UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of May 5, 2022, the registrant had
Table of Contents
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PART I. |
1 |
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Item 1. |
1 |
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Condensed Balance Sheets as of March 31, 2022 and December 31, 2021 |
1 |
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Condensed Statements of Operations for the Three Months Ended March 31, 2022 and 2021 |
2 |
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Condensed Statements Stockholders' Equity for the Three Months Ended March 31, 2022 and 2021 |
3 |
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Condensed Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 |
4 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 |
Item 3. |
36 |
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Item 4. |
36 |
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PART II. |
38 |
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Item 1. |
38 |
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Item 1A. |
38 |
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Item 2. |
38 |
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Item 3. |
38 |
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Item 4. |
38 |
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Item 5. |
38 |
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Item 6. |
39 |
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40 |
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties, including but not limited to those set forth under the caption “Special Note Regarding Forward-Looking Statements” and Item 1A “Risk Factors” of Part II in this Quarterly Report on Form 10-Q and those discussed in our other filings with the Securities and Exchange Commission (SEC), including the risks described in Item 1A “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed on March 14, 2022. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial condition, results of operations, business strategy and plans, and objectives of management for future operations, as well as statements regarding industry trends, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions.
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, factors, and assumptions described under the section titled “Risk Factors” in this Report and in the section entitled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2021, regarding, among other things:
ii
These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. New risk factors may emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or to changes in our expectations.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference and have filed as exhibits with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
BIODESIX, INC.
Condensed Balance Sheets
(in thousands, except share data)
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March 31, 2022 |
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December 31, 2021 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Other current assets |
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Total current assets |
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Non‑current assets |
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Property and equipment, net |
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Intangible assets, net |
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Operating lease right-of-use assets |
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— |
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Goodwill |
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Other long-term assets |
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Total non‑current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Deferred revenue |
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Current portion of operating lease liabilities |
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— |
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Current portion of contingent consideration |
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Current portion of notes payable |
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Other current liabilities |
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— |
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Total current liabilities |
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Non‑current liabilities |
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Long‑term notes payable, net of current portion |
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Long-term operating lease liabilities |
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— |
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Contingent consideration |
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Other long-term liabilities |
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Total non‑current liabilities |
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Total liabilities |
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Stockholders' equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid‑in capital |
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Accumulated deficit |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying Notes are an integral part of these unaudited condensed financial statements.
1
BIODESIX, INC.
Condensed Statements of Operations
(in thousands, except per share data)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Revenues |
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$ |
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$ |
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Operating expenses: |
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Direct costs and expenses |
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Research and development |
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Sales, marketing, general and administrative |
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Change in fair value of contingent consideration |
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— |
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Impairment loss on intangible assets |
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— |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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Other (expense) income: |
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Interest expense |
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( |
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( |
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Loss on debt extinguishment |
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— |
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( |
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Other income, net |
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Total other expense |
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( |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
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( |
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Weighted-average shares outstanding, basic and diluted |
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The accompanying Notes are an integral part of these unaudited condensed financial statements.
2
BIODESIX, INC.
Condensed Statements of Stockholders' Equity
(in thousands)
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Common Stock |
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Additional Paid‑In |
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Accumulated |
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Total Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance ‑ December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock under employee stock purchase plan |
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— |
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— |
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Issuance of common stock for deferred offering costs |
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— |
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— |
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Issuance of common stock, net of discounts and commissions |
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— |
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Exercise of stock options |
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— |
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Stock‑based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance ‑ March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Additional Paid‑In |
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Accumulated |
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Total Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance ‑ December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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Stock‑based compensation |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance ‑ March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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The accompanying Notes are an integral part of these unaudited condensed financial statements.
3
BIODESIX, INC.
Condensed Statements of Cash Flows
(in thousands)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash, cash equivalents, and restricted |
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Depreciation and amortization |
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Amortization of lease right-of-use assets |
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— |
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Loss on debt extinguishment |
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— |
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Stock‑based compensation expense |
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Change in contingent consideration |
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— |
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Provision for doubtful accounts |
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( |
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Accrued interest, amortization of debt issuance costs and other |
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Inventory excess and obsolescence |
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— |
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Impairment loss on intangible assets |
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— |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Other current assets |
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( |
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Other long-term assets |
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Accounts payable and other accrued liabilities |
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( |
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( |
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Deferred revenue |
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( |
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( |
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Current and long-term operating lease liabilities |
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( |
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— |
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Net cash and cash equivalents and restricted cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchases of property and equipment |
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( |
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( |
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Patent costs and intangible asset acquisition, net |
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( |
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( |
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Net cash and cash equivalents and restricted cash used in investing activities |
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( |
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( |
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Cash flows from financing activities |
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Proceeds from the issuance of common stock |
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— |
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Proceeds from issuance of common stock under employee stock purchase plan |
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— |
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Proceeds from exercise of stock options |
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Payment of contingent consideration |
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( |
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— |
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Proceeds from term loan and notes payable |
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Repayment of term loan and notes payable |
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( |
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( |
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Equity financing costs |
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( |
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— |
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Deferred offering costs |
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( |
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— |
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Payment of debt issuance costs |
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— |
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( |
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Other |
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( |
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— |
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Net cash and cash equivalents and restricted cash (used in) provided by financing activities |
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( |
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Net decrease in cash and cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents, and restricted cash ‑ beginning of period |
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Cash, cash equivalents, and restricted cash ‑ end of period |
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$ |
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$ |
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The accompanying Notes are an integral part of these unaudited condensed financial statements.
4
BIODESIX, INC.
Statements of Cash Flows
(in thousands)
(Continued from the previous page)
Supplemental cash flow information:
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Three Months Ended March 31, |
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2022 |
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2021 |
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Common stock issued for deferred offering costs |
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$ |
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$ |
— |
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Deferred offering costs amortized against Additional paid-in capital |
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— |
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Deferred offering costs included in Accrued liabilities |
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— |
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Equity financing costs included in Accrued liabilities |
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— |
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Operating lease right-of-use assets obtained in exchange for lease liabilities |
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— |
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Finance lease right-of-use assets obtained in exchange for lease liabilities |
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— |
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Cash paid for interest |
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Cash paid for income taxes |
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— |
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— |
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The accompanying Notes are an integral part of these unaudited condensed financial statements.
5
BIODESIX, INC.
Notes to Unaudited Condensed Financial Statements
Note 1 – Organization and Description of Business
Biodesix, Inc. (the “Company”, “Biodesix”, “we” “us” and “our”), formerly Elston Technologies, Inc., was incorporated in Delaware in 2005. The Company’s headquarters are in Colorado, with laboratories in Colorado and Kansas. The Company conducts all of its operations within a single legal entity. Biodesix is a data-driven diagnostic solutions company leveraging state of the art technologies with its proprietary artificial intelligence platform to discover, develop, and commercialize solutions for clinical unmet needs, with a primary focus in lung disease. In addition to diagnostic tests, the Company provides biopharmaceutical companies with services that include diagnostic research, clinical trial testing, and the discovery, development, and commercialization of companion diagnostics.
The Company performs its blood-based diagnostic tests in its laboratory facilities, which are located in Boulder, Colorado and De Soto, Kansas. In May 2020, the Federal Drug Administration (FDA) granted Emergency Use Authorization (EUA) of the Bio-Rad SARS-CoV-2 Droplet Digital™ polymerase chain reaction (ddPCR) test to detect Coronavirus Disease 2019 (COVID-19) infection. In April 2020, the FDA authorized the Platelia SARS-CoV-2 Total Ab test to detect COVID-19 antibodies. Medical products that are granted an EUA are only permitted to commercialize their products under the terms and conditions provided in the authorization. The FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization, if the conditions for the issuance of the EUA are no longer met, or if other circumstances make revocation appropriate to protect the public health or safety.
Blood-Based Lung Tests
The Company offers
Diagnosis
Treatment & Monitoring
COVID-19 Tests
We operate and have commercialized the Biodesix WorkSafe testing program, under which the Company offers
6
BIODESIX, INC.
Notes to Condensed Financial Statements
These tests under the Biodesix WorkSafe testing program are utilized by healthcare providers, including hospitals and nursing homes, and are also offered to businesses and educational systems to assist in their back-to-work or back-to-school strategies, a crucial element of restarting economic activity.
In developing the Company's products, the Company has built or gained access to unique biorepositories, proprietary technology, and bioinformatics methods that it believes are important to the development of new targeted therapies, determining clinical trial eligibility and guiding treatment selection. The Company’s testing services are made available through its clinical laboratories.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information and reflect all adjustments necessary to state fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Results for interim periods are not indicative of the results for the entire fiscal year. The accompanying Condensed Financial Statements should be read in conjunction with the audited Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Certain information and footnote disclosures, including significant accounting policies, normally included in fiscal year financial statements prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) have been condensed or omitted. The Condensed Balance Sheet as of December 31, 2021 was derived from the audited financial statements.
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The COVID-19 pandemic negatively affected, and we expect will continue to negatively affect, our lung diagnostic testing-related revenue and our clinical studies.
As of March 31, 2022, we maintained cash and cash equivalents of $
Our ability to meet our obligations as they come due may be impacted by our ability to remain compliant with financial covenants in our 2021 Term Loan (see Note 6 – Debt) or to obtain waivers or amendments that impact the related covenants. Due to the continued uncertainty caused by the COVID-19 pandemic, significant risks remain with respect to our ability to meet these thresholds and any material adverse effect on our revenues, income and expenses could impact our ability to maintain compliance with these covenants.
Based on our current operating plan, unless we raise additional capital (debt or equity) or obtain a waiver from complying with such financial covenants, we expect that we will be unable to maintain our financial covenants under our 2021 Term Loan during the next twelve months, which could result in an Event of Default, as defined, causing an acceleration and repayment of the outstanding balance. We have taken steps to improve our liquidity through raising equity capital during 2022, amendments to our 2021 Term Loan and have also undertaken several proactive measures to mitigate the financial and operational impacts of the COVID-19 pandemic through the reduction of planned capital expenditures and certain operating expenses but we do not expect that these actions alone will be sufficient to maintain our financial covenants. Subsequent to March 31, 2022, we entered into a $
7
BIODESIX, INC.
