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Exhibit 10.1
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May 3, 2021
Scott Kelley, M.D.
[...***...]
Re: Severance Agreement
Dear Scott:
This letter confirms the terms and provisions of a severance agreement (the “Agreement”) between you and Flexion Therapeutics, Inc. (the “Company”) related to your termination for “Good Reason,” effectuated in accordance with the Letter Agreement between you and the Company dated “as of January 1, 2018” (the “Letter Agreement”).
1.
Separation. Your last day of work with the Company and your employment termination date will be May 31, 2021 (the “Separation Date”).
2.
Accrued Salary. The Company will pay you all accrued salary and accrued unused vacation earned through the Separation Date, subject to standard payroll deductions and withholdings. You will receive these payments regardless of whether or not you sign this Agreement.
3.
Benefit Plans. If you are currently participating in the Company’s group health and dental insurance plans, your participation as an employee will end on the Separation Date. You will receive, under separate cover, information concerning your right to continue your health and dental insurance benefits after that date in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 or the state equivalent (“COBRA”). If applicable, your participation in Company-Sponsored Group Life Insurance and Short and Long Term Disability Insurance will cease as of the Separation Date. Deductions for the 401(k) Plan will end with your last regular paycheck (i.e., the paycheck you receive on the Separation Date). You will receive information by mail concerning 401(k) Plan rollover procedures should you be a participant in this program.
4.
Severance Benefits. In consideration for timely signing and returning this Agreement to the Company, and in compliance with the promises made herein and in the event you do not revoke your acceptance pursuant to Paragraph 14 below, and you continue to comply with your obligations under the Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement dated August 23, 2017, then the Company will pay or provide to you, as severance:
(a)
the equivalent of fifteen (15) months of your base salary in effect on the Separation Date (being $447,744.46), which computes to $559,680.58 in total, subject to standard payroll deductions and withholdings (the “Salary Continuation”). The Salary Continuation will be paid in a series of equal bi-weekly installments of $17,220.94 for 32 pay periods and $8,610.50 for one pay period on the Company’s ordinary payroll schedule from and after the Separation Date over a fifteen (15) month period following the Separation Date (the “Severance Period”); provided, however that no payments will be made prior to June 25, 2021. On June 25, 2021 the Company will pay you in a lump sum the Salary Continuation you would have received on or prior to such date under the original schedule but for the delay while waiting for the June 25, 2021 payout day, with the balance of the Salary Continuation being paid as originally scheduled;
(b)
if you are eligible for and timely elect to continue your health and dental insurance coverage under the Company's group health plans under COBRA, the Company will pay the COBRA premiums for you and your eligible dependents until the earlier of (A) the end of the Severance Period, (B) the expiration of your eligibility for the continuation coverage under COBRA, or (C) such time as you become employed by another employer or self-employed through which you are eligible for health insurance (thereafter, you will be responsible for all COBRA premium payments, if any) (such period from your termination date through the earliest of (A) through (C), the “COBRA Payment Period”). You agree to promptly notify the Company if you become employed by another employer or self-employed through which you are eligible for health insurance during the COBRA Payment Period. For purposes of this paragraph, references to COBRA premiums shall not include any amounts payable by you under an Internal Revenue Code Section 125 health care reimbursement plan. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the Company cannot provide the COBRA premiums without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof pay you a taxable cash amount, which payment shall be made regardless of whether you elect health care continuation coverage (the "Health Care Benefit Payment"). The Health Care Benefit Payment shall be paid in monthly installments on the same schedule that the COBRA premiums would otherwise have been paid to you and shall be equal to the amount that the Company would have otherwise paid for COBRA premiums (which amount shall be calculated based on your COBRA premium for the first month of coverage), and shall be paid until the earlier of (i) expiration of the COBRA Payment Period or (ii) the date you voluntarily enroll in a health insurance plan offered by another employer or entity.
5.
Tax Withholding and Section 409A.
a.
The Company shall withhold from any compensation and benefits payable under this Agreement all applicable federal, state, local, or other taxes.
b.
Although the Company does not guarantee the tax treatment of any payments under the Agreement, the intent of the Company is that the payments and benefits
under this Agreement be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended, and all Treasury Regulations and guidance promulgated thereunder (“Code Section 409A”) and to the maximum extent permitted the Agreement shall be limited, construed and interpreted in accordance with such intent. It is intended that each payment made under this Agreement shall be treated as a separate payment and the right to a series of payments under this Agreement is to be treated as a right to a series of separate payments and that all such payments satisfy, to the extent possible, the exemptions from the application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(9)(iii). For purposes of this Agreement, all references to employment termination and correlative phrases shall be construed to require a “separation from service” as defined in Section 1.409A-1(h). In no event whatsoever shall the Company or its affiliates or their respective officers, directors, employees or agents be liable for any additional tax, interest or penalties that may be imposed on you by Code Section 409A or damages for failing to comply with Code Section 409A.
Notwithstanding any other provision of this Agreement to the contrary, to the extent that any reimbursement of expenses constitutes “deferred compensation” under Code Section 409A, such reimbursement shall be provided no later than December 31 of the year following the year in which the expense was incurred. The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year. For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the right to receive payments in the form of installment payments shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment.
c.
Whenever a payment under this Agreement may be paid within a specified period, the actual date of payment within the specified period shall be within the sole discretion of the Company.
d.
Notwithstanding any other provision of this Agreement to the contrary, if at the time of your separation from service (as defined in Code Section 409A), you are a “Specified Employee”, then the Company will defer the payment or commencement of any nonqualified deferred compensation subject to Code Section 409A payable upon separation from service (without any reduction in such payments or benefits ultimately paid or provided to you) until the date that is six (6) months following separation from service or, if earlier, the earliest other date as is permitted under Code Section 409A (and any amounts that otherwise would have been paid during this deferral period will be paid in a lump sum on the day after the expiration of the six (6) month period or such shorter period, if applicable).
6.
Stock Options. You were granted options to purchase shares of the Company’s common stock (the “Option”) and restricted stock units (“RSUs”) pursuant to the Company’s 2013 Equity Incentive Plan (the “Plan”). Under the applicable terms of the Plan, your stock option grant notice, your stock option agreement, your restricted stock unit grant notice, and your restricted stock unit award agreement (collectively, the “Equity Documents”), vesting will cease as of the Separation Date. Your rights to exercise the Option as to any vested shares will be as set forth in the Equity Documents and you acknowledge that under the Plan, you must exercise your
right to purchase any vested shares no later than the date that is three (3) months following the Separation Date. Any shares of common stock of the Company that you hold shall not be affected by your termination.
7.
Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, you will not receive any additional compensation, severance or benefits after the Separation Date. You acknowledge that, except as expressly provided in this Agreement, you have not earned and will not receive from the Company any additional compensation (including base salary, bonus, incentive compensation, or equity), severance, or benefits before or after the Separation Date, with the exception of (i) any vested right you may have under the express terms of a written ERISA-qualified benefit plan (e.g., 401(k) account); (ii) monies contributed by you to your HSA account which shall remain yours; and (iii) monies contributed to your FSA account which you may use each in accordance with the respective plan rules and applicable law.
8.
Expense Reimbursements. You agree that, within ten (10) days of the Separation Date, you will submit sign-in sheets, receipts and other documentation relating to all business expenses through the Separation Date. The Company will reimburse you for any reasonable out-of-pocket business expenses that you incurred.Receipt of the severance benefits described in Paragraph 4 of this Agreement is expressly conditioned upon submission of Company expenses.
9.
Return of Company Property. Within seven (7) days of the Separation Date, you agree to return to the Company all Company documents (and all copies thereof) and other Company property that you have had in your possession at any time, including, but not limited to, Company files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry cards, identification badges and keys; and, any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof). Please coordinate return of Company property with Christina Willwerth. Receipt of the severance benefits described in Paragraph 4 of this Agreement is expressly conditioned upon the timely return of all Company Property.
10.
Proprietary Information and Post-Termination Obligations. You acknowledge and reaffirm your continuing obligations under the Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement dated August 23, 2017 (“Proprietary Information Agreement”) between you and the Company, the terms and condition which are incorporated herein by reference and remain in full force and effect for the full stated term therein, including, without limitation, your obligation not to use or disclose any confidential or proprietary information of the Company. A copy of the Proprietary Information Agreement is attached hereto as Exhibit A. If you have any doubts as to the scope of the restrictions in your agreement, you should contact Mark Levine immediately to assess your compliance. As you know, the Company will enforce its contract rights. Please familiarize yourself with the enclosed agreement which you signed. You further agree that you shall abide by any and all common-law and statutory obligations relating to protection and non-disclosure of trade secrets and confidential and proprietary documents and information. You further understand and agree that your obligations under this paragraph are material terms of this Agreement, and that the
Company shall have the right, in addition to any other damages, to seek and obtain the return of the consideration paid hereunder (without affecting the validity or enforceability of the general release contain herein) in the event you breach any of your obligations under this paragraph.
11.
Confidentiality and Non-Disparagement. The provisions of this Agreement will be held in strictest confidence by you and you agree not to disclose to anyone either directly or indirectly, any information regarding the existence or substance of this Agreement, except to your immediate family, attorneys, accountants, auditors, tax preparation professionals, and financial advisors, provided that they agree to keep such information strictly confidential. This includes, but is not limited to, present or former employees of the public or other members of the public. You further agree not to make or publish any written or oral disparaging or defamatory statements regarding the Company, and its current and former attorneys, officers, directors, managers, partners, employees, agents and affiliates. You understand and agree that your obligations under this paragraph are material terms of this Agreement, and that the Company shall have the right, in addition to any other damages, to seek and obtain the return of the consideration paid hereunder (without affecting the validity or enforceability of the general release contain herein) in the event you breach any of your obligations under this paragraph. Notwithstanding the foregoing, nothing in this Agreement shall limit your right to voluntarily communicate with the Equal Employment Opportunity Commission, United States Department of Labor, the National Labor Relations Board, other federal government agency or similar state or local agency or to discuss the terms and conditions of your employment with others to the extent expressly permitted by Section 7 of the National Labor Relations Act.
12.
Cooperation through and after Termination. You agree to cooperate fully with the Company in all matters relating to the transition of your work and responsibilities on behalf of the Company through your Separation Date, including, but not limited to, any present, prior or subsequent relationships and the orderly transfer of any such work and institutional knowledge to such other persons as may be designated by the Company, by making yourself reasonably available during regular business hours. Prior and subsequent to your Separation Date, you agree to complete the review and approval of all outstanding publications and abstracts that you are a named author. If in the Company’s sole and absolute discretion you fail to adequately respond in the time frames set forth in any communication from the Company you agree the Company shall have sole and absolute discretion to remove you as an author from such publication or abstract.
13.
General Release. In exchange for the consideration to be made by the Company to you as set forth in Paragraph 4 above, and the promises contained in this Agreement, to which you would not otherwise be entitled in the absence of your execution of this Agreement, you voluntarily and of your own free will, on behalf of yourself and, to the extent permitted by law, on behalf of your spouse, heirs, executors, administrators, assigns, insurers, attorneys and other persons or entities, acting or purporting to act on your behalf (collectively, the “Employee Parties”), hereby generally and completely release, acquit and forever discharge the Company, its parents and subsidiaries, and its and their present or former officers, directors, managers, partners, agents, representatives, employees, attorneys, shareholders, predecessors, successors, assigns, insurers and affiliates (the “Company Parties”) of and from any and all claims, liabilities, demands, contentions, actions, causes of action, suits, costs, expenses, attorneys’ fees, damages, indemnities, debts, judgments, levies, executions and obligations of every kind and
nature, in law, equity, or otherwise, both known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the execution date of this Agreement, including but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with your employment with the Company or the termination of that employment; claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law, statute, or cause of action; tort law; or contract law (individually a “Claim” and collectively “Claims”). The Claims you are releasing and waiving in this Agreement include, but are not limited to, any and all Claims that any of the Company Parties:
has allegedly violated its personnel policies, handbooks, contracts of employment, or covenants of good faith and fair dealing;
has allegedly violated the Age Discrimination in Employment Act of 1967, as amended (“ADEA”); Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1866, 29 U.S.C. § 1981, et seq.; the Rehabilitation Act of 1973, 29 U.S.C. § 701, et seq.; the Civil Rights Act of 1991; Sections 1981 through 1988 of Title 42 of the United States Code, as amended; the Equal Pay Act; the Americans With Disabilities Act of 1990 as amended; the Genetic Information Nondiscrimination Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”) (except for any vested benefits under any tax qualified benefit plan); the Employee Polygraph Protection Act; the Worker Adjustment and Retraining Notification Act; the Older Workers Benefit Protection Act; the anti-retaliation provisions of the Sarbanes-Oxley Act, or any other federal or state law regarding whistleblower retaliation; the Lilly Ledbetter Fair Pay Act; the Uniformed Services Employment and Reemployment Rights Act; the Fair Credit Reporting Act; the National Labor Relations Act; the Immigration Reform Control Act, as amended; the Occupational Safety and Health Act, as amended; the Massachusetts Law Against Discrimination, G.L. c. 151B; the Massachusetts Wage Payment Statute, G.L. c. 149, §§ 148, 148A, 148B, 148C, 149, 150, 150A-150C, 151, 152, 152A, et seq.; the Massachusetts Wage and Hour laws, G.L. c. 151§1A et seq.; the Massachusetts Privacy Statute, G.L. c. 214, § 1B; the Massachusetts Sexual Harassment Statute, G.L. c. 214 § 1C; the Massachusetts Civil Rights Act, G.L. c. 12, § 11H; the Massachusetts Equal Rights Act, G.L. c. 93, § 102; the Massachusetts Parental Leave Law, G.L. c. 149, § 105D; or other federal or state law, regulation, ordinance, or any, public policy, tort or common law (including but not limited to Claims for retaliatory discharge; negligent hiring, retention or supervision; defamation; intentional or negligent infliction of emotional distress and/or mental anguish; intentional interference with contract; negligence; detrimental reliance; loss of consortium to you or any member of your family and/or promissory estoppel); or any allegation for costs, fees, or other expenses including attorneys’ fees incurred in these matters.
Notwithstanding the foregoing, other than events expressly contemplated by this Agreement you do not waive or release rights or Claims that may arise from events that occur after the date this Agreement is executed. Also excluded from this Agreement and General Release are any Claims which cannot be waived by law, including, without limitation, any rights you may have under applicable workers’ compensation laws and your right, if applicable, to file or participate in an investigative proceeding of any federal, state or local governmental agency. Nothing in this Agreement shall prevent you from filing, communicating and/or cooperating with, or participating in any proceeding or investigation before the Equal Employment Opportunity Commission, United States Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal government agency, or similar state or local agency (“Government Agency/ies”), or exercising any rights pursuant to Section 7 of the National Labor Relations Act. You further understand this Agreement does not limit your ability to voluntarily communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. Moreover, while this Agreement does not limit your right to receive an award for information provided to the Securities and Exchange Commission, you understand and agree that, you are otherwise waiving, to the fullest extent permitted by law, any and all rights you may have to individual relief based on any Claims that you have released and any rights you have waived by signing this Agreement. If any Claim is not subject to release, to the extent permitted by law, you waive any right or ability to be a class or collective action representative or to otherwise participate in any putative or certified class, collective or multi-party action or proceeding based on such a Claim in which any of the Company Parties is a party. This Agreement does not abrogate your existing rights under any Company benefit plan or any plan or agreement related to equity ownership in the Company; however, it does waive, release and forever discharge Claims existing as of the date you execute this Agreement pursuant to any such plan or agreement. Further, this General Release does not release any claims you may have for the Company’s breach of any of the terms and provisions of this Agreement.
14.
Your Acknowledgments and Affirmations. You acknowledge that you are knowingly and voluntarily waiving and releasing any and all rights you may have under the ADEA, as amended. You also acknowledge and agree that (i) the consideration given to you in exchange for the waiver and release in this Agreement is in addition to anything of value to which you were already entitled, and (ii) that you have been paid for all time worked, have received all the leave, leaves of absence and leave benefits and protections for which you are eligible, and have not suffered any on-the-job injury for which you have not already filed a Claim. You affirm that all of the decisions of the Company Parties regarding your pay and benefits through the date of your execution of this Agreement were not discriminatory based on age, disability, race, color, sex, religion, national origin or any other classification protected by law. You affirm that you have not filed or caused to be filed, and are not presently a party to, a Claim against any of the Company Parties. You further affirm that you have no known workplace injuries or occupational diseases. You acknowledge and affirm that you have not been retaliated against for reporting any allegation of corporate fraud or other wrongdoing by any of the Company Parties, or for exercising any rights protected by law, including any rights protected by the Fair Labor Standards Act, the Family Medical Leave Act or any related statute or local leave or disability accommodation laws, or any applicable state workers’ compensation
law. You further acknowledge and affirm that you have been advised by this writing that: (a) your waiver and release do not apply to any rights or Claims that may arise after the execution date of this Agreement; (b) you have been advised hereby that you have the right to consult with an attorney prior to executing this Agreement; (c) you have been given twenty-one (21) days to consider this Agreement (although you may choose to voluntarily execute this Agreement earlier and if you do you will sign the Consideration Period waiver below); (d) you have seven (7) days following your execution of this Agreement to revoke this Agreement; and (e) this Agreement shall not be effective until the date upon which the revocation period has expired unexercised (the “Effective Date”), which shall be the eighth day after this Agreement is executed by you.
