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Exhibit 10.66
FIRST AMENDMENT TO LOAN AGREEMENT
BETWEEN
SEQUANA THERAPEUTICS, INC.
AND
THE SUMITOMO BANK, LIMITED
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "First Amendment") is made
and entered into as of January 8, 1998 by and between SEQUANA THERAPEUTICS,
INC., a California corporation ("Sequana" or the "Borrower") and THE SUMITOMO
BANK, LIMITED, a Japanese banking corporation (the "Bank").
RECITALS:
A. The Borrower and the Bank entered into that certain loan agreement
dated October 23, 1996 (the "Loan Agreement"). Any capitalized terms which are
not defined herein shall have the meaning ascribed to such capitalized terms in
the Loan Agreement.
B. Pursuant to the Loan Agreement and the other Loan Documents, Bank
agreed to make the Loan to Borrower in the aggregate principal amount of Seven
Million Dollars ($7,000,000).
C. The Bank, as Agent, and the Bank and Silicon Valley Bank, a
California banking corporation ("SVB"), as Lender entered into that certain loan
agreement dated September 29, 1997 with Arris Pharmaceutical Corporation, a
Delaware corporation ("Arris") (the "Arris Loan Agreement").
D. Pursuant to the Arris Loan Agreement, the Bank and SVB, as Lender,
together agreed to make a loan to Arris in the aggregate principal amount of
Twenty Million Dollars ($20,000,000) with the sum Eleven Million Eight Hundred
Thousand and No/100 Dollars ($11,800,000) being the initial loan disbursement
under the Arris Loan Agreement.
E. Sequana has reached an agreement with Arris pursuant to which Beagle
Acquisition Sub, Inc., a California corporation and wholly owned subsidiary of
Arris formed solely to effect the merger transaction, will merge with and into
Sequana pursuant to the terms of a Reorganization Agreement (the "Merger").
Pursuant to the Merger, Sequana will be the surviving corporation and Sequana
will become a wholly owned subsidiary of Arris. Pursuant to the Loan Agreement,
Sequana has requested that the Bank consent to the Merger. The Bank is willing
to consent to the Merger provided that certain modifications to the Loan
Agreement are made, including without limitation that the Loan Agreement and
Arris Loan Agreement provide for cross-trigger events and cross-default events.
F. As a consequence of the proposed Merger, the Bank and the Borrower
desire to make certain modifications to the Loan Agreement which shall become
effective on the Effective Date (as defined in Section 1 below). After the
Effective Date, the Borrower and the Bank intend that the Loan Agreement
together with this First Amendment be construed together as one fully integrated
agreement.
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IN CONSIDERATION of the Recitals, the mutual covenants contained herein,
and other good and valuable consideration, the Bank and the Borrower agree as
follows:
AGREEMENT
1. The effective date ("Effective Date") of this First Amendment shall
be the date that the Merger is consummated and Sequana becomes a wholly owned
subsidiary of Arris.
2. Borrower hereby unconditionally reaffirms each and all of its
obligations under the Loan Agreement, the Note, the Restricted Account and
Security Agreement, the Collateral Bailment Agreement, the Irrevocable
Instructions and Power of Attorney, the Custodian Agreement and each of the
other Loan Documents. Without limiting the generality of the foregoing, Borrower
hereby reaffirms its promise to pay the indebtedness evidenced by the Note and
Loan Agreement and to perform each and all of the conditions and covenants
required to be performed by Borrower pursuant to the Note, the Loan Agreement
and other Loan Documents. By executing this First Amendment, Borrower
acknowledges and covenants that, as of the Effective Date, Borrower has no
defenses, claims, counterclaims, causes of action or rights of setoff of any
kind or nature whatsoever against Bank with respect to or arising out of or
relating to the Loan, the Note, the Loan Agreement or any of the other Loan
Documents.
3. From and after the Effective Date the following provisions shall
apply: This First Amendment and the Loan Agreement shall be construed together
as one fully integrated agreement. Except as specifically amended by this First
Amendment, the terms of the Loan Agreement and other Loan Documents shall remain
unaltered and in full force and effect in accordance with their original terms
and conditions. Any references to the Loan Agreement contained in the Note,
Restricted Account and Security Agreement, the Collateral Bailment Agreement,
the Irrevocable Instructions and Power of Attorney, the Custodian Agreement or
any of the other Loan Documents shall be deemed to refer to the Loan Agreement
as amended by this First Amendment.