Notes to Condensed Financial Statements
interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. There can be no assurance that additional capital will be available to us or, if available, will be available in sufficient amounts or on terms acceptable to us or on a timely basis. If adequate capital resources are not available on a timely basis, we intend to consider limiting our operations substantially. This limitation of operations could include a hiring freeze, reductions in our workforce, reduction in cash compensation, deferring capital expenditures, and reducing other operating costs.
The Company’s revenues, results of operations and cash flows have been materially adversely impacted by the items noted above. Our current operating plan, which is in part determined based on our most recent historical actual results and trends, along with the items noted above, raises substantial doubt about the Company’s ability to continue as a going concern. Our unaudited financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments that might be necessary should we be unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Restricted Cash
Restricted cash consists of deposits related to the Company’s corporate credit cards. The Company had $
Concentration of Credit Risk and Other Uncertainties
Substantially all of the Company’s cash and cash equivalents are deposited with two major financial institutions in the United States. The Company continually monitors its positions with, and the credit quality of, the financial institution with which it holds cash. Periodically throughout the year, the Company has maintained balances in various operating accounts in excess of federally insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Several of the components for certain of the Company's sample collection kits, test reagents, and test systems are obtained from single-source suppliers. If these single-source suppliers fail to satisfy the Company's requirements on a timely basis, it could suffer delays in being able to deliver its diagnostic solutions, a possible loss of revenue, or incur higher costs, any of which could adversely affect its operating results.
For a discussion of credit risk concentration of accounts receivable as of March 31, 2022 and December 31, 2021, see Note 9 – Revenue and Accounts Receivable Credit Concentration.
Inventory
Inventory consists primarily of material supplies, which are consumed in the performance of testing services and charged to ‘Direct costs and expenses’. Inventory is stated at cost and reported within ‘Other current assets’ in the balance sheet and was $
Fair Value of Financial Instruments
U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). We utilize a combination of market and income approaches to value our financial instruments. Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. Fair value measurements are categorized within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value.
The three levels of the hierarchy and the related inputs are as follows:
Level |
|
Inputs |
1 |
|
Unadjusted quoted prices in active markets for identical assets and liabilities. |
2 |
|
Unadjusted quoted prices in active markets for similar assets and liabilities; |
|
|
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or |
|
|
Inputs other than quoted prices that are observable for the asset or liability. |
3 |
|
Unobservable inputs for the asset or liability. |
The carrying amounts of certain financial instruments including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.
8
BIODESIX, INC.
Notes to Condensed Financial Statements
See Note 4 — Fair Value for further discussion related to estimated fair value measurements.
Note 3 - Recently Issued Accounting Standards
Recently adopted accounting standards
In February 2016, the FASB issued Account Standard Update (ASU) No. 2016-2, Leases (ASC 842). This ASU intends to make accounting for leasing activities more transparent and comparable, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases accounted for as operating leases. In addition to other related amendments, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which offers an additional transition method whereby entities may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings rather than application of the new leases standard at the beginning of the earliest period presented in the financial statements. The Company elected this transition method and adopted ASC 842 on January 1, 2022 and as a result, recorded operating lease (ROU) assets of $
In addition, the Company elected the following practical expedients permitted under the transition guidance within the new standard:
Management determines if an arrangement is a lease at inception or upon modification of a contract. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the statements of operations. When determining whether a lease is a finance lease or an operating lease, ASC 842 does not specifically define criteria to determine the “major part of remaining economic life of the underlying asset” and “substantially all of the fair value of the underlying asset.”
ROU assets represent the Company's right to use an underlying asset for the lease term. Lease liabilities represent the Company's obligation to make lease payments under the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses either the rate implicit in the lease or its incremental borrowing rate, as applicable, based on the information available at lease commencement date. The Company applies the estimated incremental borrowing rates on a lease-by-lease level based on the economic environment associated with the lease. The operating lease ROU asset also includes any lease prepayments, net of lease incentives. Certain of the Company's leases include options to extend or terminate the lease. As leases approach maturity, the Company considers various factors such as market conditions and the terms of any renewal and termination options that may exist to determine whether we will renew or terminate the lease, as such, we generally do not include renewal or termination options in our lease terms for calculating our lease liability, as the options allow us to maintain operational flexibility and we are not reasonably certain we will exercise these options at the time of the lease commencement. The Company's lease agreements do not contain any material residual value guarantees or restrictive covenants. Lease expense for lease payments of operating leases is recognized on a straight-line basis over the term of the lease. The Company uses the long-lived assets impairment guidance to determine recognition and measurement of an ROU asset impairment, if any. The Company monitors for events or changes in circumstances that require a reassessment.
Additional information and disclosures required by this new standard are contained in Note 7 — Leases.
Standards Being Evaluated
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (ASC Topic 326). This ASU requires measurement and recognition of expected credit losses for financial assets. This guidance will become effective for the Company beginning January 1, 2023 with early adoption permitted. The Company is currently evaluating this guidance and assessing the overall impact on its financial statements.
9
BIODESIX, INC.
Notes to Condensed Financial Statements
Note 4 - Fair Value
Recurring Fair Value Measurements
Our borrowing instruments are recorded at their carrying values in the balance sheets, which may differ from their respective fair values.
|
|
As of |
|
|||||||||||||
|
March 31, 2022 |
|
|
December 31, 2021 |
|
|||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
Borrowings |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
The financial liabilities that are measured and recorded at estimated fair value on a recurring basis consist of our contingent consideration associated with our acquisition of Indi which is accounted for as a liability and remeasured through our statements of operations.
The table below presents the reported fair values of contingent consideration, which is classified as Level 3 in the fair value hierarchy, as of the dates indicated (in thousands):
Description |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Current portion of contingent consideration |
|
$ |
|
|
$ |
|
||
Contingent consideration |
|
|
|
|
|
|
||
Total contingent consideration |
|
$ |
|
|
$ |
|
||
The following table presents the changes in contingent consideration for the three months ended March 31, 2022 and 2021 (in thousands):
|
|
For the three months |
|
|||||
Level 3 Rollforward |
|
2022 |
|
|
2021 |
|
||
Beginning balances - January 1 |
|
$ |
|
|
$ |
|
||
Changes in fair value |
|
|
— |
|
|
|
|
|
Interest expense |
|
|
|
|
|
— |
|
|
Payments of contingent consideration |
|
|
( |
) |
|
|
— |
|
Ending balances - March 31 |
|
$ |
|
|
$ |
|
||
Contingent Consideration
In connection with the acquisition of Indi in 2018, the Company recorded contingent consideration for amounts contingently payable to Indi's selling shareholders pursuant to the terms of the asset purchase agreement (the Indi APA). The contingent consideration arrangement
The Company met the gross margin target of $
The significant unobservable inputs used in the measurement of fair value include the probability of successful achievement of the specified product gross margin targets, the period in which the targets were expected to be achieved, and discount rates which ranged
10
BIODESIX, INC.
Notes to Condensed Financial Statements
from
Contingent consideration expected to be paid in the next twelve months is recorded in the balance sheets as ‘Current portion of contingent consideration’ while the remaining amount to be paid is recorded as ‘Contingent consideration’ within non-current liabilities. The net change to contingent consideration through the date the gross margin target was met is recorded as operating expenses in the statements of operations. Subsequent changes to the contingent consideration following the achievement of the gross margin target are recorded as ‘Interest expense’ in the statements of operations resulting from the passage of time and fixed payment schedule.
Non-Financial Assets and Liabilities
Our non-financial assets, which primarily consist of property and equipment, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. There were no changes to the valuation methods during the periods presented.
Note 5 – Supplementary Balance Sheet Information
Property and equipment consist of the following (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Lab equipment |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Vehicles |
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended March 31, 2022 and 2021 was $
Intangible assets, excluding goodwill, consist of the following (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||||||||||||||||||
|
|
Cost |
|
|
Accumulated |
|
|
Net Carrying Value |
|
|
Cost |
|
|
Accumulated |
|
|
Net Carrying Value |
|
||||||
Intangible assets subject to amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Patents |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Purchased technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Intangible assets not subject to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trademarks |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Amortization expense related to definite-lived intangible assets was $
11
BIODESIX, INC.
Notes to Condensed Financial Statements
Future estimated amortization expense of intangible assets is (in thousands):
|
|
As of March 31, 2022 |
|
|
Remainder of 2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 and thereafter |
|
|
|
|
Total |
|
$ |
|
|
Accrued liabilities consist of the following (in thousands):
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Compensation related accruals |
|
$ |
|
|
$ |
|
||
Accrued clinical trial expense |
|
|
|
|
|
|
||
Other expenses |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
Note 6 – Debt
Our long-term debt primarily consists of notes payable associated with our 2021 Term Loan which is described in further detail below.
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
2021 Term Loan |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Unamortized debt discount and issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Less: current maturities |
|
|
|
|
|
|
||
Long-term notes payable |
|
$ |
|
|
$ |
|
||
2021 Term Loan
On March 19, 2021 (Effective Date), the Company entered into a Loan and Security Agreement (the 2021 Term Loan) by and between Silicon Valley Bank, a California corporation (SVB or Lender) and the Company, as borrower, whereby subject to the terms and conditions of the 2021 Term Loan, SVB advanced to the Company an original principal amount of $
The Company’s final payment, due at maturity on
The Company granted the Lender a security interest in substantially all of the Company’s assets.
12
BIODESIX, INC.
Notes to Condensed Financial Statements
The 2021 Term Loan contains certain covenants limiting the ability of the Company to, among other things, incur future debt, transfer assets except for the ordinary course of business, make acquisitions, pay dividends or make other certain restricted payments, or sell assets, subject to certain exceptions, without the prior written consent of the Lender. Failure to comply with the covenants and loan requirements may result in an event of default. As of March 31, 2022, the Company was in compliance with all restrictive and financial covenants associated with its borrowings. In the event of a default, including, among other things, our failure to make any payment when due or our failure to comply with any covenant under the 2021 Term Loan, the Lender may elect to declare all amounts outstanding to be immediately due and payable, and may proceed against the collateral granted to them to secure such indebtedness, including a royalty-free license or other right to use all of our intellectual property without charge.
