basis of a 360-day year and actual days elapsed. Interest shall accrue on each Loan for the day on which such Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which such Loan or such portion is paid.
The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender in the ordinary course of business. The accounts or records maintained by each Lender shall be conclusive absent manifest error of the amount of Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall
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not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender a promissory note, which shall evidence such Lender’s Loans in addition to such accounts or records. Each such promissory note shall be in the form of Exhibit B (a “Note”). Each Lender may attach schedules to any of its Notes and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.
If any Lender shall, by exercising any right of setoff or otherwise, obtain payment in respect of any principal of or interest on its portion of any of the Loans or any other amounts due in connection therewith resulting in such Lender’s receiving payment of a proportion of the aggregate amount of the Loans and accrued interest thereon and other amounts due in connection therewith greater than its pro rata share thereof as provided herein, then the Lender shall (a) notify the Administrative Agent of such fact and (b) purchase (for cash at face value) participations in the portions of the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of, accrued interest on and other amounts due in connection with their respective portions of the Loans and other amounts owing them; provided, that:
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Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.
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applied solely to pay the Loans of all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of that Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section 2.12(a)(ii) shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.
ARTICLE III
TAXES, INCREASED COSTS AND YIELD PROTECTION
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under FATCA (such Taxes described in the foregoing clauses (w), (x), (y) and (z), “Excluded Taxes”), then the sum payable by the applicable Loan Party shall be increased by such additional amount or amounts as is necessary to ensure that after withholding or deduction of such Taxes other than Excluded Taxes (including such withholding and deduction applicable to additional amounts payable under this Section 3.01) the net amount actually received by the applicable Recipient will equal the full amount such Recipient would have received had no such withholding or deduction been required.
(ii) and (iv) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender. Without limiting the generality of the foregoing:
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Lender’s eligibility for such exemption) certifying as to such Lender’s entitlement to any available exemption from or reduction of withholding or deduction of Taxes.
The Borrower shall not be required to pay additional amounts to any Foreign Lender pursuant to this Section 3.01 with respect to taxes attributable to the failure of such Foreign Lender to comply with this paragraph 3.01(c).
Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes obsolete or inaccurate in any respect, it shall promptly update such form or certification or promptly notify the Administrative Agent and the Borrower of its inability to do so.
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amounts payable to the Administrative Agent for its own account and (y) executed originals of IRS Form W-8IMY with respect to any amounts payable to the Administrative Agent for the account of others, certifying that it is a “U.S. branch” that has agreed to be treated as a “U.S. person” or a qualified intermediary that has agreed to assume primary withholding obligations for Chapter 3 and 4 of the Code with respect to payments received by it from the Borrower in its capacity as Administrative Agent, as applicable, as contemplated by Section 1.1441-1(b)(2)(iv) of the United States Treasury Regulations.
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Loan), then, the Borrower will pay (in accordance with clause (c) below) to such Lender, as the case may be, such additional amount or amounts as will compensate such Lender, as the case may be, for such additional costs incurred or reduction suffered.
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If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund
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Loans whose interest is determined by reference to SOFR or Term SOFR, or to determine or charge interest rates based upon SOFR or Term SOFR, then, upon notice thereof by such Lender to the Borrower (through the Administrative Agent) (such notice, an “Illegality Notice”), (a) any obligation of such Lender to make or continue Term SOFR Loans or to convert Base Rate Loans to Term SOFR Loans shall be suspended, and (b) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Term SOFR component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Term SOFR component of the Base Rate, in each case, until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of an Illegality Notice, the Borrower shall prepay or, if applicable, convert all Term SOFR Loans to Base Rate Loans (the interest rate on which Base Rate Loans shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Term SOFR component of the Base Rate), either on the last day of the Interest Period therefor, if all affected Lenders may lawfully continue to maintain such Term SOFR Loan to such day, or immediately, if all affected Lenders may not lawfully continue to maintain such Term SOFR Loan, in each case, until the Administrative Agent is advised in writing by each affected Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon SOFR, the Term SOFR Reference Rate or Term SOFR. Upon any such prepayment or conversion following receipt of an Illegality Notice, the Borrower shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Sections 3.02(a), 3.02(b) and 3.04(a).
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter. In the event of any such determination, until the Administrative Agent has advised the Borrower that the circumstances giving rise to such notice no longer exist, any such Borrowing shall be made as a Base Rate Borrowing. Furthermore, if any Term SOFR Loan is outstanding on the date of the Borrower’s receipt of the notice from the Administrative Agent referred to in this Section 3.04(a), then until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, then on the last day of the Interest Period applicable to such Loan (or the next succeeding Business Day if such day is not a Business Day), such Loan shall be converted by the Administrative Agent to, and shall constitute, a Base Rate Loan on such day.
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Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (y) if a Benchmark Replacement is determined in accordance with clause (b) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders. If the Benchmark Replacement is Adjusted Daily Simple SOFR, all interest payments will be payable on a monthly.
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similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
All of the Loan Parties’ obligations under this Article III shall survive termination of the Commitments, repayment of all other Obligations hereunder and resignation of the Administrative Agent.
ARTICLE IV GUARANTY
Each of the Guarantors hereby jointly and severally guarantees to each Secured Party and the Administrative Agent as hereinafter provided, as primary obligor and not as surety, the prompt payment of the Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise), the Guarantors will, jointly and severally,
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promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration or otherwise) in accordance with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any other of the Loan Documents, the obligations of each Guarantor under this Agreement and the other Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under the Debtor Relief Laws or any comparable provisions of any applicable state law.
The obligations of the Guarantors under Section 4.01 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Loan Documents, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any law or regulation or other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.02 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor for amounts paid under this Article IV until such time as the Obligations (other than contingent indemnification obligations for which no claim has been asserted) have been paid in full and the Commitments have expired or terminated. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder, which shall remain absolute and unconditional as described above:
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With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Secured Parties exhaust any right, power or remedy or proceed against any Person under any of the Loan Documents, or any other agreement or instrument referred to in the Loan Documents, or against any other Person under any other guarantee of, or security for, any of the Obligations.
The obligations of the Guarantors under this Article IV shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any Secured Party, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Secured Parties on demand for all reasonable and documented out-of-pocket costs and expenses (but limited, in the case of legal counsel, to the reasonable and documented out-of-pocket fees, charges and disbursements of one primary counsel for the Secured Parties (taken as a whole), and, of a single local counsel to the Secured Parties (taken as a whole) in each relevant material jurisdiction (and, in the case of an actual or perceived conflict of interest where the party affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of one additional firm of counsel for all such affected parties (taken as a whole))) incurred by the Secured Parties in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.
Each Guarantor agrees that such Guarantor shall have no right of recourse to security for the Obligations, except through the exercise of rights of subrogation pursuant to Section 4.02 and through the exercise of rights of contribution pursuant to Section 4.06.
The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Secured Parties, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in Section 9.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.02) for purposes of Section 4.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Obligations being deemed to have become automatically due and payable), the Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of Section 4.01. The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Collateral Documents and that the Secured Parties may exercise their remedies thereunder in accordance with the terms thereof.
The Guarantors agree among themselves that, in connection with payments made hereunder, each Guarantor shall have contribution rights against the other Guarantors as permitted under applicable law. Such contribution rights shall be subordinate and subject in right of payment to the obligations of such Guarantors under the Loan Documents and no Guarantor shall exercise such rights of contribution until
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all Obligations (other than contingent indemnification obligations for which no claim has been asserted) have been paid in full and the Commitments have terminated.
The guarantee in this Article IV is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Obligations whenever arising.
ARTICLE V
CONDITIONS PRECEDENT TO COMMITMENTS AND BORROWINGS
This Agreement and the Commitments hereunder shall become effective on the Closing Date upon the satisfaction of the following conditions precedent:
The obligation of Lender to make its portion of the Loans to be advanced on the Funding Date hereunder is subject to the satisfaction of the following conditions precedent by the Lenders of each of the following conditions precedent during the Funding Period (the date of satisfaction or waiver thereof, the “Funding Date”):
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Pledge Agreement exist in the Organization Documents of the issuer of such shares save as otherwise agreed by the Administrative Agent;
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giving effect to the transactions contemplated by the Loan Documents shall be reasonably satisfactory to the Lenders.
$32,500,000 from the issuance of its Qualified Capital Stock on or prior to the Funding Date (the “Equity Raise”).
The conditions set forth in this Section 5.02 shall have occurred on or prior to expiration of the Funding Period (or the Commitments hereunder shall terminate at such time).
The obligation of each Lender to honor any Loan Notice is subject to the following conditions precedent:
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representation or warranty is already qualified by materiality or reference to Material Adverse Effect) as of such earlier date, and except that for purposes of this Section 5.03, the representations and warranties contained in subsections (a) and (b) of Section 6.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 7.01.
Each Loan Notice submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 5.03(a) and (b) have been satisfied on and as of the date of the applicable Borrowing.
ARTICLE VI REPRESENTATIONS AND WARRANTIES
The Loan Parties represent and warrant, unless otherwise indicated, as of the Closing Date and, the Funding Date and the Second Amendment Effective Date, to the Administrative Agent and the Lenders that:
Each Loan Party and each of its Subsidiaries (a) is duly organized, incorporated or formed, validly existing and (to the extent applicable under any such Laws) in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party have been duly authorized by all necessary corporate or other organizational action, and do not (a) contravene the terms of any of such Person’s Organization Documents, (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject, or
(c) violate any Law (including, without limitation, Regulation U or Regulation X issued by the FRB) except with respect to any conflict, breach, contravention or payment (but not creation of Liens) referenced in clause (b) to the extent that such conflict, breach, contravention or payment could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
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No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document other than (a) those that have already been obtained and are in full force and effect, (b) filings to perfect the Liens created by the Collateral Documents and (c) the filing of any applicable notices under securities laws.
Each Loan Document has been duly executed and delivered by each Loan Party that is party thereto. Each Loan Document constitutes a legal, valid and binding obligation of each Loan Party that is party thereto, enforceable against each such Loan Party in accordance with its terms, subject to applicable Debtor Relief Laws or other Laws affecting creditors’ rights generally and subject to general principles of equity.
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and cash flows of the Borrower and its Subsidiaries as of the dates thereof and for the periods covered thereby.
There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Responsible Officer of any Loan Party after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to the legality, validity or enforceability of this Agreement or any other Loan Document, or the consummation of any of the transactions contemplated hereby or (b) either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Each Loan Party and its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The property of each Loan Party and its Subsidiaries is subject to no Liens, other than Permitted Liens.
Except as could not reasonably be expected to have a Material Adverse Effect:
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does any Responsible Officer of any Loan Party have knowledge or reason to believe that any such notice will be received or is being threatened.
The Loan Parties and their Subsidiaries have filed all federal, state and other material tax returns and reports required to be filed, and have paid all federal, state and other material Taxes levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against any Loan Party or any Subsidiary that would, if made, have a Material Adverse Effect. Neither any Loan Party nor any Subsidiary thereof is party to any tax sharing agreement with any Person that is not a Loan Party.
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Each Loan Party has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, in each case of the foregoing, either individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other written information (other than information of a general economic or industry specific nature) furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished, and when taken as a whole) contains, when furnished, any material misstatement of fact or omits to state any fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that, with respect to financial projections, estimates, budgets or other forward-looking information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed by the Borrower to be reasonable at the time such information was prepared (it being understood that such information is as to future events and is not to be viewed as facts, is subject to significant uncertainties and contingencies, many of which are beyond the control of the Borrower and its Subsidiaries, that no assurance can be given that any particular projection, estimate or forecast will be realized and that actual results during the period or periods covered by any such projections, estimate, budgets or forecasts may differ significantly from the projected results and such differences may be material).
Each Loan Party and each Subsidiary is in compliance with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
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Governmental Authority (or comparable organization or office established in any country or pursuant to an international treaty or similar international agreement for the filing, recordation or registration of interests in intellectual property), together with relevant identifying information with respect to such Patents, (ii) all Trademarks of any Loan Party or any Subsidiary that are issued, or in respect of which an application has been filed or recorded, with the United States Patent and Trademark Office or with any other Governmental Authority (or comparable organization or office established in any country or pursuant to an international treaty or similar international agreement for the filing, recordation or registration of interests in intellectual property), together with relevant identifying information with respect to such Trademarks, (iii) all Copyrights of any Loan Party or any Subsidiary that are registered, or in respect of which an application for registration has been filed or recorded, with the United States Copyright Office or with any other Governmental Authority (or comparable organization or office established pursuant to an international treaty or similar international agreement for the filing, recordation or registration of interests in intellectual property), together with relevant identifying information with respect to such Copyrights, and (iv) each other item of Material Intellectual Property, owned or licensed by any Loan Party or any Subsidiary. Schedule 6.17(a) to the Disclosure Letter also sets forth a complete and accurate list as of the ClosingSecond Amendment Effective Date of all license agreements (inbound or outbound) of any Material Intellectual Property. No settlements or consents, covenants not to sue, nonassertion assurances, or releases have been entered into by any Loan Party or any Subsidiary or to which such Loan Party or Subsidiary is bound that adversely affects its rights to own or use any Material Intellectual Property.
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6.17(f) to the Disclosure Letter, no Material Intellectual Property constitutes Excluded Property (other than Material Intellectual Property subject to any inbound license entered into after the ClosingSecond Amendment Effective Date in accordance with Section 7.18). The consummation of the transactions contemplated hereby and the exercise by the Administrative Agent or the Lenders of any right or protection set forth in the Loan Documents will not constitute a breach or violation of, or otherwise affect the enforceability or approval of, (i) any licenses of any Material Intellectual Property owned or licensed by any Loan Party or Subsidiary or (ii) any Regulatory Authorizations.
The Borrower and its Subsidiaries, on a consolidated basis, are Solvent (after giving effect to the transactions contemplated hereby and the incurrence of Indebtedness related thereto).