15.
Effective Date of Agreement. You will be afforded up to twenty-one (21) days to consider the meaning and effect of this Agreement. You are advised to consult with an attorney and you acknowledge that you have had the opportunity to do so. You agree that any modification, material or otherwise do not restart or affect in any manner the original 21-day consideration period for the severance proposal made to you. If you do not sign and return this Agreement within the dates set forth below, the Company’s offer to provide you with the monies and/or other benefits set forth herein will expire. You may revoke this Agreement for a period of seven (7) calendar days following the date you execute this Agreement. Any revocation within this period must be submitted, in writing, to Mark Levine and state, “I hereby revoke my acceptance of the Agreement.” The revocation must be personally delivered to Mark Levine, General Counsel, Flexion Therapeutics, Inc., 10 Mall Road, Suite 301, Burlington, MA 01803, or mailed to him first class mail and postmarked within seven (7) calendar days of execution of this Agreement. This Agreement shall not be effective until the date upon which the revocation period has expired unexercised (the “Effective Date”), which shall be the eighth day after this Agreement is executed by you. If the last day of the revocation period is a Saturday, Sunday, or legal holiday in Massachusetts, or the state in which you reside, then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday.
16.
No Admission. You agree that neither this Agreement, nor the furnishing of consideration for this Agreement, shall be deemed or construed at any time for any purpose as an admission by the Company of any liability, wrongdoing or unlawful conduct of any kind, including, but not limited to, any violation of any federal, state, or local statute, or common law rights, including those relating to the provisions of any law or statute concerning employment actions, or of any other possible or claimed violation of law or rights.
17.
Breach. You agree that upon any breach of this Agreement, you will forfeit all amounts or owing to you under this Agreement. Further, you acknowledge that it may be impossible to assess the damages caused by your violation of the terms of Paragraphs 8, 9, 10 and 11 of this Agreement and further agree that any threatened or actual violation or breach of those Paragraphs of this Agreement will constitute immediate and irreparable injury to the Company. You therefore agree that any such breach of those Paragraphs is a material breach of this Agreement, and, in addition to any and all other damages and remedies available to the Company upon your breach of this Agreement, the Company shall be entitled to an injunction to prevent you from violating or breaching those Paragraphs. You agree that if the Company is successful in whole or part in any legal or equitable action against you under this Agreement, you agree to pay all of the costs, including reasonable attorneys’ fees, incurred by the Company in enforcing the terms of this Agreement.
18.
Miscellaneous. This Agreement, including Exhibit A, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to this subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of Massachusettsas applied to contracts made and to be performed entirely within Massachusetts.
19.
Indemnification. The terms of the Indemnity Agreement between you and the Company dated January 1, 2018 shall remain in effect in accordance with its terms and provisions. A copy of the Indemnity Agreement is attached hereto as Exhibit B, the terms and provisions of which are specifically incorporated herein.
I wish you good luck in your future endeavors.
Sincerely,
By: /s/ Christina Willwerth
Christina Willwerth
Chief Strategy Officer
Head of Human Resources
I, Scott Kelley, M.D., have been advised in writing that I have until June 3, 2021 a period of more than 21 days to consider whether to sign this Agreement but that I cannot sign it prior to May 31, 2021, and to consult with an attorney prior to the execution of this Agreement, which I received on May 3, 2021.
Having elected to execute this Agreement, to fulfill the promises set forth herein, and to receive thereby the sums and benefits set forth in Paragraph 4 above, I knowingly, and after due consideration, enter into this Agreement, intending to waive, settle, and release all claims I have or might have against the Company, its subsidiaries, divisions and affiliates, its present or former officers, directors, trustees, employees, agents, insurers, or successors or assigns.
/s/ Scott Kelley, M.D.
Scott Kelley, M.D.
June 3, 2021
Date
Exhibit A - Employee Proprietary Information, Inventions Assignment, Non-Competition and Non-Solicitation Agreement
Exhibit B - Indemnity Agreement
Exhibit 10.2
May 12, 2021
Frederick Driscoll
[...***...]
Dear Fred:
We are pleased to offer you employment with Flexion Therapeutics, Inc. (the "Company"), initially as Advisor beginning May 17, 2021 (“Start Date”), then as Chief Financial Officer beginning June 1, 2021, reporting to Michael Clayman, Chief Executive Officer.
Compensation: Your compensation package includes the following:
Salary. A base salary at the rate of $17.115.39 on a bi-weekly basis (which equates to $445,000 on an annualized basis), less payroll deductions and all required withholdings and payable in accordance with the Company's standard payroll practices as may be modified from time to time. As an exempt salaried employee, you are not eligible for overtime pay. You are eligible for performance reviews on a periodic basis and may be eligible for annual salary increases as long as you remain employed by Flexion.
Bonus. Effective with the annual bonus payable in connection with the 2021 calendar year (which will be pro-rated based on your Start Date), a discretionary target annual performance bonus of forty-five percent (45%) of your base salary (which bonus, if any, is calculated annually, and subject to approval by the Board of Directors of the Company (the "Board")). Among other eligibility factors for such discretionary bonus to be determined by the Board, you must be employed in good standing at the time that bonuses are paid out in order to be eligible for such a bonus. The annual bonus is paid on or before March 15th of the calendar year following the applicable “bonus” year.
Equity. (1) Subject to Board approval, as an inducement to your commencement of employment you will be granted an option (the “Option”) under the Company’s equity incentive plan in place at the time of grant (the "Plan"), to purchase 168,000 shares of common stock of the Company at an exercise price per share equal to the fair market value per share of the Company's common stock on the date of grant. Subject to your Continuous Service (as defined in the Plan) through each such vesting date, the Option will vest as to 25% of the shares of common stock underlying such Option on the one year anniversary of your Start Date and as to 1/48th of the shares of common stock underlying such Option in equal monthly installments for 36 months thereafter. All other terms, conditions, and limitations of the Option will be set forth in a stock option grant notice, the Company's standard stock option agreement and the Plan (collectively, the “Stock Option Documents,” which shall govern your Option). To the extent there is a conflict between this Agreement and the Stock Option Documents, the Stock Option Documents shall govern.
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February 2021
(2) In addition, subject to Board approval and as an inducement to your commencement of employment, you will be granted under the Plan 28,000 restricted stock units (“RSUs”). Subject to your Continuous Service with the Company through each vesting date, 25% of the shares of common stock subject to the RSUs will vest on each anniversary of your Start Date so that all of the shares subject to the RSU will vest four years from your Start Date. All other terms, conditions, and limitations of the RSUs will be set forth in a Restricted Stock Unit Grant Notice, the Company's Restricted Stock Unit Award Agreement and the Plan (collectively, the “RSU Documents,” which shall govern your RSUs). To the extent there is a conflict between this Agreement and the RSU Documents, the RSU Documents shall govern.
Change of Control Severance Benefits. You are eligible for benefits under the Company’s Change in Control Severance Benefit Plan (the “CIC Plan”) and Participation Agreement (the “Participation Agreement”), which is included with this Agreement.
Benefits: You will be eligible to participate on the same basis as similarly situated employees in the Company's benefit plans in effect from time to time during your employment. All matters of eligibility for coverage or employee benefits under any benefit plan shall be determined in accordance with the provisions of such plan. For a more detailed understanding of the Company’s benefits and the eligibility requirements, please consult the policies and summary plan descriptions for the programs which will be made available to you. Please note that the Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion.
At-Will Employment; Certain Conditions of Employment: Your employment with the Company is “at will,” which means that the Company may modify the terms of employment at any time, and either you or the Company may terminate your employment at any time for any or no reason, with or without prior notice. Along these same lines, please note that nothing in this Agreement is a promise or guarantee of employment for any specific period of time or for continued employment.
In addition to the above, by signing this Agreement you are representing that you have full authority to accept this position and perform the duties of the position without conflict with any other obligations, and that you are not involved in any situation that might create, or appear to create, a conflict of interest with respect to your loyalty to or duties for the Company. You specifically warrant that you are not subject to an employment agreement or restrictive covenant preventing full performance of your duties to the Company.
You further acknowledge that the Company’s board of directors has determined that you will be performing significant policy-making functions for the Company and shall therefore be regarded as a Section 16 officer of the Company pursuant to Section 16(a) of the Securities Exchange Act (“Section 16 Officer”). For so long as the Company’s board of directors continues to regard you as a Section 16 Officer, you acknowledge your obligation to make certain periodic filings with the SEC, including but not limited to, the “Initial Statement of Beneficial Ownership of Securities” on Form 3 and the “Statement of Changes of Beneficial Ownership of Securities” on SEC Form 4. You represent and warrant that you will timely comply with all obligations relating to your role as a Section 16 Officer.
Severance Eligibility: Subject to the other provisions of this Agreement, upon termination of your employment, the Company shall pay your base salary and accrued and unused vacation benefits earned through the date of termination at the rate in effect at the time of termination, less standard deductions
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February 2021
and withholdings (the “Accrued Obligations”). In addition, you will be eligible for the following severance benefits if your employment is terminated under the circumstances described below.
If the Company terminates your employment without Cause (as defined below) or if you terminate your employment for Good Reason (as defined below) and provided such termination constitutes a “Separation from Service” (as defined under U.S. Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder) and such termination is not as a result of your death or Disability, then in addition to the Accrued Obligations, you will be eligible to receive the following benefits:
(i) You shall continue to receive your then-current base salary (ignoring any decrease that forms the basis for your termination for Good Reason, if applicable), less standard deductions and withholdings, for fifteen (15) months following the date of termination (the “Severance Period”).
(ii) If you are eligible for and timely elect to continue your health insurance coverage under the Company’s group health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985 or the state equivalent (“COBRA”), the Company will pay the COBRA premiums for you and your eligible dependents until the earlier of (A) the end of the Severance Period, (B) the expiration of your eligibility for the continuation coverage under COBRA, or (C) such time as you become employed by another employer or self-employed through which you are eligible for health insurance (thereafter, you will be responsible for all COBRA premium payments, if any) (such period from your termination date through the earliest of (A) through (C), the “COBRA Payment Period”). For purposes of this Section, references to COBRA premiums shall not include any amounts payable by you under an Internal Revenue Code Section 125 health care reimbursement plan. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the Company cannot provide the COBRA premiums without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof pay you a taxable cash amount, which payment shall be made regardless of whether you elect health care continuation coverage (the “Health Care Benefit Payment”). The Health Care Benefit Payment shall be paid in monthly installments on the same schedule that the COBRA premiums would otherwise have been paid to you and shall be equal to the amount that the Company would have otherwise paid for COBRA premiums (which amount shall be calculated based on your COBRA premium for the first month of coverage), and shall be paid until the earlier of (i) expiration of the COBRA Payment Period or (ii) the date you voluntarily enroll in a health insurance plan offered by another employer or entity.
(iii) If your termination occurs within one (1) month prior to or twelve (12) months following a Change in Control, you shall be eligible to receive the payments and benefits as described in the Company’s Change in Control Severance Benefit Plan (the “CIC Plan”) and the Participation Agreement thereunder (the “Participation Agreement”) attached thereto. If as a result of your termination or resignation you become entitled to severance benefits under the CIC Plan and you are also entitled to severance benefits described under Sections (i) and (ii) of the “Severance Eligibility” section of this Agreement above, the severance benefits under the CIC Plan shall be provided in lieu of the severance benefits you are entitled to under Sections (i) and (ii) of the “Severance Eligibility” section of this Agreement described above.
Severance benefits under this Agreement are expressly conditioned upon (a) your delivery to the Company of a signed release and waiver of claims in such form as may be specified by the Company (the “Release”) within the applicable deadline set forth therein, and permitting the Release to become effective in accordance with its terms no later than the Release Deadline (as defined in the Section 409A Section below); and (b) your fully complying with your obligations under your Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement.
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For the avoidance of doubt, you shall not be eligible for severance and continued benefits (other than the Accrued Obligations) if you resign without Good Reason, are terminated by the Company for Cause, or are terminated due to your death or Disability.
Definitions: For purposes of this Agreement, the following terms shall have the following meanings set forth in the CIC Plan: Cause, Good Reason, and Change in Control.
Section 409A: Notwithstanding anything in this Agreement to the contrary, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). Severance benefits shall not commence until you have a Separation from Service. Each installment of severance benefits is a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if such exemptions are not available and you are, upon Separation from Service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits payments shall be delayed until the earlier of (i) six (6) months and one day after your Separation from Service, or (ii) your death. You shall receive severance benefits only if you execute and return to the Company the Release within the applicable time period set forth therein and permit such Release to become effective in accordance with its terms, which date may not be later than sixty (60) days following the date of your Separation from Service (such latest permitted date, the “Release Deadline”). If the severance benefits are not covered by one or more exemptions from the application of Section 409A and the Release could become effective in the calendar year following the calendar year in which your Separation from Service occurs, the Release will not be deemed effective any earlier than the Release Deadline. None of the severance benefits will be paid or otherwise delivered prior to the effective date of the Release. Except to the minimum extent that payments must be delayed because you are a “specified employee” or until the effectiveness of the Release, all amounts will be paid as soon as practicable in accordance with the schedule provided herein and in accordance with the Company’s normal payroll practices. All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by you during the time periods described in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit. The benefits under this Agreement are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.
Compliance with Rules, etc.: You will comply at all times with (i) all Company policies, rules and procedures as they may be established, stated and/or modified from time to time at the Company’s sole discretion, (ii) the terms of that certain Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement, and (iii) all laws and regulations applicable to the Company’s business and your performance of your duties for the Company.
General: By signing this Agreement, you acknowledge that the terms described in this letter, together with the Equity Documents, CIC Plan, Participation Agreement, and Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement attached hereto, set forth the entire offer to you and
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understanding between you and the Company and supersedes any prior representations or agreements, whether written or oral pertaining to the subject matter herein. You further acknowledge that there are no terms, conditions, representations, warranties or covenants other than those contained herein. No term or provision of this letter may be amended waived, released, discharged or modified except in writing, signed by you and an authorized officer of the Company, except that the Company may, in its sole discretion, adjust salaries, incentive compensation, stock plans, benefits, job titles, locations, duties, responsibilities, and reporting relationships.
We look forward to you joining the Flexion team.
Sincerely,
/s/ Michael Clayman
Michael Clayman
Chief Executive Officer
ACCEPTED AND AGREED TO:
Name: /s/ Frederick Driscoll Date: May 14, 2021
Frederick Driscoll
Attachments:
Change in Control Severance Benefit Plan Participation Agreement
Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement
Indemnity Agreement
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Exhibit 10.3
May 17, 2021
William T. Andrews, MD, FACP
[...***...]
Dear Will:
We are pleased to offer you employment with Flexion Therapeutics, Inc. (the "Company"), as Chief Medical Officer beginning July 1, 2021 (“Start Date”) reporting to Michael Clayman, Chief Executive Officer.
Compensation: Your compensation package includes the following:
Salary. A base salary at the rate of $18,461.54 on a bi-weekly basis (which equates to $480,000 on an annualized basis), less payroll deductions and all required withholdings and payable in accordance with the Company's standard payroll practices as may be modified from time to time. As an exempt salaried employee, you are not eligible for overtime pay. You are eligible for performance reviews on a periodic basis and may be eligible for annual salary increases as long as you remain employed by Flexion.
Bonus. Effective with the annual bonus payable in connection with the 2021 calendar year (which will be pro-rated based on your Start Date), a discretionary target annual performance bonus of forty-five percent (45%) of your base salary (which bonus, if any, is calculated annually, and subject to approval by the Board of Directors of the Company (the "Board")). Among other eligibility factors for such discretionary bonus to be determined by the Board, you must be employed in good standing at the time that bonuses are paid out in order to be eligible for such a bonus. The annual bonus is paid on or before March 15th of the calendar year following the applicable “bonus” year.