4. The effectiveness of this First Amendment and the obligations of the
Bank hereunder shall be subject to the following conditions precedent:
(a) the Borrower will have executed and delivered to the Bank this
First Amendment;
(b) no Event of Default (after giving effect to the amendments
contemplated in this First Amendment) shall have occurred, and be continuing,
under the Loan Agreement;
(c) the Bank shall have received reimbursement from Borrower of all
costs and expenses incurred by Bank in connection with this First Amendment,
including without limitation, the Bank's legal fees and expenses incurred in
connection with the negotiation and preparation of this First Amendment and any
other fees and expenses of the Bank for UCC searches or filing fees.
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(d) the Borrower will have delivered to the Bank the following, in a
form and in substance acceptable to the Bank:
(i) a copy of the certificate of incorporation of Sequana
certified by the Secretary of State of California;
(ii) a copy of the bylaws of the Borrower certified by its
Secretary;
(iii) a copy of resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance by the Borrower of
this First Amendment and the reaffirmation of all obligations under the Loan
Documents, certified by the Secretary of the Borrower;
(iv) a good standing certificate for the Borrower, dated as of
the date not more than ten (10) days prior to the Effective Date of this First
Amendment from the Secretary of State of the State of California; and
(v) an incumbency certificate with respect to the officers of
the Borrower, certified by the Secretary.
(e) counsel to the Borrower (which may be in-house general counsel)
will have delivered to the Bank such counsel's legal opinion as to the due
organization, existence and qualification to do business, and good standing of
the Borrower, due authorization, execution and enforceability of this First
Amendment, the Loan Agreement and the other Loan Documents, the absence of
pending and threatened litigation, the non-contravention of other documents,
instruments, laws and regulations, and such other matters that the Bank may
reasonably require, in form and substance reasonably satisfactory to the Bank.
(f) Arris will have executed and delivered to the Bank a First
Amendment to the Arris Loan Agreement in a form and substance satisfactory to
the Bank and SVB.
(g) The Merger shall have been consummated and Sequana shall have
become a wholly owned subsidiary of Arris.
5. Borrower hereby represents and warrants that all representations and
warranties contained in the Loan Agreement are true and correct as of the date
of execution hereof.
6. From and after the Effective Date, Section 5.10 is amended and
restated in its entirety to read as follows:
"SECTION 5.10. FINANCIAL COVENANTs. The Borrower, on a
consolidated basis with Borrower's subsidiaries (if any) but not
on a consolidated basis with its parent Arris Pharmaceutical
Corporation, a Delaware corporation ("Arris") or its other
Affiliates, shall at all times maintain:
(i) A maximum ratio of Total Debt to Net Worth, as
calculated at the end of each fiscal quarter on the basis of the
average of the ratio of Total Debt to Net Worth for each of the
previous four fiscal quarters, of 0.5:1;
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(ii) A minimum Current Ratio, as calculated on a
quarterly basis, of 2.0:1;
(iii) A minimum Net Cash Level equal to the then
outstanding principal balance due under the Note plus Fifteen
Million Dollars ($15,000,000);
(iv) Cash and Cash Equivalents, which are not subject to
any Lien or claim of any Person (other than General Tax Liens),
on hand in the Investment Account in an amount not less than the
sum of Ten Million Dollars ($10,000,000) plus restricted cash
and amounts which may be restricted in the future pursuant to
agreements between the Borrower and third parties; and
(v) A minimum Net Worth of Ten Million Dollars
($10,000,000).
The failure of the Borrower to maintain any of the covenants set forth in this
Section 5.10(i)-(v) and/or the failure of Borrower to maintain the covenants set
forth in Section 5.12 and/or the failure of Arris to maintain any of the
covenants set forth in Section 5.10 of that certain loan agreement dated as of
September 29, 1997 by and among Arris, the Bank, as Agent and the Bank and
Silicon Valley Bank, a California banking corporation, as Lender, as it may be
amended from time to time (the "Arris Loan Agreement") and/or the occurrence of
an Event of Default under Section 8.1 of this Agreement shall be a "Trigger
Event.""