Subject to Section 7.21, the Collateral Documents create valid security interests in, and Liens on, the Collateral purported to be covered thereby, which security interests and Liens will be, upon the timely and proper filings, deliveries, notations and other actions contemplated in the Collateral Documents, perfected security interests and Liens (to the extent that such security interests and Liens can be perfected by such filings, deliveries, notations and other actions), prior to all other Liens other than Permitted Liens.
Set forth on Schedule 6.20(a) to the Disclosure Letter is a complete and correct list of all real property located in the United States that is owned or leased by the Loan Parties as of the ClosingSecond Amendment Effective Date (with (x) a description of each real property that is Excluded Property and (y) a designation of whether such real property is owned or leased). Set forth on Schedule 6.20(b) to the Disclosure Letter is the taxpayer identification number and organizational identification number of each Loan Party as of the ClosingSecond Amendment Effective Date. The exact legal name and state of organization of (a) the Borrower (i) is as set forth on the signature pages hereto or (ii) as may be otherwise disclosed by the Loan Parties to the Administrative Agent in accordance with Section 8.12(c) and (b) each Guarantor is (i) as set forth on the signature pages hereto, (ii) as set forth on the signature pages to the Joinder Agreement pursuant to which such Guarantor became a party hereto or (iii) as may be otherwise disclosed by the Loan Parties to the Administrative Agent in accordance with Section 8.12(c). Except as set forth on Schedule 6.20(c) to the Disclosure Letter, no Loan Party has during the five years preceding the ClosingSecond Amendment Effective Date (i) changed its legal name, (ii) changed its state of organization, or (iii) been party to a merger, consolidation or other change in structure.
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instituted and maintained policies and procedures designed to promote and achieve compliance with applicable Sanctions.
The Borrower is under no requirement to register under the Securities Act, or the Trust Indenture Act of 1939, as amended, any of its presently outstanding securities or any of its securities that may subsequently be issued.
Set forth on Schedule 6.23 to the Disclosure Letter is a complete and accurate list of all Material Contracts of the Borrower and its Subsidiaries as of the ClosingSecond Amendment Effective Date, with an adequate description of the parties thereto, and amendments and modifications thereto. Each such Material Contract (a) is in full force and effect and is binding upon and enforceable against the Borrower and its Subsidiaries party thereto and, to the knowledge of any Responsible Officer of the Borrower, all other parties thereto in accordance with its terms (except for expirations of such Material Contracts in accordance with their terms), and (b) is not currently subject to any material breach or default by the Borrower or any Subsidiary or, to the knowledge of any Responsible Officer of the Borrower, any other party thereto. None of the Borrower nor any of its Subsidiaries has taken or failed to take any action that would permit any other Person party to any Material Contract to have, and, to the knowledge of any Responsible Officer of the Borrower, no such Person otherwise has, any defenses, counterclaims or rights of setoff thereunder. Other than those agreements entered into after the ClosingSecond Amendment Effective Date (but, in the case of such agreements, subject to Section 7.18), none of the Material Contracts are non-assignable by their terms (other than those certain agreements separately noted in Schedule 6.23 to the Disclosure Letter) or as a matter of law, or prevent the granting of a security interest therein. The consummation of the transactions contemplated by the Loan Documents and the exercise by the Administrative Agent or the Lenders of any right or protection set forth in the Loan Documents will not constitute a breach or violation of, or otherwise affect the enforceability of, or give rise to a right of termination in favor of any party to any Material Contract.
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valid and enforceable with the applicable Regulatory Agency. All required notices, registrations and listings, supplemental applications or notifications, reports (including reports of adverse experiences) and other required filings with respect to all material Products have been filed with the FDA, the DEA, and all other applicable Regulatory Agencies when due, except where the failure to do so could not reasonably be expected to result in a material adverse effect on any Product Development and Commercialization Activities.
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adverse regulatory action with respect to the Products or any Product Development and Commercialization Activities; and
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seizure or criminal action. No Product in the inventory of the Loan Parties or their respective Subsidiaries is adulterated or misbranded. All labels and labeling (including package inserts) and product information are in material compliance with applicable FDA and other Regulatory Agency requirements, and the Products are in material compliance with all classification, registration, listing, marking, tracking, reporting, recordkeeping and audit requirements of the FDA, the DEA, and any other Regulatory Agency. No Product is an article prohibited from introduction into interstate commerce under the provisions of Sections 404, 505 or 512 of the FDCA.
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There are no existing or threatened strikes, lockouts or other labor disputes involving the Borrower or any Subsidiary that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, hours worked by and payment made to employees of the Borrower and its Subsidiaries are not in violation of the Fair Labor Standards Act or any other applicable law, rule or regulation dealing with such matters.
Neither any Loan Party nor any Subsidiary is an EEA Financial Institution.
No real property subject to a Mortgage is a Flood Hazard Property unless the Administrative Agent shall have received the following: (a) the applicable Loan Party’s written acknowledgment of receipt of written notification from the Administrative Agent (i) as to the fact that such real property subject to a Mortgage is a Flood Hazard Property and (ii) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program,
(b) copies of insurance policies or certificates of insurance of the applicable Loan Party evidencing flood insurance reasonably satisfactory to the Administrative Agent and naming the Administrative Agent as loss payee on behalf of the Lenders and (c) such other flood hazard determination forms, notices and confirmations thereof as reasonably requested by the Administrative Agent. All flood hazard insurance policies required hereunder have been obtained and remain in full force and effect, and the premiums thereon have been paid in full.
ARTICLE VII AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations for which no claim has been asserted), the Loan Parties shall and shall cause each Subsidiary to:
Deliver to the Administrative Agent (for further distribution to each Lender):
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any qualification or exception as to the scope of such audit, and in the case of such consolidating statements certified by a Responsible Financial Officer of the Borrower to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Borrower and its Subsidiaries; and
Deliver to the Administrative Agent (for further distribution to each Lender):
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containing information regarding the amount of all Dispositions and Involuntary Dispositions, in each case, the Net Cash Proceeds of which exceed $1,000,000, all Debt Issuances, all Extraordinary Receipts the Net Cash Proceeds of which exceed $1,000,000 and all Acquisitions that occurred during the period covered by such financial statements;
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Loan Party or any Subsidiary by any Governmental Authority (including any Form 483s and warning letters).;
Documents required to be delivered pursuant to Section 7.01(a) or (b) or Section 7.02 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 11.02, or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided, that: (x) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender upon its request to the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (y) with respect to documents required to be delivered pursuant to Section 7.01(a) or (b) or Section 7.02(a), (b), (d) or (i), the Borrower shall notify the Administrative Agent (by facsimile or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery by a Lender, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
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Each notice pursuant to this Section 7.03(a) through (f) shall be accompanied by a statement of a Responsible Financial Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the applicable Loan Party has taken and proposes to take with respect thereto. Each notice pursuant to Section 7.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.
Pay and discharge, as the same shall become due and payable, (a) all its federal and state income and other material Taxes upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Loan Party or such Subsidiary, and (b) all lawful claims which, if unpaid, would by law become a Lien upon its property (other than Permitted Liens).
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Comply with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of
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Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted, or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (so long as a representative of the Borrower is provided a reasonable opportunity to participate in any such discussion with such accountants), all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be desired, upon reasonable advance notice to the Borrower; provided, however, so long as no Event of Default exists, only the Administrative Agent may exercise rights under this Section 7.10 and the Administrative Agent shall not exercise such rights more often than one (1) time in any fiscal year (excluding any such visits during the continuance of an Event of Default); provided, further, however, when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.
Use the proceeds of the Loans (a) to refinance existing Indebtedness of the Borrower and its Subsidiaries and (b) for other general corporate purposes, provided, that, in no event shall the proceeds of the Loans be used in contravention of any Loan Document.
Within thirty (30) days (or such longer period as the Administrative Agent shall agree in it is sole discretion) after the acquisition or formation of any Subsidiary:
(i) jurisdiction of organization or incorporation, (ii) number of shares of each class of Equity Interests outstanding, (iii) number and percentage of outstanding shares of each class owned (directly or indirectly) by the Borrower or any Subsidiary and (iv) number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and all other similar rights with respect thereto; and
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delivering to the Administrative Agent a Joinder Agreement or such other documents as the Administrative Agent shall reasonably request for such purpose, and (ii) deliver to the Administrative Agent documents of the types referred to in Sections 5.02(g) and (h) and, if requested by the Administrative Agent, favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (i)), all in form, content and scope reasonably satisfactory to the Administrative Agent.
Do, and cause each of its ERISA Affiliates to do, each of the following: (a) except as could not reasonably be expected to have a Material Adverse Effect, maintain each Plan in compliance with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state law, and (b) make all required contributions to any Plan subject to Section 412, Section 430 or Section 431 of the Internal Revenue Code, in each case, except as could not reasonably be expected to have a Material Adverse Effect.
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such longer period as the Administrative Agent shall agree in its sole discretion) to comply with this Section 7.14(b) with respect to any owned or leased real property acquired or leased after the Closing Date (such period to be measured from the date of acquisition of such real property or the signing date of the lease of such real property, as applicable)).
Comply in all material respects with each Material Contract of such Person.
At the end of each fiscal month after entering into or becoming bound by any Material Contract or any inbound license or agreement (other than (i) over-the-counter software that is commercially available to the public and (ii) any license of or agreement relating to Intellectual Property that is not Material Intellectual Property) after the Closing Date: (a) provide written notice to the Administrative Agent of the material terms of such Material Contract, license or agreement if (x) the actions described in clause (b) below would need to be taken with respect to such Material Contract, license or agreement if requested by the Administrative Agent or (y) the entering into or becoming bound by such Material Contract, license or agreement has not been previously disclosed in a public filing made with the SEC, in
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each case with a description of its anticipated and projected impact on such Person’s business and financial condition; and (b) take such commercially reasonable actions as the Administrative Agent may reasonably request to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for the Administrative Agent to be granted and perfect a valid security interest in such Material Contract, license or agreement and to fully exercise its rights under any of the Loan Documents in the event of a disposition or liquidation of the rights, assets or property that is the subject of such Material Contract, license or agreement.
(a) Conduct its business in compliance with applicable Anti-Corruption Laws and applicable Sanctions, and maintain policies and procedures designed to promote and achieve compliance with applicable Anti-Corruption Laws and applicable Sanctions; and (b) conduct its business in compliance, in all material respects, with applicable Anti-Money Laundering Laws.
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development, manufacture, use, sale or other commercialization of any Product) Infringes any Intellectual Property of that Person.
Within the time periods set forth therefor on Schedule 7.21 (or such longer periods of time as may be agreed to by the Administrative Agent in its sole discretion), deliver to the Administrative Agent such other documents, instruments, certificates or agreements as are listed on Schedule 7.21 or take such other actions as are described on Schedule 7.21, in each case in form and substance reasonably satisfactory to the Administrative Agent; provided that Schedule 7.21 can be supplemented or modified on the Funding Date with the consent of the Administrative Agent and the Borrower.2
The Borrower shall cause management of the Borrower and at the request of the Administrative Agents, other professionals, to attend conference calls with the Administrative Agent and the Lenders from time to time, but no less than once every two weeks.
ARTICLE VIII NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations for which
2 To include real estate collateral and landlord access letters
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no claim has been asserted), no Loan Party shall, nor shall it permit any Subsidiary to, directly or indirectly:
Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:
Letter;
(iii) that if overdue by more than thirty (30) days, are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established or (iv) with respect to which the failure to make payment could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
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acquisition or Investment; provided, that, such Liens do not at any time encumber any assets or property other than the assets or property financed by such Indebtedness and, for the avoidance of doubt, such Liens do not apply to any other assets or property of the Borrower or any Subsidiary;
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Make any Investments, except:
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Create, incur, assume or suffer to exist any Indebtedness, except:
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clause (ii) of this Section 8.03(e), shall not exceed an aggregate principal amount of $1,000,000 at any one time outstanding and (ii) purchase money Indebtedness (including obligations in respect of Capital Leases or Synthetic Leases) assumed in connection with a Permitted Acquisition or other Investment permitted by Section 8.02, that was incurred to finance the purchase of fixed assets, and renewals, refinancings and extensions thereof; provided, that, (x) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing (other than by an amount equal to unpaid interest and premium thereon, and any underwriting discounts, fees, commissions and expenses associated with such refinancing), (y) such Indebtedness shall not have been incurred in contemplation of such Permitted Acquisition or other Investment and (z) the total of all such Indebtedness assumed in reliance on this clause (ii) for all such Persons taken together, together with the total of all Indebtedness incurred by the Borrower and its Subsidiaries in reliance on clause (i) of this Section 8.03(e), shall not exceed an aggregate principal amount of $1,000,000 at any one time outstanding;
$6,116,672.72, (B) such Indebtedness is unsecured and does not mature prior to the ninety-first (91st) day after the Maturity Date, (C) such Indebtedness is subordinated to the Obligations at all times on terms and conditions that are reasonably satisfactory to the Administrative Agent on the ClosingSecond Amendment Effective Date;
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Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person; provided, that, notwithstanding the foregoing provisions of this Section 8.04 but subject to the terms of Sections 7.12 and 7.14, (a) the Borrower may merge or consolidate with any of its Subsidiaries, provided, that, the Borrower shall be the continuing or surviving Person, (b) any Loan Party (other than the Borrower) may merge or consolidate with any other Loan Party (other than the Borrower), (c) any Subsidiary that is not a Loan Party may be merged or consolidated with or into any Loan Party, provided, that, the continuing or surviving Person shall be such Loan Party or concurrently therewith become a Loan Party, (d) any Subsidiary that is not a Loan Party may be merged or consolidated with or into any other Subsidiary that is not a Loan Party, (e) any Subsidiary may dissolve, liquidate or wind up its affairs at any time, provided, that, such dissolution, liquidation or winding up could not reasonably be expected to have a Material Adverse Effect and all of its assets and business are transferred to a Loan Party or solely in the case of a Subsidiary that is not a Loan Party, another Subsidiary that is not a Loan Party prior to or concurrently with such dissolution, liquidation or winding up, (f) in connection with any Permitted Acquisition or other Investment permitted under Section 8.02 (other than by reference to this Section 8.04 (or any sub-clause hereof)) the Borrower or any Subsidiary may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it, so long as
Subsidiary (and, if such Subsidiary is a Domestic Subsidiary, a Wholly Owned Domestic Subsidiary), (ii) in the case of any such merger to which the Borrower is a party, the Borrower is the surviving Person, and (iii) in the case of any such merger to which a Loan Party (other than the Borrower) is a party, the surviving Person is such Loan Party or concurrently therewith becomes a Loan Party, and (g) in connection with any Disposition permitted under Section 8.05 (other than by reference to this Section 8.04 (or any sub-clause hereof)) any Subsidiary that is not a Loan Party may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it to consummate such Disposition.
