Loan And Security Agreement

ABGENIX, INC.



LOAN AND SECURITY AGREEMENT





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TABLE OF CONTENTS



Page

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1. DEFINITIONS AND CONSTRUCTION....................................................... 1

1.1 Definitions................................................................. 1

1.2 Accounting Terms............................................................ 7



2. ADVANCES AND TERMS OF PAYMENT...................................................... 7

2.1 Advances.................................................................... 7

2.2 Interest Rates, Payments, and Calculations.................................. 7

2.3 Crediting Payments.......................................................... 8

2.4 Fees........................................................................ 8

2.5 Additional Costs............................................................ 9

2.6 Term........................................................................ 9



3. CONDITIONS OF LOANS................................................................ 9

3.1 Conditions Precedent to Initial Advance..................................... 9

3.2 Conditions Precedent to all Advances........................................ 10



4. CREATION OF SECURITY INTEREST...................................................... 10

4.1 Grant of Security Interest.................................................. 10

4.2 Delivery of Additional Documentation Required............................... 10



5. REPRESENTATIONS AND WARRANTIES..................................................... 11

5.1 Due Organization and Qualification.......................................... 11

5.2 Due Authorization; No Conflict.............................................. 11

5.3 No Prior Encumbrances....................................................... 11

5.4 Name; Location of Chief Executive Office.................................... 11

5.5 Litigation.................................................................. 11

5.6 No Material Adverse Change in Financial Statements.......................... 11

5.7 Solvency.................................................................... 11

5.8 Regulatory Compliance....................................................... 11

5.9 Environmental Condition..................................................... 12

5.10 Taxes....................................................................... 12

5.11 Subsidiaries................................................................ 12

5.12 Government Consents......................................................... 12

5.13 Full Disclosure............................................................. 12



6. AFFIRMATIVE COVENANTS.............................................................. 12

6.1 Good Standing............................................................... 12

6.2 Government Compliance....................................................... 12

6.3 Financial Statements, Reports, Certificates................................. 13

6.4 Taxes....................................................................... 13

6.5 Insurance................................................................... 13

6.6 Debt-Net Worth Ratio........................................................ 14

6.7 Tangible Net Worth.......................................................... 14

6.8 Minimum Liquidity/Debt Service Coverage..................................... 14

6.9 Right to Inspect............................................................ 14

6.10 Principal Depository........................................................ 14



7. NEGATIVE COVENANTS................................................................. 14

7.1 Dispositions................................................................ 14

7.2 Change in Business.......................................................... 14



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7.3 Mergers or Acquisitions..................................................... 14

7.4 Indebtedness................................................................ 15

7.5 Encumbrances................................................................ 15

7.6 Distributions............................................................... 15

7.7 Investments................................................................. 15

7.8 Transactions with Affiliates................................................ 15

7.9 Subordinated Debt........................................................... 15

7.10 Compliance.................................................................. 15



8. EVENTS OF DEFAULT.................................................................. 15

8.1 Payment Default............................................................. 15

8.2 Covenant Default............................................................ 15

8.3 Attachment.................................................................. 16

8.4 Insolvency.................................................................. 16

8.5 Other Agreements............................................................ 16

8.6 Judgments................................................................... 16

8.7 Guarantor................................................................... 16

8.8 Misrepresentations.......................................................... 16



9. BANK'S RIGHTS AND REMEDIES......................................................... 16

9.1 Rights and Remedies......................................................... 16

9.2 Power of Attorney........................................................... 17

9.3 Bank Expenses............................................................... 17

9.4 Bank's Liability for Collateral............................................. 17

9.5 Remedies Cumulative......................................................... 18

9.6 Demand; Protest............................................................. 18



10. NOTICES............................................................................ 18



11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................................... 18



12. GENERAL PROVISIONS................................................................. 19

12.1 Successors and Assigns...................................................... 19

12.2 Indemnification............................................................. 20

12.3 Time of Essence............................................................. 20

12.4 Severability of Provisions.................................................. 20

12.5 Amendments in Writing, Integration.......................................... 20

12.6 Counterparts................................................................ 20

12.7 Survival.................................................................... 20

12.8 Confidentiality............................................................. 20

12.9 Guaranty.................................................................... 21













This LOAN AND SECURITY AGREEMENT is entered into as of January 23, 1997, by and between SILICON VALLEY BANK ("Bank") and ABGENIX, INC. ("Borrower").







Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.