Equity. (1) Subject to Board approval, as an inducement to your commencement of employment you will be granted an option (the “Option”) under the Company’s equity incentive plan in place at the time of grant (the "Plan"), to purchase 205,500 shares of common stock of the Company at an exercise price per share equal to the fair market value per share of the Company's common stock on the date of grant. Subject to your Continuous Service (as defined in the Plan) through each such vesting date, the Option will vest as to 25% of the shares of common stock underlying such Option on the one year anniversary of your Start Date and as to 1/48th of the shares of common stock underlying such Option in equal monthly installments for 36 months thereafter. All other terms, conditions, and limitations of the Option will be set forth in a stock option grant notice, the Company's standard stock option agreement and the Plan (collectively, the “Stock Option Documents,” which shall govern your Option). To the extent there is a conflict between this Agreement and the Stock Option Documents, the Stock Option Documents shall govern.
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(2) In addition, subject to Board approval and as an inducement to your commencement of employment, you will be granted under the Plan 34,250 restricted stock units (“RSUs”). Subject to your Continuous Service with the Company through each vesting date, 25% of the shares of common stock subject to the RSUs will vest on each anniversary of your Start Date so that all of the shares subject to the RSU will vest four years from your Start Date. All other terms, conditions, and limitations of the RSUs will be set forth in a Restricted Stock Unit Grant Notice, the Company's Restricted Stock Unit Award Agreement and the Plan (collectively, the “RSU Documents,” which shall govern your RSUs). To the extent there is a conflict between this Agreement and the RSU Documents, the RSU Documents shall govern.
Change of Control Severance Benefits. You are eligible for benefits under the Company’s Change in Control Severance Benefit Plan (the “CIC Plan”) and Participation Agreement (the “Participation Agreement”), which is included with this Agreement.
Sign-On Bonus. In addition to your base salary, you will be eligible for a one-time sign-on bonus in the amount of $50,000 (less applicable taxes), which the Company will advance to you on your first payroll date after you have started working. Please note that if your employment is terminated for cause or you voluntarily resign prior to completing one year of service, you will be required to return the entire sign-on bonus amount within 60 days of such termination. To the extent permitted by applicable law, you expressly authorize the Company to deduct from your final paycheck any portion of the sign-on bonus that you are required to repay.
Benefits: You will be eligible to participate on the same basis as similarly situated employees in the Company's benefit plans in effect from time to time during your employment. All matters of eligibility for coverage or employee benefits under any benefit plan shall be determined in accordance with the provisions of such plan. For a more detailed understanding of the Company’s benefits and the eligibility requirements, please consult the policies and summary plan descriptions for the programs which will be made available to you. Please note that the Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion.
At-Will Employment; Certain Conditions of Employment: Your employment with the Company is “at will,” which means that the Company may modify the terms of employment at any time, and either you or the Company may terminate your employment at any time for any or no reason, with or without prior notice. Along these same lines, please note that nothing in this Agreement is a promise or guarantee of employment for any specific period of time or for continued employment.
In addition to the above, by signing this Agreement you are representing that you have full authority to accept this position and perform the duties of the position without conflict with any other obligations, and that you are not involved in any situation that might create, or appear to create, a conflict of interest with respect to your loyalty to or duties for the Company. You specifically warrant that you are not subject to an employment agreement or restrictive covenant preventing full performance of your duties to the Company.
You further acknowledge that the Company’s board of directors has determined that you will be performing significant policy-making functions for the Company and shall therefore be regarded as a Section 16 officer of the Company pursuant to Section 16(a) of the Securities Exchange Act (“Section 16 Officer”). For so long as the Company’s board of directors continues to regard you as a Section 16 Officer, you acknowledge your obligation to make certain periodic filings with the SEC, including but not limited to, the “Initial Statement of Beneficial Ownership of Securities” on Form 3 and the “Statement of Changes
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February 2021
of Beneficial Ownership of Securities” on SEC Form 4. You represent and warrant that you will timely comply with all obligations relating to your role as a Section 16 Officer.
Severance Eligibility: Subject to the other provisions of this Agreement, upon termination of your employment, the Company shall pay your base salary and accrued and unused vacation benefits earned through the date of termination at the rate in effect at the time of termination, less standard deductions and withholdings (the “Accrued Obligations”). In addition, you will be eligible for the following severance benefits if your employment is terminated under the circumstances described below.
If the Company terminates your employment without Cause (as defined below) or if you terminate your employment for Good Reason (as defined below) and provided such termination constitutes a “Separation from Service” (as defined under U.S. Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder) and such termination is not as a result of your death or Disability, then in addition to the Accrued Obligations, you will be eligible to receive the following benefits:
(i) You shall continue to receive your then-current base salary (ignoring any decrease that forms the basis for your termination for Good Reason, if applicable), less standard deductions and withholdings, for fifteen (15) months following the date of termination (the “Severance Period”).
(ii) If you are eligible for and timely elect to continue your health insurance coverage under the Company’s group health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985 or the state equivalent (“COBRA”), the Company will pay the COBRA premiums for you and your eligible dependents until the earlier of (A) the end of the Severance Period, (B) the expiration of your eligibility for the continuation coverage under COBRA, or (C) such time as you become employed by another employer or self-employed through which you are eligible for health insurance (thereafter, you will be responsible for all COBRA premium payments, if any) (such period from your termination date through the earliest of (A) through (C), the “COBRA Payment Period”). For purposes of this Section, references to COBRA premiums shall not include any amounts payable by you under an Internal Revenue Code Section 125 health care reimbursement plan. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that the Company cannot provide the COBRA premiums without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof pay you a taxable cash amount, which payment shall be made regardless of whether you elect health care continuation coverage (the “Health Care Benefit Payment”). The Health Care Benefit Payment shall be paid in monthly installments on the same schedule that the COBRA premiums would otherwise have been paid to you and shall be equal to the amount that the Company would have otherwise paid for COBRA premiums (which amount shall be calculated based on your COBRA premium for the first month of coverage), and shall be paid until the earlier of (i) expiration of the COBRA Payment Period or (ii) the date you voluntarily enroll in a health insurance plan offered by another employer or entity.
(iii) If your termination occurs within one (1) month prior to or twelve (12) months following a Change in Control, you shall be eligible to receive the payments and benefits as described in the Company’s Change in Control Severance Benefit Plan (the “CIC Plan”) and the Participation Agreement thereunder (the “Participation Agreement”) attached thereto. If as a result of your termination or resignation you become entitled to severance benefits under the CIC Plan and you are also entitled to severance benefits described under Sections (i) and (ii) of the “Severance Eligibility” section of this Agreement above, the severance benefits under the CIC Plan shall be provided in lieu of the severance benefits you are entitled to under Sections (i) and (ii) of the “Severance Eligibility” section of this Agreement described above.
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Severance benefits under this Agreement are expressly conditioned upon (a) your delivery to the Company of a signed release and waiver of claims in such form as may be specified by the Company (the “Release”) within the applicable deadline set forth therein, and permitting the Release to become effective in accordance with its terms no later than the Release Deadline (as defined in the Section 409A Section below); and (b) your fully complying with your obligations under your Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement.
For the avoidance of doubt, you shall not be eligible for severance and continued benefits (other than the Accrued Obligations) if you resign without Good Reason, are terminated by the Company for Cause, or are terminated due to your death or Disability.
Definitions: For purposes of this Agreement, the following terms shall have the following meanings set forth in the CIC Plan: Cause, Good Reason, and Change in Control.
Section 409A: Notwithstanding anything in this Agreement to the contrary, the following provisions apply to the extent severance benefits provided herein are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”). Severance benefits shall not commence until you have a Separation from Service. Each installment of severance benefits is a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2)(i), and the severance benefits are intended to satisfy the exemptions from application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if such exemptions are not available and you are, upon Separation from Service, a “specified employee” for purposes of Section 409A, then, solely to the extent necessary to avoid adverse personal tax consequences under Section 409A, the timing of the severance benefits payments shall be delayed until the earlier of (i) six (6) months and one day after your Separation from Service, or (ii) your death. You shall receive severance benefits only if you execute and return to the Company the Release within the applicable time period set forth therein and permit such Release to become effective in accordance with its terms, which date may not be later than sixty (60) days following the date of your Separation from Service (such latest permitted date, the “Release Deadline”). If the severance benefits are not covered by one or more exemptions from the application of Section 409A and the Release could become effective in the calendar year following the calendar year in which your Separation from Service occurs, the Release will not be deemed effective any earlier than the Release Deadline. None of the severance benefits will be paid or otherwise delivered prior to the effective date of the Release. Except to the minimum extent that payments must be delayed because you are a “specified employee” or until the effectiveness of the Release, all amounts will be paid as soon as practicable in accordance with the schedule provided herein and in accordance with the Company’s normal payroll practices. All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by you during the time periods described in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit. The benefits under this Agreement are intended to qualify for an exemption from application of Section 409A or comply with its requirements to the extent necessary to avoid adverse personal tax consequences under Section 409A, and any ambiguities herein shall be interpreted accordingly.
Compliance with Rules, etc.: You will comply at all times with (i) all Company policies, rules and procedures as they may be established, stated and/or modified from time to time at the Company’s sole discretion,
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(ii) the terms of that certain Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement, and (iii) all laws and regulations applicable to the Company’s business and your performance of your duties for the Company.
General: By signing this Agreement, you acknowledge that the terms described in this letter, together with the Equity Documents, CIC Plan, Participation Agreement, and Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement attached hereto, set forth the entire offer to you and understanding between you and the Company and supersedes any prior representations or agreements, whether written or oral pertaining to the subject matter herein. You further acknowledge that there are no terms, conditions, representations, warranties or covenants other than those contained herein. No term or provision of this letter may be amended waived, released, discharged or modified except in writing, signed by you and an authorized officer of the Company, except that the Company may, in its sole discretion, adjust salaries, incentive compensation, stock plans, benefits, job titles, locations, duties, responsibilities, and reporting relationships.
We look forward to you joining the Flexion team.
Sincerely,
/s/ Michael Clayman
Michael Clayman
Chief Executive Officer
ACCEPTED AND AGREED TO:
Name: /s/ William T. Andrews, MD, FACP Date: May 26, 2021
William T. Andrews, MD, FACP
Attachments:
Change in Control Severance Benefit Plan Participation Agreement
Proprietary Information, Inventions, Non-Solicitation, and Non-Competition Agreement
Indemnity Agreement
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Exhibit 10.4
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT (this “Agreement”) is dated as of July 30 2021, by and among (a) SILICON VALLEY BANK, a California corporation (“SVB”), in its capacity as administrative agent and collateral agent (“Agent”), (b) SVB, as a Revolving Line Lender and as a 2021 Term Loan Lender, MIDCAP FUNDING IV TRUST, a Delaware statutory trust, as a Revolving Line Lender (in such capacity and together with its successors and assigns, “MidCap Lender”), and MIDCAP FINANCIAL TRUST, a Delaware statutory trust, and MIDCAP FUNDING XIII TRUST, a Delaware statutory trust (“MidCap XIII”), each as a 2021 Term Loan Lender (in such capacity and together its successors and assigns, collectively the “MidCap Term Loan Lender”, and together with MidCap Lender, “MidCap”) and each other Lender listed on Schedule 1 attached hereto and the other financial institutions party hereto from time to time (each, a “Lender” and collectively, the “Lenders”), (c) MidCap XIII, ELM 2020-3 TRUST, a Delaware statutory trust, and ELM 2020-4 TRUST, a Delaware statutory trust (each an “Existing Term Loan Lender” and collectively, the “Existing Term Loan Lenders”), and (d) FLEXION THERAPEUTICS, INC., a Delaware corporation (“Borrower”).
W I T N E S S E T H:
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit and Security Agreement, dated as of August 2, 2019, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of May 18, 2020 by and among Borrower, Lenders, and Agent (as further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein have the meanings given to them in the Credit Agreement except as otherwise expressly defined herein), pursuant to which Lenders have agreed to provide to Borrower certain loans and other extensions of credit in accordance with the terms and conditions thereof;
WHEREAS, Borrower, Agent and Lenders desire to amend certain provisions of the Credit Agreement in accordance with, and subject to, the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, Lenders and Agent hereby agree as follows:
1.
Acknowledgment of Obligations. Borrower hereby acknowledges, confirms and agrees that all Credit Extensions made prior to the date hereof, together with interest accrued and accruing thereon, and fees, costs, expenses and other charges owing by Borrower (on behalf of itself and the other Credit Parties) to Agent and Lenders under the Credit Agreement and the other Loan Documents, are unconditionally owing by Borrower (on behalf of itself and the other Credit Parties) to Agent and Lenders, without offset, defense or counterclaim of any kind, nature or description whatsoever except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditor’s rights generally.
2.
Description in Change of Terms.
A. Modifications to Credit Agreement
1.
The Credit Agreement shall be amended by adding the following new Section 2.3.1 to appear immediately following Section 2.3 thereof:
“2.3.1 2021 Term Loan Advances
(a) Availability. Subject to the terms and conditions of this Agreement, upon Borrower’s request in accordance with Section 3.3(b), the Lenders with 2021 Term Loan Commitments (the “2021 Term Loan Lenders”) severally and not jointly, shall make one (1) term loan advance to Borrower on or about the Second Amendment Closing Date in an original principal amount of Fifty-Five Million Dollars ($55,000,000.00) according to each 2021 Term Loan Lender’s Applicable Commitment as set forth on Schedule 1 hereto (the “2021 Term A Loan Advance”), provided that all or a portion of the proceeds of the 2021 Term A Loan Advance shall be used to repay in full all of Borrower’s obligations and liabilities with respect to the Term Loan Advances (including without limitation, the accrued portion of the Final Payment as of the Second Amendment Closing Date) (the “2021 Prior Obligations”). For the avoidance of doubt, the Existing Term Loan Lenders hereby waive the unaccrued portion of the Final Payment as of the Second Amendment Closing Date. Borrower hereby authorizes Agent to apply such proceeds to the 2021 Prior Obligation as part of the funding process without actually depositing such funds in an account of Borrower. Subject to the terms and conditions of this Agreement, during the 2021 Draw Period, upon Borrower’s request in accordance with Section 3.3(b), the 2021 Term Loan Lenders, severally and not jointly, shall make one (1) term loan advance to Borrower in an original principal amount of Twenty Million Dollars ($20,000,000.00) according to each 2021 Term Loan Lender’s Applicable Commitment as set forth on Schedule 1 hereto (the “2021 Term B Loan Advance”). The 2021 Term A Loan Advance and the 2021 Term B Loan Advance are each hereinafter referred to singly as a “2021 Term Loan Advance” and collectively as the “2021 Term Loan Advances”. After repayment, no 2021 Term Loan Advance (or any portion thereof) may be reborrowed.
(b) Interest Payments. With respect to the 2021 Term Loan Advances, commencing on the first (1st) Payment Date following the Funding Date of the applicable 2021 Term Loan Advance and continuing on the Payment Date of each month thereafter, Borrower shall make monthly payments of interest to Agent, for the account of the Lenders, in arrears, on the principal amount of each 2021 Term Loan Advance, at the rate set forth in Section 2.4(a).
(c) Repayment of the 2021 Term Loan Advances. Commencing on the 2021 Term Loan Amortization Date, and continuing on each Payment Date thereafter, Borrower shall repay the aggregate outstanding 2021 Term Loan
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Advances to Agent, for the account of the 2021 Term Loan Lenders, in (i) consecutive equal monthly installments of principal over the number of months for the period commencing as of the 2021 Term Loan Amortization Date and ending on the 2021 Term Loan Maturity Date, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.4(a). All outstanding principal and accrued and unpaid interest with respect to the 2021 Term Loan Advances, and all other outstanding Obligations under the 2021 Term Loan Advances, are due and payable in full on the 2021 Term Loan Maturity Date.
(d) Permitted Prepayment. Borrower shall have the option to prepay all, but not less than all, of the 2021 Term Loan Advances advanced by the 2021 Term Loan Lenders under this Agreement, provided Borrower (i) delivers written notice to Agent and each 2021 Term Loan Lender of its election to prepay the 2021 Term Loan Advances at least fifteen (15) days prior to such prepayment, and (ii) pays to Agent, for the account of each 2021 Term Loan Lender, as applicable, on the date of such prepayment (A) the outstanding principal plus accrued and unpaid interest with respect to the 2021 Term Loan Advances, (B) the 2021 Prepayment Premium, (C) the 2021 Final Payment and (D) all other sums, if any, that shall have become due and payable with respect to the 2021 Term Loan Advances, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.
(e) Mandatory Prepayment Upon an Acceleration. If the 2021 Term Loan Advances are accelerated by Agent pursuant to Section 10.2 hereof (or to the extent otherwise automatically accelerated pursuant to Section 10.2 hereof following an Event of Default pursuant to Section 10.1(e)), following the occurrence and during the continuance of an Event of Default, Borrower shall immediately pay to Agent and each 2021 Term Loan Lender, as applicable, for the account of the 2021 Term Loan Lenders in accordance with its respective Pro Rata Share, an amount equal to the sum of (i) all outstanding principal plus accrued and unpaid interest with respect to the 2021 Term Loan Advances, (ii) the 2021 Prepayment Premium, (iii) the 2021 Final Payment and (iv) all other sums, if any, that shall have become due and payable with respect to the 2021 Term Loan Advances, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.”