Scheduled principal repayments (maturities) of long-term obligations were as follows (in thousands):
|
|
As of March 31, 2022 |
|
|
Remainder of 2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 and thereafter |
|
|
|
|
Total |
|
$ |
|
|
Note 7 - Leases
Operating Leases
The Company acts as a lessee under all its lease agreements. The Company leases its headquarters and laboratory facilities in Boulder, Colorado, under a non-cancelable lease agreement for approximately
Centennial Valley Properties I, LLC Lease Agreement
On March 11, 2022, the Company entered into a Lease Agreement (the Lease) with Centennial Valley Properties I, LLC, a Colorado limited liability company (the Landlord) for office and laboratory space located at 919 West Dillion Road; Louisville, Colorado (the Leased Premises). The purpose of the Lease is to replace the Company’s current leased premises at 2970 Wilderness Place, Suite 100 in Boulder, Colorado and the Company intends to move its corporate headquarters to the Leased Premises by mid-2023.
13
BIODESIX, INC.
Notes to Condensed Financial Statements
Under the Lease, the Company will lease approximately
The Lease includes various covenants, indemnities, defaults, termination rights, and other provisions customary for lease transactions of this nature, including maintaining a $
Future minimum lease payments associated with our operating leases were as follows (in thousands):
|
|
As of March 31, 2022 |
|
|
Remainder of 2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 and thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less amount representing interest |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
|
Future minimum lease payments, which do not include amounts for common area maintenance, insurance, or taxes, for operating lease obligations in accordance with ASC 840 were as follows (in thousands):
|
|
As of |
|
|
|
|
December 31, 2021 |
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 and thereafter |
|
|
|
|
Total |
|
$ |
|
|
14
BIODESIX, INC.
Notes to Condensed Financial Statements
Note 8 – Equity
Equity Financing Programs
The Company maintains
Common Stock Purchase Agreement
On March 7, 2022 (the Effective Date), the Company entered into a purchase agreement with Lincoln Park Capital Fund, LLC (Lincoln Park), pursuant to which Lincoln Park has committed to purchase up to $
Lincoln Park has no right to require the Company to sell any shares of common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the Purchase Agreement if doing so would result in Lincoln Park beneficially owning more than
Actual sales of shares of common stock to Lincoln Park under the Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The net proceeds, if any, under the Purchase Agreement will depend on the frequency and prices at which the Company sells shares of its common stock to Lincoln Park. The Company intends to use any net proceeds from the sale of its common stock to Lincoln Park to advance its growth strategy and for general corporate purposes. On the Effective Date, the Company issued
The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the common stock. Although the Company has agreed to reimburse Lincoln Park for a limited portion of the fees it incurred in connection with the Purchase Agreement, the Company did not pay any additional amounts to reimburse or otherwise compensate Lincoln Park in connection with the transaction, other than the issuance of the Commitment Shares.
15
BIODESIX, INC.
Notes to Condensed Financial Statements
Warrants
During 2018, the Company issued warrants to purchase shares of convertible preferred stock in conjunction with the sale of certain convertible preferred shares and issuance of debt. The Company issued to the lender a warrant to purchase
Note 9 – Revenue and Accounts Receivable Credit Concentration
Diagnostic test revenues consist of blood-based lung tests and COVID-19 tests, which are recognized in the amount expected to be received in exchange for diagnostic tests when the diagnostic tests are delivered. The Company conducts diagnostic tests and delivers the completed test results to the prescribing physician or patient, as applicable. The fees for diagnostic tests are billed either to a third party such as Medicare, medical facilities, commercial insurance payers, or to the patient. The Company determines the transaction price related to its diagnostic test contracts by considering the nature of the payer and historical price concessions granted to groups of customers. For diagnostic test revenue, the Company estimates the transaction price, which is the amount of consideration it expects to be entitled to receive in exchange for providing services based on its historical collection experience, using a portfolio approach. The Company recognizes revenues for diagnostic tests upon delivery of the tests to the physicians requesting the tests or patient, as applicable.
Services revenue consists of on-market tests, pipeline tests, custom diagnostic testing, and other scientific services for a purpose as defined by any individual customer, which is often with biopharmaceutical companies. The performance obligations and related revenue for these sales is defined by a written agreement between the Company and the customer. These services are generally completed upon the delivery of testing results, or other contractually defined milestone(s), to the customer. Revenue for these services is recognized upon delivery of the completed test results, or upon completion of the contractual milestone(s).
Revenues consisted of the following (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Diagnostic tests |
|
$ |
|
|
$ |
|
||
Services |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
Deferred Revenue
Deferred revenue consists of cash payments from customers received in advance of delivery. As test results are delivered, the Company recognizes the deferred revenue in ‘Revenues’ in the statements of operations. Of the $
The Company’s customers in excess of 10% of total revenue, and their related revenue as a percentage of total revenue were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
The Big Ten Conference |
|
|
— |
|
|
|
% |
|
16
BIODESIX, INC.
Notes to Condensed Financial Statements
In addition to the above table, we collect reimbursement on behalf of customers covered by Medicare, which accounted for
The Company’s third-party payors and other customers in excess of 10% of accounts receivable, and their related accounts receivable as a percentage of total accounts receivable were as follows:
|
|
As of |
|
|||||
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Medicare |
|
|
% |
|
|
% |
||
Janssen Research and Development, LLC |
|
|
% |
|
|
% |
||
LabCorp DD (formerly Covance) |
|
|
% |
|
|
% |
||
Note 10 – Share-Based Compensation
The Company’s share-based compensation awards are issued under the 2020 Equity Incentive Plan (2020 Plan), the predecessor 2016 Equity Incentive Plan (2016 Plan) and 2006 Equity Incentive Plan (2006 Plan). Any awards that expire or are forfeited under the 2016 Plan or 2006 Plan become available for issuance under the 2020 Plan. As of March 31, 2022,
Share-Based Compensation Expense
Pre-tax share-based compensation expense reported in the Company’s statements of operations was (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Direct costs and expenses |
|
$ |
|
|
$ |
— |
|
|
Research and development |
|
|
|
|
|
|
||
Sales, marketing, general and administrative |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The remaining unrecognized stock‑based compensation expense for options and restricted stock units was approximately $
Stock Option Activity
Stock option activity during the three months ended March 31, 2022, excluding the Bonus Option Program described below, was (in thousands, except weighted average exercise price and weighted average contractual life):
|
|
Number of Options |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding ‑ January 1, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Forfeited/canceled |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Exercised |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Outstanding ‑ March 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable - March 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
17
BIODESIX, INC.
Notes to Condensed Financial Statements
Restricted Stock Unit Activity
Restricted stock unit activity during the three months ended March 31, 2022 was (in thousands, except weighted average grant date fair value per share):
|
|
Number of Shares |
|
|
Weighted Average |
|
||
Outstanding ‑ January 1, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Forfeited/canceled |
|
|
— |
|
|
|
— |
|
Vested |
|
|
— |
|
|
|
— |
|
Outstanding ‑ March 31, 2022 |
|
|
|
|
$ |
|
||
Bonus-to-Options Program
As part of the Bonus-to-Options Program (Bonus Option Program), the Company recorded the following activity during the three months ended March 31, 2022 (in thousands, excepted weighted average exercise price and weighted average contractual life):
|
|
Number of Options |
|
|
Weighted Average |
|
|
Weighted Average |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding ‑ January 1, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Forfeited/canceled |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding ‑ March 31, 2022 |
|
|
|
|
$ |
|
|
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During the three months ended March 31, 2022 and 2021, the Company accrued $
Employee Stock Purchase Plan
A total of
Note 11 – Net Loss per Common Share
Basic earnings per share (EPS) excludes dilution and is computed by dividing net loss attributable to the common stockholders by the weighted-average shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of shares of common stock that would then share in the earnings or losses of the Company.
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18
BIODESIX, INC.
Notes to Condensed Financial Statements
The following outstanding common stock equivalents were excluded from diluted net loss attributable to common stockholders for the periods presented because inclusion would be anti-dilutive (in thousands):
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Note 12 - Income Taxes
Since inception, the Company has incurred net taxable losses, and accordingly,
Note 13 – Commitments and Contingencies
Co‑Development Agreement
In April 2014 and amended in October 2016, the Company entered into a worldwide agreement with AVEO to develop and commercialize AVEO's hepatocyte growth factor inhibitory antibody ficlatuzumab with the Company's proprietary companion diagnostic test, BDX004, a version of the Company’s serum protein test that is commercially available to help physicians guide treatment decisions for patients with advanced non-small cell lung cancer (NSCLC). Under the terms of the agreement, AVEO will conduct a proof of concept (POC) clinical study of ficlatuzumab for NSCLC in which BDX004 will be used to select clinical trial subjects (the NSCLC POC Trial). Under the agreement, the Company and AVEO would share equally in the costs of the NSCLC POC Trial, and each would be responsible for
In September 2020, the Company exercised its opt-out right with AVEO for the payment of
License Agreements
In August 2019, we entered into a non-exclusive license agreement with Bio-Rad Laboratories, Inc. (Bio-Rad) (the Bio-Rad License). Under the terms of the Bio-Rad License, the Company received a non-exclusive license, without the right to grant sublicenses, to utilize certain of Bio-Rad’s intellectual property, machinery, materials, reagents, supplies and know-how necessary for the performance of Droplet Digital PCR™ (ddPCR) in cancer detection testing for third parties in the United States. The Company also agreed to purchase all of the necessary supplies and reagents for such testing exclusively from Bio-Rad, pursuant to a separately executed supply agreement (the Supply Agreement) with Bio-Rad. As further consideration for the non-exclusive license, the Company agreed to pay a royalty of
On May 13, 2021 (Effective Date), we reached agreement with CellCarta Biosciences Inc. (formerly “Caprion Biosciences, Inc.”) (the CellCarta License) on a new royalty bearing license agreement for the Nodify XL2 test. The parties agreed to terminate all prior agreements and replace with this new arrangement, which has a
19
BIODESIX, INC.
