Provision Language
4. Withdrawal Right
The withdrawal right described in this section will be triggered only as a result of actions taken by the Company that are inconsistent with restrictions herein on the use of funds from the Foundation Investment or related U.S. tax obligations, including without limitation the requirements set forth in Sections 5 and 8 below, or are in material breach of the Global Access Commitments (a “Material Breach”) provided that for the avoidance of doubt the parties agree that a breach of the Global Access Commitments that could reasonably result in the Foundation Investment failing to qualify as a “program related investment” under the Code will constitute a material breach of the Global Access Requirements. For the avoidance of doubt, the withdrawal right will not be triggered by the inability, for technical or scientific reasons, to successfully develop vaccines and other products for Foundation Priority Areas, so long as the Company has not materially breached its obligations under this Letter Agreement.
In the event the Company fails to comply with the restrictions on the use of funds from the Foundation Investment, or the other related U.S. tax obligations set forth herein or is in Material Breach (a “Charitability Default”), the Foundation will have the rights set forth below (the “Withdrawal Right”). Each party agrees to promptly notify the other party in writing of the occurrence of such event and the Company shall thereafter provide to the Foundation a proposed strategy to remedy the Charitability Default.
If the Company fails to cure the Charitability Default within [**] days of receipt of the above described notice, the Company shall have the obligation to (i) redeem all of the Series A Preferred Stock held by the Foundation or any Common Stock held by the Foundation issued upon conversion of the Series A Preferred Stock (collectively, the “Foundation Stock”), provided that such redemption shall be made only to the extent permitted by applicable law and not to the extent that it renders the Company insolvent or causes the Company to be in material breach of a third party financial covenant or contractual obligation, or (ii) locate a third party that will purchase the Foundation Stock. If the Company is unable to redeem all of the Foundation Stock, and no third party purchases the Foundation Stock, then the Company shall use its best efforts to effect the Withdrawal Right, consistent with the Code and applicable law, as soon as practicable. During the period when the Company is unable to exercise its obligation to redeem or find a purchaser of the Foundation Stock, the Company shall not pay dividends on any of its capital stock, redeem the capital stock of any other stockholder of the Company or otherwise make any other distribution to any other stockholder of the Company. Upon the transfer of any Foundation Stock to any one or more transferees that are tax-exempt organizations as described in Section 501(c)(3) of the Code, the Foundation may assign to any such transferee all of its rights attached to such Foundation Stock.
For redemption or purchase by a third party, Foundation Stock shall be valued at the greater of the Original Purchase Price or the fair market value thereof as determined in good faith by the Board of Directors of the Company. If the Foundation disagrees with such Board determination, it may seek an independent appraisal, in which case the then current fair market value of the Foundation Stock shall be determined by a mutually agreed upon (such agreement not unreasonably withheld) third-party appraiser. The Foundation shall be responsible for the payment of the appraisal fees.
If the Foundation’s shares are sold or redeemed due to a Charitability Default, commencing upon the date of such sale or redemption, the Foundation or a Foundation Affiliate will have a twelve (12) month look back right by which, in the event of (i) a sale of all or substantially all of the shares of the Company, or a sale of all or substantially all of its assets (“Sale Transaction”), that results in cash proceeds, or (ii) upon the closing of a firmly underwritten public offering (“Public Offering”) of shares of Common Stock of the Company pursuant to a registration statement under the Securities Act of 1933, as amended (“ Securities Act ”), representing a per share valuation for the Company in excess of 200% of the valuation used for the sale or redemption of the Foundation Stock from the Foundation, the Foundation will receive compensation equal to the excess of what it would have received in such transaction if it still held the Foundation Stock at the time of such Sale Transaction or Public Offering over what it actually received in the sale or redemption of the Foundation Stock had the Charitability Default not occurred.
Amendment 1
1. The Letter Agreement is hereby amended by replacing in its entirety the third full paragraph in Section 4., Withdrawal Right, of the Letter Agreement with the following:
If the Company fails to cure the Charitability Default within [**] days of receipt of the above described notice, the Company shall have the obligation to (i) redeem all of the Series A Preferred Stock held by the Foundation or any Common Stock held by the Foundation issued upon conversion of the Series A Preferred Stock (collectively, the “Foundation Stock”), provided that such redemption shall be made only to the extent permitted by applicable law and not to the extent that it renders the Company insolvent or causes the Company to be in material breach of a third party financial covenant or contractual obligation (including, without limitation, any prohibition on redemptions contained in that certain Loan and Security Agreement between the Company, Square 1 Bank and Oxford Finance, as it may be amended from time to time (the “Loan Agreement”)), or (ii) locate a third party that will purchase the Foundation Stock. In the event the Company redeems the Foundation Stock by incurring indebtedness to the Foundation (the “Foundation Debt”), the Foundation shall enter into a subordination agreement with the Company’s lenders under the Loan Agreement pursuant to which the Foundation Debt is subordinated to the Company’s indebtedness under the Loan Agreement to such lenders (the “Subordination Agreement”). The Subordination Agreement shall substantially be in the form agreed upon by lenders and the Foundation on or prior to the effective date of the Loan Agreement, attached to this amendment as Exhibit A. The Company shall repay the Foundation Indebtedness as soon as practicable and consistent with the terms of the subordination agreement. If the Company is unable to redeem all of the Foundation Stock, and no third party purchases the Foundation Stock, then the Company shall use its best efforts to effect the Withdrawal Right, consistent with the Code and applicable law, as soon as practicable. During the period when the Company is unable to satisfy its obligation to redeem or find a purchaser of the Foundation Stock, the Company shall not pay dividends on any of its capital stock, redeem the capital stock of any other stockholder of the Company or otherwise make any other distribution to any other stockholder of the Company. Upon the transfer of any Foundation Stock to any one or more transferees that are tax-exempt organizations as described in Section 501(c)(3) of the Code, the Foundation may assign to any such transferee all of its rights attached to such Foundation Stock.