2.
The Credit Agreement shall be amended by deleting the following, appearing as Section 2.4(a) thereof:
“(a) Interest.
(i) Advances. Subject to Section 2.4(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the greater of (A) five and one half of one percent (5.50%) and (B) the Prime Rate, which interest, in each case, shall be payable monthly in accordance with Section 2.4(e) below.
(ii) Term Loan Advances. Subject to Section 2.4(b), the principal amount outstanding under each Term Loan Advance shall accrue interest at a
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floating per annum rate equal to the greater of (A) six and one half of one percent (6.50%) and (B) one and one-half of one percent (1.50%) above the Prime Rate, which interest, in each case, shall be payable monthly in accordance with Section 2.4(e) below.”
and inserting in lieu thereof the following:
“(a) Interest.
(i) Advances. Subject to Section 2.4(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the greater of (A) five percent (5.00%) and (B) one and three-quarters of one percent (1.75%) above the Prime Rate, which interest, in each case, shall be payable monthly in accordance with Section 2.4(e) below.
(ii) 2021 Term Loan Advances. Subject to Section 2.4(b), the principal amount outstanding under each 2021 Term Loan Advance shall accrue interest at a floating per annum rate equal to the greater of (A) six percent (6.00%) and (B) two and three-quarters of one percent (2.75%) above the Prime Rate, which interest, in each case, shall be payable monthly in accordance with Section 2.4(e) below.”
3.
The Credit Agreement shall be amended by deleting the following, appearing as Section 2.4(h)(i)-(iv) thereof:
“ (i) Revolving Line Commitment Fee. A non-refundable Revolving Line commitment fee (the “Revolving Line Commitment Fee”) in the amount of Two Hundred Thousand Dollars ($200,000.00) is fully earned as of the Closing Date and payable as follows: (i) One Hundred Thousand Dollars ($100,000.00), payable on the Closing Date and (ii) One Hundred Thousand Dollars ($100,000.00), payable on the earliest to occur of (A) an Event of Default, (B) the termination of this Agreement or the Revolving Line, or (C) the first (1st) anniversary of the Closing Date, to be shared between the Revolving Line Lenders pursuant to their respective Applicable Commitment Percentages;
(ii) Final Payment. The Final Payment, when due hereunder, to be shared between the Term Loan Lenders pursuant to their respective Applicable Commitment Percentages;
(iii) Prepayment Premium. The Prepayment Premium, when due hereunder, to be shared between the Term Loan Lenders pursuant to their respective Applicable Commitment Percentages;
(iv) Termination Fee. Upon termination of this Agreement or the termination of the Revolving Line for any reason prior to the Revolving Line Maturity Date, in addition to the payment of any other amounts then-owing, a termination fee (the “Termination Fee”) in an amount equal to two percent (2.0%) of the Revolving Line if such termination occurs on or prior to the first anniversary of the Closing Date, (ii) one percent (1.0%) of the Revolving Line if such
4
termination occurs at any time after the first anniversary of the Closing Date but on or prior to the second anniversary of the Closing Date, and (iii) zero percent (0.0%) of the Revolving Line if such termination occurs at any time after the second anniversary of the Closing Date, in each case to be shared between the Term Loan Lenders pursuant to their respective Applicable Commitment Percentage;”
and inserting in lieu thereof the following:
“ (i) Revolving Line Commitment Fee. A non-refundable Revolving Line commitment fee (the “Revolving Line Commitment Fee”) in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00) is fully earned as of the Second Amendment Closing Date and payable as follows: (i) One Hundred Twenty-Five Thousand Dollars ($125,000.00), payable on the Second Amendment Closing Date and (ii) One Hundred Twenty-Five Thousand Dollars ($125,000.00), payable on the earliest to occur of (A) an Event of Default (and such Event of Default has not been expressly waived in writing by Agent and Required Lenders), (B) the termination of this Agreement or the Revolving Line, or (C) the first (1st) anniversary of the Second Amendment Closing Date, in each case, to be shared between the Revolving Line Lenders pursuant to their respective Applicable Commitment Percentages;
(ii) 2021 Final Payment. The 2021 Final Payment, when due hereunder, to be shared between the 2021 Term Loan Lenders pursuant to their respective Applicable Commitment Percentages;
(iii) 2021 Prepayment Premium. The 2021 Prepayment Premium, when due hereunder, to be shared between the 2021 Term Loan Lenders pursuant to their respective Applicable Commitment Percentages;
(iv) Termination Fee. Upon termination of this Agreement or the termination of the Revolving Line for any reason prior to the Revolving Line Maturity Date, in addition to the payment of any other amounts then-owing, a termination fee (the “Termination Fee”) in an amount equal to two percent (2.0%) of the Revolving Line if such termination occurs on or prior to the first anniversary of the Second Amendment Closing Date, (ii) one percent (1.0%) of the Revolving Line if such termination occurs at any time after the first anniversary of the Second Amendment Closing Date but on or prior to the second anniversary of the Second Amendment Closing Date, and (iii) zero percent (0.0%) of the Revolving Line if such termination occurs at any time after the second anniversary of the Second Amendment Closing Date, in each case to be shared between the 2021 Term Loan Lenders pursuant to their respective Applicable Commitment Percentage;”
4.
The Credit Agreement shall be amended by deleting the following, appearing as Section 3.3 thereof:
“3.3 Procedures for Borrowing.
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(a) Advances. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, to obtain an Advance, Borrower (via an individual duly authorized by an Administrator) shall notify Agent (which notice shall be irrevocable) by electronic mail by 12:00 p.m. Eastern time on the Funding Date of the Advance. Such notice shall be made by Borrower through Agent’s online banking program, provided, however, if Borrower is not utilizing Agent’s online banking program, then such notice shall be in a written format acceptable to Agent that is executed by an Authorized Signer. Agent shall have received satisfactory evidence that the Board has approved that such Authorized Signer may provide such notices and request Advances. In connection with any such notification, Borrower must promptly deliver to Agent by electronic mail or through Agent’s online banking program such reports and information, including without limitation, a Borrowing Base Report, sales journals, cash receipts journals, accounts receivable aging reports, as Agent may request in its sole discretion. Agent shall credit proceeds of an Advance to the Designated Deposit Account. Agent may make Advances under this Agreement based on instructions from an Authorized Signer or without instructions if the Advances are necessary to meet Obligations which have become due.
(b) Term Loan Advances. Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan Advances set forth in this Agreement, to obtain a Term Loan Advance, Borrower shall notify Agent (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Eastern time at least five (5) Business Days before the proposed Funding Date (with the exception of the Term B Loan Advance that shall be made on the First Amendment Effective Date, which shall be one (1) Business Day before the proposed Funding Date) of the Term Loan Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Agent by electronic mail or facsimile a completed Disbursement Letter (and Payment Advance Request Form) executed by an Authorized Signer. Agent may rely on any telephone notice given by a person whom Agent believes is an Authorized Signer. On the Funding Date, Agent shall credit each Term Loan Advance to the Designated Deposit Account. Agent may make a Term Loan Advance under this Agreement based on instructions from an Authorized Signer or without instructions if such Term Loan Advance is necessary to meet Obligations which have become due.”
and inserting in lieu thereof the following:
“ (a) Advances. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, to obtain an Advance, Borrower (via an individual duly authorized by an Administrator) shall notify Agent (which notice shall be irrevocable) by electronic mail by 12:00 p.m. Eastern time on the Funding Date of the Advance. Such notice shall be made by Borrower through Agent’s online banking program, provided, however, if Borrower is not utilizing Agent’s online banking program, then such notice shall be in a written format acceptable to Agent that is executed by an Authorized Signer. Agent shall have received satisfactory evidence that the Board has
6
approved that such Authorized Signer may provide such notices and request Advances. In connection with any such notification, Borrower must promptly deliver to Agent by electronic mail or through Agent’s online banking program such reports and information, including without limitation, a Borrowing Base Report including a detailed accounts receivable agings, aged by invoice date, sales journals, cash receipts journals, monthly accounts receivable agings, aged by invoice date, monthly accounts payable agings, aged by invoice date, as Agent may request in its sole discretion. Agent shall credit proceeds of an Advance to the Designated Deposit Account. Agent may make Advances under this Agreement based on instructions from an Authorized Signer or without instructions if the Advances are necessary to meet Obligations which have become due.
(b) 2021 Term Loan Advances. Subject to the prior satisfaction of all other applicable conditions to the making of a 2021 Term Loan Advances set forth in this Agreement, to obtain a 2021 Term Loan Advance, Borrower shall notify Agent (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Eastern time at least five (5) Business Days before the proposed Funding Date of the 2021 Term Loan Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Agent by electronic mail or facsimile a completed Disbursement Letter (and Payment Advance Request Form) executed by an Authorized Signer. Agent may rely on any telephone notice given by a person whom Agent believes is an Authorized Signer. On the Funding Date, Agent shall credit each 2021 Term Loan Advance to the Designated Deposit Account. Agent may make a 2021 Term Loan Advance under this Agreement based on instructions from an Authorized Signer or without instructions if such 2021 Term Loan Advance is necessary to meet Obligations which have become due.”
5.
The Credit Agreement shall be amended by deleting the following, appearing as Section 6.2(a) and (b) thereof:
“ (a) a Borrowing Base Report (and any schedules related thereto and including any other information requested by Agent with respect to Borrower’s Accounts) within seven (7) days after the end of each month;
(b) within thirty (30) days after the end of each month, (i) monthly accounts receivable agings, aged by invoice date, (ii) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (iii) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, sell through reports, detailed Account Debtor listing, Deferred Revenue report, and general ledger;”
and inserting in lieu thereof the following:
“ (a) a Borrowing Base Report (and any schedules related thereto and including a detailed accounts receivable agings, aged by invoice date, and any other information requested by Agent with respect to Borrower’s Accounts) (i)
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within seven (7) days after the end of each month, (ii) and with each request for an Advance;
(b) within thirty (30) days after the end of each month (and with each request for an Advance for subsections (i) and (ii) hereof), (i) monthly accounts receivable agings, aged by invoice date, (ii) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (iii) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, sell through reports, detailed Account Debtor listing, Deferred Revenue report, and general ledger;”
6.
The Credit Agreement shall be amended by deleting the following, appearing as Section 6.2(d) thereof:
“ (d) within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Agent may reasonably request, including, without limitation, a statement that at the end of such month there were no held checks;”
and inserting in lieu thereof the following:
“ (d) within thirty (30) days after the last day of each month and together with the Monthly Financial Statements (provided that for the months ending March 31, June 30, and September 30, within forty-five days after the last day of each such month, and for the month ending December 31, within 90 days after the last day of such month), a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Agent may reasonably request, including, without limitation, a statement that at the end of such month there were no held checks;”
7.
The Credit Agreement shall be amended by deleting the following, appearing as Section 6.2(f) thereof:
“ (f) as soon as available, and in any event within ninety (90) days following the end of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Agent;”
and inserting in lieu thereof the following:
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“ (f) (i) as soon as available, and in any event within forty-five (45) days after the end of the first three fiscal quarters of Borrower, a company prepared consolidated balance sheet and income statement covering Borrower’s consolidated operations for such quarter, consistent with such quarterly financial statements submitted to the SEC, in a form acceptable to Agent; and (ii) as soon as available, and in any event within ninety (90) days following the end of Borrower’s fiscal year, Borrower shall deliver its 10-K report, together with audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Agent;”
1.
The Credit Agreement shall be amended by deleting the following appearing as Section 6.6(a) thereof:
“Borrower shall, and shall cause each Credit Party to, maintain all of its operating accounts, the Cash Collateral Account and excess cash with SVB and SVB’s Affiliates. Notwithstanding the foregoing, Borrower shall be permitted to invest up to fifty (50.0%) percent of its excess cash and cash equivalents in securities/investment accounts maintained at another bank or financial institution other than SVB subject to the terms and conditions of this Agreement. In addition, Borrower shall conduct all of its primary banking facilities with SVB, including, without limitation, cash management, asset management, letters of credit and business credit cards.”
and inserting in lieu the following:
“Borrower shall, and shall cause each Credit Party to, maintain all of its operating accounts, the Cash Collateral Account and excess cash with SVB and SVB’s Affiliates. In addition, Borrower shall conduct all of its primary banking facilities with SVB, including, without limitation, cash management, asset management, letters of credit and business credit cards. Notwithstanding the foregoing, prior to the expiration of the 2021 Transition Period, Borrower may maintain its lockbox account with Wells Fargo Bank (the “Wells Fargo Account”), provided that any and all funds deposited into the Wells Fargo Account shall be transferred into an account in the name of Borrower maintained with SVB every three (3) Business Days.”
8.
Section 6.13 of the Credit Agreement shall be amended in its entirety and replaced with the following:
“6.13 Minimum Revenue. Borrower shall maintain minimum Revenue (measured as of the last day of each fiscal quarter) in at least the amount set forth for the corresponding measuring periods in the table below, or as applicable as determined in accordance with the last paragraph of this Section 6.13. Notwithstanding the foregoing, minimum Revenue will not be tested (a) for any quarter, when Borrower has, at all times during such quarter maintained Liquidity, as determined by Agent in its sole discretion, of at least One Hundred Million Dollars ($100,000,000.00), and (b) notwithstanding clause (a), upon the occurrence of the 2021 Milestone Event, and at all times thereafter, for any quarter
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in which a Streamline Period is in effect for the entirety of such quarter.
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Period Ending
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Minimum Revenue
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June 30, 2021
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At least $47,689,000.00 for the trailing six (6) month period ending June 30, 2021
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September 30, 2021
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At least $48,510,000.00 for the trailing six (6) month period ending September 30, 2021
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December 31, 2021
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At least $52,311,000.00 for the trailing six (6) month period ending December 31, 2021
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March 31, 2022
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At least $54,000,000.00 for the trailing six (6) month period ending March 31, 2022
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June 30, 2022
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At least $57,000,000.00 for the trailing six (6) month period ending June 30, 2022
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September 30, 2022
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At least $63,000,000.00 for the trailing six (6) month period ending September 30, 2022
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December 31, 2022
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At least $68,000,000.00 for the trailing six (6) month period ending December 31, 2022
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With respect to the trailing six (6) month period ending March 31, 2023 and each fiscal quarter thereafter, the minimum Revenue levels shall be proposed by Agent and Lenders to Borrower in writing based upon Borrower’s Board approved operating budget acceptable to Agent and each Lender in Agent’s and each such Lender’s sole discretion and based upon each Lender’s then current credit underwriting. With respect thereto, Borrower’s failure to agree in writing (which agreement shall be set forth in a written amendment to this Agreement) on or prior to March 15, 2023, to any such covenant levels with respect with respect to the trailing six (6) month period ending March 31, 2023 and each fiscal quarter thereafter, shall result in an immediate Event of Default for which there shall be no grace or cure period.”
9.
The Credit Agreement shall be amended by inserting the following new definitions, appearing alphabetically in Section 13.1 thereof:
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“ “2017 Convertible Note Event” occurs if and when (if ever) Agent confirms in writing that it has received evidence, satisfactory to Agent and each Lender in Agent’s and each Lender’s sole and absolute discretion, that Borrower has either (i) (a) entered into fully-executed written amendments to the 2017 Convertible Notes, (b) entered into fully-executed unsecured convertible notes, replacing the 2017 Convertible Notes, or (c) completed a refinancing of the 2017 Convertible Notes, in the case of (a), (b) or (c), on terms satisfactory to Agent and each Lender in Agent’s and each Lender’s sole and absolute discretion, including, without limitation, extending the maturity date of the 2017 Convertible Notes (or such replacement or refinanced unsecured convertible notes) to no earlier than November 1, 2026; or (ii) fully converted all 2017 Convertible Notes into equity securities of Borrower.”
“ “2021 Draw Period” is the period commencing on the occurrence of the 2021 Milestone Event, and ending on the earlier to occur of (a) March 31, 2022, or (b) an Event of Default (and such Event of Default has not been expressly waived in writing by Agent and Required Lenders).”
“ “2021 Final Payment” is a payment (in addition to and not in substitution for the regular monthly payments of principal plus accrued interest) equal to the original principal amount of the 2021 Term Loan Advances extended by the 2021 Term Loan Lenders to Borrower hereunder multiplied by four and three-quarters of one percent (4.75%) due on the earliest to occur of (a) the 2021 Term Loan Maturity Date, (b) the repayment in full of the 2021 Term Loan Advance, (c) as required pursuant to Section 2.3.1(d) or 2.3.1(e), or (d) the termination of this Agreement.”