Notes to Condensed Financial Statements
As part of the acquisition of the assets of Oncimmune USA, the Company entered into several agreements to govern the relationship between the parties. The Company agreed to a license agreement and royalty payment related to an acquired diagnostic test of
Litigation, Claims and Assessments
From time to time, we may become involved in legal proceedings or investigations which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. In September 2021, we reached a settlement agreement with the plaintiffs, which received preliminary approval from the Circuit Court of the City of St. Louis, State of Missouri (the Court) on November 10, 2021 regarding a dispute involving the Telephone Consumer Protection Act (TCPA). On January 31, 2022, the Court approved the final settlement payment to third parties of approximately $
Note 14 – Subsequent Events
The Company continues to address our liquidity needs through improvements to our capital structure. Subsequent to March 31, 2022, the Company entered into: (i) a private placement that raised approximately $
Subscription Agreements
Pursuant to the Subscription Agreements, the Investors purchased shares at a purchase price (determined in accordance with Nasdaq rules relating to the “Minimum Value” of the Company’s common stock) of $
2021 Term Loan Amendment and Partial Repayment
On April 7, 2022, the Company entered into the Consent and Third Amendment to Loan and Security Agreement (the 2021 Term Loan Third Amendment) by and between SVB and the Company, as borrower, whereby subject to the terms and conditions of the 2021 Term Loan Third Amendment, certain waivers and consents were provided.
Under the terms of the 2021 Term Loan Third Amendment, the Company agreed to the repayment of $
As of the date of this filing, the Company raised sufficient debt and equity funding to extend the remaining $
20
BIODESIX, INC.
Notes to Condensed Financial Statements
Integrated Diagnostics, Inc. Asset Purchase Agreement Amendment
On April 7, 2022, the Company entered into Amendment No. 3 to Asset Purchase Agreement and Plan of Reorganization (the Third Amendment), dated June 30, 2018 by and among Integrated Diagnostics, Inc. and IND Funding LLC (collectively, Indi) as amended by Amendment No. 1 to Asset Purchase Agreement and Plan of Reorganization dated as of July 29, 2021 (the First Amendment) and Amendment No. 2 to Asset Purchase Agreement and Plan of Reorganization dated as of August 9, 2021 (the Second Amendment, as amended collectively, the APA Agreement) in order to reduce and extend the payment terms associated with the Company's contingent consideration balance payable to Indi.
The modification of key terms under the Third Amendment to the APA Agreement include, among other things, the following:
At-the-Market Offering
In April 2022, the Company raised approximately $
Securities Purchase Agreement
On May 9, 2022 (the First Closing Date), the Company entered into a securities purchase agreement (the SPA) with Streeterville Capital, LLC (the Lender), pursuant to which, among other things, the Lender:
The Company’s election associated with Promissory Note Two is subject to the Company satisfying, among other things, the following conditions:
Under the SPA, the parties provided customary representations and warranties to each other. Also, until amounts due under the Promissory Notes are paid in full, the Company agreed, among other things, to: (i) timely make all filings under the Securities Exchange Act of 1934, (ii) ensure the Common Stock continues to be listed on the NASDAQ or New York Stock Exchange, (iii) not enter into any agreement or otherwise agree to any covenant, condition, or obligation that locks up, restricts in any way or otherwise prohibits Company: (a) from entering into a variable rate transaction with Lender or any affiliate of Lender, or (b) from issuing Common Stock, preferred stock, warrants, convertible notes, other debt securities, or any other Company securities to Lender or any affiliate of Lender, (iv) will not make any Restricted Issuances (as defined in the Promissory Notes) without Lender’s prior written consent, which consent
21
BIODESIX, INC.
Notes to Condensed Financial Statements
may be granted or withheld in Lender’s sole and absolute discretion (v) within 9 months following the First Closing Date, the Company will repay in full all outstanding obligations under the SVB 2021 Term Loan, (vi) beginning on April 1, 2023, Company shall maintain a minimum liquidity balance of at least $
The Promissory Notes have an interest rate of
Beginning on the date that is nine months after the issuance date of the applicable Promissory Note, the Lender has the right to redeem up to $
The Promissory Notes contain certain Trigger Events that generally, if uncured within five trading days, may result in an event of default in accordance with the terms of the Promissory Notes (such event, an Event of Default). Upon an Event of Default, the interest rate may also be increased to the lesser of
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Biodesix, Inc. is referred to throughout this Quarterly Report on Form 10-Q for the period ended March 31, 2022 (Form 10-Q) as “we”, “us”, “our” or the “Company”.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (Form 10-K) and the Condensed Financial Statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, included in Part I, Item 1 of this Form 10-Q, which provide additional information regarding our financial position, results of operations and cash flows. To the extent that the following MD&A contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties, including but not limited to those set forth under the caption “Special Note Regarding Forward-Looking Statements” and Item 1A “Risk Factors” of Part II in this Quarterly Report on Form 10-Q and those discussed in our other filings with the Securities and Exchange Commission (SEC), including the risks described in Item 1A “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed on March 14, 2022.
The following MD&A discussion is provided to supplement the Condensed Financial Statements as of March 31, 2022 and 2021 and for the three months then ended included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We intend for this discussion to provide you with information that will assist you in understanding our financial statements, the changes in key items in those financial statements from period to period, and the primary factors that accounted for those changes.
Data for the three months ended March 31, 2022 and 2021 has been derived from our unaudited condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Overview
We are a leading data-driven diagnostic solutions company leveraging state of the art technologies with our proprietary AI platform to discover, develop, and commercialize solutions for clinical unmet needs, with a primary focus in lung disease. By combining a technology multi-omic approach with a holistic view of the patient’s disease state, we believe our solutions provide physicians with greater insights to help personalize their patient’s care and meaningfully improve disease detection, evaluation, and treatment. Our unique approach to precision medicine provides timely and actionable clinical information, which we believe helps improve overall patient outcomes and lowers the overall healthcare cost by reducing the use of ineffective and unnecessary treatments and procedures. In addition to our diagnostic tests, we provide biopharmaceutical companies with services that include diagnostic research, clinical trial testing, and the discovery, development, and commercialization of companion diagnostics.
Our core belief is that no single technology will answer all clinical questions that we encounter. Therefore, we employ multiple technologies, including genomics, transcriptomics, proteomics, and radiomics, and leverage our proprietary AI-based Diagnostic Cortex® platform to discover innovative diagnostic tests for clinical use. The Diagnostic Cortex is an extensively validated deep learning platform optimized for the discovery of diagnostic tests, which we believe overcomes standard machine learning challenges faced in life sciences research. Our data-driven and multi-omic approach is designed to enable us to discover diagnostic tests that answer critical clinical questions faced by physicians, researchers, and biopharmaceutical companies.
We continuously incorporate new market insights and patient data to enhance our platform through a data-driven learning loop. We regularly engage with our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic treatment landscape to identify additional clinical unmet needs where a diagnostic test could help improve patient care. Additionally, we incorporate clinical and molecular profiling data from our commercial clinical testing, research studies, clinical trials, and biopharmaceutical customers or academic partnerships, to continue to advance our platform. We have over 150,000 samples and data in our biobank, including tumor profiles and immune profiles, which are used for both internal and external research and development initiatives.
We have commercialized eight diagnostic tests which are currently available for use by physicians. Our Nodify XL2 and Nodify CDT tests, marketed as part of the Nodify Lung Nodule Risk Assessment testing strategy, assess the risk of lung cancer to help identify the most appropriate treatment pathway. We believe we are the only company to offer two commercial blood-based tests to help physicians reclassify risk of malignancy in patients with suspicious lung nodules. Our GeneStrat ddPCR, GeneStrat NGS, and VeriStrat tests, marketed as the IQLung testing strategy, are used following diagnosis of lung cancer to measure the presence of mutations in the tumor and the state of the patient’s immune system to establish the patient’s prognosis and help guide treatment decisions. The GeneStrat targeted tumor profiling test and the VeriStrat immune profiling test now have a less than 36-hour average turnaround time, down from the previous 72-hour average turnaround time, providing physicians with timely results to facilitate treatment decisions. The GeneStrat NGS test is our 72-hour blood-based NGS test, which was launched in November 2021 to a select group of physicians, with national launch in January 2022. The 52-gene panel includes guideline recommended mutations to help physicians treating advanced-stage lung cancer patients identify targeted therapy mutations, such as EGFR, ALK, KRAS, MET, NTRK, ERBB2, and others, and delivers them in an expedited timeframe so patient treatment can begin sooner.
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In response to the COVID-19 pandemic, through our partnership with Bio-Rad, we commercialized the Biodesix WorkSafe™ testing program. Our scientific diagnostic expertise, technologies, and existing commercial infrastructure enabled us to rapidly commercialize two FDA EUA authorized tests, a part of our customizable program. Both diagnostic tests are owned and were developed by Bio-Rad and Bio-Rad has granted us permission to utilize both tests for commercial diagnostic services. Then U.S. Health and Human Services Secretary Azar declared a public health emergency for COVID-19 in February 2020 which justified the authorization of emergency use of diagnostic tests for the detection and/or diagnosis of COVID-19. The Bio-Rad SARS-CoV-2 ddPCR test and the Platelia SARS-CoV-2 Total Ab test have been granted FDA EUA pursuant to the current emergency declaration. The Bio-Rad SARS-CoV-2 ddPCR test was FDA EUA authorized on May 1, 2020, authorizing performance of the test in laboratories certified under CLIA to perform high complexity tests. The second test is the Platelia SARS-CoV-2 Total Ab test, which is an antibody test intended for detecting a B-cell immune response to SARS-CoV-2, indicating recent or prior infection. The Platelia SARS-CoV-2 Total Ab test was FDA EUA authorized on April 29, 2020. Prior to using the Bio-Rad SARS-CoV-2 tests as part of our testing program, we performed feasibility, verification, and validation studies, including developing software for process automation, sample accessioning, data management and reporting, all required to demonstrate the test operated as claimed by the manufacturer and as required by our certifying regulatory agencies for high complexity laboratory testing. We secured independent reference specimens run with EUA tests to validate these tests as fit for diagnostic use in our laboratories. Post-launch development support for these tests have included improvements in on-boarding new personnel, logistics of sample collection, sample receipt and data reporting, all required to support our testing program. Additional releases of the laboratory data management software are ongoing and planned for the foreseeable future. Beginning in the quarter ended June 30, 2021, we began partnering with GenScript Biotech Corporation to commercialize the blood-based cPass SARS-CoV-2 Neutralizing Antibody testing as a service. The test is the first surrogate neutralizing antibody test with FDA EUA and uses ELISA technology to qualitatively detect circulating neutralizing antibodies to the RBD in the spike protein of SARS-CoV-2 that are produced in response to a previous SARS-CoV-2 infection.