Make any Disposition (which, for the avoidance of doubt, shall not include any Permitted Transfer), except that, (a) the Loan Parties may consummate the Specified Asset Sale and (b) the Borrower and each Subsidiary may make Dispositions if, with respect to any such Disposition, (i) the consideration paid in connection therewith shall be at least 75% cash or Cash Equivalents paid contemporaneous with consummation of the transaction and shall be in an amount not less than the fair market value of the property disposed of, (ii) no Default or Event of Default shall have occurred and be continuing both immediately prior to and after giving effect to such Disposition, (iii) such transaction does not involve the sale or other disposition of a minority equity interest in any Subsidiary, and (iv) the aggregate fair market value of all of the assets sold or otherwise disposed of in such Disposition together
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with the aggregate fair market value of all assets sold or otherwise disposed of by the Borrower and its Subsidiaries in all such transactions occurring during the term of this Agreement does not exceed
$2,000,000.
Declare or make, directly or indirectly, any Restricted Payment, except that:
Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the Closing Date or any business reasonably related or incidental thereto or which constitutes a reasonable extension or expansion thereof.
Enter into or permit to exist any transaction or series of transactions with any officer, director or Affiliate of such Person other than (a) (i) transactions solely among Loan Parties and (ii) transactions solely among Subsidiaries that are not Loan Parties, (b) transfers of cash and assets to any Loan Party,
(c) intercompany transactions expressly permitted by Section 8.02, 8.03, 8.04, 8.05 or 8.06 (in each case, other than by reference to this Section 8.08 (or any sub-clause hereof)), (d) normal and reasonable compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and reimbursement of expenses of officers and directors in the ordinary course of business,
(e) except as otherwise specifically limited in this Agreement, other transactions which are entered into on terms and conditions substantially as favorable to such Person as would be obtainable by it in a
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comparable arm’s-length transaction with a Person other than an officer, director or Affiliate and
(f) transactions set forth on Schedule 8.08 to the Disclosure Letter.
Enter into, or permit to exist, any Contractual Obligation that encumbers or restricts the ability of any such Person to (a) make Restricted Payments to any Loan Party, (b) pay any Indebtedness or other obligations owed to any Loan Party, (c) make loans or advances to any Loan Party, (d) transfer any of its property to any Loan Party, (e) pledge its property pursuant to the Loan Documents or any renewals, refinancings, exchanges, refundings or extension thereof or (f) in the case of the Borrower or any Wholly Owned Domestic Subsidiary, act as a Loan Party pursuant to the Loan Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (a) through (e) above) for (1) this Agreement and the other Loan Documents, (2) any document or instrument governing Indebtedness incurred pursuant to Section 8.03(e), provided, that, any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith, (3) any Permitted Lien or any document or instrument governing any Permitted Lien, provided, that, any such restriction contained therein relates only to the asset or assets subject to such Permitted Lien, (4) customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under Section 8.05 pending the consummation of such sale, (5) customary provisions regarding confidentiality or restricting assignment, pledges or transfer of any agreement entered into in the ordinary course of business, (6) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 8.02 and applicable solely to the assets of such joint ventures, so long as such provisions and restrictions remain in effect, and (7) restrictions or encumbrances in any agreement in effect at the time such Person becomes a Subsidiary, so long as such agreement was not entered into in contemplation of such Person becoming a Subsidiary.
Use the proceeds of any Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.
Make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due), refund, refinance or exchange of any Junior Debt of any Loan Party or any Subsidiary (other than (i) intercompany Indebtedness of the Borrower and its Subsidiaries permitted by Section 8.03 and (ii) unsecured Indebtedness incurred in reliance on Section 8.03(d), Section 8.03(f) or Section 8.03(k)) or make any payment in violation of any subordination provision applicable to such Junior Debt.
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Agent.
Notwithstanding any other provisions of this Agreement to the contrary, (a) permit any Loan Party or any Subsidiary to issue or have outstanding any shares of Disqualified Capital Stock or (b) create, incur, assume or suffer to exist any Lien on any Equity Interests of any Subsidiary, except for Permitted Liens.
Enter into any Sale and Leaseback Transaction.
Measuring Date |
Minimum Liquidity |
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Each of December 31, 2022, March 31, 2023, June 30, 2023 andThe last day of each calendar month ending September 30, 2023, December 31, 2023 and March 31, 2024 |
$4,000,000 |
The last day of the calendar month ending June 30, 2024 |
$3,500,000 |
Each of December 31, 2023, March 31, 2024, June 30, 2024 andThe last day of the calendar month ending September 30, 2024 |
$4,500,000 |
The last day of each fiscal quarter commencingcalendar month ending December 31, 2024 until the Maturity Date, March 31, 2025, June 30, 2025 and September 30, 2025 |
$5,000,000 |
The last day of each calendar month (other than the calendar months specified above) |
$1,500,000 |
Beginning with the fiscal quarter of the Borrower ending December 31, 2023, make or commit to make any Funded Capital Expenditure, other than Funded Capital Expenditures of the Borrower not exceeding $9,000,000 in the aggregate for the period of the four fiscal quarters of the Borrower most recently ended.
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ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Any of the following shall constitute an Event of Default:
(ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap
Contract) resulting from any event of default under such Swap Contract as to which the
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Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) and the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or
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If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:
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provided, however, that, upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, in each case without further act of the Administrative Agent or any Lender.
After the exercise of remedies provided for in Section 9.02 (or after the Loans have automatically become immediately due and payable as set forth in the proviso to Section 9.02), any amounts received by any Lender or the Administrative Agent on account of the Obligations shall be applied by the Administrative Agent in the following order:
First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;
Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including fees, charges and disbursements of counsel to the respective Lenders) arising under the Loan Documents and amounts payable under Article III, ratably among them in proportion to the respective amounts described in this clause Second payable to them;
Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on, and any compensation due with respect to, the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Third held by them;
Fourth, to payment of that portion of the Obligations constituting accrued and unpaid principal of the Loans, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fourth held by them; and
Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.
ARTICLE X ADMINISTRATIVE AGENT
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powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are incidental thereto. Except for the rights of the Borrower under Section 10.06, the provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Loan Party or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
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its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may affect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 11.01 and Section 9.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and non-appealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given in writing to the Administrative Agent by the Borrower or a Lender.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article V or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Loan Parties), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform
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any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
The Administrative Agent may resign as Administrative Agent at any time by giving thirty (30) days advance notice thereof to the Lenders and the Borrower and, thereafter, the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. Upon any such resignation, the Required Lenders shall have the right, subject to the approval of the Borrower (so long as no Event of Default under Section 9.01(a), 9.01(f) or 9.01(g) has occurred and is continuing; such approval not to be unreasonably withheld), to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, been approved (so long as no Event of Default under Section 9.01(a), 9.01(f) or 9.01(g) has occurred and is continuing) by the Borrower or have accepted such appointment within thirty (30) days after the Administrative Agent’s giving of notice of resignation, then the Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent reasonably acceptable to the Borrower (so long as no Default or Event of Default under Section 9.01(a), 9.01(f) or 9.01(g) has occurred and is continuing). Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Section 10.06 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. If no successor has accepted appointment as Administrative Agent by the date which is thirty
(30) days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective and the Required Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent
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shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 11.04.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion,
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular
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types or items of property, or to release any Guarantor from its obligations under the Guaranty, pursuant to this Section 10.09.
The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.
10.10 Erroneous Payments.
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otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part), then in each such case:
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obligations under the indemnification provisions of this Agreement and its applicable Commitments which shall survive as to such assigning Lender, (D) the Administrative Agent and the Borrower shall each be deemed to have waived any consents required under this Agreement to any such Erroneous Payment Deficiency Assignment, and (E) the Administrative Agent will reflect in the Register its ownership interest in the Loans subject to the Erroneous Payment Deficiency Assignment. For the avoidance of doubt, no Erroneous Payment Deficiency Assignment will reduce the Commitments of any Lender and such Commitments shall remain available in accordance with the terms of this Agreement.
(ii) Subject to Section 11.06 (but excluding, in all events, any assignment consent or approval requirements (whether from the Borrower or otherwise)), the Administrative Agent may, in its discretion, sell any Loans acquired pursuant to an Erroneous Payment Deficiency Assignment and upon receipt of the proceeds of such sale, the Erroneous Payment Return Deficiency owing by the applicable Lender shall be reduced by the net proceeds of the sale of such Loan (or portion thereof), and the Administrative Agent shall retain all other rights, remedies and claims against such Lender (and/or against any recipient that receives funds on its respective behalf). In addition, an Erroneous Payment Return Deficiency owing by the applicable Lender (x) shall be reduced by the proceeds of prepayments or repayments of principal and interest, or other distribution in respect of principal and interest, received by the Administrative Agent on or with respect to any such Loans acquired from such Lender pursuant to an Erroneous Payment Deficiency Assignment (to the extent that any such Loans are then owned by the Administrative Agent) and (y) may, in the sole discretion of the Administrative Agent, be reduced by any amount specified by the Administrative Agent in writing to the applicable Lender from time to time.
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counterclaim by the Administrative Agent for the return of any Erroneous Payment received, including, without limitation, any defense based on “discharge for value” or any similar doctrine.
ARTICLE XI MISCELLANEOUS
No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, further, that:
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pursuant to Section 10.09 (in which case such release may be made by the Administrative Agent acting alone);
provided, however, that, notwithstanding anything to the contrary herein, (i) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender, (ii) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code of the United States supersedes the unanimous consent provisions set forth herein and (iii) the Required Lenders shall determine whether or not to allow a Loan Party to use cash collateral in the context of a bankruptcy or insolvency proceeding and such determination shall be binding on all of the Lenders.
Notwithstanding anything to the contrary herein, the Administrative Agent and the Borrower may amend or modify this Agreement and any other Loan Document to (1) cure any factual or typographical error, omission, defect or inconsistency therein, (2) grant a new Lien for the benefit of the Lenders, extend an additional Lien over additional property for the benefit of the Lenders or join additional Persons as Loan Parties or (3) without the consent of any Lender, enter into amendments or modifications to this Agreement or any of the other Loan Documents or to enter into additional Loan Documents as the Administrative Agent deems appropriate in order to implement any Benchmark Replacement or any Benchmark Replacement Conforming Change or otherwise effectuate the terms of Section 3.04 or 2.06(d) in accordance with the terms thereof.
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Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided, that, for both clauses (i) and (ii), if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice, email or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
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Agent has on record (i) an effective address, contact name, telephone number, facsimile number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.
No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 10.01 for the benefit of all the Secured Parties; provided, however, that, the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Lender from exercising setoff rights in accordance with Section 11.08 (subject to the terms of Section 2.11), or (c) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that, if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 10.01 and (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 2.11, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
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of this Agreement and the other Loan Documents and (B) any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) or the administration of this Agreement and the other Loan Documents and (ii) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent or any Lender (but limited, in the case of legal counsel, to the reasonable and documented out-of-pocket fees, charges and disbursements of one primary counsel for the Administrative Agent and the Lenders (taken as a whole), and, of a single local counsel to the Administrative Agent and the Lenders (taken as a whole) in each relevant material jurisdiction (and, in the case of an actual or perceived conflict of interest where the party affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of one additional primary firm of counsel for all such affected parties (taken as a whole) and one additional firm of counsel for all such affected parties (taken as a whole) in each relevant material jurisdiction)), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made hereunder, including all such reasonable and documented out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.
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acting in its capacity or in fulfilling its role as Administrative Agent, or any similar role under this Agreement or any other Loan Document) that does not involve any act or omission of the Borrower or any of its Affiliates. This Section 11.04(b) shall not apply with respect to Taxes other than any Taxes that represent liabilities, obligations, losses, damages, penalties, claims, costs, expenses and disbursements arising from any third party claim or any other non-Tax claim.
(10) Business Days after demand therefor.
To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such
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payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
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Facility of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than
$1,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
(i) any unfunded Commitment if such assignment is to a Person that is not a Lender with a Commitment in respect of the applicable Facility, an Affiliate of such Lender or an Approved Fund with respect to such Lender or (ii) any Loan to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund.
(A) to the Borrower or any of the Borrower’s Affiliates or Subsidiaries, (B) to any Defaulting Lender or any of its Subsidiaries or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B) or
(C) to a natural Person.
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the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.02 and 11.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.