The parties agree as follows:



1. DEFINITIONS AND CONSTRUCTION



1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions:



"Advance" or "Advances" have the meaning set forth in Section 2.1.



"Affiliate" means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person's senior executive officers, directors, and partners.



"Aggregate Obligations" means the aggregate outstanding Obligations of Borrower, as defined in this Agreement, and the aggregate outstanding Obligations of Guarantor, as defined in the Loan and Security Agreement of even date with Bank.



"Availability Date" has the meaning set forth in Section 2.1.



"Bank Expenses" means all: reasonable costs or expenses (including reasonable attorneys' fees and expenses) incurred in connection with the preparation, negotiation, administration (including for example negotiation of landlord waivers, and amendments and waivers to the Loan Documents, but not including day to day administration of the Loan Documents) or, and enforcement of the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred in amending, enforcing or defending the Loan Documents, whether or not suit is brought.



"Business Day" means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close.



"Cash Burn" means, as of the last day of any fiscal quarter with respect to Borrower and Guarantor on a consolidated basis, the change in cash balances (excluding changes in debt or equity or corporate milestone payments) from the last day of the preceding quarter.



"Closing Date" means the date of this Agreement.



"Code" means the California Uniform Commercial Code.



"Collateral" means the property described on Exhibit A attached hereto; provided that "Collateral" shall mean the property described on Exhibit A-1 attached hereto upon the occurrence of a Conversion Event.













"Committed Line" means Four Million Three Hundred Thousand Dollars ($4,300,000).



"Contingent Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term "Contingent Obligation" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.



"Conversion Event" means the earlier of (i) the date that the balance of the Liquidity is less than two and one half (2.5) times the Aggregate Obligations, or (ii) the date that Cash Burn is less than twelve (12) months.



"Daily Balance" means the amount of the Obligations owed at the end of a given day.



"Debt Service Coverage" means, as of any date of determination, with respect to Borrower and its Subsidiaries on a consolidated basis, a ratio of (a) the sum of (i) earnings after tax plus (ii) interest and non-cash expense to (b) the sum of (i) current portion of long term debt plus (ii) interest expense.



"ERISA" means the Employment Retirement Income Security Act of 1974, as amended, and the regulations thereunder.



"Equipment" means all equipment, machinery, fixtures, vehicles (including motor vehicles and trailers), and all attachments, accessories, accessions, replacements, substitutions, additions and improvements to any of the foregoing, and all proceeds thereof.



"Facility" means the Advances provided to Borrower by Bank pursuant to Section 2 hereof.



"GAAP" means generally accepted accounting principles as in effect from time to time.



"Guarantor" means Cell Genesys, Inc.



"Guaranty" means an unconditional guaranty of Guarantor.



"Indebtedness" means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations.



"Insolvency Proceeding" means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria,











compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.



"Investment" means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.



"IRC" means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.



"Lien" means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. It is expressly agreed and understood that licenses of intellectual property in the ordinary course of business and licenses or similar arrangement entered into or Liens granted in connection with joint ventures, collaborations and research and development limited partnerships shall not be considered "Liens" for purpose of this Agreement and shall not be restricted by any provision hereof.



"Liquidity" means, at any time of determination, the sum of Borrower's and Guarantor's (i) cash balance of deposit accounts and investment accounts, plus (ii) market value of all readily marketable securities beneficially owned by Borrower or Guarantor, minus (iii) cash value of any certificates of deposit or securities encumbered and/or restricted by Bank or other Persons.



"Loan Documents" means, collectively, this Agreement, any note or notes executed by Borrower, and any other agreement entered into between Borrower and Bank in connection with this Agreement, all as amended or extended from time to time.



"Material Adverse Effect" means a material adverse effect on - -(i) the business operations or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the Obligations.



"Maturity Date" means January 22, 2001.



"Obligations" means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise.



"Periodic Payments" means all installments of principal or interest that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.



"Permitted Indebtedness" means:



(a) Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document;



(b) Indebtedness existing on the Closing Date and disclosed in the Schedule;



(c) Subordinated Debt;



(d) Indebtedness to trade creditors incurred in the ordinary course of business;



(e) Contingent Obligations of any Subsidiary with respect to obligations of Borrower (provided that the primary obligations are not prohibited hereby); provided that the incurrence of











such Indebtedness or Contingent Obligations, as the case may be, does not result in a violation of Section 7.7 as a consequence of the provisos set forth in paragraph (d) of the definition of "Permitted Investments;"



(f) Indebtedness of Borrower to any Subsidiary and Contingent Obligations of Borrower with respect to obligations of any Subsidiary (provided that the primary obligations are not prohibited hereby), and Indebtedness of any Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary with respect to obligations of any other Subsidiary (provided that the primary obligations are not prohibited hereby);



(g) Indebtedness secured by Permitted Liens;



(h) Indebtedness by Borrower and its Subsidiaries consisting of guarantees (and other credit support) of the obligations of vendors and suppliers of Borrower or its Subsidiaries in respect of transactions entered into in the ordinary course of business.