Medical products that are granted an EUA are only permitted to commercialize their products under the terms and conditions provided in the authorization. The FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization, if the conditions for the issuance of the EUA are no longer met, or if other circumstances make revocation appropriate to protect the public health or safety, and we cannot predict how long the EUAs for the SARS-CoV-2 tests will remain in place.
These tests under the Biodesix WorkSafe testing program are utilized by healthcare providers, including hospitals and nursing homes, and are also offered to businesses and educational systems. We have announced multiple partnerships for COVID-19 testing, and maintain an agreement with the State of Colorado to be one of the diagnostic companies to support widespread COVID-19 testing for the State. Additionally, we have overseen and managed onsite testing and validating testing for the Big Ten Conference athletic competitions through the term of our contract which expired on June 30, 2021.
In addition to the eight diagnostic tests currently on the market, we perform over 30 assays for research use as part of our laboratory services that have been used by over 50 biopharmaceutical companies and academic partners. All of our diagnostic testing is performed at one of our two accredited, high-complexity clinical laboratories in Boulder, Colorado and De Soto, Kansas.
Since our inception, we have performed over 500,000 tests and continue to generate a large and growing body of clinical evidence consisting of over 300 clinical and scientific peer-reviewed publications, presentations, and abstracts. Through ongoing study of each of our tests, we continue to grow our depth of understanding of disease biology and the broad utility of each of our tests. We believe we are poised for rapid growth by leveraging our scientific development and laboratory operations expertise along with our commercial infrastructure which includes sales, marketing, reimbursement, and regulatory affairs.
In the United States, we market our tests to clinical customers through our targeted sales organization, which includes sales representatives that are engaged in sales efforts and promotional activities primarily to pulmonologists, oncologists, cancer centers and nodule clinics. We market our tests and services to biopharmaceutical companies globally through our targeted business development team, which promotes the broad utility of our tests and testing capabilities throughout drug development and commercialization which is of value to pharmaceutical companies and their drug-development process.
The Company continues to address our liquidity needs through improvements to our capital structure. Subsequent to March 31, 2022, the Company entered into: (i) a private placement that raised approximately $11.7 million in net equity proceeds, (ii) an amendment and partial repayment of our 2021 Term Loan, (iii) modifications to extend payment terms under the Integrated Diagnostics asset purchase agreement (the Indi APA), (iv) common stock sales raising additional funds through our at-the-market facility, and (v) the closing of a $25.0 million debt facility with funding for up to $25.0 million occurring in two tranches. On May 9, 2022, we closed on the first tranche for gross proceeds of $15.0 million (approximately $13.0 million, net, after deducting estimated debt issuance costs and OID). Each of these strategic initiatives is described in further detail within Note 14 to our condensed financial statements in Part 1 of this Quarterly Report on Form 10-Q as well as our Liquidity and Capital Resources section below.
We have funded our operations to date principally from net proceeds from the issuances of our common stock, the sale of convertible preferred stock, revenue from diagnostic testing and services, and the incurrence of indebtedness. We had cash and cash equivalents of $16.4 million and $32.7 million as of March 31, 2022 and December 31, 2021, respectively.
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Factors Affecting Our Performance
We believe there are several important factors that have impacted our operating performance and results of operations, including:
Historically, we have experienced situations where commercial payers proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payers have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made. When we contract to serve as a participating provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. Becoming a participating provider generally results in higher reimbursement for covered indications and lack of reimbursement for non-covered indications. As a result, the impact of becoming a participating provider with a specific payer will vary. If we are not able to obtain or maintain coverage and adequate reimbursement from third-party payers, we may not be able to effectively increase our testing volume and revenue as expected. Additionally, retrospective reimbursement adjustments can negatively impact our revenue and cause our financial results to fluctuate.
Our clinical research has resulted in approximately 90 peer-reviewed publications for our tests. In addition to clinical studies, we are collaborating with investigators from multiple academic cancer centers. We believe these studies are critical to gaining physician adoption and driving favorable coverage decisions by payers and expect our investments in research and development to increase. Further we also expect to increase our research and development expenses to fund further innovation and develop new clinically relevant tests.
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While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address. See Part II, Item 1A “Risk Factors” within this Form 10-Q and Item 1A “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021 for more information.
COVID-19 Pandemic
The COVID-19 pandemic has disrupted, and may continue to disrupt, our lung diagnostic testing operations. To protect the health and well-being of our workforce, partners, vendors and customers, we provide voluntary COVID-19 testing for employees working on-site, implemented social distance and building entry policies at work, restricted travel and facility visits, and followed the States of Colorado and Kansas’ public health orders and the guidance from the Centers for Disease Control and Prevention (CDC). Employees who can perform their duties remotely are asked to work from home and those on site are asked to follow our social distance guidelines. Our sales, marketing and business development efforts have also been constrained by our operational response to the COVID-19 pandemic. We will continue to adjust our operational norms, as needed, to help slow the spread of COVID-19, including complying with government directives and guidelines as they are modified and supplemented.
The COVID-19 pandemic and the surge associated with the Delta and Omicron variants have negatively affected our lung diagnostic testing-related revenue and our clinical studies. For example, cancer patients had more limited access to hospitals, healthcare providers and medical resources as steps were taken to control the spread of COVID-19. Beginning in the third quarter 2020, the Company’s COVID-19 testing services began to experience rapid growth with a peak in the first quarter 2021; however, subsequent to this peak, we experienced a rapid decline in COVID-19 testing revenue primarily as a result of a few significant contracts that expired as well as the ongoing increase in COVID-19 vaccination rates across the U.S. and the adoption and availability of at-home testing. We do not anticipate the need for COVID testing to be commensurate with the peak demand experienced during the first quarter 2021 and instead expect the demand to moderate as new variants and infections occur. The reduction in demand for COVID-19 diagnostic testing will be a key indicator of continued recovery and is taken as a positive sign for both our Lung Diagnostic and Biopharmaceutical Services during 2022. There is no assurance that our COVID-19 testing program will continue to be accepted by the market or that other diagnostic tests will become more accepted, produce quicker results or are more accurate. Further, the longevity and extent of the COVID-19 pandemic is uncertain and the need for COVID-19 testing could vary which could have a significant effect on our results of operations and profitability. As a result, increases in revenue due to any increase in demand for these diagnostic tests may not be indicative of our future revenue. For example, we began to see recovery during the fourth quarter 2020 in our core lung diagnostic testing as our delivered tests exceeded first quarter 2020 delivered tests. The Company’s sales efforts continued to be impacted by the COVID-19 pandemic during the first half of the first quarter 2022 due to surges associated with variants, which negatively affected the growth rate of our core lung diagnostic testing-related revenue and our clinical studies. However, we began to see further recovery during the latter half of the first quarter 2022 in lung diagnostic testing with tests delivered in March reaching an all-time high as health care practitioners, including pulmonologists, increasingly returned to pre-pandemic related care. While the full outcome of the COVID-19 pandemic is unknown, it continues to negatively impact our ability to grow and scale our business in line with our expectations and disclosures at the time of our IPO.
See Item 1A “Risk Factors” of Part II in this Quarterly Report on Form 10-Q and those discussed in our other filings with the SEC, including the risks described in Item 1A “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed on March 14, 2022, for a description of how the COVID-19 pandemic may adversely affect our business, financial condition and results of operations.
First Quarter 2022 Financial and Operational Highlights
Net revenues for the quarter declined as compared to the comparable quarter in 2021 primarily as a result of the expected continued decline in our COVID-19 testing revenue. The following were significant developments affecting our business, capital structure and liquidity during the three months ended March 31, 2022 as compared to the same period in 2021 unless otherwise noted:
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Components of Operating Results
Revenues
We derive our revenue from two primary sources: (i) providing diagnostic testing in the clinical setting (Diagnostic Tests); and (ii) providing biopharmaceutical companies with services that include diagnostic research, clinical research, clinical trial testing, development and testing services generally provided outside the clinical setting and governed by individual contracts with third parties as well as development and commercialization of companion diagnostics (Services).
Diagnostic Tests
Diagnostic test revenue is generated from delivery of results from our diagnostic tests. In the United States, we performed tests as both an in-network and out-of-network service provider depending on the test performed and the contracted status of the insurer. We provide diagnostic tests in two primary categories: (i) core lung diagnostics testing and (ii) COVID-19 testing.
We consider diagnostic testing to be completed upon the delivery of test results to our customer, either the prescribing physician or third-party to which we contracted for services to be performed, which is considered the performance obligation. The fees for such services are billed either to a third party such as Medicare, medical facilities, commercial insurance payers, or to the patient. We determine the transaction price related to our contracts by considering the nature of the payer, the historical amount of time until payment by a payer and historical price concessions granted to groups of customers.
Services
Services revenue is generated from the delivery of our on-market tests, pipeline tests, custom diagnostic testing, and other scientific services for a purpose as defined by any individual customer. At times we collaborate with large biopharmaceutical companies in an attempt to discover biomarkers that would be helpful in their drug development or marketing. The performance obligations and related revenue for these sales is defined by a written agreement between us and our customer. These services are generally completed upon the delivery of testing results, or other contractually defined milestone(s), to the customer, which is considered the performance obligation. Customers for these services are typically large pharmaceutical companies where collectability is reasonably assured and therefore revenue is accrued upon completion of the performance obligations. Revenue derived from services is often unpredictable and can cause dramatic swings in our overall net revenue line from quarter to quarter.