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obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 11.04(c) without regard to the existence of any participation.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided, that, such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in clauses (i) through (vi) of Section 11.01(a) that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Section 3.01 (subject to the requirements and limitations therein (it being understood that the documentation required under Section 3.01(c) shall be delivered to the participating Lender)) and Section 3.02 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided, that, such Participant (A) agrees to be subject to the provisions of Sections 3.05 and 11.13 as if it were an assignee under paragraph (b) of this Section and (B) shall not be entitled to receive any greater payment under Sections 3.01 or 3.02, with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 3.05 with respect to any Participant. To the fullest extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender; provided, that, such Participant agrees to be subject to Section 2.11 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts of (and stated interest on) each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations and Section 1.163-5 of the proposed United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of, and not disclose, the Information (as defined below), except that Information may be disclosed (a) to its
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Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information prior to such disclosure and instructed to keep such Information confidential), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), in which case the disclosing party agrees, to the extent permitted by law, rule or regulation and reasonably practicable, to promptly inform the Borrower, except with respect to any audit or examination conducted by bank accountants or any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; provided, that, (x) prior to any disclosure under this clause (c), the Administrative Agent or such Lender agrees to endeavor to provide the Borrower with prior notice thereof to the extent that the Administrative Agent or such Lender is permitted to provide such prior notice to the Borrower pursuant to the terms of applicable laws and regulations or such subpoena or legal process, as the case may be, and (y) any disclosure under this clause (c) pursuant to subpoena or similar legal process shall be limited solely to that portion of the Information as may be specifically compelled by such subpoena or similar legal process, (d) to any other party hereto, (e) as may be reasonably necessary in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to a written agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to a Loan Party and its obligations, this Agreement or payments hereunder, (g) on a confidential basis to (i) any rating agency in connection with rating the Borrower or its Subsidiaries or the credit facilities provided hereunder or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers or other market identifiers with respect to the credit facilities provided hereunder, (h) with the consent of the Borrower, (i) to the members of its investment committee (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential) or (j) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower who is not, to the knowledge of the Administrative Agent or such Lender, in breach of any obligation of confidentiality to any Loan Party or Subsidiary with respect to such Information.
For purposes of this Section, “Information” means all information received from a Loan Party or any Subsidiary relating to the Loan Parties or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by such Loan Party or any Subsidiary. Any Person required to maintain the confidentiality of, and not disclose, Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised a commercially reasonable degree of care to maintain the confidentiality of such Information.
If an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the prior written consent of the Administrative Agent, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under
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this Agreement or any other Loan Document to such Lender or its Affiliates, irrespective of whether or not such Lender or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch office or Affiliate of such Lender different from the branch office or Affiliate holding such deposit or obligated on such indebtedness; provided, that, in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.12 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or their respective Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided, that, the failure to give such notice shall not affect the validity of such setoff and application.
Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01 and Section 5.02, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imaging means (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement.
All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof and shall continue in full force and effect as long as any Loan or other Obligation (other than contingent indemnification obligations for which no claim has been asserted) hereunder shall remain unpaid or unsatisfied. Such representations and warranties have been or
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will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Borrowing, and shall continue in full force and effect as long as any Loan or any other Obligation (other than contingent indemnification obligations for which no claim has been asserted) hereunder shall remain unpaid or unsatisfied.
If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 11.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, then such provisions shall be deemed to be in effect only to the extent not so limited.
If the Borrower is entitled to replace a Lender pursuant to the provisions of Section 3.05, or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon written notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.06), all of its interests, rights (other than its existing rights to payments pursuant to Section 3.01 and 3.02) and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided, that:
Notwithstanding anything to the contrary set forth herein, the failure by any Lender replaced pursuant to this Section 11.13 to execute and deliver an Assignment and Assumption shall not impair the
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validity of the removal of such Lender and the mandatory assignment of such Lender’s Commitments and outstanding Loans pursuant to this Section 11.13 shall nevertheless be effective without the execution by such Lender of an Assignment and Assumption.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
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OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
The words “execute,” “execution,” “signed,” “signature” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower and the other Loan Parties that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the Act. The Borrower and the Loan Parties agree to, promptly following a request by the Administrative Agent or any Lender, provide all such other documentation and information that the Administrative Agent or such Lender requests in order to comply with its ongoing
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obligations under applicable “know your customer” rules and Anti-Money Laundering Laws, including the USA PATRIOT Act.
In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (a)(i) the arranging and other services regarding this Agreement provided by the Administrative Agent, RBC Capital Markets, and the Lenders are arm’s-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Administrative Agent, RBC Capital Markets and the Lenders on the other hand, (ii) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (b)(i) the Administrative Agent, RBC Capital Markets and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not and will not be acting as an advisor, agent or fiduciary, for the Borrower or any of Affiliates or any other Person and (ii) neither the Administrative Agent nor any Lender has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (c) the Administrative Agent, RBC Capital Markets and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Administrative Agent, RBC Capital Markets nor any Lender has any obligation to disclose any of such interests to the Borrower or its Affiliates. To the fullest extent permitted by law, the Borrower hereby waives and releases, any claims that it may have against the Administrative Agent, RBC Capital Markets or any Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
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Upon the request of the Borrower, the Administrative Agent agrees to execute and deliver to the applicable Loan Party such documents as the Borrower may reasonably request, in each case in accordance with the terms of the Loan Documents and this Section 11.20:
The Administrative Agent will promptly, in connection with the foregoing, at the Borrower’s expense, and the Lenders hereby authorize the Administrative Agent to, deliver to the applicable Loan Party any Collateral in the Administrative Agent’s possession following the release of such Collateral pursuant to the terms hereof.
To the extent that the Loan Documents provide support, through a guarantee or otherwise (including the Guaranty), for any Swap Contracts or any other agreement or instrument that is a QFC (such support, “QFC Credit Support”, and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if
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the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
[Remainder of Page Intentionally Left Blank]
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Annex B
[See attached]
Schedule 11.02
Certain Addresses for Notices
To Any Loan Party:
Ryan Lake
Chief Financial Officer Societal CDMO, Inc.
1 E. Uwchlan Avenue, Suite 112
Exton, PA 19341
Email: ryan.lake@recrocdmo.com With a copy to:
Jennifer Porter Goodwin Procter LLP One Commerce Square
2005 Market St., 32nd Floor Philadelphia, PA 19103
Email: jporter@goodwinlaw.com Phone: 445-207-7806
Kathryn P. Nordick
Troutman Pepper Hamilton Sanders LLP 3000 Two Logan Square
Eighteenth and Arch Streets Philadelphia, PA 19103
Email: kathryn.nordick@troutman.com Phone: 215-981-4379
To the Administrative Agent:
Royal Bank of Canada
155 Wellington Street West, 8th Floor Toronto, Ontario M5V 3K7
Canada
Attention: Manager, Agency Services Email: rbcmagnt@rbccm.com
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302
OF THE SARBANES OXLEY ACT OF 2002
I, J. David Enloe, Jr., certify that:
Date: August 14, 2023
/s/ J. David Enloe, Jr. |
J. David Enloe, Jr. |
President and Chief Executive Officer |
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302
OF THE SARBANES OXLEY ACT OF 2002
I, Ryan D. Lake, certify that:
Date: August 14, 2023
/s/ Ryan D. Lake |
Ryan D. Lake |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Societal CDMO, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:
Date: August 14, 2023
/s/ J. David Enloe, Jr. |
J. David Enloe, Jr. |
President and Chief Executive Officer |
(Principal Executive Officer) |
|
/s/ Ryan D. Lake |
Ryan D. Lake |
Chief Financial Officer (Principal Financial and Accounting Officer) |
Consolidated Balance Sheets (Parenthetical) (Unaudited) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Convertible preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Shares of convertible preferred stock issued | 0 | 450,000 |
Preferred stock, shares outstanding | 0 | 450,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 185,000,000 | 185,000,000 |
Common stock, shares issued | 90,046,925 | 84,588,868 |
Common stock, shares outstanding | 90,046,925 | 84,588,868 |
Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Income Statement [Abstract] | ||||
Revenue | $ 21,799,000 | $ 23,152,000 | $ 43,326,000 | $ 44,346,000 |
Operating expenses: | ||||
Cost of sales | 17,327,000 | 17,470,000 | 36,606,000 | 33,584,000 |
Selling, general and administrative | 5,272,000 | 5,160,000 | 9,934,000 | 10,870,000 |
Amortization of intangible assets | 168,000 | 220,000 | 352,000 | 441,000 |
Total operating expenses | 22,767,000 | 22,850,000 | 46,892,000 | 44,895,000 |
Operating (loss) income | (968,000) | 302,000 | (3,566,000) | (549,000) |
Interest expense | (2,314,000) | (3,430,000) | (4,459,000) | (6,848,000) |
Interest income | 109,000 | 9,000 | 240,000 | 14,000 |
Loss before income taxes | (3,173,000) | (3,119,000) | (7,785,000) | (7,383,000) |
Income tax expense | 39,000 | 0 | 111,000 | 0 |
Net loss | $ (3,212,000) | $ (3,119,000) | $ (7,896,000) | $ (7,383,000) |
Loss per share, Basic | $ (0.04) | $ (0.06) | $ (0.09) | $ (0.13) |
Loss per share, Diluted | $ (0.04) | $ (0.06) | $ (0.09) | $ (0.13) |
Weighted average shares outstanding, Basic | 87,330,496 | 56,598,706 | 86,072,074 | 56,475,626 |
Weighted average shares outstanding, Diluted | 87,330,496 | 56,598,706 | 86,072,074 | 56,475,626 |
Background |
6 Months Ended |
---|---|
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background | (1) Background Societal CDMO, Inc. (the “Company”) was incorporated in the Commonwealth of Pennsylvania on November 15, 2007. The Company is a bi-coastal contract development and manufacturing organization with capabilities spanning pre-investigational new drug development to commercial manufacturing and packaging for a wide range of therapeutic dosage forms with a primary focus on small molecules. With an expertise in solving complex manufacturing problems, the Company provides therapeutic development, end-to-end regulatory support, clinical and commercial manufacturing, aseptic fill/finish, lyophilization, packaging and logistics services to the global pharmaceutical market. Liquidity and capital resources The Company has incurred net losses since inception, including net losses for the three and six months ended June 30, 2023, and has an accumulated deficit of $273,531 as of June 30, 2023. As of June 30, 2023, the Company’s cash and cash equivalents were $4,703. The Company’s future operations are highly dependent on the profitability of its development and manufacturing operations. Management concluded that substantial doubt about its ability to continue as a going concern was raised as of the date of the issuance of these financial statements. However, management concluded that actions taken to date as well as its plans alleviate the substantial doubt that was raised. The Company’s credit agreement with Royal Bank of Canada contains certain financial and other covenants, including a minimum liquidity requirement applicable to certain quarter-ends of $4,000, and maximum leverage ratios, and includes limitations on, among other things, additional indebtedness, paying dividends in certain circumstances, acquisitions and certain investments. The credit agreement provides for certain mandatory prepayment events, including with respect to the proceeds of asset sales, extraordinary receipts, equity or debt issuances and other specified events, based on the terms of the credit agreement. Any failure to comply with the terms, covenants and conditions of the credit agreement or the debt agreements may result in an event of default under such agreements, which could have a material adverse effect on the business, financial condition and results of operations. The pharmaceutical industry is experiencing a slowdown in clinical development activities resulting from reduced cash funding and other liquidity resources and the Company is experiencing higher rates of customer attrition and development program delays that caused management to revise its 2023 earnings and cash projections during the second quarter of 2023. As a result of these factors, management took actions to amend its debt agreements to align financial covenants and other terms of the indebtedness with its revised projections (see note 16). Absent these amendments, management would not have been able to conclude that it was probable of complying with the provisions of its debt agreements through August 14, 2024. The Company believes that its results of operations will allow it to comply with the financial and other covenants and contractual requirements of the agreements for at least the next twelve months. The Company’s ability to comply is subject to the Company’s success in implementing certain cost control measures, reducing capital expenditures and managing working capital in order to improve its ongoing financial performance and its liquidity position. The Company may extend and or supplement the actions it is taking if it continues to experience adverse conditions described above, among others, that might impact the forecasted performance. If the Company is unable to achieve the results required to comply with the terms of its credit agreement in one or more quarters over the next twelve months, the Company may be required to take specific actions in addition to those described above, including but not limited to, additional cost control measures, or alternatively, seeking an amendment or waiver from its lenders. Obtaining a waiver or an amendment is not within the Company’s control, and if unsuccessful, the lenders may exercise the rights available to them under the credit agreement. |