“ “2021 Interest Only Extension Event” occurs if and when (if ever) Agent confirms in writing that it has received evidence, on or prior to July 31, 2023, satisfactory to Agent and each 2021 Term Loan Lender in Agent’s and each 2021 Term Loan Lender’s sole and absolute discretion, that each of the following has occurred on or prior to July 31, 2023: (i) 2021 Milestone Event, and (ii) Borrower has requested and Lenders have made the 2021 Term B Loan Advance to Borrower; and no Event of Default has occurred and is continuing at such time. ”
“ “2021 Milestone Event” occurs if and when (if ever) Agent confirms in writing that it has received evidence, on or prior to March 31, 2022, satisfactory to Agent and each 2021 Term Loan Lender in Agent’s and each 2021 Term Loan Lender’s sole and absolute discretion, that Borrower has (a) (i) received positive data with respect to Borrower’s FX201 phase 1 clinical trial sufficient to progress to a phase 2 clinical trial as indicated by the FDA, or (ii) received positive data with respect to Borrower’s FX301 phase 1b clinical trial sufficient to progress to a phase 2 clinical trial as indicated by the FDA, and (b) achieved Revenue of at least One Hundred Million Dollars ($100,000,000.00) for a trailing twelve (12) month period ending after the Second Amendment Closing Date, but
11
on or prior to March 31, 2022, provided, however, that Revenue shall be tested for the trailing twelve (12) month period ending on the last day of the calendar month for the reporting period immediately prior to the date on which Borrower requests the 2021 Term B Loan Advance.”
“ “2021 Prepayment Premium” shall be an additional fee, payable to Agent, for the ratable benefit of the 2021 Term Loan Lenders based on their Pro Rata Share, with respect to the 2021 Term Loan Advances, in an amount equal to:
(a) for a prepayment of the 2021 Term Loan Advances made on or prior to the first (1st) anniversary of the Second Amendment Closing Date, three percent (3.0%) of the then outstanding principal amount of the 2021 Term Loan Advances immediately prior to the date of such prepayment;
(b) for a prepayment of the 2021 Term Loan Advances made after the first (1st) anniversary of the Second Amendment Closing Date, but on or prior to the second (2nd) anniversary of the Second Amendment Closing Date, two percent (2.0%) of the then outstanding principal amount of the 2021 Term Loan Advances immediately prior to the date of such prepayment;
(c) for a prepayment of the 2021 Term Loan Advances made after the second (2nd) anniversary of the Second Amendment Closing Date, but on or prior to the third (3rd) anniversary of the Second Amendment Closing Date, one percent (1.0%) of the then outstanding principal amount of the 2021 Term Loan Advances immediately prior to the date of such prepayment; and
(d) for a prepayment of the 2021 Term Loan Advances made after the third (3rd) anniversary of the Second Amendment Closing Date, zero percent (0.0%) of the then outstanding principal amount of the 2021 Term Loan Advances immediately prior to the date of such prepayment.
“ “2021 Prior Obligations” has the meaning given it in Section 2.3.1(a).”
“ “2021 Term A Loan Advance” has the meaning given it in Section 2.3.1(a).”
“ “2021 Term B Loan Advance” has the meaning given it in Section 2.3.1(a).”
“ “2021 Term Loan Advance” and “2021 Term Loan Advances” each has the meaning given it in Section 2.3.1(a).”
“ “2021 Term Loan Amortization Date” means August 1, 2023, which shall be extended to August 1, 2024, upon the occurrence of the 2021 Interest Only Extension Event.”
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“ “2021 Term Loan Commitment” means, for any Lender, the obligation of such Lender to make a 2021 Term Loan Advance as and when available, up to the principal amount shown on Schedule 1. “2021 Term Loan Commitments” means the aggregate amount of such commitments of all Lenders.”
“ “2021 Term Loan Lenders” has the meaning given it in Section 2.3.1(a).”
“ “2021 Term Loan Maturity Date” is February 1, 2024, which shall be extended to July 1, 2026 upon the occurrence of the 2017 Convertible Note Event.”
“ “2021 Transition Period” is the period of time commencing upon the Second Amendment Closing Date, and ending on the earlier to occur of (a) October 28, 2021, and (b) an Event of Default.”
“ “Existing Term Loan Lenders” means, individually and collectively, MIDCAP FUNDING XIII TRUST, a Delaware statutory trust, ELM 2020-3 TRUST, a Delaware statutory trust, and ELM 2020-4 TRUST, a Delaware statutory trust.”
“ “Second Amendment Closing Date” means July 30, 2021.”
“ “Wells Fargo Account” has the meaning given it in Section 6.6(a).”
10.
The Credit Agreement shall be amended by deleting the following definitions, appearing in Section 13.1 thereof:
“ “Credit Extension” is any Advance, Overadvance, Term Loan Advance, or any other extension of credit by any Lender for Borrower’s benefit.”
“ “Lenders” and “Lenders” has the meaning given it in the preamble of this Agreement, including, without limitation or duplication, each Revolving Line Lender and each Term Loan Lender.
“ “Maturity Date” means the Revolving Line Maturity Date and/or the Term Loan Maturity Date, as applicable.”
“ “Obligations” means all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, fees, indemnities, the Revolving Line Commitment Fee, the Unused Revolving Line Facility Fee, the Termination Fee, the Prepayment Fee, the Final Payment and other amounts Borrower owes the Agent or Lenders now or later under this Agreement or the other Loan Documents, including, without limitation, interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned
13
to the Lenders and/or Agent, and the payment and performance of each other Credit Party’s covenants and obligations under the Loan Documents. “Obligations” does not include obligations under any warrants issued to Agent or a Lender.”
“ “Payment Date” means (a) with respect to Advances, the last calendar day of each calendar month, and (b) with respect to the Term Loan Advances, the first calendar day of each calendar month.
“ “Required Lenders” means, unless all of the Lenders and Agent agree otherwise in writing, Lenders having (a) more than sixty percent (60.0)% of the Applicable Commitments of all Lenders, or (b) if such Applicable Commitments have expired or been terminated, more than sixty percent (60.0%) of the aggregate outstanding principal amount of the Credit Extensions; provided, however, that so long as a Lender on the Closing Date does not assign any portion of its Term Loan Commitment, its Revolving Line Commitment, or all or any part of its Term Loan Advances or its portion of the Revolving Line (other than, in each case, an assignment to any Affiliate or Approved Fund of such Lender), the “Required Lenders” shall include such Lender (or such Affiliate or Approved Fund of such Lender).”
“ “Revolving Line” is the aggregate principal amount equal to Five Million Dollars ($5,000,000.00).”
“ “Revolving Line Maturity Date” is January 1, 2024.”
“ “Streamline Period” is, on and after the Closing Date, provided no Event of Default has occurred and is continuing: (a) commencing on the first day of the month following the day that Borrower provides to Agent a written report that Borrower has, at all times during the immediately preceding calendar month maintained Liquidity, as determined by Agent in its sole discretion, of at least Eighty Million Dollars ($80,000,000.00) (the “Streamline Threshold”); and (b) terminating on the earlier to occur of (i) the occurrence of an Event of Default, or (ii) the first day thereafter in which Borrower fails to maintain the Streamline Threshold, as confirmed by Agent in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Threshold each consecutive day for one (1) month as determined by Agent in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Agent prior written notice of Borrower’s election to enter into any such Streamline Period, and each such Streamline Period shall commence on the first day of the monthly period following the date Agent determines, in its sole discretion, that the Streamline Threshold has been achieved.”
“ “Term Loan Maturity Date” is January 1, 2024.”
and inserting in lieu thereof the following:
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“ “Credit Extension” is any Advance, Overadvance, Term Loan Advance, 2021 Term Loan Advance, or any other extension of credit by any Lender for Borrower’s benefit.”
“ “Lenders” and “Lenders” has the meaning given it in the preamble of this Agreement, including, without limitation or duplication, each Revolving Line Lender, each Term Loan Lender, and each 2021 Term Loan Lender.”
“ “Maturity Date” means the Revolving Line Maturity Date, the Term Loan Maturity Date, and/or the 2021 Term Loan Maturity Date, as applicable.”
“ “Obligations” means all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, fees, indemnities, the Revolving Line Commitment Fee, the Unused Revolving Line Facility Fee, the Termination Fee, the 2021 Prepayment Fee, the 2021 Final Payment and other amounts Borrower owes the Agent or Lenders now or later under this Agreement or the other Loan Documents, including, without limitation, interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Agent, and the payment and performance of each other Credit Party’s covenants and obligations under the Loan Documents. “Obligations” does not include obligations under any warrants issued to Agent or a Lender.”
“ “Payment Date” means (a) with respect to Advances, the last calendar day of each calendar month, and (b) with respect to the 2021 Term Loan Advances and the Term Loan Advances, the first calendar day of each calendar month.”
“ “Required Lenders” means, unless all of the Lenders and Agent agree otherwise in writing, Lenders having (a) more than sixty percent (60.0)% of the Applicable Commitments of all Lenders, or (b) if such Applicable Commitments have expired or been terminated, more than sixty percent (60.0%) of the aggregate outstanding principal amount of the Credit Extensions; provided, however, that so long as a Lender on the Second Amendment Closing Date does not assign any portion of its 2021 Term Loan Commitment, its Revolving Line Commitment, or all or any part of its 2021 Term Loan Advances or its portion of the Revolving Line (other than, in each case, an assignment to any Affiliate or Approved Fund of such Lender), the “Required Lenders” shall include such Lender (or such Affiliate or Approved Fund of such Lender).”
“ “Revolving Line” is the aggregate principal amount equal to Twenty-Five Million Dollars ($25,000,000.00).”
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“ “Revolving Line Maturity Date” is February 1, 2024, which shall be extended to July 1, 2026 upon the occurrence of the 2017 Convertible Note Event.”
“ “Streamline Period” is, on and after the Second Amendment Closing Date, provided no Event of Default has occurred and is continuing, the period (a) commencing on the first day of the month following the day that Borrower provides to Agent a written report that Borrower has, at all times during the immediately preceding calendar month maintained Liquidity, as determined by Agent in its sole discretion, of at least One Hundred Twenty Million Dollars ($120,000,000.00) (the “Streamline Threshold”); and (b) terminating on the earlier to occur of (i) the occurrence of an Event of Default (and such Event of Default has not been expressly waived in writing by Agent and Required Lenders), or (ii) the first day thereafter in which Borrower fails to maintain the Streamline Threshold, as confirmed by Agent in its sole discretion. Upon the termination of a Streamline Period, Borrower must maintain the Streamline Threshold each consecutive day for one (1) month as determined by Agent in its sole discretion, prior to entering into a subsequent Streamline Period. Borrower shall give Agent prior written notice of Borrower’s election to enter into any such Streamline Period, and each such Streamline Period shall commence on the first day of the monthly period following the date Agent determines, in its sole discretion, that the Streamline Threshold has been achieved.”
“ “Term Loan Maturity Date” is the Second Amendment Closing Date.”
11.
Schedule 1 (Credit Facility Schedule) appearing as Schedule 1 to the Credit Agreement is hereby deleted and replaced with the Schedule 1 (Credit Facility Schedule) attached as Exhibit A hereto.
12.
The Compliance Certificate appearing as Exhibit B to the Credit Agreement is hereby deleted and replaced with the Compliance Certificate attached as Exhibit B hereto.
3.
No Other Amendments. Except for the amendments set forth and referred to in Sections 2 above, the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect and Borrower hereby ratifies and reaffirm all of its obligations under the Credit Agreement and the other Loan Documents as amended by this Agreement. Nothing in this Agreement is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any of Borrower’s Obligations or to modify, affect or impair the perfection or continuity of Agent’s security interests in, security titles to or other liens, for the benefit of itself and the Lenders, on any Collateral for the Obligations.
4.
Representations and Warranties. To induce Agent and Lenders to enter into this Agreement, Borrower hereby warrants, represents and covenants to Agent and Lenders that (i) each representation or warranty of each Credit Party set forth in the Credit Agreement and other Loan Documents are hereby restated and reaffirmed as true, accurate and complete in all material respects on
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and as of the date hereof as if such representation or warranty were made on and as of the date hereof (provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof, and provided, further, that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date), (ii) both before and after giving effect to this Agreement, no Default or Event of Default has occurred and is continuing and (iii) each Credit Party has the power and is duly authorized and has obtained all necessary consents and has taken all necessary actions to enter into, deliver and perform this Agreement and this Agreement is the legal, valid and binding obligation of each Credit Party enforceable against such Credit Party in accordance with its terms.
5.
No Defense of Borrower. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Agent and Lenders with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Agent and Lenders, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Agent and Lenders from any liability thereunder.
6.
Updated Perfection Certificate. Borrower has delivered an updated Perfection Certificate in connection with this Agreement (the “Updated Perfection Certificate”) dated as of the date hereof, which Updated Perfection Certificate shall supersede in all respects that certain Perfection Certificate of Borrower dated as of August 2, 2019. Borrower agrees that all references in the Credit Agreement to “Perfection Certificate” shall hereinafter be deemed to be a reference to the Updated Perfection Certificate.
7.
Ratification of Pledge Agreement. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and conditions of a certain Pledge Agreement dated as of August 2, 2019 between Borrower and Agent, and acknowledges, confirms and agrees that said Pledge Agreement shall remain in full force and effect.
8.
Electronic Execution of Documents. The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
9.
Severability of Provisions. In case any provision of or obligation under this Agreement shall be invalid, illegal or unenforceable in any applicable jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
10.
Counterparts. This Agreement may be executed in multiple counterparts and all of which when taken together shall constitute one and the same instrument.
11.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT
17
REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS.
12.
Entire Agreement. The Credit Agreement and the other Loan Documents as and when amended through this Agreement embody the entire agreement between the parties hereto relating to the subject matter thereof and supersede all prior agreements, representations and understandings, if any, relating to the subject matter thereof.
13.
No Strict Construction, Etc. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Time is of the essence for this Agreement.
14.
Costs and Expenses. Borrower absolutely and unconditionally agrees to pay or reimburse upon demand for all reasonable fees, costs and expenses incurred by Agent and the Lenders in connection with the preparation, negotiation, execution and delivery of this Agreement and any other Loan Documents or other agreements prepared, negotiated, executed or delivered in connection with this Agreement or transactions contemplated hereby.
15.
Effectiveness. This Agreement shall be deemed effective upon (a) the due execution and delivery to Agent of this Agreement by each party hereto, (b) delivery of each of the deliverables listed on the document agenda, satisfactory to Agent and each Lender, (c) Borrower’s payment of (i) the Revolving Line Commitment Fee payable on the Second Amendment Closing Date, and (ii) Lender’s Expenses incurred in connection with this Amendment.
[Remainder of page intentionally blank; signature pages follow.]
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Closing Date.
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BORROWER:
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FLEXION THERAPEUTICS, INC.
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By
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/s/ Mark S. Levine
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Name: Mark S. Levine
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Title: Secretary
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19
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AGENT:
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SILICON VALLEY BANK, as Agent
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By
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/s/ Lauren Cole
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Name: Lauren Cole
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Title: Director
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LENDERS:
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SILICON VALLEY BANK
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By
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/s/ Lauren Cole
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Name: Lauren Cole
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Title: Director
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MIDCAP FINANCIAL TRUST
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By: Apollo Capital Management, L.P., its investment manager
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By: Apollo Capital Management GP, LLC, its general partner
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By:
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/s/ Maurice Amsellem
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Name: Maurice Amsellem
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Title: Authorized Signatory
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20
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MIDCAP FUNDING IV TRUST
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By: Apollo Capital Management, L.P., its investment manager
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By: Apollo Capital Management GP, LLC, its general partner
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By:
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/s/ Maurice Amsellem
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Name: Maurice Amsellem
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Title: Authorized Signatory
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21
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MIDCAP FUNDING XIII TRUST
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By: Apollo Capital Management, L.P., its investment manager
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By: Apollo Capital Management GP, LLC, its general partner
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By:
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/s/ Maurice Amsellem
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Name: Maurice Amsellem
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Title: Authorized Signatory
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22
EXISTING TERM LOAN LENDERS
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MIDCAP FUNDING XIII TRUST
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By: Apollo Capital Management, L.P., its investment manager
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By: Apollo Capital Management GP, LLC, its general partner
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|
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By:
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/s/ Maurice Amsellem
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Name: Maurice Amsellem
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Title: Authorized Signatory
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ELM 2020-3 TRUST
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By: MidCap Financial Services Capital
Management, LLC, as Servicer
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By:
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/s/ John O’Dea
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Name: John O’Dea
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Title: Authorized Signatory
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ELM 2020-4 TRUST
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By: MidCap Financial Services Capital
Management, LLC, as Servicer
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By:
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/s/ John O’Dea
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Name: John O’Dea
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Title: Authorized Signatory
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23
EXHIBIT A
Schedule 1
2021 Credit Facility Schedule
Revolving Line
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Lender
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Applicable Commitment
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Applicable Commitment Percentage
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Silicon Valley Bank
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$12,500,000.00
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50.0%
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MidCap Funding IV Trust
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$12,500,000.00
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50.0%
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TOTAL
|
$25,000,000.00
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100.0000%
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2021 Term A Loan Advance
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|
|
|
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Lender
|
Applicable Commitment
|
Applicable Commitment Percentage
|
|
Silicon Valley Bank
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$27,500,000.00
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50.0%
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MidCap Financial Trust
|
$20,625,000.00
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37.50%
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Midcap Funding XIII Trust
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$6,875,000.00
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12.50%
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TOTAL
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$55,000,000.00
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100.0000%
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2021 Term B Loan Advance
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Lender
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Applicable Commitment
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Applicable Commitment Percentage
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Silicon Valley Bank
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$10,000,000.00
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50.0%
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MidCap Financial Trust
|
$10,000,000.00
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50.0%
|
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TOTAL
|
$20,000,000.00
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100.0000%
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24
EXHIBIT B
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK, as Agent, and the Lenders Date:
FROM: FLEXION THERAPEUTICS, INC.