Operating Expenses
Direct costs and expenses
Cost of diagnostic testing generally consists of cost of materials, direct labor, including bonus, employee benefits, equipment and infrastructure expenses associated with acquiring and processing test samples, including sample accessioning, test performance, quality
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control analyses, charges to collect and transport samples; curation of test results for physicians; and in some cases, license or royalty fees due to third parties. Costs associated with performing our tests are recorded as the tests are processed regardless of whether revenue was recognized with respect to the tests. Infrastructure expenses include depreciation of laboratory equipment, rent costs, amortization of leasehold improvements and information technology costs. Royalties for licensed technology are calculated as a percentage of revenues generated using the associated technology and recorded as expense at the time the related revenue is recognized. One-time royalty payments related to signing of license agreements or other milestones, such as issuance of new patents, are amortized to expense over the expected useful life of the patents. While we do not believe the technologies underlying these licenses are necessary to permit us to provide our tests, we do believe these technologies are potentially valuable and of possible strategic importance to us or our competitors. Under these license agreements, we are obligated to pay aggregate royalties ranging from 1% to 8% of sales in which the patents or know-how are used in the product or service sold, sometimes subject to minimum annual royalties or fees in certain agreements.
We expect the aggregate cost of diagnostic testing to increase in line with the increase in the number of tests we perform, but the cost per test to decrease modestly over time due to the efficiencies we may gain as test volume increases, and from automation and other cost reductions. Cost of services includes costs incurred for the performance of development services requested by our customers. Costs of development services will vary depending on the nature, timing and scope of customer projects.
Research and development
Research and development expenses consist of costs incurred to develop technology and include salaries and benefits, reagents and supplies used in research and development laboratory work, infrastructure expenses, including allocated facility occupancy and information technology costs, contract services, clinical studies, other outside costs and costs to develop our technology capabilities. Research and development expenses account for a significant portion of our operating expenses and consist primarily of external and internal costs incurred in connection with the discovery and development of our product candidates.
External expenses include: (i) payments to third parties in connection with the clinical development of our product candidates, including contract research organizations and consultants; (ii) the cost of manufacturing products for use in our preclinical studies and clinical trials, including payments to contract manufacturing organizations (CMOs) and consultants; (iii) scientific development services, consulting research fees and for sponsored research arrangements with third parties; (iv) laboratory supplies; and (v) allocated facilities, depreciation and other expenses, which include direct or allocated expenses for IT, rent and maintenance of facilities. External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. We track external costs by the stage of program, clinical or preclinical.
Internal expenses include employee-related costs, including salaries and related benefits for employees engaged in research and development functions. We do not track internal costs by product candidate because these costs are deployed across multiple programs and, as such, are not separately classified.
Research and development costs are expensed as incurred. Payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are rendered. Costs to develop our technology capabilities are recorded as research and development.
We expect our research and development expenses to increase as we continue to innovate and develop additional products and expand our data management resources. As our services revenue grows, an increasing portion of research and development dollars are expected to be allocated to cost of services for biopharmaceutical service contracts. This expense, though expected to increase in dollars, is expected to decrease as a percentage of revenue in the long term, though it may fluctuate as a percentage of our revenues from period to period due to the timing and extent of these expenses.
Sales, marketing, general and administrative
Our sales and marketing expenses are expensed as incurred and include costs associated with our sales organization, including our direct sales force and sales management, client services, marketing and reimbursement, as well as business development personnel who are focused on our biopharmaceutical customers. These expenses consist primarily of salaries, commissions, bonuses, employee benefits, and travel, as well as marketing and educational activities and allocated overhead expenses. We expect our sales and marketing expenses to increase in dollars as we expand our sales force, increase our presence within the United States, and increase our marketing activities to drive further awareness and adoption of our tests and our future products. These expenses, though expected to increase in dollars, are expected to decrease as a percentage of revenue in the long term, though they may fluctuate as a percentage of our revenues from period to period due to the timing and extent of these expenses.
Our general and administrative expenses include costs for our executive, accounting, finance, legal and human resources functions. These expenses consist principally of salaries, bonuses, employee benefits, and travel, as well as professional services fees such as consulting, audit, tax and legal fees, and general corporate costs and allocated overhead expenses. We expect that our general and administrative expenses will continue to increase in dollars, primarily due to increased headcount and costs associated with operating as a public company, including expenses related to legal, accounting, regulatory, maintaining compliance with exchange listing and
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requirements of the SEC, director and officer insurance premiums and investor relations. These expenses, though expected to increase in dollars, are expected to decrease as a percentage of revenue in the long term, though they may fluctuate as a percentage from period to period due to the timing and extent of these expenses.
Change in Fair Value of Contingent Consideration
In connection with the purchase transaction of Indi, we recorded contingent consideration pertaining to the amounts potentially payable to Indi shareholder pursuant to the terms of the asset purchase agreement. The fair value of contingent consideration was assessed at each balance sheet date and changes, if any, to the fair value were recognized as operating expenses within the statement of operations. The Company met the gross margin target of $2.0 million for three consecutive months during the three months ended June 30, 2021. Subsequent changes to the contingent consideration following the achievement of the gross margin target are recorded as ‘Interest expense’ in the statements of operations resulting from the passage of time and fixed payment schedule. The significant unobservable inputs used in the measurement of fair value included the probability of successful achievement of the specified product gross margin targets, the period in which the targets were expected to be achieved, and discount rates which ranged from 11% to 13.5%. As a result of the achievement of the gross margin target, the only significant unobservable input used in the measurement of fair value includes the discount rate since all other inputs became fixed and determinable.
Non-Operating Expenses
Interest Expense and Interest Income
For the three months ended March 31, 2022, interest expense consists of cash and non-cash interest from our 2021 Term Loan and changes in the value of our contingent consideration associated with the passage of time subsequent to the achievement of the contingency in the second quarter 2021. For the three months ended March 31, 2021, interest expense consists of cash and non-cash interest from our 2021 Term Loan, the 2018 Notes, and the Paycheck Protection Program loan. Interest income, which is included in ‘Other income, net’ in the statements of operations consists of income earned on our cash and cash equivalents.
Results of Operations
The following table sets forth the significant components of our results of operations for the periods presented (in thousands, except percentages).
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Revenues |
|
$ |
6,548 |
|
|
$ |
28,866 |
|
|
$ |
(22,318 |
) |
|
|
(77 |
)% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct costs and expenses |
|
|
3,235 |
|
|
|
18,218 |
|
|
|
(14,983 |
) |
|
|
(82 |
)% |
Research and development |
|
|
3,206 |
|
|
|
3,321 |
|
|
|
(115 |
) |
|
|
(3 |
)% |
Sales, marketing, general and administrative |
|
|
14,487 |
|
|
|
11,927 |
|
|
|
2,560 |
|
|
|
21 |
% |
Change in fair value of contingent consideration |
|
|
— |
|
|
|
983 |
|
|
|
(983 |
) |
|
|
(100 |
)% |
Impairment loss on intangible assets |
|
|
81 |
|
|
|
— |
|
|
|
81 |
|
|
|
100 |
% |
Total operating expenses |
|
|
21,009 |
|
|
|
34,449 |
|
|
|
(13,440 |
) |
|
|
(39 |
)% |
Loss from operations |
|
|
(14,461 |
) |
|
|
(5,583 |
) |
|
|
(8,878 |
) |
|
|
(159 |
)% |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(1,137 |
) |
|
|
(651 |
) |
|
|
(486 |
) |
|
|
(75 |
)% |
Loss on debt extinguishment |
|
|
— |
|
|
|
(728 |
) |
|
|
728 |
|
|
|
100 |
% |
Other income, net |
|
|
12 |
|
|
|
1 |
|
|
|
11 |
|
|
|
1,100 |
% |
Total other expense |
|
|
(1,125 |
) |
|
|
(1,378 |
) |
|
|
253 |
|
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(15,586 |
) |
|
$ |
(6,961 |
) |
|
$ |
(8,625 |
) |
|
|
(124 |
)% |
29
Revenues
We generate revenue from our diagnostic tests and services that we provide. Our revenues for the periods indicated were as follows (in thousands, except percentages):
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
Diagnostic revenue |
|
$ |
5,633 |
|
|
$ |
27,195 |
|
|
$ |
(21,562 |
) |
|
|
(79 |
)% |
Services revenue |
|
|
915 |
|
|
|
1,671 |
|
|
|
(756 |
) |
|
|
(45 |
)% |
Total revenue |
|
$ |
6,548 |
|
|
$ |
28,866 |
|
|
$ |
(22,318 |
) |
|
|
(77 |
)% |
Total revenue decreased $22.3 million or 77% for the three months ended March 31, 2022 compared to the same period in 2021 as diagnostic test revenue decreased $21.6 million or 79% for the three months ended March 31, 2022 compared to the same period in 2021. The $21.6 million decrease for the three months ended March 31, 2022 compared to the same period in 2021 is due to a $22.3 million reduction in COVID-19 revenue resulting from a decrease in delivered COVID-19 diagnostic tests, which was partially offset by an increase in our lung diagnostic revenue of $0.7 million driven primarily from an increase in Nodify XL2, GeneStrat NGS, and Nodify CDT tests delivered. The Company’s sales efforts continued to be impacted by the COVID-19 pandemic during the first half of the first quarter 2022 due to surges associated with variants, which negatively affected the growth rate of our core lung diagnostic testing-related revenue and our clinical studies. However, we began to see further recovery during the latter half of the first quarter 2022 in lung diagnostic testing with tests delivered in March reaching an all-time high as health care practitioners, including pulmonologists, increasingly returned to pre-pandemic related care.
Services revenue decreased $0.8 million or 45% for the three months ended March 31, 2022 compared to the same period in 2021 due to lower testing volumes driven by delayed receipt of samples from partner organizations, with an expected increase in volume in the coming months as those samples are delivered. In addition to delayed receipts in samples, service revenue can fluctuate due to several factors including contract timing, which can be long under normal circumstances, and currently reflects the continued impact the pandemic has had on overall prospective clinical trial enrollment.