Summary of Significant Accounting Principles |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Principles | (2) Summary of significant accounting principles Basis of presentation and principles of consolidation The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. In accordance with Securities and Exchange Commission’s (“SEC”) rules for interim financial statements, certain information required by U.S. GAAP may be condensed or omitted. The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s results for the interim periods. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The Company has determined that it operates in a single segment. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the annual audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Use of estimates The preparation of financial statements and the notes to the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates. Cash and cash equivalents Cash and cash equivalents represent cash in banks and highly liquid short-term investments that have maturities of three months or less when acquired. These highly liquid short-term investments are both readily convertible to known amounts of cash and so near to their maturity that they present insignificant risk of changes in value due to changes in interest rates. Accounts receivable, net Accounts receivable generally represent amounts billed for services provided under our customer contracts and are recorded at the invoiced amount net of an allowance for credit losses, if necessary. We apply judgment in assessing the ultimate realization of our receivables, and we estimate an allowance for credit losses based on various factors, such as the aging of our receivables, historical experience, and the financial condition of our customers. The allowance for credit losses was not material as of the balance sheet dates presented. Inventory Inventory is stated at the lower of cost or net realizable value. Included in inventory are raw materials and work-in-process used in the production of commercial products. Items are issued out of inventory using the first-in, first-out method. Adjustments to inventory are determined at the raw materials, work-in-process, and finished good levels to reflect obsolescence or impaired balances. Factors influencing inventory obsolescence include changes in demand, product life cycle, product pricing, physical deterioration and quality concerns. Property, plant and equipment, net Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which are as follows: to ten years for furniture, office and computer equipment; to ten years for manufacturing equipment; 40 years for buildings; and the shorter of the lease term or useful life for leasehold improvements. Repairs and maintenance costs are expensed as incurred. The Company reviews the carrying value of property, plant and equipment for recoverability whenever events occur or changes in circumstances indicate that the carrying amount of individual assets or asset groups may not be recoverable. The Company considers assets to be held for sale when (i) management commits to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) the asset is actively being marketed for sale at a price that is reasonable given the estimate of current market value; and (iv) the sale is probable and will be completed within one year. Upon designation of an asset as held for sale, the Company records the asset’s value at the lower of its carrying value plus selling costs or its estimated net realizable value. Goodwill and intangible assets Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company in a business combination. Goodwill is not amortized but assessed for impairment on an annual basis or more frequently if impairment indicators exist. The impairment analysis for goodwill consists of an optional qualitative assessment potentially followed by a quantitative analysis. If the Company determines that the carrying value of its reporting unit exceeds its fair value, an impairment charge is recorded for the excess. The Company performs its annual goodwill impairment test as of November 30th, or whenever an event or change in circumstance occurs that would require reassessment of the impairment of goodwill. In performing the evaluation, the Company assesses qualitative factors such as overall financial performance, actual and anticipated changes in industry and market conditions, and competitive environments. As a result of the most recent annual goodwill impairment test, the Company determined that there was no impairment of goodwill. Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful life. The Company is required to review the carrying value of definite-lived intangible assets for recoverability whenever events occur or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Contingencies The Company’s business exposes it to various contingencies including compliance with regulations, legal exposures and other matters. Loss contingencies are reflected in the financial statements based on management’s assessments of their expected outcome or resolution: • They are recognized as liabilities on the balance sheet if the potential loss is probable and the amount can be reasonably estimated. • They are disclosed if the potential loss is material and considered at least reasonably possible. Significant judgment is required to determine probability and whether the amount can be reasonably estimated. Due to uncertainties related to these matters, accruals are based only on the information available at the time. As additional information becomes available, the Company reassesses potential liabilities and may revise previous estimates. Revenue recognition The Company generates revenues from manufacturing, profit-sharing and development services for multiple pharmaceutical companies. Manufacturing Manufacturing, packaging and other related services revenue is recognized upon transfer of control of a product to a customer, generally upon shipment, based on a transaction price that reflects the consideration the Company expects to be entitled to as specified in the agreement with the commercial partner, which could include variable consideration such as pricing and volume-based adjustments. Profit-sharing In addition to manufacturing and packaging revenue, certain customers who use our technologies are subject to agreements that provide us intellectual property sales-based profit-sharing and/or royalties consideration, collectively referred to as profit-sharing, computed on the net product sales of the commercial partner. Profit-sharing revenues are generally recognized under the terms of the applicable license, development and/or supply agreement. The Company has determined that, in its arrangements, the license for intellectual property is not the predominant item to which the profit-sharing relates, so the Company recognizes revenue upon transfer of control of the manufactured product. In these cases, significant judgment is required to calculate the estimated variable consideration from such profit-sharing using the expected value method based on historical commercial partner pricing and deductions. Estimated variable consideration is partially constrained due to the uncertainty of price adjustments made by the Company’s commercial partners, which are outside of the Company’s control. Factors causing price adjustments by the Company’s commercial partners include increased competition in the products’ markets, mix of volume between the commercial partners’ customers, and changes in government pricing. Development Development revenue includes services associated with formulation, process development, clinical trial materials services, as well as custom development of manufacturing processes and analytical methods for a customer’s non-clinical, clinical and commercial products. Such revenues are recognized at a point in time or over time depending on the nature and particular facts and circumstances associated with the contract terms. In contracts that specify milestones, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments related to arrangements under which the Company has continuing performance obligations are deferred and recognized over the period of performance. Milestone payments that are not within the Company’s control, such as submission for approval to regulators by a commercial partner or approvals from regulators, are not considered probable of being achieved until those submissions are submitted by the customer or approvals are received. In contracts that require revenue recognition over time, the Company utilizes input or output methods, depending on the specifics of the contract, that compare the cumulative work-in-process to date to the most current estimates for the entire performance obligation. Under these contracts, the customer typically owns the product details and process, which have no alternative use. These projects are customized to each customer to meet its specifications, and typically only one performance obligation is included. Each project represents a distinct service that is sold separately and has stand-alone value to the customer. The customer also retains control of its product as the product is being created or enhanced by the Company’s services and can make changes to its process or specifications upon request. Contract assets represent revenue recognized for performance obligations completed or in process before an unconditional right to payment exists, and therefore invoicing or associated reporting from the customer regarding the computation of the net product sales has not yet occurred. Contract liabilities represent payments received from customers prior to the completion of associated performance obligations. Concentration of credit risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company manages its cash and cash equivalents based on established guidelines relative to diversification and maturities to maintain safety and liquidity. The Company’s accounts receivable balances are primarily concentrated among three customers, with balances in the aggregate accounting for 78% of the balance as of June 30, 2023. If any of these customers’ receivable balances should be deemed uncollectible, it could have a material adverse effect on the Company’s results of operations and financial condition. The Company is dependent on its relationships with a small number of commercial partners. The Company’s three largest customers generated 66% and 76% of revenues for the three months ended June 30, 2023 and 2022, respectively, and 75% and 72% of its revenues for the six months ended June 30, 2023 and 2022, respectively. Stock-based compensation expense The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. The Company accounts for forfeitures as they occur. Determining the appropriate fair value of stock options requires the use of subjective assumptions, including the expected life of the option and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and/or management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options was estimated using the “simplified method,” which is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses the historical volatility of its publicly traded stock in order to estimate future stock price trends. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option. Upon exercise of stock options or vesting of restricted stock units, the holder may elect to cover tax withholdings by forfeiting shares of an equivalent value. In such cases, the Company issues net new shares to the holder, pays the tax withholding on behalf of the participant and presents the payment similar to a capital distribution: a reduction to additional paid-in-capital and a financing cash outflow in the consolidated financial statements. Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. In assessing the realizability of net deferred tax assets, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. A full valuation allowance was recorded as of June 30, 2023 and December 31, 2022. Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the consolidated financial statements. The Company recognizes the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company does not anticipate significant changes in the amount of unrecognized income tax benefits over the next year. Leases The Company determines under U.S. GAAP if an arrangement is a lease at inception. The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Options to extend the lease are included in the lease term if the options are reasonably certain to be exercised. Operating lease expense is recognized on a straight-line basis over the lease term. In a sale-leaseback transaction, the Company determines if it relinquished control of the assets to the buyer-lessor. If control is not relinquished, it does not derecognize the asset and does not apply the lease accounting model. Operating lease balances are presented as separate captions on the balance sheets. Finance lease assets are included in property, plant and equipment. Finance lease liabilities are included in other liabilities. Income or loss per share Basic income or loss per share is determined by dividing net income or loss (the numerator) by the weighted average common shares outstanding during the period (the denominator). To calculate diluted income or loss per share, the numerator and denominator are adjusted to eliminate the income or loss and the dilutive effects on shares, respectively, caused by outstanding common stock options, warrants and unvested restricted stock units, using the treasury stock method, if the inclusion of such instruments would be dilutive. For all periods presented, the Company incurred a net loss. In periods of net loss, the inclusion of dilutive securities would be antidilutive because it would reduce the amount of loss incurred per share. As a result, no additional dilutive shares were included in diluted loss per share, and there were no differences between basic and diluted loss per share. The following table presents the potentially dilutive securities that were excluded from the computations of diluted loss per share:
Amounts in the table above reflect the common stock equivalents of the noted instruments. |
Inventory |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | (3) Inventory The following table presents the components of inventory:
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Intangible Assets, Net |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net | (4) Intangible assets, net The following table presents the components of other intangible assets:
The following table presents estimated future amortization of other intangible assets:
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Property, Plant and Equipment, Net |
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Property, Plant and Equipment | (5) Property, plant and equipment, net The following table presents the components of property, plant and equipment:
Interest expense capitalized to construction in process was $59 and $294 for the three months ended June 30, 2023 and 2022, respectively, and $266 and $563 for the six months ended June 30, 2023 and 2022, respectively. The Company is party to a sale and purchase agreement to sell approximately 121 acres of land adjacent to its Gainesville, Georgia manufacturing campus for expected proceeds of $9,075. The cost of the land has been removed from property, plant and equipment, and together with cumulative closing costs of $143 through June 30, 2023, is currently presented as a held-for-sale asset of $2,802 within prepaid expenses and other current assets. The completion of the land sale is subject to customary closing conditions for transactions of this type, including completion of title and environmental due diligence and receipt of certain zoning approvals and permits, which remained to be satisfied at June 30, 2023. |
Accrued Expenses and Other Current Liabilities |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities | (6) Accrued expenses and other current liabilities Accrued expenses and other current liabilities consist of the following:
Accrued transaction costs include costs incurred related to the refinancing completed in December 2022 which included the sale and subsequent leaseback of the Company’s commercial manufacturing campus located in Gainesville, Georgia (see note 9), the issuance of common and preferred stock, a borrowing of $36,900 under a new term loan with Royal Bank of Canada (see note 8) and a one-time cash transaction bonus to certain executive officers and employees. |
Commitments and Contingencies |
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Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (7) Commitments and contingencies Litigation The Company is involved, from time to time, in various claims and legal proceedings arising in the ordinary course of its business. The Company is not currently a party to any such claims or proceedings that, if decided adversely to it, would either individually or in the aggregate have a material adverse effect on its business, financial condition or results of operations. On July 2, 2022, a product liability lawsuit was filed against the Company and various other defendants in the State Court of Cobb County, Georgia that claimed injuries and damages caused by Plaintiff Jakob Cuble’s alleged ingestion of, among other things, Focalin XR. The complaint sought compensatory and punitive damages. On April 14, 2023, Plaintiff's counsel withdrew the case. Purchase commitments As of June 30, 2023, the Company had outstanding cancelable and non-cancelable purchase commitments in the aggregate amount of $7,992 related to inventory, capital expenditures and other goods and services. Employment agreements and certain other contingencies The Company has entered into employment agreements with each of its executive officers that provide for, among other things, severance commitments of up to $1,393 should the Company terminate the executive officers for convenience or if certain events occur following a change in control. In addition, the Company is subject to other contingencies of up to $4,597 in the aggregate if certain events occur following a change in control. |
Debt |
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Debt | (8) Debt The following table presents the components and classification of debt:
The following table presents the future maturity of debt principal:
Term loan under Credit Agreement See note 16 for information about an amendment to the Credit Agreement that occurred subsequent to June 30, 2023. The Company is currently party to a credit agreement (as amended from time to time, the “Credit Agreement”) with Royal Bank of Canada. The Credit Agreement has been fully drawn in the form of a term loan of $36,900. The outstanding principal amount will be repaid in quarterly amounts totaling $2,306, $3,229 and $923 during the twelve months ending June 30, 2024, 2025 and 2026, respectively. The final payment of all remaining outstanding principal is due on December 16, 2025. Subject to certain exceptions, the Company is required to make mandatory prepayments with the cash proceeds received in respect of asset sales, certain equity sales, extraordinary receipts, debt issuances, upon a change of control and specified other events. Additionally, the Company is obligated by December 14, 2023 to complete the sale of certain real property adjacent to its Gainesville, Georgia manufacturing campus (see note 5). If that property is not sold by December 14, 2023, the Company will be required to pay a fee of $369 and increase each of its quarterly principal payments by $231 until that property is sold and any mandatory prepayment is made. Because the Company concluded that the sale of the property is probable as of June 30, 2023, an additional $2,802 of debt principal has been presented as current, representing the carrying value of the current asset held for sale. The Credit Agreement also includes certain financial covenants that the Company will need to satisfy on a quarterly basis. As of June 30, 2023, the Company was in compliance with its covenants under the Credit Agreement. In connection with the Credit Agreement, the Company has paid financing costs. These costs are being recognized in interest expense using the effective interest method over the term of the Credit Agreement, resulting in non-cash interest expense of $ 233 and $469 for the three and six months ended June 30, 2023, respectively. The Credit Agreement bears interest at a floating rate equal to the three-month term Secured Overnight Financing Rate, or SOFR, with an initial floor of 1.00%, plus an applicable margin that is equal to 4.50% per annum for the first year, 5.00% for the second year and 5.50% for the third year, with quarterly interest payments due until maturity. At June 30, 2023, the overall effective interest rate, including cash paid for interest and non-cash interest expense, was 12.4%. Historical term loans with Athyrium The Company was previously party to a credit agreement with Athyrium Opportunities III Acquisition LP (“Athyrium Credit Agreement”). The Athyrium Credit Agreement included $100,000 of term loans at an interest rate equal to the three-month LIBOR rate plus 8.25% per annum. During the term of Athyrium Credit Agreement, the Company paid financing costs and accreted an exit fee. These costs were recognized in interest expense using the effective interest method, resulting in non-cash interest expense of $1,151 and $1,618 for the three and six months ended June 30, 2022, respectively. The Company repaid the term loans in full using the proceeds from the new Credit Agreement, the sale-leaseback transaction (see note 9) and the issuance of preferred and common stock (see note 10) in December 2022. Note with former equity holder of IriSys See note 16 for information about an amendment to the Note that occurred subsequent to June 30, 2023. In connection with the acquisition of IriSys, LLC (“IriSys”), the Company issued a subordinated promissory note to a former equity holder of IriSys in the aggregate principal amount of $6,117 (the “Note”). The Note is unsecured, has a three-year term, and bears interest at a rate of 6% per annum. The Note must be repaid in three equal installments through its maturity date, August 13, 2024. The Note may be prepaid in whole or in part at any time prior to the maturity date. The Note is expressly subordinated in right of payment and priority to the term loan under the Credit Agreement. The Note was initially recognized at fair value as part of the consideration paid for the acquisition of IriSys, resulting in an original discount recognized of $877 that is being recognized as interest expense using the effective interest method over the term of the Note. At June 30, 2023, the overall effective interest rate, including the amortization of the original discount, was 13.0%. |
Other liabilities |
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Jun. 30, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Other liabilities | (9) Other liabilities At June 30, 2023, other liabilities include a sale-leaseback liability of $38,589 and other liabilities of $1,131. Sale-leaseback liability In December 2022, the Company concurrently entered into sale and lease agreements related to its commercial manufacturing campus in Gainesville, Georgia. The selling price was $39,000, of which $1,750 was placed as a lease deposit and classified within other assets, resulting in cash proceeds to the Company of $37,250 in 2022. The lease is for an initial term of 20 years with four renewal options of ten years each. Rent under the lease will be payable monthly at a rate of $3,510 per year, increasing annually by 3%, except for the first year where annual base rent will increase by the change in the consumer price index, not to exceed 5%, if greater. The Company is responsible for the payment of all operating expenses, property taxes and insurance for the property. Pursuant to the terms of the lease, the Company will have a purchase option every ten years and a right of first offer and a right of first refusal to purchase the property should the buyer-lessor intend to sell the property to a third party. The Company determined that it did not relinquish control of the assets to the buyer-lessor. Therefore, the assets were not derecognized, and the selling price was recorded as a financial liability. As of June 30, 2023, the carrying value of the liability was $38,589, which is net of $838 of unamortized deferred financing costs. The Company will recognize interest expense at an approximately 11% imputed rate of interest over a term of 20 years that includes the amortization of the deferred financing costs over the term of the lease. The gross liability balance is scheduled to increase through 2034, at which point it will decrease through the end of lease term on December 31, 2042. |
Shareholders' Equity or Deficit |
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Jun. 30, 2023 | |
Equity [Abstract] | |
Shareholders' Equity or Deficit | (10) Shareholders’ equity or deficit Common stock On May 17, 2023, the Company's shareholders approved an amendment to the articles of incorporation to increase the number of authorized shares of common stock from 95,000,000 to 185,000,000. Convertible preferred stock In December 2022, the Company issued 450,000 shares of Series A Convertible Preferred Stock for proceeds of $11.00 per share. Each share was convertible into ten shares of common stock automatically upon approval by the Company’s shareholders to increase the number of authorized shares of common stock. As of June 30, 2023, no preferred stock was issued or outstanding. Warrants See note 16 for information about warrants that were issued subsequent to June 30, 2023. At June 30, 2023, warrants to purchase 402,126 shares of common stock were outstanding. The warrants were originally issued to Athyrium in connection with the Athyrium Credit Agreement, are equity-classified, exercisable at $1.50 per share and expire in November 2024. |
Revenue Recognition |
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Revenue Recognition | (11) Revenue recognition The following table presents changes in contract assets and liabilities:
Contract assets and contract liabilities are reported at the contract level. Contracts with multiple performance obligation are reported as a net contract asset or contract liability on the consolidated balance sheet. The reclassification to revenue appearing in the contract assets column results from the recognition of revenue on contract liabilities that are presented as a net contract asset at the beginning of the year. The following table disaggregates revenue by timing of revenue recognition:
The Company’s payment terms for manufacturing revenue and development services are typically 30 to 45 days. Profit-sharing revenue is recorded to accounts receivable in the quarter that the product is sold by the commercial partner upon reporting from the commercial partner and payment terms are generally 45 days after quarter end. |
Stock-Based Compensation |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | (12) Stock-based compensation In October 2013, the Company established an equity incentive plan that has been subsequently amended and restated to become the 2018 Amended and Restated Equity Incentive Plan (the “A&R Plan”). At June 30, 2023, a total of 299,809 shares were available for future grants under the A&R Plan. On December 1st of each year, pursuant to an “evergreen” provision of the A&R Plan, the number of shares available under the A&R Plan may be increased by the board of directors by an amount equal to 5% of the outstanding common stock on December 1st of that year. Stock options Stock options are exercisable generally for a period of ten years from the date of grant and generally vest over four years. The following table presents information about the fair value of stock options granted:
No options were exercised in the six months ended June 30, 2023. The intrinsic value of options exercised was negligible in the six months ended June 30, 2022. The following table presents information about stock option balances and activity:
Included in the table above are 1,043,949 options outstanding as of June 30, 2023 that were granted outside the A&R Plan. The grants were made pursuant to the inducement grant exception in accordance with Nasdaq Listing Rule 5635(c)(4). Restricted stock units Restricted stock units (“RSUs”) vest over six months to four years depending on the purpose of the award and sometimes include performance conditions in addition to service conditions. The fair value of RSUs on the date of grant is measured as the closing price of the Company’s common stock on that date. The weighted average grant-date fair value of RSUs awarded to employees was $1.30 in the six months ended June 30, 2023 and $1.32 in the six months ended June 30, 2022. The fair value of RSUs vested was $1,183 and $719 in the six months ended June 30, 2023 and 2022, respectively. The following table presents information about recent RSU activity:
Included in the table above are 73,506 time-based RSUs outstanding at June 30, 2023 that were granted outside of the A&R Plan. The grants were made pursuant to the inducement grant exception in accordance with Nasdaq Listing Rule 5635(c)(4). Other information The following table presents the classification of stock-based compensation expense:
As of June 30, 2023, there was $9,358 of unrecognized compensation expense related to unvested options and RSUs that are expected to vest and will be expensed over a weighted average period of 2.6 years. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (13) Income taxes The tax provision for interim periods is determined using the estimated annual effective consolidated tax rate, based on the current estimate of full-year earnings before taxes, adjusted for the impact of discrete quarterly items. The provision for income taxes was $39 and $111 for the three and six months ended June 30, 2023, respectively. There was no provision for income taxes for the three or six months ended June 30, 2022. The change in effective tax rate to (1)% in the 2023 period from 0% in the prior periods was due to the utilization of all net operating loss carryforwards without limitations during 2022 in connection with the sale-leaseback transaction (see note 9). |
Fair Value of Financial Instruments |
6 Months Ended |
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Jun. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | (14) Fair value of financial instruments The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” for fair value measurement recognition and disclosure purposes for its financial assets and financial liabilities that are remeasured and reported at fair value each reporting period. The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, short-term investments and certain warrants. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. Categorization is based on a three-tier valuation hierarchy, which prioritizes the inputs used in measuring fair value, as follows: • Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2: Inputs that are other than quoted prices in active markets for identical assets and liabilities, inputs that are quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are either directly or indirectly observable; and • Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Items measured at fair value on a recurring basis Cash equivalents of $2,525 at June 30, 2023 and $6,034 at December 31, 2022 consisted entirely of money market mutual funds whose fair value were determined using Level 1 measurements. Fair value disclosures The Company follows the disclosure provisions of FASB ASC Topic 825, “Financial Instruments” (ASC 825), for disclosure purposes for financial assets and financial liabilities that are not measured at fair value. As of June 30, 2023, the financial assets and liabilities recorded on the consolidated balance sheets that are not measured at fair value on a recurring basis include accounts receivable, accounts payable and accrued expenses. The carrying values of these financial assets and liabilities approximate fair value due to their short-term nature. The fair value of long-term debt, where a quoted market price is not available, is evaluated based on, among other factors, interest rates currently available to the Company for debt with similar terms, remaining payments and considerations of the Company’s creditworthiness. The Company determined that the recorded book value of its debt, a level 2 measurement, approximated fair value at June 30, 2023 due to the recent issuances of those instruments and taking into consideration management’s current evaluation of market conditions. |
Leases |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||
Lessee Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Leases | (15) Leases The Company is party to two operating leases for development facilities in California and Georgia that end in 2031 and 2025, respectively, as well as other immaterial operating leases for office space, storage and office equipment. The development facility leases each include options to extend, none of which are included in the lease terms. Short-term and variable lease costs were not material for the periods presented. The development facility leases do not provide an implicit rate, so the Company uses its incremental borrowing rate to discount the lease liabilities. Undiscounted future lease payments for the two development leases, which were the only material noncancelable leases at June 30, 2023, were as follows:
At June 30, 2023, the weighted average remaining lease term was 7.3 years, and the weighted average discount rate was 14.1%. Total lease cost was $321 and $485 for the three months ended June 30, 2023 and 2022, respectively, and $801 and $973 for the six months ended June 30, 2023 and 2022, respectively. |
Subsequent event |
6 Months Ended |
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Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
Subsequent event | (16) Subsequent events Amendment to Seller Note In August 2023, the Company and IriSys, Inc. (the “Seller”) entered into a First Amendment to Subordinated Promissory Note (the “Note Amendment”) pursuant to which the parties agreed to defer the due date of the payment due to the Seller on August 12, 2023 of $2,039 of principal, plus accrued interest, under the Subordinated Promissory Note to the earlier of (i) June 24, 2024; and (ii) the date on which the Company completes its previously announced sale of certain land at its Gainesville, Georgia location (see note 5). In addition, the Note Amendment provides that the Company will pay up to $1,000 of the deferred payment upon completion of certain financings. In consideration of Seller’s entry into the Note Amendment, the Company paid the Seller a $150 amendment fee, agreed to pay up to $50 of Seller’s legal fees in connection with the Note Amendment and issued the Seller a warrant to purchase 100,000 shares of the Company’s common stock, par value $0.01 per share at an exercise price of $1.00 with a term of three years. Amendment to the RBC Credit Agreement In August 2023, the Company amended its Credit Agreement with Royal Bank of Canada pursuant to a Second Amendment and Waiver to Credit Agreement (the “Credit Agreement Amendment”). Pursuant to the terms of the Credit Agreement Amendment: (i) the Company is obligated to make a $7,500 mandatory principal prepayment upon the sale of the Company’s real property located adjacent to its Gainesville, Georgia manufacturing campus (see note 5); (ii) effective for the fiscal quarter ending September 30, 2023 through the quarter ending March 31, 2024, the net leverage ratio is permitted to be no greater than 3.75:1.00, stepping down to 2.75:1.00 for each quarter thereafter; (iii) effective for the quarter ending September 30, 2023, the permitted fixed charge coverage ratio was decreased to 1.00:1.00, which increases to 1.05:1.00 for each quarter thereafter; (iv) the permitted quarterly minimum liquidity amount of $4,000 was extended through June 30, 2024, after which the quarterly minimum liquidity amount increases to $4,500 through September 30, 2024 and increases to $5,000 through September 30, 2025; (v) a new permitted monthly minimum liquidity amount was established applicable to all month-end dates, other than quarter-end dates, and equal to $1.5 million; and (vi) beginning with the quarter ending December 31, 2023, funded capital expenditures, as defined, cannot exceed $9,000 in the aggregate for the preceding twelve-month period. In connection with the amendment, the Company paid an amendment fee of $90. |
Summary of Significant Accounting Principles (Policies) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Principles of Consolidation | Basis of presentation and principles of consolidation The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. In accordance with Securities and Exchange Commission’s (“SEC”) rules for interim financial statements, certain information required by U.S. GAAP may be condensed or omitted. The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s results for the interim periods. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. The Company has determined that it operates in a single segment. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the annual audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. |
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Use of Estimates | Use of estimates The preparation of financial statements and the notes to the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates. |
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Cash and Cash Equivalents | Cash and cash equivalents Cash and cash equivalents represent cash in banks and highly liquid short-term investments that have maturities of three months or less when acquired. These highly liquid short-term investments are both readily convertible to known amounts of cash and so near to their maturity that they present insignificant risk of changes in value due to changes in interest rates. |
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Accounts Receivable, net | Accounts receivable, net Accounts receivable generally represent amounts billed for services provided under our customer contracts and are recorded at the invoiced amount net of an allowance for credit losses, if necessary. We apply judgment in assessing the ultimate realization of our receivables, and we estimate an allowance for credit losses based on various factors, such as the aging of our receivables, historical experience, and the financial condition of our customers. The allowance for credit losses was not material as of the balance sheet dates presented. |
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Inventory | Inventory Inventory is stated at the lower of cost or net realizable value. Included in inventory are raw materials and work-in-process used in the production of commercial products. Items are issued out of inventory using the first-in, first-out method. Adjustments to inventory are determined at the raw materials, work-in-process, and finished good levels to reflect obsolescence or impaired balances. Factors influencing inventory obsolescence include changes in demand, product life cycle, product pricing, physical deterioration and quality concerns. |