7. From and after the Effective Date, new Section 5.12 shall be
applicable and read as follows:
"5.12 MAINTENANCE OF SEPARATE CORPORATE EXISTENCE. For
purposes of Borrower's preparing an internal annual report under
Section 6.1, the quarterly reports under Section 6.2, the cash
and covenant reports required under Section 6.4 and determining
Borrower's compliance with the financial covenants set forth in
Sections 5.10(i) through 5.10(v), Borrower shall maintain its
own financial statements, balance sheets, income statements,
statements of cash flow and other books and records separate
from the financial statements, books and records of Arris;
provided, however, that such reports and such separate financial
statements, balance sheets, income statements, statements of
cash flow and other books and records of Borrower may be
internally prepared by Borrower and need not be audited by
Borrower's outside auditors; provided, further, that Borrower's
outside accountant audited annual reports under Section 6.1 and
Borrower's public reports under Section 6.3 may be prepared by
Borrower on a consolidated basis with Arris and Arris' and
Borrower's respective Affiliates. All of Borrower's assets,
including Borrower's Cash and Cash Equivalents, and all of
Borrower's liabilities shall be maintained separate from, and
not commingled or consolidated with, the assets or liabilities
of Arris. Borrower shall maintain its own corporate existence
and shall not consolidate with, merge into or convey or transfer
its properties substantially as an entirety to any Affiliate
(including, without limitation, Arris) without the Bank's prior
written consent."
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8. From and after the Effective Date, Section 8.1 is amended and
restated in its entirety to read as follows:
"SECTION 8.1. EVENTS OF DEFAULT. If any one or more of
the following events ("Event of Default") shall occur and be
continuing, the entire unpaid balance of the principal of and
interest on the Note and all other obligations and Indebtedness
of the Borrower to the Bank arising hereunder and under the
other Loan Documents will (i) in the case of any Event of
Default of the types referred to in subparagraph (f)
hereinbelow, immediately become due and payable without notice
and (ii) in the case of any other Event of Default, immediately
become due and payable upon written notice to that effect given
to the Borrower by the Bank, without presentment or demand for
payment, notice of non-payment, protest or further notice or
demand of any kind, all of which are expressly waived by the
Borrower. Upon an Event of Default, the Bank shall have the
rights and remedies provided for herein and in the other Loan
Documents and under applicable law and in equity, and the rights
and remedies provided for herein shall be cumulative and in
addition to the rights and remedies provided for therein. Each
of the following shall constitute an Event of Default:
(a) Failure by the Borrower to make any payment when due
of any amount payable under the Loan Documents, which failure is
not cured within five (5) days of the occurrence thereof.
(b) Failure by the Borrower to make any mandatory
payments under any borrowing agreement (other than the Loan
Documents) to which the Borrower is a party within any
applicable grace period provided in such agreement or any other
default by the Borrower under any such borrowing agreement and
the failure of the Borrower to cure such default within any
applicable grace period, provided that no Event of Default will
be deemed to have occurred under this paragraph (b) with respect
to any indebtedness under any borrowing agreement if payment of
such indebtedness, after notice thereof having been given to the
Bank, is being contested by the Borrower in good faith and by
appropriate proceedings and such contest operates to prevent the
other party to such agreement from exercising its remedies
against the Borrower or any of its properties and the amount in
dispute is in the aggregate less than $250,000.
(c) Failure by the Borrower to perform or observe any
term, condition or covenant set forth in Section 2.6.
(d) Failure by the Borrower to perform or observe any
material term, condition or covenant of this Agreement or of any
of the Loan Documents (other than the covenants set forth in
Section 5.10(i) through 5.10(v) which shall constitute a Trigger
Event instead) which failure (other than a failure which by its
nature is not capable of cure and other than a failure to
perform or observe any term, condition or covenant referred to
or set forth in Subparagraphs (a), (b) and (c) hereinabove) is
not cured within thirty (30) days of the occurrence thereof.
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(e) Any representation or warranty made in writing to
the Bank in any of the Loan Documents or in connection with the
making of the Loan or a certificate, statement or report made or
delivered in compliance with this Agreement, will have been
false or misleading in any material respect when made or
delivered.