The undersigned authorized officer of FLEXION THERAPEUTICS, INC. (“Borrower”) certifies that under the terms and conditions of the Amended and Restated Credit and Security Agreement among Borrower, SVB, as Agent and Lender and the other Lenders from time to time party thereto (the “Loan Agreement”):
(1) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.6 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Agent.
Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
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Please indicate compliance status by circling Yes/No under “Complies” column.
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Reporting Covenants
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Required
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Complies
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Monthly financial statements
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Monthly within 30 days
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Yes No
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Compliance Certificates
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Monthly within 30 days (45 days for March, June, September, and 90 days for December)
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Yes No
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10-Q Report
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Quarterly (Q1, Q2, and Q3) within 45 days
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Yes No
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10-K Report and annual financial statements (CPA audited)
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FYE within 90 days
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Yes No
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Filed 10-Q, 10-K, and 8-K
|
Within 5 days after filing with SEC
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Yes No
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A/R & A/P Agings
|
Monthly within 30 days and with each Advance request
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Yes No
|
25
|
|
|
|
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Deferred Revenue report
|
Monthly within 30 days
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Yes No
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Sell through reports
|
Monthly within 30 days
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Yes No
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Borrowing Base Reports with detailed A/R aging
|
Monthly within 7 days and with each Advance request
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Yes No
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Board approved projections
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FYE within 90 days and as amended/updated
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Yes No
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The following Material Intellectual Property was registered after the Closing Date (if no registrations, state “None”)
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Financial Covenant
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Required
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Actual
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Complies
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|
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Minimum Revenue
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See Schedule 1
|
$________
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Yes No
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Streamline Period
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Required
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Actual
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Complies
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Maintain:
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Liquidity
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≥ $120,000,000.00
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$_________
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Yes No
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Other Matters
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|
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Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this Compliance Certificate.
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Yes
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No
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The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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FLEXION THERAPEUTICS, INC.
By:
Name:
Title:
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AGENT USE ONLY
Received by: _____________________
authorized signer
Date: _________________________
Verified: ________________________
authorized signer
Date: _________________________
Compliance Status: Yes No
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26
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern.
Dated: ____________________
I. Minimum Revenue (Section 6.13)
Required: Minimum Revenue. Borrower shall maintain minimum Revenue (measured as of the last day of each fiscal quarter) in at least the amount set forth for the corresponding measuring periods in the table below, or as applicable as determined in accordance with the last paragraph of this Section 6.13. Notwithstanding the foregoing, minimum Revenue will not be tested (a) for any quarter, when Borrower has, at all times during such quarter maintained Liquidity, as determined by Agent in its sole discretion, of at least One Hundred Million Dollars ($100,000,000.00), and (b) notwithstanding clause (a), upon the occurrence of the 2021 Milestone Event, and at all times thereafter, for any quarter in which a Streamline Period is in effect for the entirety of such quarter.
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Period Ending
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Minimum Revenue
|
|
June 30, 2021
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At least $47,689,000.00 for the trailing six (6) month period ending June 30, 2021
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September 30, 2021
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At least $48,510,000.00 for the trailing six (6) month period ending September 30, 2021
|
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December 31, 2021
|
At least $52,311,000.00 for the trailing six (6) month period ending December 31, 2021
|
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March 31, 2022
|
At least $54,000,000.00 for the trailing six (6) month period ending March 31, 2022
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June 30, 2022
|
At least $57,000,000.00 for the trailing six (6) month period ending June 30, 2022
|
|
September 30, 2022
|
At least $63,000,000.00 for the trailing six (6) month period ending September 30, 2022
|
|
December 31, 2022
|
At least $68,000,000.00 for the trailing six (6) month period ending December 31, 2022
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*See Section 6.13 with respect to the fiscal quarter ending March 31, 2023 and each fiscal quarter thereafter.
27
Actual: $ ______________
No, not in compliance Yes, in compliance
ny-2186255
28
Exhibit 10.5
CERTAIN INFORMATION CONTAINED IN THIS EXHIBIT, MARKED BY [***], HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE THE REGISTRANT HAS DETERMINED THAT IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
SUPPLY AGREEMENT
This Supply Agreement (“Agreement”) is made effective as of the 1st day of July, 2016 (the “Effective Date”) by and between Evonik Corporation, an Alabama Corporation with its principal place of business at 299 Jefferson Road, Parsippany, New Jersey 07054 and with a facility at 750 Lakeshore Parkway, Birmingham, Alabama 35211 (hereinafter referred to as “Supplier”) and Flexion Therapeutics, Inc. with its principal place of business at 10 Mall Road, Suite 301, Burlington, Massachusetts 01803 (hereinafter referred to as “Purchaser”). Supplier and Purchaser are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
PREAMBLE
WHEREAS, Supplier is engaged in the business of selling a certain polymer product known as […***…] as further identified in Exhibit A (hereinafter “Product”); and
WHEREAS, Purchaser is engaged in the business of formulation development and commercial manufacturing and desires to utilize and incorporate the Product, which Supplier shall supply in accordance with certain specifications agreed upon by Supplier and Purchaser to be attached as Exhibit B hereto (“Specifications”), as a raw material in Purchaser's subsequent manufacture of Purchaser’s product referred to as Zilretta™ (also known as FX006) containing the active ingredient triamcinolone acetonide (“Finished Product”); and
WHEREAS, Purchaser acknowledges, understands and agrees: (i) that Supplier is only willing to enter into this Agreement and to sell Product hereunder provided that Purchaser accepts and agrees to purchase Product subject to the terms and conditions hereof including but not limited to the disclaimer set forth in Section 2.4 hereof (the “Disclaimer”), and (ii) that Supplier is relying upon Purchaser’s warranties and representations to that effect, as an express inducement to enter into this Agreement; and
WHEREAS, upon the Effective Date the Parties have simultaneously executed a quality agreement (“Quality Agreement”) which describes the relationship of the Parties hereunder and the responsibilities of each Party regarding quality systems practices and activities concerning the Product. However, this Agreement will expressly and exclusively govern all provisions regarding the purchase and sale of all Product between the Parties and all terms, obligations, responsibility, and liability regarding same. The aforementioned Quality Agreement will only provide guidelines with regard to the quality of the Product and each Party’s responsibilities regarding quality systems practices and activities concerning the Product.
***Certain Confidential Information Omitted
NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Supplier and Purchaser agree as follows:
The recitals described above are hereby expressly made part of this Agreement.
1.
DEFINITIONS. For purposes of this Agreement, the following terms have the meaning set forth below:
1.1
“Affiliate” of a Party means any person, corporation, association or other entity that directly or indirectly owns, is owned by, or is under common ownership of such Party, either now or at any time during the term of this Agreement. The terms “owns,” “owned,” or “ownership” mean the direct or indirect possession of more than fifty percent (50%) of the voting securities of, or income interest or comparable equity in, such entity.
1.2
““Applicable Laws”“ means all federal, state, and local ordinances, rules, and regulations of any kind whatsoever, which as it applies to Supplier are applicable to Product or the manufacture thereof or, as it applies to Purchaser, applicable to the Finished Product.
1.3
“Batch” means […***…] of monomer (lactide and glycolide) that is charged into a GMP commercial vessel yielding a minimum of […***…] of Product. The Parties will mutually agree upon any adjustments to the minimum volume of Product yield in a Batch and consequently the definition of Batch, annually, based upon actual Product yields.
1.4
“Binding Forecast” has the meaning set forth in Section 3.4(a).
1.5
“Certificate of Analysis” means a document certifying that the Product meets all Product Requirements. Each Certificate of Analysis shall also include the test results, batch lot number, location of manufacture, and date of manufacture.
1.6
“Confidential Information” has the meaning set forth in Section 8.1.
1.7
“Contract Year” means each consecutive twelve (12) month period beginning on the Effective Date or anniversary thereof, as applicable.
1.8
“Current Good Manufacturing Practices” (abbreviated “GMPs” or “cGMPs”) means the standards established by the FDA for current Good Manufacturing Practices, as specified in the International Pharmaceutical Excipients Council (IPEC) and the Pharmaceutical Quality Group (PQG) for current Good Manufacturing Practices for Pharmaceutical Excipients, as specified in the 2006 Guide (or their successor provisions), as any of the foregoing may be amended from time to time.
1.9
“Delivery Notice” has the meaning set forth in Section 3.6.
1.10
“Disclaimer” has the meaning set forth in the Preamble.
-2-
***Certain Confidential Information Omitted
0.11
“Disqualification” has the meaning set forth in Section 4.2(c).
0.12
“DMF” means any drug master file filed with the FDA, and any equivalent filing in other countries or regulatory jurisdictions covering Product.
0.13
“Effective Date” has the meaning set forth in the introductory paragraph to this Agreement.
0.14
“Excess” has the meaning set forth in Section 3.5.
0.15
“FDA” means the United States Food and Drug Administration and any successor agency or entity that may be established hereafter.
0.16
“Finished Product” has the meaning set forth in the Preamble.
0.17
“Firm Purchase Orders” has the meaning set forth in Section 3.4(a).
0.18
“Force Majeure” has the meaning set forth in Section 10.
0.19
“Initial Term” has the meaning set forth in Section 9.1.
0.20
“Latent Defect” means a failure of Product to meet the Product Requirements, upon delivery, that is not readily determinable upon a reasonable inspection of the Product (based on physical inspection, identity test on satellite sample(s), release testing of Product to the extent conducted by Purchaser at its sole discretion, and review of the Certificate of Analysis) which occurs at the time Product is delivered to the shipping destination point specified in the applicable Purchase Order.
0.21
“Losses” has the meaning set forth in Section 6.1.
0.22
“Nonbinding Forecast” has the meaning set forth in Section 3.4(a).
0.23
“Party” has the meaning set forth in the introductory paragraph to this Agreement.
0.24
“Price” has the meaning set forth in Section 3.8.
0.25
“Product” has the meaning set forth in the Preamble.
0.26
“Product Requirements” has the meaning set forth in Section 4.4(a).
0.27
“Product Technical File” means the technical file that describes non-confidential information regarding the facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of the Product.
0.28
“Purchaser” has the meaning set forth in the Preamble.
0.29
“Quality Agreement” has the meaning set forth in the Preamble.
-3-
***Certain Confidential Information Omitted
0.30
“Quality Failure” means (i) any failure by Supplier to materially comply the terms of the Quality Agreement; and (ii) which also results in a determination by Purchaser’s quality function that […***…].
0.31
“Regulatory Approval” means all authorizations by the appropriate Regulatory Authority necessary for commercial sale of Finished Product in a jurisdiction.
0.32
“Regulatory Authority” means any national, state, provincial, or local or any foreign or supranational government, governmental, regulatory or administrative authority, agency or commission of any court, tribunal or judicial or arbitral body, including without limitation the FDA.
0.33
“Rejection Notice” has the meaning set forth in Section 3.5.
0.34
“Rejection Period” has the meaning set forth in Section 4.4(a).
0.35
“Renewal Term” has the meaning set forth in Section 9.1.
0.36
“Representatives” has the meaning set forth in Section 2.4.
0.37
“Reserved Amount” has the meaning set forth in Section 3.4(b).
0.38
“Rolling Forecast” has the meaning set forth in Section 3.4(a).
0.39
“Specifications” has the meaning set forth in the Preamble.
0.40
“Supplier” has the meaning set forth in the introductory paragraph to this Agreement.
0.41
“Supply Failure” means Supplier’s failure to either: (i) give Delivery Notice within […***…] days of the applicable delivery month, […***…] or more times in a Contract Year, or (ii) deliver Product which meet the Product Requirements, and failure to replace such Product within […***…] days during the first Contract Year and […***…] days in any other Contract Year, greater than […***…] per Contract Year.
0.42
“Term” has the meaning set forth in Section 9.1.
0.43
“Total Commercial Volume Requirement” means, for purposes of calculating Purchaser’s total volume requirements for Product for a given Contract Year, the total amount of […***…] that Purchaser orders for delivery from […***…] in a given Contract Year, that Purchaser intends to incorporate into Finished Product that is to be sold commercially.
0.44
“Validation Batches” means the batches used to validate Supplier’s Product manufacturing process and has the meaning set forth in Section 3.11.
2.
MANUFACTURE AND SALE OF PRODUCT
0.45
Subject to the provisions of the Disclaimer set forth in Section 2.4 below and the terms and conditions of this Agreement, Supplier agrees to sell Product to
-4-
***Certain Confidential Information Omitted
Purchaser in accordance with the terms hereof for the Term. This Agreement applies to all Product delivered from Supplier to Purchaser beginning as of the Effective Date through the Term. The terms and conditions of any purchase orders or quotations submitted prior to the Effective Date, for which Product will be delivered after the Effective Date shall be disregarded and all such sales of Product shall be governed pursuant to the terms of this Agreement, with the exception of pricing terms, which shall
remain as specified in such purchase orders or quotations. From time to time and pursuant to Section 12 of this Agreement, Products may be added in writing to or deleted from Exhibit A with corresponding additions or deletions to the Specifications in Exhibit B attached hereto and made a part hereof, with the mutual written consent of the Parties.
0.46
Product shall meet the Specifications as set forth in Exhibit B, which Purchaser warrants and represents shall meet its needs.
0.47
Supplier agrees to supply the Product in accordance with the Specifications, all Applicable Laws, the DMF, cGMPs, and the […***…] and to furnish every Batch with a Certificate of Analysis, to confirm conformity to the Specifications; provided, however, that the Supplier’s obligations to supply Product in accordance with the […***…] shall be subject to the limitations in Section 6.4. Supplier additionally agrees to maintain a Product Technical File for the benefit of Purchaser. On an […***…] basis, within […***…] days of Purchaser’s annual report due date, Purchaser can request updates, which Supplier shall consider in good faith and upon reasonable notice, to the Product Technical File based on changes to the DMF, provided that Purchaser shall pay Supplier $[…***…] for such updates. For clarity, if there are no changes to the DMF, then there shall not be updates to the Product Technical File.
0.48
As an express inducement to Supplier to enter into this Agreement, Purchaser warrants and represents that it has read, understood and accepted and agrees to the following Disclaimer, and that the sale of Product hereunder is in all respects subject to such Disclaimer:
It shall be Supplier’s sole responsibility under this Agreement to provide Product that meets the Specifications, is made in accordance with cGMP, the DMF, and all Applicable Laws and has at least […***…] of shelf life remaining upon Delivery Notice. The suitability of the Specifications and/or of Product that conforms to the terms of this Agreement for use in Purchaser’s Finished Product […***…] and Purchaser shall indemnify, defend and hold Supplier and its parent, subsidiary(ies) and Affiliates and their respective directors, officers, employees, agents and assigns (“Representatives”) as set forth in Section 6.1.
0.49
Changes in Manufacturing. Purchaser may, upon written notice to Supplier, request changes to the Specifications, and Supplier agrees to negotiate in good faith an appropriate adjustment to the Price in order to accommodate such request.
3.
COMMERCIAL TERMS OF SALE
-5-
***Certain Confidential Information Omitted
0.50
During Contract Years […***…] of the Term of this Agreement, Purchaser agrees that, subject to Section 3.2, Purchaser shall order from Supplier […***…]%) of its Total Commercial Volume Requirements from Supplier. During Contract Years […***…] of the Term of the Agreement, Purchaser agrees that, subject to Section 3.2, Purchaser shall order from
Supplier at least […***…]%) of the Total Commercial Volume Requirements from Supplier.