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Property, Plant and Equipment, net | Property, plant and equipment, net Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which are as follows: to ten years for furniture, office and computer equipment; to ten years for manufacturing equipment; 40 years for buildings; and the shorter of the lease term or useful life for leasehold improvements. Repairs and maintenance costs are expensed as incurred. The Company reviews the carrying value of property, plant and equipment for recoverability whenever events occur or changes in circumstances indicate that the carrying amount of individual assets or asset groups may not be recoverable. The Company considers assets to be held for sale when (i) management commits to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) the asset is actively being marketed for sale at a price that is reasonable given the estimate of current market value; and (iv) the sale is probable and will be completed within one year. Upon designation of an asset as held for sale, the Company records the asset’s value at the lower of its carrying value plus selling costs or its estimated net realizable value. |
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Goodwill and Intangible Assets | Goodwill and intangible assets Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company in a business combination. Goodwill is not amortized but assessed for impairment on an annual basis or more frequently if impairment indicators exist. The impairment analysis for goodwill consists of an optional qualitative assessment potentially followed by a quantitative analysis. If the Company determines that the carrying value of its reporting unit exceeds its fair value, an impairment charge is recorded for the excess. The Company performs its annual goodwill impairment test as of November 30th, or whenever an event or change in circumstance occurs that would require reassessment of the impairment of goodwill. In performing the evaluation, the Company assesses qualitative factors such as overall financial performance, actual and anticipated changes in industry and market conditions, and competitive environments. As a result of the most recent annual goodwill impairment test, the Company determined that there was no impairment of goodwill. Definite-lived intangible assets are amortized on a straight-line basis over their estimated useful life. The Company is required to review the carrying value of definite-lived intangible assets for recoverability whenever events occur or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. |
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Contingencies | Contingencies The Company’s business exposes it to various contingencies including compliance with regulations, legal exposures and other matters. Loss contingencies are reflected in the financial statements based on management’s assessments of their expected outcome or resolution: • They are recognized as liabilities on the balance sheet if the potential loss is probable and the amount can be reasonably estimated. • They are disclosed if the potential loss is material and considered at least reasonably possible. Significant judgment is required to determine probability and whether the amount can be reasonably estimated. Due to uncertainties related to these matters, accruals are based only on the information available at the time. As additional information becomes available, the Company reassesses potential liabilities and may revise previous estimates. |
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Revenue Recognition | Revenue recognition The Company generates revenues from manufacturing, profit-sharing and development services for multiple pharmaceutical companies. Manufacturing Manufacturing, packaging and other related services revenue is recognized upon transfer of control of a product to a customer, generally upon shipment, based on a transaction price that reflects the consideration the Company expects to be entitled to as specified in the agreement with the commercial partner, which could include variable consideration such as pricing and volume-based adjustments. Profit-sharing In addition to manufacturing and packaging revenue, certain customers who use our technologies are subject to agreements that provide us intellectual property sales-based profit-sharing and/or royalties consideration, collectively referred to as profit-sharing, computed on the net product sales of the commercial partner. Profit-sharing revenues are generally recognized under the terms of the applicable license, development and/or supply agreement. The Company has determined that, in its arrangements, the license for intellectual property is not the predominant item to which the profit-sharing relates, so the Company recognizes revenue upon transfer of control of the manufactured product. In these cases, significant judgment is required to calculate the estimated variable consideration from such profit-sharing using the expected value method based on historical commercial partner pricing and deductions. Estimated variable consideration is partially constrained due to the uncertainty of price adjustments made by the Company’s commercial partners, which are outside of the Company’s control. Factors causing price adjustments by the Company’s commercial partners include increased competition in the products’ markets, mix of volume between the commercial partners’ customers, and changes in government pricing. Development Development revenue includes services associated with formulation, process development, clinical trial materials services, as well as custom development of manufacturing processes and analytical methods for a customer’s non-clinical, clinical and commercial products. Such revenues are recognized at a point in time or over time depending on the nature and particular facts and circumstances associated with the contract terms. In contracts that specify milestones, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments related to arrangements under which the Company has continuing performance obligations are deferred and recognized over the period of performance. Milestone payments that are not within the Company’s control, such as submission for approval to regulators by a commercial partner or approvals from regulators, are not considered probable of being achieved until those submissions are submitted by the customer or approvals are received. In contracts that require revenue recognition over time, the Company utilizes input or output methods, depending on the specifics of the contract, that compare the cumulative work-in-process to date to the most current estimates for the entire performance obligation. Under these contracts, the customer typically owns the product details and process, which have no alternative use. These projects are customized to each customer to meet its specifications, and typically only one performance obligation is included. Each project represents a distinct service that is sold separately and has stand-alone value to the customer. The customer also retains control of its product as the product is being created or enhanced by the Company’s services and can make changes to its process or specifications upon request. Contract assets represent revenue recognized for performance obligations completed or in process before an unconditional right to payment exists, and therefore invoicing or associated reporting from the customer regarding the computation of the net product sales has not yet occurred. Contract liabilities represent payments received from customers prior to the completion of associated performance obligations. |
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Concentration of Credit Risk | Concentration of credit risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and accounts receivable. The Company manages its cash and cash equivalents based on established guidelines relative to diversification and maturities to maintain safety and liquidity. The Company’s accounts receivable balances are primarily concentrated among three customers, with balances in the aggregate accounting for 78% of the balance as of June 30, 2023. If any of these customers’ receivable balances should be deemed uncollectible, it could have a material adverse effect on the Company’s results of operations and financial condition. The Company is dependent on its relationships with a small number of commercial partners. The Company’s three largest customers generated 66% and 76% of revenues for the three months ended June 30, 2023 and 2022, respectively, and 75% and 72% of its revenues for the six months ended June 30, 2023 and 2022, respectively. |
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Stock-based Compensation Expense | Stock-based compensation expense The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. The Company accounts for forfeitures as they occur. Determining the appropriate fair value of stock options requires the use of subjective assumptions, including the expected life of the option and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and/or management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options was estimated using the “simplified method,” which is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses the historical volatility of its publicly traded stock in order to estimate future stock price trends. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option. Upon exercise of stock options or vesting of restricted stock units, the holder may elect to cover tax withholdings by forfeiting shares of an equivalent value. In such cases, the Company issues net new shares to the holder, pays the tax withholding on behalf of the participant and presents the payment similar to a capital distribution: a reduction to additional paid-in-capital and a financing cash outflow in the consolidated financial statements. |
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Income Taxes | Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. In assessing the realizability of net deferred tax assets, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. A full valuation allowance was recorded as of June 30, 2023 and December 31, 2022. Unrecognized income tax benefits represent income tax positions taken on income tax returns that have not been recognized in the consolidated financial statements. The Company recognizes the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company does not anticipate significant changes in the amount of unrecognized income tax benefits over the next year. |
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Leases | Leases The Company determines under U.S. GAAP if an arrangement is a lease at inception. The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Options to extend the lease are included in the lease term if the options are reasonably certain to be exercised. Operating lease expense is recognized on a straight-line basis over the lease term. In a sale-leaseback transaction, the Company determines if it relinquished control of the assets to the buyer-lessor. If control is not relinquished, it does not derecognize the asset and does not apply the lease accounting model. Operating lease balances are presented as separate captions on the balance sheets. Finance lease assets are included in property, plant and equipment. Finance lease liabilities are included in other liabilities. |
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Income or Loss Per Share | Income or loss per share Basic income or loss per share is determined by dividing net income or loss (the numerator) by the weighted average common shares outstanding during the period (the denominator). To calculate diluted income or loss per share, the numerator and denominator are adjusted to eliminate the income or loss and the dilutive effects on shares, respectively, caused by outstanding common stock options, warrants and unvested restricted stock units, using the treasury stock method, if the inclusion of such instruments would be dilutive. For all periods presented, the Company incurred a net loss. In periods of net loss, the inclusion of dilutive securities would be antidilutive because it would reduce the amount of loss incurred per share. As a result, no additional dilutive shares were included in diluted loss per share, and there were no differences between basic and diluted loss per share. The following table presents the potentially dilutive securities that were excluded from the computations of diluted loss per share:
Amounts in the table above reflect the common stock equivalents of the noted instruments. |
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Fair Value Measurement | The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” for fair value measurement recognition and disclosure purposes for its financial assets and financial liabilities that are remeasured and reported at fair value each reporting period. The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, short-term investments and certain warrants. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. Categorization is based on a three-tier valuation hierarchy, which prioritizes the inputs used in measuring fair value, as follows: • Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2: Inputs that are other than quoted prices in active markets for identical assets and liabilities, inputs that are quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are either directly or indirectly observable; and •
Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
Summary of Significant Accounting Principles (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Anti-Dilutive Securities | The following table presents the potentially dilutive securities that were excluded from the computations of diluted loss per share:
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Inventory (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventory | The following table presents the components of inventory:
|
Intangible Assets, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Components of Other Intangible Assets | The following table presents the components of other intangible assets:
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Schedule of Finite Lived Intangible Assets, Estimated Future Amortization Expense | The following table presents estimated future amortization of other intangible assets:
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Property, Plant and Equipment, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property, Plant and Equipment | The following table presents the components of property, plant and equipment:
|
Accrued Expenses and Other Current Liabilities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consist of the following:
Accrued transaction costs include costs incurred related to the refinancing completed in December 2022 which included the sale and subsequent leaseback of the Company’s commercial manufacturing campus located in Gainesville, Georgia (see note 9), the issuance of common and preferred stock, a borrowing of $36,900 under a new term loan with Royal Bank of Canada (see note 8) and a one-time cash transaction bonus to certain executive officers and employees. |
Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components and Classification of Debt | The following table presents the components and classification of debt:
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Schedule of Future Maturities of Debt | The following table presents the future maturity of debt principal:
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Revenue Recognition (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Contract Assets and Liabilities | The following table presents changes in contract assets and liabilities:
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Disaggregation of Revenue by Timing of Revenue Recognition | The following table disaggregates revenue by timing of revenue recognition:
|
Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Stock Options Granted | The following table presents information about the fair value of stock options granted:
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Summary of Stock Option Activity | The following table presents information about stock option balances and activity:
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Summary of Restricted Stock Units Activity | The following table presents information about recent RSU activity:
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Summary of Stock Based Compensation Expense | The following table presents the classification of stock-based compensation expense:
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Leases - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||
Lessee Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Schedule of Undiscounted Future Lease Payments for the Development Lease | Undiscounted future lease payments for the two development leases, which were the only material noncancelable leases at June 30, 2023, were as follows:
|
Background - Additional Information (Detail) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023
USD ($)
a
|
Dec. 31, 2022
USD ($)
|
|
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Entity incorporation date | Nov. 15, 2007 | |
Accumulated deficit | $ (273,531) | $ (265,635) |
Cash and cash equivalents | 4,703 | $ 14,995 |
Minimum liquidity requirement | $ 4,000 | |
Land [Member] | ||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
Area Of Land | a | 121 |
Summary of Significant Accounting Principles - Schedule of Anti-Dilutive Securities (Detail) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Restricted Stock Units [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of diluted weighted average shares outstanding | 3,367,297 | 1,576,166 | 2,883,887 | 1,514,461 |
Stock options [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of diluted weighted average shares outstanding | 7,523,524 | 8,279,256 | 7,418,326 | 7,383,008 |
Warrants [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of diluted weighted average shares outstanding | 402,126 | 348,664 | 402,126 | 348,664 |
Inventory - Components of Inventory (Detail) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 6,199 | $ 4,318 |
Work in process | 2,741 | 3,689 |
Finished goods | 3,919 | 2,294 |
Inventory | $ 12,859 | $ 10,301 |
Intangible Assets , Net - Summary of Components of Other Intangible Assets (Detail) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Gross value | $ 19,670 | $ 19,670 |
Accumulated amortization | 17,094 | 16,742 |
Carrying value | 2,576 | 2,928 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross value | 18,900 | 18,900 |
Accumulated amortization | 16,431 | 16,188 |