Operating expenses
Direct costs and expenses
Direct costs and expenses related to revenue decreased $15.0 million or 82% for the three months ended March 31, 2022 compared to the same period in 2021 driven primarily by the overall decline in COVID-19 testing as vaccinations increase as well as broader adoption and availability of at-home testing.
Research and development
Research and development expenses decreased $0.1 million or 3% for the three months ended March 31, 2022 compared to the same period in 2021. The decrease in cost was due primarily to decreased spending on clinical trials, partially offset by increased employee compensation and benefits costs associated with our research and development personnel.
The following table summarizes our external and internal costs for the three months ended March 31, 2022 and 2021 (in thousands, except percentages).
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
||||
External expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Clinical trials and associated costs |
|
$ |
458 |
|
|
$ |
710 |
|
|
$ |
(252 |
) |
|
|
(35 |
)% |
Other external costs |
|
|
1,036 |
|
|
|
983 |
|
|
|
53 |
|
|
|
5 |
% |
Total external costs |
|
|
1,494 |
|
|
|
1,693 |
|
|
|
(199 |
) |
|
|
(12 |
)% |
Internal expenses |
|
|
1,712 |
|
|
|
1,628 |
|
|
|
84 |
|
|
|
5 |
% |
Total research and development expenses |
|
$ |
3,206 |
|
|
$ |
3,321 |
|
|
$ |
(115 |
) |
|
|
(3 |
)% |
Sales, marketing, general and administrative
Sales, marketing, general and administrative expenses increased $2.6 million or 21% for the three months ended March 31, 2022 compared to the same period in 2021. This increase was driven primarily by increases in employee compensation and benefits for the three months ended March 31, 2022 associated with expansion of the Company’s workforce. This is also the result of increases in non-employee costs for the three months ended March 31, 2022 associated with increased spending on various sales meetings, training, and campaigns.
30
Change in fair value of contingent consideration
Change in fair value of contingent consideration decreased $1.0 million or 100% for the three months ended March 31, 2022 compared to the same period in 2021. The decrease of $1.0 million is a result of the gross margin target being met during the three months ended June 30, 2021. The net change to contingent consideration through the date the gross margin target was met is recorded as operating expenses in the statements of operations. Subsequent changes to the contingent consideration following the achievement of the gross margin target are recorded as ‘Interest expense’ in the statements of operations resulting from the passage of time and fixed payment schedule.
Non-operating expenses
Interest expense
Interest expense increased $0.5 million or 75% for the three months ended March 31, 2022 compared to the same period in 2021. This increase is primarily related to contingent consideration recorded as ‘Interest expense’ resulting from the passage of time and fixed payment schedule during the three months ended March 31, 2022.
Loss on debt extinguishment
On March 19, 2021, the Company entered into a new Loan and Security Agreement (2021 Term Loan) for an original principal amount of $30 million with a maturity date of March 1, 2026. In connection with entering into the 2021 Term Loan, the Company repaid all outstanding principal and unpaid interest in the amount of $25.9 million due under the secured promissory note (2018 Notes) and contemporaneously terminated the Loan and Security Agreement, dated as of February 23, 2018, as amended. As a result of the extinguishment of the 2018 Notes, the Company recorded a loss on debt extinguishment of $0.7 million during the three months ended March 31, 2021.
Liquidity and Capital Resources
We are an emerging growth company and, as such, have yet to generate positive cash flows from operations. We have funded our operations to date principally from net proceeds from the sale of our common stock, the sale of convertible preferred stock, revenue from diagnostic testing and services, and the incurrence of indebtedness.
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). As a result of the pandemic, the Company diversified its diagnostic testing beyond lung diagnostic testing to include the critical service of COVID-19 diagnostic testing. Beginning in the third quarter 2020, the Company’s COVID-19 testing services began to experience rapid growth with a peak in the first quarter 2021; however, subsequent to this peak, we experienced a rapid decline in COVID-19 testing revenue primarily as a result of a few significant contracts that expired as well as the ongoing increase in COVID-19 vaccination rates across the U.S. and the adoption and availability of at-home testing. In addition, the COVID-19 pandemic negatively affected our lung diagnostic testing-related revenue and our clinical studies. We began to see recovery during the fourth quarter 2020 in our core lung diagnostic testing as our delivered tests exceeded first quarter 2020 delivered tests. The Company’s sales efforts continued to be impacted by the COVID-19 pandemic during the first half of the first quarter 2022 due to surges associated with variants, which negatively affected the growth rate of our core lung diagnostic testing-related revenue and our clinical studies. However, we began to see further recovery during the latter half of the first quarter 2022 in lung diagnostic testing with tests delivered in March reaching an all-time high as health care practitioners, including pulmonologists, increasingly returned to pre-pandemic related care. While the full outcome of the COVID-19 pandemic is unknown, it continues to negatively impact our ability to grow and scale our business in line with our expectations and disclosures at the time of our IPO. As a result, the items identified above have had an adverse effect on our revenue, results of operations and cash flows.
In March 2021, we completed the closing of our 2021 Term Loan for a principal amount of $30 million and extinguished our prior 2018 term loan for $25.9 million. The 2021 Term Loan contains customary affirmative covenants, including covenants regarding compliance with applicable laws and regulation, payment of taxes, insurance coverage, notice of certain events, and reporting requirements. Further, the 2021 Term Loan contains customary negative covenants limiting the ability to, among other things, incur future debt, transfer assets except for the ordinary course of business, make acquisitions, make certain restricted payments, and sell assets, subject to certain exceptions. The 2021 Term Loan required the Company to comply with a minimum liquidity ratio covenant (as defined in the 2021 Term Loan) of not less than 0.95 to 1.00, and had a trailing six-month rolling revenue requirement of not less than 70% of the Company’s projected revenue performed at the end each reporting period.
On September 30, 2021, we entered into the Consent and First Amendment to Loan and Security Agreement (the 2021 Term Loan Amendment) to, among other things, amend our 2021 Term Loan to eliminate the revenue covenant for the period ended September 30, 2021 and modify the revenue covenant threshold for the three month period ended December 31, 2021. In addition, we agreed to establish a restricted cash collateral account for $15 million for the benefit of our lender if the balance of our cash and cash equivalents declined below $40 million.
31
On December 30, 2021, the Company raised approximately $16.3 million in gross proceeds from the sale of 3,756,994 common shares at a public offering price of $4.35 per share in an at-the-market offering. The Company received net proceeds of $15.7 million after deducting underwriting discounts and commissions and offering expenses payable by the Company.
On December 31, 2021, we entered into the Consent and Second Amendment to Loan and Security Agreement (Second Amendment) to, among other things, amend our 2021 Term Loan and First Amendment to: (i) obtain consent for the $4.6 million January 2022 milestone payment due under the Indi APA, (ii) repay $20 million in outstanding principal on December 31, 2021, (iii) waive the $600,000 prepayment fee on the $20 million Term Loan repayment, (iv) waive the minimum revenue covenant as of December 31, 2021, and (v) modify the minimum revenue requirement to not less than 75% for the three months ended March 31, 2022 and not less than 75% on a trailing six month rolling basis for each quarter thereafter of the Company’s projected revenue performed at the end of each reporting period. The Lender agreed to apply the full amount of funds previously established within the restricted cash collateral account to partially repay the $20 million in outstanding principal, thereby eliminating the restricted cash collateral account.
On March 7, 2022 (the Effective Date), the Company entered into a purchase agreement with Lincoln Park, pursuant to which Lincoln Park has committed to purchase up to $50.0 million of the Company's common stock (the Purchase Agreement). Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $50.0 million of the Company’s common stock. Such sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on the Effective Date. As consideration for Lincoln Park's irrevocable commitment to purchase our common stock upon the terms of and subject to satisfaction of the conditions set forth in the purchase agreement, on the Effective Date, the Company issued 184,275 shares of common stock to Lincoln Park as a commitment fee valued at $600,000 for which no consideration was received.
The Company maintains two facilities that enable equity financing on an ongoing basis at the Company’s sole discretion, our at-the-market offering and our common stock purchase agreement with Lincoln Park (the LPC facility). During the three months ended March 31, 2022, the Company raised approximately $1.6 million ($1.5 million after deducting underwriting costs and commissions and offering expenses payable) in gross proceeds from the sale of 708,752 common shares at a weighted average price per share of $2.26 under these programs. As of March 31, 2022, the Company had remaining available capacity for share issuances of approximately $32.8 million under the at-the-money facility and up to $49.2 million under the LPC facility, each subject to the restrictions and limitations of the underlying facilities, as applicable.
As of March 31, 2022, we maintained cash and cash equivalents of $16.4 million and we have $10 million in principal balance remaining on our 2021 Term Loan. We have incurred significant losses since inception and, as a result, we have funded our operations to date primarily through the sale of common stock, the sale of convertible preferred stock, the issuance of notes payable, and from our two primary revenue sources: (i) diagnostic testing, which include lung diagnostic testing and COVID-19 testing, and (ii) providing biopharmaceutical companies with development and testing services. In accordance with Accounting Standards Update 2014-15 (ASC Topic 205-40), Presentation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management projected its cash flow sources, including the debt and equity funding and amendments to the 2021 Term Loan and Indi APA subsequent to March 31, 2022 (each described below), and needs and evaluated the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements were issued. Management considered the Company’s current projections of future cash flows, current financial condition, sources of liquidity and debt obligations for at least one year from the date of issuance of this Form 10-Q in considering whether it has the ability to meet its obligations.
Our ability to meet our obligations as they come due may be impacted by our ability to remain compliant with financial covenants in our 2021 Term Loan or to obtain waivers or amendments that impact the related covenants. As of March 31, 2022, the Company was in compliance with all restrictive and financial covenants associated with its borrowings. However, due to the continued uncertainty caused by the COVID-19 pandemic, significant risks remain with respect to our ability to meet these thresholds and any material adverse effect on our revenues, income and expenses could impact our ability to maintain compliance with these covenants.
In April 2022, the Company raised approximately $2.7 million in gross proceeds from the sale of 1,349,139 common shares at a weighted average price per share of $2.04 in an at-the-market offering. The Company received net proceeds of $2.7 million, after deducting underwriting discounts and commissions and offering expenses payable of approximately $80,000.