0.51
Notwithstanding anything to the contrary contained in this Agreement:
(a)
Purchaser may either supply itself or obtain supply of Product from a third party in each of the following circumstances and, in each such circumstance, such supply of Product shall be included when determining if Purchaser’s minimum Total Commercial Volume Requirements have been met: (i) during any period in which Supplier is in breach or default of any provision of this Agreement in any material manner, (ii) for the Excess if Supplier provides a Rejection Notice pursuant to Section 3.5, (iii) if Purchaser cancels any unfulfilled part of a Firm Purchase Order pursuant to Section 3.7, (iv) if Purchaser has ordered a quantity of Product but Product is rightfully rejected by Purchaser pursuant to Section 4.4 and Supplier is to provide Purchaser a Product credit instead of replacement Product, (v) during any ongoing Force Majeure event declared by Supplier, or (vi) subject to the additional provisions in Section 6.4, during any period in which a Quality Failure has occurred and has not been cured within […***…] days of Purchaser’s notice or such other time period as agreed to by the Parties; and
(b)
Purchaser may, notwithstanding Purchaser’s minimum Total Commercial Volume Requirements in Section 3.1, during Contract Years […***…] of the Term, order material from a third party supplier in order to qualify (and thereafter maintain) alternative sources of supply of Product; provided, however, that Purchaser may only use up to an aggregative total of […***…] of Product […***…] from a third party during such time period in order qualify (and thereafter maintain) alternative sources of supply of Product.
0.52
To assure compliance with Section 3.1 and Section 3.2, Supplier shall have the right, […***…] during the Term of this Agreement, to, upon reasonable notice, have Purchaser’s records audited by an independent third party that is mutually acceptable to Supplier and Purchaser and that has entered into a confidentiality agreement reasonably acceptable to both Parties. The costs of such evaluations shall be borne by the Party against whom the audit is resolved. Further, in the event that it is found the Purchaser has failed to purchase the required percentage in a given Contract Year or a relevant minimum volume pursuant to Section 3.4(b),
Purchaser agrees to pay to Supplier within sixty (60) days of the close of such Contract Year, a Price equal to […***…] of Product Purchaser has failed to purchase […***…]. Failure by Purchaser to purchase the required percentage of Product per calendar year shall be considered a material breach of this Agreement unless the foregoing corrective payment has been timely made.
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0.53
Forecasting/Purchase Orders
(c)
Prior to the beginning of each calendar quarter during the Term (except for the first such calendar quarter, which shall be as soon as reasonable practicable after the Effective Date), Purchaser shall provide to Supplier a rolling […***…] month forecast of the quantity of Product (in Batches) to be ordered during the […***…] (“Rolling Forecast”). The Rolling Forecast shall be binding (“Binding Forecast”) on Purchaser and Supplier for the immediate subsequent […***…] but non-binding for the remainder of the forecast (“Nonbinding Forecast”). At least […***…] days prior to the desired Product delivery date, Purchaser shall provide firm and binding purchase orders (“Firm Purchase Orders”) to Supplier for its Product requirements. Each Firm Purchase Order shall designate the quantity of Product in Batches to be delivered, the desired delivery month, and delivery destination.
(d)
In each Contract Year, Supplier is required to deliver the volume of Product set forth in such Firm Purchase Orders up to the Binding Forecast. Furthermore, for each Contract Year, Supplier agrees to make available for Purchaser to purchase for delivery in the […***…] calendar quarter of that calendar year […***…], an additional […***…]%) of Product (rounded up to the next Batch based on minimum Batch size), based on the Binding Forecast for that Contract Year (the “Reserved Amount”). Furthermore, in the event that Purchaser does not purchase the Reserved Amount in a given Contract Year, Purchaser must […***…].
0.54
If the cumulative Firm Purchase Orders exceeds the Binding Forecast plus the Reserved Amount (such excess amount, the “Excess”), Supplier shall use commercially reasonable efforts to deliver to Purchaser the Excess. If Supplier determines that, despite such commercially reasonable efforts, Supplier will be unable to deliver the Excess, Supplier may reject the Excess portion of the applicable Firm Purchase Order so long as it provides Purchaser notice of such rejection within […***…] days of the receipt of the applicable Firm Purchase Order (“Rejection Notice”). For clarity, notwithstanding such rejection, Supplier shall remain bound to deliver the Binding Forecast Amount plus the Reserved Amount. If Supplier does not provide Purchaser a Rejection Notice within […***…] days of the receipt of the applicable Firm Purchase Order including an Excess, (i) such Firm Purchase Order including the Excess shall become binding on Supplier, and (ii) Supplier shall deliver the Binding Forecast Amount, the Reserved Amount and Excess set forth in such Firm Purchase Orders.
0.55
Once Product is ready for delivery, Supplier shall notify Purchaser by email at […***…] (“Delivery Notice”), and Purchaser shall then arrange for delivery of Product. If Purchaser does not facilitate delivery of Product within […***…] days of receipt of the Delivery Notice, Supplier may arrange delivery of Product and invoice Purchaser for Product and cost of delivery. Delivery shall be […***…]. Title and Risk of Loss of Product pass to Purchaser upon […***…]. The termination of this Agreement shall not relieve Purchaser from its obligations to timely pay for Product purchased and delivered hereunder. For clarity, the Delivery Notice is not considered provided unless and until Product meets the Product Requirements (defined herein) and is ready for final packaging.
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0.56
Supplier will make Delivery Notice of ordered Product by the […***…] but will not be liable for any damages for failure to provide Delivery Notice within […***…] except as set forth in this Agreement, including that: if Supplier fails to give Delivery Notice in the […***…] set forth in a Firm Purchase Order by greater than […***…] days, (i) […***…], (ii) if Purchaser elects to accept delivery of such Purchase Order, […***…]. Unless, Supplier receives notice that Purchaser wishes to cancel such Firm Purchase Order prior to Supplier giving Delivery Notice, Supplier shall deliver and Purchaser shall accept and purchase Product in accordance with this Section.
0.57
The Price of Product is as set forth in Exhibit A (“Price”).
0.58
All Product Prices are in U.S. dollars. Supplier shall submit invoices along with supporting documentation to Purchaser at the address and to the attention of the person identified by Purchaser on the Firm Purchase Order. Payment of undisputed amounts is due from Purchaser in full within […***…] days of the date of invoice receipt, which is presumed to have occurred within […***…] days of submission of an invoice to Purchaser at […***…]. If Purchaser is […***…] days late in payment of undisputed amounts, a […***…]% charge on undisputed amounts of the late invoice or, […***…], may be enforced and the appropriate invoice will be issued and become due. If Purchaser is more than […***…] days late in payment, a […***…]% charge on undisputed amounts of the late invoice or […***…] may be enforced […***…] and the appropriate invoice will be issued and become due. The Parties acknowledge and agree that where liquidated damages are provided as a remedy for the non-defaulting Party in this Section 3.9, such Party's actual damages are difficult to measure, such liquidated damages are reasonable compensation to the non-defaulting Party for its damages, and such liquidated damages are not a penalty. Further, if at any time, Purchaser fails to pay the undisputed amounts of an invoice when due, Supplier may, in its own discretion, […***…].
0.59
In ordering and delivering, the Parties shall use their standard ordering, invoicing, acknowledgment and/or shipping forms, but such forms shall be for the convenience of the Parties only, and nothing in those forms shall be construed as a modification or an amendment of the terms of this Agreement. In the event of any inconsistency between the terms of a Firm Purchase Order and this Agreement, the terms of this Agreement shall control, regardless of any provision to the contrary in any such Firm Purchase Order, and even if such Firm Purchase Order is dated later than this Agreement.
0.60
Initially Supplier will manufacture Product at its production facility located at […***…] which Purchaser represents has been qualified by Purchaser as a production facility for Product. However, upon mutual agreement by both Parties, Supplier shall attempt to have Product manufactured in its […***…] facility or another Supplier facility or location (if applicable). Once agreed, Supplier will make commercially reasonable efforts manufacture […***…] Batches for validation (“Validation Batches”) in its […***…] facility or such other Supplier facility or location and Purchaser agrees to purchase […***…] per Batch […***…] at the then current Price, in order for Purchaser to perform its own validation of the Product, of which Purchaser agrees to make commercially reasonable efforts to do within […***…]. Once the Product is validated by Purchaser,
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***Certain Confidential Information Omitted
Purchaser shall purchase […***…] of Product from the Validation Batches […***…] and Supplier may manufacture Product for delivery to Purchaser under this Agreement from […***…]. For clarity, any purchase of Validation Batches shall be taken into account in determining whether Purchaser has satisfied its obligations under a Binding Forecast, but only with respect to Batches ordered by Purchaser under a Binding Forecast that Supplier has not started manufacturing at the time such Validation Batches are purchased.
4.
WARRANTY, REJECTION AND RECALLS
0.61
SUPPLIER PRODUCT WARRANTY. SUPPLIER MAKES NO WARRANTY WITH RESPECT TO THE PRODUCT OTHER THAN AS SET FORTH IN THIS ARTICLE 4 INCLUDING THAT, UPON DELIVERY, PRODUCT (i) MEETS SUPPLIER’S SPECIFICATIONS IN EXHIBIT B, (ii) WAS MADE IN ACCORDANCE WITH cGMP, THE DMF, AND ALL APPLICABLE LAWS, AND (iii) PRODUCT HAS AT LEAST […***…] OF SHELF LIFE REMAINING. THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES AND SUPPLIER MAKES NO WARRANTY OF, AND SHALL HAVE NO LIABILITY FOR ANY OTHER WARRANTIES, EXPRESS OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. PURCHASER SHALL NOT MAKE ANY REPRESENTATION OR WARRANTY ON BEHALF OF SUPPLIER.
0.62
Supplier further represents, warrants and covenants that:
(e)
Upon delivery, title to Product will pass to Purchaser free and clear of any security interest, lien or other encumbrance.
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***Certain Confidential Information Omitted
(f)
The facility used to manufacture Product was in material compliance with all Applicable Laws at the time of such manufacture (including applicable inspection requirements of FDA and other Regulatory Authorities);
(g)
neither Supplier, nor any third party or Affiliates engaged by Supplier under this Agreement, has ever been, are currently, or shall become: (i) disqualified or debarred by the FDA (including United States law, including the statutory debarment provisions at 21 U.S.C. § 335a(a) or (b) or is under consideration or investigation to be disqualified or debarred, or has been convicted of, or is currently charged with, a felony for conduct relating to the development, approval, regulation or handing of any drug product under any Applicable Law; (ii) charged or convicted for conduct relating to the development or approval of, or otherwise relating to the regulation of, any drug product under any Applicable Laws; (iii) excluded or threatened with exclusion under state or federal laws, including under 42 U.S.C. § 1320a-7 or relevant regulations in 42 C.F.R. Part 1001, or assessed or threatened with assessment of civil money penalties pursuant to 42 U.S.C. Part 1003; (iv) ineligible for contract with the federal government; or (v) subject to similar actions by any state, local, or foreign governmental authority (collectively “Disqualification”). Supplier agrees to notify Purchaser immediately, in the event that Supplier or any of its officers, directors, employees, agents, or parties under contract to perform and work under this Agreement (i) becomes subject to Disqualification, or (ii) receives or becomes aware of an action, notice of action, inquiry, or investigation with relating to or that could result in Disqualification during the Term. In the event that Supplier receives any notice of actions set forth in this Section, without limiting any other rights or remedies of Purchaser, Purchaser shall, upon sixty (60) days’ notice and opportunity for Supplier to cure within such sixty (60) day period (to the extent such Disqualification is capable of being cured and to the reasonable satisfaction of Purchaser), have the right to terminate this Agreement pursuant to the provisions of this Agreement. Any termination by Purchaser pursuant to this Section shall be deemed to be a termination by Purchaser for material breach of this Agreement by Supplier. Supplier shall remove the individuals who have caused such action from performing any work associated with this Agreement;
(h)
entering into this Agreement with Purchaser and Supplier’s manufacture of Product do not, and shall not, breach any agreement that obligates Supplier to keep in confidence any trade secrets or confidential information of any third party; and
(i)
the manufacture of Product provided under this Agreement will not infringe the intellectual property rights of any third party, and Supplier will promptly notify Purchaser in writing should it become aware of any claims asserting such infringement.
0.63
Purchaser Warranty. Purchaser warrants and represents that (i) it has read, understood, accepts and agrees to be bound by the provisions of this Agreement, including Supplier’s disclaimer in Section 2.4 above and (ii) without Supplier’s written consent, it shall not make or request any third party to make any analysis or any observation of the chemical composition and/or physical characteristics of the Product
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***Certain Confidential Information Omitted
for the purpose of reverse-engineering the Product (i.e. for the purpose of recreating such Product).
0.64
Rejection of Product for Failure to Conform to Specifications
(j)
Purchaser shall have (i) […***…] days after the receipt of any shipment of Product, or (ii) in the case of Latent Defects, for which Purchaser shall have […***…] days from the date of its determination that Product does not conform to the Product Requirements and a maximum of […***…] from delivery of Product (in each case a “Rejection Period”), to inspect the Product, to conduct quality control testing to determine conformity to the Specifications, cGMPs, the DMF, and all Applicable Laws (“Product Requirements”); provided, however, that with respect to Applicable Laws, the determination shall be based upon conformance to Applicable Laws in a material manner. If Purchaser fails to give such notice within the Rejection Period, the Product shall be deemed to conform to the terms of this Agreement, and Purchaser shall be bound to accept and pay for the Product in accordance with the terms of this Agreement. Purchaser expressly waives any rights Purchaser may have to revoke acceptance after the Rejection Period.
(k)
If such Product fails to meet the Product Requirements, Purchaser may return the entire shipment, or any portion thereof, to Supplier at Supplier’s expense within a reasonable time following the above described testing provided that notice of non-conformity is received by Supplier from Purchaser within the applicable Rejection Period. Supplier shall replace such returned Product as soon as reasonably possible and in no event longer than […***…] days at Supplier’s expense using expedited shipment with Product which conforms to the Product Requirements or in the event Supplier cannot replace such returned Product within […***…] days, promptly provide Purchaser with full credit for the returned Product including all shipping and other charges. Should there be a discrepancy between Purchaser's Product test results and the results of testing performed by Supplier pursuant to this Section 4.4, including any disagreement regarding whether or not Product has met Product Requirements, such discrepancies shall be finally resolved by testing performed by a third party mutually agreed upon by Purchaser and Supplier. The costs of such testing shall be borne by the Party against whom the discrepancy is resolved.
(l)
Supplier’s measurements shown on the packaging slip accompanying each delivery shall be deemed to be correct unless Purchaser notifies Supplier in writing of a shortage within […***…] days of the date of the Product is delivered to the shipping destination point specified in the applicable Firm Purchase Order. In the event of a shortage, Purchaser will remain liable for payment for the Product delivered and Supplier shall promptly deliver to Purchaser an amount of Product necessary to eliminate such shortage.
0.65
Recall. Purchaser shall be responsible for coordinating the recall of Finished Product. Purchaser shall notify Supplier if any Product is the cause of a recall and provide Supplier with a copy of relevant documents relating to such recall. Supplier shall reasonably cooperate with Purchaser in connection with any recall. Unless such recall is caused by […***…], Purchaser shall be responsible for all of the costs and
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***Certain Confidential Information Omitted
expenses of such recall. If a recall, product withdrawal or field correction is necessary due to […***…], Supplier will bear the reasonable costs associated with such recall, product withdrawal or field correction (including, but not limited to […***…]) as well as responsible for the costs and expenses of the […***…]. For clarity, notwithstanding anything in this Section, any and all Supplier costs and liability pursuant to this Section 4.5 are […***…].
5.
RESPONSIBILITIES OF PURCHASER
Purchaser shall be fully responsible for compliance with any and all Applicable Laws relating to the design, production, and sale of Finished Product.
6.
INDEMNIFICATION, LIMIT OF LIABILITY AND THE QUALITY AGREEMENT
0.66
Purchaser hereby agrees to indemnify, save harmless and defend Supplier and Representatives from and against any and all third party losses, liabilities, claims, penalties, forfeitures, suits, and the cost and expenses incident thereto (including cost of defense, settlement and reasonable attorney’s fees) (“Losses”) which Supplier or Supplier’s Representatives may hereafter incur, become responsible for or pay out to the extent: (1) caused by Purchaser’s breach of any term or provision of this Agreement, including but not limited to Section 2.4, (2) caused by the gross negligence, misconduct or omission of Purchaser, its Affiliates or its or their employees or agents in the performance of this Agreement, (3) relating to or arising out of the suitability of the Specifications and/or the use of conforming Product, including the use of conforming Product in Purchaser’s products including Finished Product, or (4) due to the infringement or misappropriation of the intellectual property rights of any third party by Purchaser’s Finished Product; except in each case to the extent such Losses result from matters contemplated by Section 6.2.