Carrying value | 2,469 | 2,712 |
Backlog [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross value | 460 | 460 |
Accumulated amortization | 353 | 261 |
Carrying value | 107 | 199 |
Trademarks and Trade Names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross value | 310 | 310 |
Accumulated amortization | $ 310 | 293 |
Carrying value | $ 17 |
Intangible Assets, Net - Schedule of Finite Lived Intangible Assets, Estimated Future Amortization Expense (Detail) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2024 | $ 593 | |
2025 | 486 | |
2026 | 486 | |
2027 | 486 | |
2028 | 486 | |
Thereafter | 39 | |
Carrying value | $ 2,576 | $ 2,928 |
Property, Plant and Equipment, Net - Schedule of Property, Plant and Equipment (Detail) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | $ 99,591 | $ 94,806 |
Less: accumulated depreciation | (48,379) | (44,441) |
Property, plant and equipment, net | 51,212 | 50,365 |
Land [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 604 | 604 |
Buildings and Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 22,867 | 22,751 |
Furniture, Office & Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 6,789 | 6,388 |
Manufacturing Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | 63,846 | 58,039 |
Construction in Progress [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment | $ 5,485 | $ 7,024 |
Property, Plant and Equipment, Net - Additional Information (Detail) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023
USD ($)
a
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2023
USD ($)
a
|
Jun. 30, 2022
USD ($)
|
|
Property, Plant and Equipment [Line Items] | ||||
Interest Expense | $ 2,314 | $ 3,430 | $ 4,459 | $ 6,848 |
Construction in Progress [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Interest Expense | $ 59 | $ 294 | $ 266 | $ 563 |
Land [Member] | ||||
Property, Plant and Equipment [Line Items] | ||||
Area Of Land | a | 121 | 121 | ||
Proceeds from Sale of property plant and equipment | $ 9,075 | |||
Carrying value of other assets | $ 2,802 | 2,802 | ||
Cumulative closing costs | $ 143 |
Accrued Expenses and Other Current Liabilities - Summary of Accrued Expenses and Other Current Liabilities (Detail) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Payables and Accruals [Abstract] | ||
Payroll and related costs | $ 2,902 | $ 4,276 |
Contract liabilities | 1,281 | 2,211 |
Accrued transaction costs | 781 | 3,653 |
Property, plant and equipment | 162 | 934 |
Other | 2,011 | 1,612 |
Total | $ 7,137 | $ 12,686 |
Accrued Expenses and Other Current Liabilities - Additional Information (Details) - Term loans under Credit Agreement [Member] - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
New term loan | $ 36,900 | |
Georgia [Member] | ||
New term loan | $ 36,900 |
Commitments and Contingencies - Additional Information (Detail) $ in Thousands |
Jun. 30, 2023
USD ($)
|
---|---|
Executive Officer [Member] | |
Supply Commitment [Line Items] | |
Potential severance commitments arrangement consideration | $ 1,393 |
Other Contingencies | 4,597 |
Purchase Commitment [Member] | |
Supply Commitment [Line Items] | |
Purchase commitment non cancelable and cancelable | $ 7,992 |
Debt - Schedule of Components and Classification of Debt (Detail) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Debt Instrument [Line Items] | ||
Debt principal | $ 40,395 | $ 41,317 |
Unamortized deferred issuance costs | (2,076) | (2,476) |
Unamortized original discount | (161) | (297) |
Carrying value of debt | 38,158 | 38,544 |
Current portion of debt | 7,148 | 7,577 |
Debt, net of current portion | 31,010 | 30,967 |
Carrying value of debt | 38,158 | 38,544 |
Term loans under Credit Agreement [Member] | ||
Debt Instrument [Line Items] | ||
Debt principal | 35,978 | 36,900 |
Current portion of debt | 2,802 | |
Note With Former [Member] | ||
Debt Instrument [Line Items] | ||
Debt principal | 4,078 | 4,078 |
Other [Member] | ||
Debt Instrument [Line Items] | ||
Debt principal | $ 339 | $ 339 |
Debt - Schedule of Future Maturities of Debt (Detail) $ in Thousands |
Jun. 30, 2023
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
2024 | $ 7,148 |
2025 | 5,299 |
2026 | 27,675 |
2027 | 42 |
2028 | 51 |
Thereafter | 180 |
Total debt principal | 40,395 |
Term loans under Credit Agreement [Member] | |
Debt Instrument [Line Items] | |
2024 | 2,306 |
2025 | 3,229 |
2026 | $ 923 |
Debt - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Debt Instrument [Line Items] | ||||||
Long term debt, maturity, year two | $ 7,148 | $ 7,148 | ||||
Long term debt, maturity, year three | 5,299 | 5,299 | ||||
Long term debt, maturity, year four | 27,675 | 27,675 | ||||
Carrying value of debt | 38,158 | 38,158 | $ 38,544 | |||
Current portion of debt | $ 7,148 | 7,148 | $ 7,577 | |||
Non-cash interest expense | $ 624 | $ 2,530 | ||||
Athyrium Opportunities I I I Acquisition Limited Partnership Credit Agreement [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Credit agreement | $ 100,000 | |||||
Term loan interest rate, Description | an interest rate equal to the three-month LIBOR rate plus 8.25% per annum | |||||
Non-cash interest expense | $ 1,151 | $ 1,618 | ||||
Athyrium Opportunities I I I Acquisition Limited Partnership Credit Agreement [Member] | LIBOR [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Term loan variable interest rate | 8.25% | |||||
Note With Former [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, maturity date | Aug. 13, 2024 | Aug. 13, 2024 | ||||
Carrying value of debt | $ 6,117 | $ 6,117 | ||||
Debt Instrument, Interest Rate, Stated Percentage | 6.00% | 6.00% | ||||
Unamortized original discount | $ 877 | $ 877 | ||||
Debt Instrument, Interest Rate, Basis for Effective Rate | 13.0 | |||||
Long-term debt term | 3 years | 3 years | ||||
Term loans under Credit Agreement [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Credit agreement | $ 36,900 | $ 36,900 | ||||
Long term debt, maturity, year two | 2,306 | 2,306 | ||||
Long term debt, maturity, year three | 3,229 | 3,229 | ||||
Long term debt, maturity, year four | 923 | $ 923 | ||||
Repayment Terms | The outstanding principal amount will be repaid in quarterly amounts totaling $2,306, $3,229 and $923 during the twelve months ending June 30, 2024, 2025 and 2026, respectively. The final payment of all remaining outstanding principal is due on December 16, 2025. | |||||
Term loan interest rate, Description | interest at a floating rate equal to the three-month term Secured Overnight Financing Rate, or SOFR, with an initial floor of 1.00%, plus an applicable margin that is equal to 4.50% per annum for the first year, 5.00% for the second year and 5.50% for the third year, with quarterly interest payments due until maturity. | |||||
Debt instrument, early repayment terms | Subject to certain exceptions, the Company is required to make mandatory prepayments with the cash proceeds received in respect of asset sales, certain equity sales, extraordinary receipts, debt issuances, upon a change of control and specified other events. Additionally, the Company is obligated by December 14, 2023 to complete the sale of certain real property adjacent to its Gainesville, Georgia manufacturing campus (see note 5). If that property is not sold by December 14, 2023, the Company will be required to pay a fee of $369 and increase each of its quarterly principal payments by $231 until that property is sold and any mandatory prepayment is made. Because the Company concluded that the sale of the property is probable as of June 30, 2023, an additional $2,802 of debt principal has been presented as current, representing the carrying value of the current asset held for sale. | |||||
Fee on debt instrument | 369 | |||||
Increase in qauterly repayments | $ 231 | |||||
Current portion of debt | $ 2,802 | $ 2,802 | ||||
Effective interest rate | 12.40% | 12.40% | ||||
Non-cash interest expense | $ 233 | $ 469 | ||||
Term loans under Credit Agreement [Member] | Debt Instrument, Redemption, Period One [Member] | Floor [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Term loan variable interest rate | 1.00% | |||||
Term loans under Credit Agreement [Member] | Debt Instrument, Redemption, Period One [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Term loan variable interest rate | 4.50% | |||||
Term loans under Credit Agreement [Member] | Debt Instrument, Redemption, Period Two [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Term loan variable interest rate | 5.00% | |||||
Term loans under Credit Agreement [Member] | Debt Instrument, Redemption, Period Three [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Term loan variable interest rate | 5.50% |
Other liabilities - Additional Information (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
Accelerated Share Repurchases [Line Items] | ||
Sale Leaseback Liability | $ 38,589 | |
Other Liabilities | $ 39,720 | $ 39,225 |
Sale lease back transaction description of assets | In December 2022, the Company concurrently entered into sale and lease agreements related to its commercial manufacturing campus in Gainesville, Georgia. The selling price was $39,000, of which $1,750 was placed as a lease deposit and classified within other assets, resulting in cash proceeds to the Company of $37,250 in 2022. The lease is for an initial term of 20 years with four renewal options of ten years each. Rent under the lease will be payable monthly at a rate of $3,510 per year, increasing annually by 3%, except for the first year where annual base rent will increase by the change in the consumer price index, not to exceed 5%, if greater. The Company is responsible for the payment of all operating expenses, property taxes and insurance for the property. Pursuant to the terms of the lease, the Company will have a purchase option every ten years and a right of first offer and a right of first refusal to purchase the property should the buyer-lessor intend to sell the property to a third party. | |
Sale lease back transaction date | December 2022 | |
Lease Deposit | $ 1,750 | |
Lessee,lease, description | The lease is for an initial term of 20 years with four renewal options of ten years each. Rent under the lease will be payable monthly at a rate of $3,510 per year, increasing annually by 3%, except for the first year where annual base rent will increase by the change in the consumer price index, not to exceed 5%, if greater. | |
Lessee, lease, renewal term | 10 years | |
Proceeds from sales-lease back liability | $ 37,250 | |
Lease initial term | 20 years | |
Annual base rent under the lease | $ 3,510 | |
Percentage of increase in rent amount | 3.00% | |
Company recognized liability | $ 38,589 | |
Unamortized deferred financing costs | $ 838 | |
Imputed rate of interest | 11.00% | |
Term of contract under recognize interest expense | 20 years | |
Description of sale leaseback liability, gross liability period | The gross liability balance is scheduled to increase through 2034, at which point it will decrease through the end of lease term on December 31, 2042. | |
Maximum [Member] | ||
Accelerated Share Repurchases [Line Items] | ||
Percentage of increase in rent amount | 5.00% | |
Gainesville, Georgia | ||
Accelerated Share Repurchases [Line Items] | ||
Other Liabilities | $ 1,131 | |
Selling price | $ 39,000 |
Revenue Recognition - Disaggregation of Revenue by Timing of Revenue Recognition (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Disaggregation Of Revenue [Line Items] | ||||
Revenue | $ 21,799 | $ 23,152 | $ 43,326 | $ 44,346 |
Point In Time [Member] | ||||
Disaggregation Of Revenue [Line Items] | ||||
Revenue | 16,368 | 19,406 | 33,181 | 36,286 |
Over Time [Member] | ||||
Disaggregation Of Revenue [Line Items] | ||||
Revenue | $ 5,431 | $ 3,746 | $ 10,145 | $ 8,060 |
Stock-Based Compensation - Fair Value of Stock Options Granted (Detail) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Weighted average grant date fair value | $ 0.96 | $ 1.02 |
Assumptions used to determine fair value: | ||
Expected dividend yield | 0.00% | 0.00% |
Minimum [Member] | ||
Assumptions used to determine fair value: | ||
Range of expected option life | 5 years 6 months | 5 years 6 months |
Expected volatility | 79.00% | 79.00% |
Risk-free interest rate | 3.50% | 1.50% |
Maximum [Member] | ||
Assumptions used to determine fair value: | ||
Range of expected option life | 6 years | 6 years |
Expected volatility | 83.00% | 81.00% |
Risk-free interest rate | 4.10% | 3.00% |
Stock-Based Compensation - Summary of Restricted Stock Units Activity (Detail) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Weighted average grant date fair value, Granted | $ 0.96 | $ 1.02 |
Restricted Stock Units [Member] | ||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Number of shares, Beginning balance | 2,061,866 | |
Number of shares, Granted | 2,640,762 | |
Number of shares, Vested | (1,160,599) | |
Number of shares, Forfeited | (45,049) | |
Number of shares, Ending balance | 3,496,980 | |
Weighted average grant date fair value, Beginning balance | $ 1.71 | |
Weighted average grant date fair value, Granted | 1.30 | $ 1.32 |
Weighted average grant date fair value, Vested | 1.53 | |
Weighted average grant date fair value, Forfeited | 2.37 | |
Weighted average grant date fair value, Ending balance | $ 2.69 |
Stock-Based Compensation - Summary of Stock Based Compensation Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Stock based compensation expense | $ 1,593 | $ 1,408 | $ 2,637 | $ 2,887 |
Cost Of Sales [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Stock based compensation expense | 588 | 525 | 995 | 916 |
Selling General And Administrative Expenses [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Stock based compensation expense | $ 1,005 | $ 883 | $ 1,642 | $ 1,971 |
Income Taxes - Additional Information (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ 39,000 | $ 0 | $ 111,000 | $ 0 |
Effective income tax rate | (1.00%) | 0.00% |
Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Money Market Mutual Funds [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | ||
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items] | ||
Cash equivalents | $ 2,525 | $ 6,034 |
Leases - Additional Information (Detail) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2023
USD ($)
Lease
|
Jun. 30, 2022
USD ($)
|
|
Lessee Lease Description [Line Items] | ||||
Number of Operating Lease | 2 | |||
Number of Development Lease | 2 | |||
Operating lease, weighted average remaining term | 7 years 3 months 18 days | 7 years 3 months 18 days | ||
Operating lease, weighted average discount rate percent | 14.10% | 14.10% | ||
Total operating lease, cost | $ | $ 321 | $ 485 | $ 801 | $ 973 |
California [Member] | ||||
Lessee Lease Description [Line Items] | ||||
Operating lease, option to extend | The development facility leases each include options to extend, none of which are included in the lease terms. | |||
Operating lease expiration year | 2031 | |||
Georgia [Member] | ||||
Lessee Lease Description [Line Items] | ||||
Operating lease expiration year | 2025 |
Leases - Schedule of Undiscounted Future Lease Payments for the Development Lease (Detail) $ in Thousands |
Jun. 30, 2023
USD ($)
|
---|---|
Lessee Disclosure [Abstract] | |
2024 | $ 1,179 |
2025 | 1,208 |
2026 | 1,094 |
2027 | 1,112 |
2028 | 1,143 |
Thereafter | 3,109 |
Total lease payments | 8,845 |
Less imputed interest | (3,371) |
Total operating lease liabilities | $ 5,474 |
Subsequent Events - Additional Information (Detail) $ / shares in Units, $ in Thousands |
1 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Aug. 31, 2023
USD ($)
$ / shares
shares
|
Jun. 30, 2023
USD ($)
$ / shares
|
Jun. 30, 2022
USD ($)
|
Aug. 12, 2023
USD ($)
|
Dec. 31, 2022
$ / shares
|
|
Subsequent Event [Line Items] | |||||
Common stock, par value | $ / shares | $ 0.01 | $ 0.01 | |||
Capital expenditure | $ 652 | $ 582 | |||
Subsequent Event [Member] | Tranche One [Member] | |||||
Subsequent Event [Line Items] | |||||
Minimum Liquidity Amount | $ 4,000 | ||||
Subsequent Event [Member] | Note Amendment [Member] | |||||
Subsequent Event [Line Items] | |||||
Principal amount | $ 2,039 | ||||
Deferred payment | 1,000 | ||||
Amendment Fee | 150 | ||||
Legal fees | $ 50 | ||||
Warrant issued to purchase shares | shares | 100,000 | ||||
Warrant, exercise price per share | $ / shares | $ 1.00 | ||||
Common stock, par value | $ / shares | $ 0.01 | ||||
Term of agreement to purchase warrants | 3 years | ||||
Subsequent Event [Member] | Credit Agreement Amendment [Member] | |||||
Subsequent Event [Line Items] | |||||
Amendment Fee | $ 90 | ||||
Debt instrument, early repayment terms | Pursuant to the terms of the Credit Agreement Amendment: (i) the Company is obligated to make a $7,500 mandatory principal prepayment upon the sale of the Company’s real property located adjacent to its Gainesville, Georgia manufacturing campus (see note 5); (ii) effective for the fiscal quarter ending September 30, 2023 through the quarter ending March 31, 2024, the net leverage ratio is permitted to be no greater than 3.75:1.00, stepping down to 2.75:1.00 for each quarter thereafter; (iii) effective for the quarter ending September 30, 2023, the permitted fixed charge coverage ratio was decreased to 1.00:1.00, which increases to 1.05:1.00 for each quarter thereafter; (iv) the permitted quarterly minimum liquidity amount of $4,000 was extended through June 30, 2024, after which the quarterly minimum liquidity amount increases to $4,500 through September 30, 2024 and increases to $5,000 through September 30, 2025; (v) a new permitted monthly minimum liquidity amount was established applicable to all month-end dates, other than quarter-end dates, and equal to $1.5 million; and (vi) beginning with the quarter ending December 31, 2023, funded capital expenditures, as defined, cannot exceed $9,000 in the aggregate for the preceding twelve-month period. In connection with the amendment, the Company paid an amendment fee of $90. | ||||
Principal prepayment | $ 7,500 | ||||
Minimum liquidity amount for month end date | $ 1,500 | ||||
Subsequent Event [Member] | Credit Agreement Amendment [Member] | Maximum [Member] | |||||
Subsequent Event [Line Items] | |||||
Maximum Leverage Ratio | 3.75 | ||||
Minimum Fixed Charge Ratio | 1.05 | ||||
Subsequent Event [Member] | Credit Agreement Amendment [Member] | Minimum [Member] | |||||
Subsequent Event [Line Items] | |||||
Maximum Leverage Ratio | 2.75 | ||||
Minimum Fixed Charge Ratio | 1.00 | ||||
Capital expenditure | $ 9,000 | ||||
Subsequent Event [Member] | Credit Agreement Amendment [Member] | Tranche Two [Member] | Maximum [Member] | |||||
Subsequent Event [Line Items] | |||||
Minimum Liquidity Amount | 4,500 | ||||
Subsequent Event [Member] | Credit Agreement Amendment [Member] | Tranche Three [Member] | Maximum [Member] | |||||
Subsequent Event [Line Items] | |||||
Minimum Liquidity Amount | $ 5,000 |
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