(i) Capital leases or indebtedness incurred solely to purchase Equipment (excluding the Collateral) which is secured in accordance with clause (c) of the definition of "Permitted Liens" and is not in excess of the lesser of the purchase price of such Equipment or the fair market value of such Equipment on the date of acquisition; and



(j) Extensions, refinancings, modifications, amendments and restatements of any of items of Permitted Indebtedness (a) through (i) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.



"Permitted Investment" means:



(a) Investments existing on the Closing Date disclosed in the Schedule;



(b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more than one (1) year from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of deposit maturing no more than one (1) year from the date of investment therein issued by Bank, and (iv) other similar short term investments made in accordance with an investment policy adopted by the Board of Directors of Borrower, a true and correct copy of which will be delivered to Bank promptly following the Closing Date and promptly following each change in such policy;



(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business;



(d) Investments (whether consisting of the purchase of securities, loans, capital contributions, or otherwise) of Subsidiaries in or to other Subsidiaries or in Borrower;



(e) Investments consisting of receivables owing to Borrower or its Subsidiaries by Persons and advances to customers or suppliers, in each case, if created, acquired or made in the ordinary course of business; provided that this paragraph (f) shall not apply to Investments owing by Subsidiaries to Borrower;



(f) Investments consisting of (i) compensation of employees, officers and directors of Borrower or its Subsidiaries so long as the Board of Directors of Borrower determines that such compensation is in the best interests of Borrower, (ii) travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business; (iii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries;













(g) Investments pursuant to or arising under currency agreements or interest rate agreements entered into in the ordinary course of business for bona fide hedging purposes and not for speculation;



(h) Investments permitted under Section 7.3;



(i) Investments consisting of deposit accounts of Borrower in which Bank has a Lien prior to any other Lien;



(j) Investments consisting of deposit accounts of any Subsidiaries maintained in the ordinary course of business;



(k) Investments accepted in connection with Transfers permitted by Section 7.1;



(l) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and



(m) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions to, customers and suppliers who are not Affiliates in the ordinary course of business.



"Permitted Liens" means the following:



(a) Any Liens existing on the Closing Date and disclosed in the Schedule or arising under this Agreement or the other Loan Documents;



(b) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings, provided the same have no priority over any of Bank's security interests;



(c) Liens (i) upon or in any Equipment (other than the Collateral) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or leasing of such Equipment, or (ii) existing on such Equipment at the time of its acquisition or lease, provided that the Lien is confined solely to the Equipment so acquired or leased;



(d) Leases or subleases and license and sublicenses granted to others in the ordinary course of Borrower's or its Subsidiaries' business not interfering in any material respect with the business of Borrower and its Subsidiaries taken as a whole, and any interest or title of a lessor, licensor or under any lease or license;



(e) Liens on assets (including the proceeds thereof and accessions thereto) that existed at the time such assets were acquired by Borrower or any Subsidiary (including Liens on assets of any corporation that existed at the time it became or becomes a Subsidiary);



(f) Liens on Equipment leased by Borrower or any Subsidiary pursuant to an operating lease in the ordinary course of business incurred solely for the purpose of financing the lease of such Equipment;



(g) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.7;













(h) Easements, reservations, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances affecting real property not interfering in any material respect with the ordinary conduct of the business of Borrower and its Subsidiaries, taken as a whole;



(i) Liens which constitute rights of set-off of a customary nature or bankers' Liens with respect to amounts on deposit, whether arising by operation of law or by contract, in connection with arrangements entered into with banks in the ordinary course of business; provided that with respect to Liens on amounts on deposit owned by Borrower, such Liens shall not be prior to the Lien of Bank;



(j) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;



(k) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums; and



(l) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase.



"Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.



"Prime Rate" means the variable rate of interest, per annum, most recently announced by Bank, as its "prime rate," whether or not such announced rate is the lowest rate available from Bank.



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