0.67
Supplier hereby agrees to indemnify, save harmless and defend Purchaser and Representatives from and against any and all third party Losses which Purchaser or Purchaser’s Representatives may hereafter incur, become responsible for or pay out to the extent: (1) caused by the gross negligence, misconduct or omission of Supplier, its Affiliates or its or their employees or agents in the performance of this Agreement, or (2) due to the infringement or misappropriation of the intellectual property rights of any third party by Product or its manufacture; except in each case to the extent such Losses result from matters contemplated by Section 6.1.
0.68
EACH PARTY’S LIABILITY UNDER THIS AGREEMENT FOR EACH CLAIM, SHALL BE LIMITED TO […***…] THE PURCHASE PRICE OF THE BATCH OF PRODUCT SUPPLIED (OR TO HAVE BEEN SUPPLIED) HEREUNDER IN RESPECT OF WHICH DAMAGES ARE CLAIMED. FURTHERMORE, EACH PARTY’S LIABILITY UNDER THIS AGREEMENT IN THE AGGREGATE, SHALL BE LIMITED TO […***…] THE PURCHASE PRICE OF ALL PRODUCT SUPPLIED (OR TO HAVE BEEN SUPPLIED) UNDER THE AGREEMENT. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR OTHER DAMAGES, AND REGARDLESS WHETHER THE CLAIM IS BASED ON WARRANTY, CONTRACT, TORT, STRICT LIABILITY, NEGLIGENCE OR OTHERWISE. HOWEVER,
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***Certain Confidential Information Omitted
IN NO EVENT WILL THE LIABILITY RESTRICTIONS IN THIS SECTION 6.3 APPLY WITH REGARDS TO LIABILITY PURSUANT TO SECTIONS 6.1, 6.2 OR SECTION 8.
0.69
Limitation of Liability and Remedies Regarding the Quality Agreement. During the manufacture of Product pursuant to this Agreement, in the event of a Quality Failure, Purchaser shall, within […***…] days of such Quality Failure, provide Supplier with written notice of such Quality Failure and Supplier shall cure such Quality Failure with respect to the applicable Batch(es) within […***…] days of Purchaser’s notice or such other time period as mutually agreed by the Parties (“Cure Period”).
(m)
Should Supplier, within the Cure Period, notify Purchaser that it disagrees as to whether or not a Quality Failure has occurred, then such disagreement shall be finally resolved within […***…] days of the date of such notice, by a determination of a qualified technical third party mutually agreed upon by Purchaser and Supplier. […***…].
(n)
If Supplier indicates it has cured such Quality Failure and Purchaser disagrees and provides written notice that it does not believe Supplier has cured the Quality Failure within […***…] days, then such disagreement shall be finally resolved within […***…] days of the date of such notice, by a determination of a qualified technical third party mutually agreed upon by Purchaser and Supplier. The costs of such third party determination shall be borne by the Party against whom the discrepancy is resolved.
(o)
If Supplier provides such notice that it disagrees with the Quality Failure or if Supplier indicates it has cured such Quality Failure and Purchaser disagrees, and such discrepancy is resolved by the qualified technical third party in favor of Supplier, and Purchaser’s quality function […***…] as a result of Supplier’s non-compliance with the Quality Agreement, then:
(i)
Purchaser must pay for all Batches ordered pursuant to Firm Purchase Orders, which (y) otherwise conform to the Product Requirements and (z) had been released by Supplier’s quality group at the time of such Quality Failure;
(ii)
Purchaser may invoke its backup supply rights under Section 3.2(a)(vi), subject to paying Supplier […***…];
(iii)
and Purchaser shall remain obligated to […***…], through the remainder of Term of the Agreement, […***…].
(p)
If Supplier fails to notify Purchaser that is disagrees with the Quality Failure or if Supplier indicates it has cured such Quality Failure and Purchaser disagrees, and such discrepancy is resolved in favor of Purchaser, then:
(iv)
Purchaser must pay for […***…]%) of all Batches ordered pursuant to Firm Purchase Orders, which (y) […***…] and (z) had been […***…];
(v)
Purchaser may invoke its backup supply rights under Section 3.2(a)(vi);
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***Certain Confidential Information Omitted
(vi)
and Supplier shall give Purchaser […***…].
(q)
EXCLUDING THE […***…], IN NO EVENT SHALL SUPPLIER BE LIABLE TO PURCHASER FOR ANY DAMAGES WHATSOEVER, INCLUDING BUT NOT LIMITED TO DIRECT, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 6.4, PURCHASER SHALL NOT HAVE GROUND NOT TO PAY FOR PRODUCT THAT CONFORMS TO THE PRODUCT REQUIREMENTS SOLELY TO THE EXTENT BASED ON […***…].
0.70
Each Party shall, at its sole cost and expense, procure and maintain in full force during the entire Term of this Agreement the following types of insurance in the minimum amounts set forth below with insurance carriers having a rating of at least A VII as to financial strength by the latest edition of A. M. Best & Co:
Comprehensive General Liability insurance including Products Liability (in the case of Purchaser), Completed Operations Liability, Personal Injury Liability and Advertising Liability covering bodily injury and property damage with combined single limits of $[…***…] each occurrence and $[…***…] annual aggregate.
0.71
Upon execution of this Agreement, each Party shall furnish to the other Party a copy of the certificate of insurance evidencing such coverages referred herein on an Accord form. Each Party shall provide at least thirty (30) days’ written notice to the other Party in the event that such required insurance is being cancelled (except for cancellation due to nonpayment of a premium, which notice shall be at least ten (10) days). All stated insurance policies, where applicable, will designate the other Party as additional insured including primary and non-contributory wording without qualifications or limitation, as its interest may appear. Each Party shall cause its insurers to waive all rights of subrogation against the other Party. The waiver of subrogation clause and additional insured wording must be stated explicitly on the face of the certificate of insurance.
0.72
Both Parties acknowledge that it may be necessary for each to disclose certain technical and proprietary information with respect to the Product to the other. For purposes of this Agreement, the term “Confidential Information” shall mean all such information, including the Specifications, all technical and/or proprietary information relating to the Product, information relating to the marketing of, customers for, and sales as well as the pricing of Product, and all other written information clearly identified as “Confidential” when submitted by the disclosing Party to the receiving Party. The fact that Supplier is manufacturing Product pursuant to the Specifications for Purchaser shall be deemed the Confidential Information of Purchaser. Notwithstanding anything to the contrary in this Agreement, but Subject to the limitations in Section 4.3, Purchaser shall be entitled to provide the Specifications to Purchaser’s contract manufacturers or contract testing laboratories, for purposes of producing Product and any bioresorbable
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***Certain Confidential Information Omitted
polymer that can replace Product in Finished Product. All test methods regarding or associated with the manufacture of Product and/or process of manufacturing Product shall be deemed the Confidential Information of Supplier.
0.73
Each receiving Party shall hold in strict confidence any such Confidential Information received from the other Party. Each receiving Party shall not, without the prior written consent of the disclosing Party, (i) disclose such Confidential Information to any third party, other than disclosure of such Confidential Information to a Party's Representatives; or (ii) use such Confidential Information for its own benefit or the benefit of others, in each case, except as may be as may be necessary to fulfill its obligations hereunder or in furtherance of its rights hereunder. In any such case of consented to disclosure, the Party requesting such consent of the disclosing Party shall cause any person to whom such disclosure may be authorized as aforesaid, to agree to hold such information in confidence and not to use or disclose same to the same extent as such Party. However, the foregoing obligations shall not apply to information which:
(r)
at the time of disclosure to the receiving Party or at the time the receiving Party learns of such Confidential Information, was in the public domain, or which thereafter enters the public domain, through no act or omission of the receiving Party; or
(s)
at the time of disclosure to the receiving Party or at the time the receiving Party learns of such Confidential Information, was already in the possession of the receiving Party or its Representatives, and was not acquired (i) from the disclosing Party, or (ii) from another source under an obligation of confidence and/or non-use, as documented by receiving Party’s written records documenting such knowledge; or
(t)
is hereafter lawfully received by the receiving Party or its Representatives on a non-restricted basis from another source having rightful possession of such Confidential Information and the legal right to disclose it to the receiving Party as documented by the receiving Party’s written records; or
(u)
is hereafter independently developed by the receiving Party or its Representatives who is shown not to have received or have available to him or her any such Confidential Information, as documented by the receiving Party’s written records.
0.74
The burden of proving the applicability of any one or more of the above exceptions shall at all times be with the receiving Party. The mutual obligations of confidentiality under this Section shall survive expiration or earlier termination of this Agreement. If a receiving Party is required by a government body or court of law to disclose Confidential Information, the receiving Party agrees, to the extent permitted by law, to give the disclosing Party reasonable advance notice thereof and to cooperate with the reasonable efforts of disclosing Party to contest the disclosure or seek an appropriate protective order.
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***Certain Confidential Information Omitted
0.75
This Agreement shall commence on the Effective Date and shall continue for a period of five (5) year(s) (the “Initial Term”). Upon the mutual written consent of both Parties prior to expiration of the Initial Term or any Renewal Term, this Agreement shall renew for successive two (2) year terms (each, a “Renewal Term” and together with the Initial Term, the “Term”). Each July 1 to June 30 of every year of the Agreement shall be considered a Contract Year. In the final Contract Year of the Term, Purchaser agrees to purchase […***…] for that final year and […***…].
0.76
This Agreement may be terminated by either Party:
(v)
upon written notice if the other Party breaches this Agreement in any material manner and shall have failed to remedy or submit to the non-breaching Party a plan to cure such default within sixty (60) days after notice thereof from the terminating Party (a failure of Supplier to supply Product shall not be a terminable event except as covered under Section 9.2(b)); or
(w)
upon written notice by Purchaser in the event of a Supply Failure by Supplier; or
(x)
immediately if the other Party by voluntary or involuntary action goes into liquidation or receivership; or dissolves or files a petition for bankruptcy or reorganization or for suspension of payments or is adjudicated a bankrupt, becomes insolvent or assigns or makes any composition of its assets for the benefit of creditors.
0.77
This Agreement may be terminated at any time by Purchaser if Purchaser does not receive FDA approval to market, distribute and sell Finished Product by December 31, 2019 or, following such approval, if a Regulatory Authority determines that Purchaser is no longer permitted under Applicable Law to market, distribute or sell Finished Product nor have a third party market, distribute or sell Finished Product. If Purchaser provides a notice of termination pursuant to this Section 9.3, Supplier shall continue to supply and Purchaser shall continue to purchase Product the greater of (i) the next […***…], or (ii) the volume of Product […***…].
0.78
In the event this Agreement is terminated by Purchaser pursuant to Section 9.2 and/or 4.2(c), then the Binding Forecast and the Reserved Amount shall no longer be binding on Purchaser.
0.79
Notice of termination must in all cases be given pursuant to Section 14.
0.80
Notwithstanding anything else written in this Agreement, the rights and obligations of the Parties under Sections 3.3, 3.6, 3.7, 3.9, 4.1, 4.3, 4.4, 6.1, 6.2, 6.3, 6.4, 8, 9.5, 11, and 14 shall survive the expiration or termination of this Agreement in accordance with their terms.
Neither Party shall be liable for delay or failure to perform its obligations hereunder due to any circumstances beyond its reasonable control, regardless of whether such circumstances can be reasonably foreseen, including, but not limited to acts of God, war
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(declared or undeclared), acts of terrorism (and related government actions), riot, political insurrection, rebellion, sabotage, revolution, acts, laws, regulations or orders of or expropriation by any government (whether de facto or de jure), acts of government prohibiting the import or export of the Product, governmental rationing, strike, lock-out or fire, flood, explosion, earthquake, tornados or other natural events or disasters(“Force Majeure”). Labor difficulties, strike, lockout or injunction shall be conclusively presumed to be beyond Supplier’s reasonable control, and accordingly within the meaning and intent of the definition of Force Majeure. If such Force Majeure occurs, the impacted Party shall notify the other Party in writing as soon as practicable of the occurrence of said Force Majeure event, the nature of and expected duration of the Force Majeure event as well as, in the case of Supplier, the effect the Force Majeure event will have on
Supplier’s performance of this Agreement. The impacted Party will be excused from performing its obligations hereunder only during the Force Majeure event and shall not be liable to the other Party for damages by reason of any delay or suspension of performance resulting from the Force Majeure event. Further, in the event of inability for any reason to supply the quantity of Product stated in this Agreement, Supplier must […***…]. If an event of Force Majeure continues and causes a Party to delay its performance of its obligations for more than one hundred and twenty (120) days, then the other Party shall have the right upon written notice to terminate this Agreement without any liability for such termination to the other Party.
11.
GOVERNING LAW, PLACE OF VENUE
This Agreement and all rights and remedies hereunder shall be governed by and interpreted and enforced in accordance with the laws of the State of New Jersey, without regard to conflict of law principles. The federal and state courts of New Jersey shall have exclusive jurisdiction over any disputes or issues arising out of or in connection with this Agreement, and the Parties hereby irrevocably submit to such exclusive jurisdiction. In performance of this Agreement, Purchaser and Supplier shall comply with all Applicable Laws, including but not limited to those pertaining to environmental protection and safety and health.
Notwithstanding any course of performance hereunder or other course of dealing, any amendment to or waiver of any provision of this Agreement must be in writing signed by
each Party, and must specifically refer to the provision of the Agreement being amended or waived in order to be effective. Any purported amendment or waiver, whether oral, by electronic communication including emails between Parties, by conduct, custom shall not constitute a writing sufficient to amend this Agreement. The Parties are expressly and deliberately establishing these procedures specifically to avoid any possibility that an amendment, waiver or estoppel of or with respect to any of this Agreement’s terms could be deemed to have been affected in a manner other than as set forth in this Section.
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Neither Party may assign all or any part of this Agreement without the other Party's prior written consent, which shall not be unreasonably withheld. Notwithstanding the foregoing, neither Party shall be required to obtain the consent of the other Party in order to assign or otherwise transfer this Agreement (1) to an Affiliate, including its parent company, if applicable; or (2) in the event of a merger or the sale of substantially all of the assets of such Party or the portion of such Party’s business responsible for performance of this Agreement. Benefits and burdens of this Agreement shall inure to the benefit of and be binding upon both Parties, their respective legal representatives and successors and their assigns, subsidiaries and parent companies.
All notices or other communication permitted or required hereunder shall be sufficiently given if sent by certified mail, return receipt requested, postage prepaid, by a nationally recognized overnight courier service which provides a delivery receipt, or by facsimile (with delivery confirmation), addressed to Purchaser or Supplier at the addresses set forth below or at such other address or as shall be furnished in writing by Purchaser or Supplier to the other pursuant to this Section 14. Any such notice or communication required or permitted hereunder shall be deemed to have been given as of the date received, as evidenced by the postmark on the envelope or the official notice of time and date on a facsimile.
If to Supplier:
Evonik Corporation,
299 Jefferson Road
Parsippany, NJ 07054
Attention: Jeff Smith
Facsimile: […***…]
If to Flexion:
Flexion Therapeutics, Inc.
10 Mall Road
Burlington, MA 01803
Attention: SVP, CMC Operations
Facsimile: […***…]
This Agreement and attachments hereto together with the Quality Agreement contain the entire understanding between the Parties with respect to the manufacture and supply of Product and supersedes any and all prior agreements, understandings and arrangements whether written or oral between the Parties with respect thereto. In the event of a conflict between the provisions of this Agreement and the provisions of the Quality Agreement, the provisions of the Quality Agreement shall govern with respect to quality matters and this Agreement shall govern with respect to all other matters.
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The waiver by any Party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.
17.
INDEPENDENT CONTRACTORS
Nothing in this Agreement shall operate to or be construed or interpreted as to render the Parties hereto as other than independent contractors, and neither shall be the employee or agent of the other.
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In the event that individual provisions of this Agreement become wholly or partially invalid as evidenced by a ruling of a court of competent jurisdiction, the effectiveness of the remaining rulings shall not be affected, to the extent severable. The Parties undertake in good faith to replace an invalid provision by a valid one which most closely corresponds with the economic intention of the invalid ruling.
This Agreement shall bind and inure to the benefit of Supplier, its successors, permitted assigns, and trustees, and of Purchaser, its successors, trustees, and permitted assigns.
The captions and section headings used herein are for reference only and shall otherwise be disregarded.
22.
This Agreement may be executed in two or more counter-parts each of which shall be deemed an original. Facsimile and pdf signatures shall have the same force and effect as original signatures.
(Signature Page Follows)
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IN WITNESS WHEREOF, the Parties have caused these presents to be signed by their duly authorized representatives.
SUPPLIER: PURCHASER:
Evonik Corporation Flexion Therapeutics, Inc.
By: /s/ Yann D’herve By: /s/ Michael Clayman
Title: Global VP Sales Healthcare Title: CEO
Date: Nov 9, 2016 Date: Nov 10, 2016
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EXHIBIT A
Product:
[…***…]
Pricing of all Product:
[…***…]
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EXHIBIT B
[…***…]
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