(f) The Borrower makes an assignment for the benefit of
creditors, files a petition for bankruptcy, petitions or applies
to any tribunal for the appointment of a receiver, custodian, or
any trustee for it or a substantial part of its assets, or
commences any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in
effect; or there will have been filed any such petition or
application, or any such proceeding has been commenced against
it, which remains undismissed for a period of sixty (60) days or
more; or any order for relief is entered in any such proceeding;
or the Borrower by any act or omission indicates its consent to,
approval of or acquiescence in any such petition, application or
proceeding or the appointment of a custodian, receiver or any
trustee for it or any substantial part of any of its properties;
or the Borrower suffers any custodianship, receivership or
trusteeship to continue undischarged for a period of sixty (60)
days or more.
(g) Any single judgment of $200,000 or more or a
combination of unsecured judgments aggregating $200,000 or more
against the Borrower not covered by insurance or any attachment
or levy of execution against any substantial part of the
Borrower's properties for any amount (not covered by insurance)
remains unpaid, unstayed on appeal, undischarged, unbonded or
undismissed for a period of thirty (30) days or more.
(h) Any Loan Document ceases to be in full force and
effect in all material respects for any reason (other than due
to the payment in full of all amounts secured or evidenced
thereby or due to discharge in writing by the Bank).
(i) After the occurrence of a Trigger Event under
Section 5.10, the failure of the Borrower and/or the Account
Holder to make the requisite transfer to the Custodian Account
as provided in Section 5.11 such that, not later than 5:00 P.M.
in New York, New York on the first Business Day following the
occurrence of the Trigger Event, the Restricted Account Balance
equals or exceeds the Required Restricted Account Balance.
(j) Upon the occurrence of a Trigger Event under Section
5.10, the failure of the Borrower to execute and deliver, or
cause to be executed and delivered, any additional documents
reasonably requested by the Bank in connection with the transfer
by the Borrower and/or Account Holder to the Custodian Account
as provided in Section 5.11 (including without limitation any
additional documents requested by the Bank in order to further
implement or perfect the pledge of assets held in the Custodian
Account and any additional opinion of the Borrower's counsel on
such matters the Bank may require, in a form and substance
satisfactory to Bank).
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(k) Failure by the Borrower to comply in any material
respect with its "Investment Policy", for investment of all Cash
and Cash Equivalents or the Borrower's making a material change
to such investment policy without the Bank's prior written
approval, which approval shall not be unreasonably withheld. A
copy of the Borrower's Investment Policy is attached hereto as
Schedule 8.1 .(j).
(l) After the occurrence of a Trigger Event and the
initial transfer to the Custodian Account as provided in Section
5.11, the failure of the Borrower and/or the Account Holder to
make, within one Business Day following the request of the Bank,
such additional transfers to the Custodian Account as may be
necessary, from time to time, to increase the Restricted Account
Balance so that it equals the Required Restricted Account
Balance.
(m) The failure by the Borrower, at any time, to
maintain a Net Cash Level equal to the sum of (i) the then
outstanding principal balance under the Note plus (ii) Ten
Million Dollars ($10,000,000).
(n) The occurrence of an "Event of Default" under the
Arris Loan Agreement, as defined in Section 8.1 of the Arris
Loan Agreement.
(o) After the Closing Date, a material adverse change in
the business or financial condition of the Borrower occurs."
9. CONSENT TO MERGER. In consideration of this First Amendment, the Bank
hereby consents to the Merger.
10. MISCELLANEOUS.
(a) This First Amendment shall be governed by, construed and
interpreted in accordance with the laws of the State of California without
reference to its conflict of laws rules.
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(b) This First Amendment may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Loan Agreement to be duly executed as of date first above written.
SEQUANA THERAPEUTICS, INC.
By: /s/ M. XXXXX XXXXX
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Name: M. Xxxxx Xxxxx
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Title: Vice President, Chief Financial
Officer
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By:
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Name:
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Title:
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THE SUMITOMO BANK, LIMITED
By: /s/ XXXXXX X. XXXXX
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Name: Xxxxxx X. Xxxxx
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Title: Vice President and Manager
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By: /s/ J. XXXXXXX XXXXXX
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Name: J. Xxxxxxx Xxxxxx
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Title: Vice President
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