On April 7, 2022, the Company entered into subscription agreements (the Subscription Agreements) with a consortium of investors (the Investors), including three members of our Board of Directors and other existing shareholders of the Company, for the issuance and sale by the Company of an aggregate of 6,508,376 shares of the Company’s common stock in an offering for an aggregate purchase price of approximately $11.7 million.
On April 7, 2022, the Company entered into the Consent and Third Amendment to Loan and Security Agreement (Third Amendment) whereby subject to the terms and conditions of the Third Amendment, certain waivers and consents were provided. Under the terms of
32
the Third Amendment to our 2021 Term Loan, the Company agreed to the repayment of $3.0 million in outstanding principal in April 2022 with an additional $2.0 million to be paid no earlier than May 15, 2022, which could be extended to September 30, 2022, subject to debt or equity fund raising of at least $15 million, inclusive of the $11.7 million in funding through the Subscription Agreements noted above, in exchange for the following:
The Company further amended the Indi APA agreement in April 2022 in which all parties agreed to restructure the milestone payments whereby the Company will make five quarterly installments of $2.0 million each beginning in April 2022, three quarterly installments of $3.0 million beginning in July 2023, one quarterly installments of $5.0 million in April 2024, and one quarterly installment of approximately $8.4 million in July 2024. In addition the Company agreed to an exit fee of approximately $6.1 million in October 2024. Interest shall accrue on the excess of the original payment schedule and the aggregate amount of the installment payments paid as of any date, at an aggregate per annum rate equal to 10%, with such interest to be payable quarterly on the following installment payment date. Our ability to make these payments are subject to consent from our lender under the 2021 Term Loan and related amendments. We obtained consent and subsequently made the second milestone payment of $2.0 million in April 2022 and we are in discussions with our lender to obtain consents for future payments.
On May 9, 2022, the Company entered into a securities purchase agreement with Streeterville Capital, LLC (the Lender), pursuant to which, among other things, the Lender: (i) purchased a secured convertible promissory note (Promissory Note One) in the aggregate principal amount totaling $16,025,000 in exchange for $15,000,000 less certain expenses and (ii) agreed to purchase another secured promissory note at the Company’s election (Promissory Note Two and, together with Promissory Note One, the Promissory Notes), subject to certain conditions precedent in aggregate principal amount totaling $10,250,000 in exchange for $10,000,000. Each of the Promissory Notes shall, at the Company's option, be convertible into shares of common stock, $0.001 par value per share, of the Company, upon the terms and subject to the limitations and conditions set forth in the Promissory Notes. On May 9, 2022, the Company closed on the first tranche for gross proceeds of $15.0 million (approximately $13.0 million, net, after deducting estimated debt issuance costs and OID), and intends to use the proceeds from such issuance for general corporate purposes.
Based on our current operating plan, unless we raise additional capital (debt or equity) or obtain waiver from complying with such financial covenants, we expect that we will be unable to maintain our financial covenants under our 2021 Term Loan during the next twelve months, which could result in an Event of Default, as defined, causing an acceleration of the outstanding balance. We have taken steps to improve our liquidity through and the actions noted above and have also undertaken several proactive measures to mitigate the financial and operational impacts of COVID-19 through the reduction of planned capital expenditures and certain operating expenses but we do not expect that these actions alone will be sufficient to maintain our financial covenants. We plan to raise additional funding through the issuance of equity or debt securities and any such financing activities are subject to market conditions. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. There can be no assurance that additional capital will be available to us or, if available, will be available in sufficient amounts or on terms acceptable to us or on a timely basis nor can there be any assurance that the Company will be a beneficiary of the COVID-19 Action Plan. If adequate capital resources are not available on a timely basis, we intend to consider limiting our operations substantially. This limitation of operations could include a hiring freeze, reductions in our workforce, reduction in cash compensation, deferring capital expenditures, and reducing other operating costs.
The Company’s revenues, results of operations and cash flows have been materially adversely impacted by the items noted above. We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while we make investments to support our anticipated growth. Our current operating plan, which is in part determined based on our most recent historical actual results and trends, along with the items noted above, raises substantial doubt about the Company’s ability to continue as a going concern. Our unaudited financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments that might be necessary should we be unable to continue as a going concern.
33
Cash Flows
The following summarizes our cash flows for the periods indicated (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net cash flows (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(13,099 |
) |
|
$ |
(11,326 |
) |
Investing activities |
|
|
(352 |
) |
|
|
(516 |
) |
Financing activities |
|
|
(2,834 |
) |
|
|
4,951 |
|
Net (decrease) increase in cash and cash equivalents and restricted cash |
|
$ |
(16,285 |
) |
|
$ |
(6,891 |
) |
Our cash flows resulted in a net decrease in cash and cash equivalents of $16.3 million during the three months ended March 31, 2022 as compared to the net decrease in cash of $6.9 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, net cash used in operating activities increased by approximately $1.8 million, primarily due to a year-over-year increase in net loss of $8.6 million and decrease in non-cash adjustments to net loss of $0.5 million driven primarily by a decrease in loss on debt extinguishment of $0.7 million, stock based compensation expense of $0.4 million, partially offset by the write-off of excess and obsolete inventory of $0.4 million. In addition, during the three months ended March 31, 2022, the Company experienced favorable changes in net working capital of $7.4 million primarily as a result of cash collections from customers, partially offset by payments to vendors.
Net cash used in investing activities during the three months ended March 31, 2022 totaled $0.4 million, a decrease of $0.1 million compared to the same period in 2021. The decrease in net cash used in investing activities was primarily due decreases in purchases of property and equipment, partially offset by an increase in payments for patents and trademarks.
Net cash used by financing activities during the three months ended March 31, 2022 totaled $2.8 million, a decrease of $7.8 million compared to the same period in 2021. The net cash provided by financing activities for the three months ended March 31, 2022 primarily resulted from $1.7 million net proceeds from the issuance of common stock, primarily offset by the first milestone payment to Indi of $4.6 million. The net cash provided by financing activities for the three months ended March 31, 2021 primarily resulted from the net proceeds from our 2021 Term Loan of $29.9 million, and proceeds from the exercise of stock options of approximately $0.5 million, primarily offset by the repayment of $25.4 million from our 2018 Term Loan.
Contractual Obligations and Commitments
As a result of the entering into additional operating lease agreements, our non-cancelable contractual obligations and commitments for lease obligations as presented in our Form 10-K have been modified. The following table provides an update as follows as of March 31, 2022 (in thousands):
|
|
Payments due by period |
|
|||||||||||||||||
|
|
Total |
|
|
Less than |
|
|
1 to 3 |
|
|
4 to 5 |
|
|
More than 5 years |
|
|||||
Borrowings and interest (1) |
|
$ |
14,494 |
|
|
$ |
594 |
|
|
$ |
6,240 |
|
|
$ |
7,660 |
|
|
$ |
— |
|
Fair value of contingent consideration (2) |
|
|
32,506 |
|
|
|
18,631 |
|
|
|
13,875 |
|
|
|
— |
|
|
|
— |
|
Operating lease obligations |
|
|
2,546 |
|
|
|
1,310 |
|
|
|
1,232 |
|
|
|
4 |
|
|
|
— |
|
Total |
|
$ |
49,546 |
|
|
$ |
20,535 |
|
|
$ |
21,347 |
|
|
$ |
7,664 |
|
|
$ |
— |
|
There have been no other significant changes to our future contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
34
Off-Balance Sheet Arrangements
As of March 31, 2022, we have not entered into any off-balance sheet arrangements.
Critical Accounting Policies and Significant Judgments and Estimates
In accordance with accounting principles generally accepted in the United States, we are required to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Certain of these estimates significantly influence the portrayal of our financial condition and results of operations and require us to make difficult, subjective or complex judgments. Our critical accounting policies are described in greater detail below and in Note 2 to our condensed financial statements in Part 1 of this Quarterly Report on Form 10-Q.
Revenue Recognition
We recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for our goods or services. To determine revenue recognition for our arrangements with our customers, we perform a five-step process, which includes: (i) identifying the contract(s) with a customer; (ii) identifying the performance obligations in the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the performance obligations in the contract; and (v) recognizing revenue when (or as) we satisfy our performance obligations.
Diagnostic test revenues
Diagnostic test revenues are recognized upon completion of our performance obligation to the deliver test results to our customer, either the prescribing physician or third-party to which we contracted for services to be performed. We consider diagnostic testing to be completed upon the delivery of test results to our customer which is considered the performance obligation. The fees for such services are billed either to a third party such as Medicare, medical facilities, commercial insurance payers, or to the patient. We determine the transaction price related to our contracts by considering the nature of the payer, the historical amount of time until payment by a payer and historical price concessions granted to groups of customers. These estimates require significant judgment by management.
Service revenues
Service revenues are recognized upon completion of our performance obligation to deliver testing results for assay development and testing services. The performance obligations and related revenue for these sales is defined by a written agreement between us and our customer. These services are generally completed upon the delivery of testing results, or other contractually defined milestone(s), to the customer, which is considered the performance obligation. Customers for these services are typically large pharmaceutical companies where collectability is reasonably assured and therefore revenue is accrued upon completion of the performance obligations. Revenue derived from services is often unpredictable and can cause dramatic swings in our overall net revenue line from quarter to quarter.
Share-based Compensation and Grant Date Fair Value
Share-based compensation related to stock options granted to our employees, directors and non-employees is measured at the grant date based on the fair value of the award. For our service-based awards, the fair value of each award is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. Compensation expense for share-based awards with performance conditions is recognized based upon the probability the performance conditions will be met as defined in the grant. Restricted stock units are measured at their grant date fair value using the closing price of our common stock on the date of grant and recognized to expense on a straight-line basis over the vesting period of each award. We estimate forfeitures and adjust these estimates to actual forfeitures as they occur.
We use the Black-Scholes option-pricing model to estimate the fair value of our share-based option awards, which requires assumptions to be made related to expected term of an award, expected volatility, the risk-free rate and expected dividend yield. The fair value of our common stock is based on our closing price as reported on the date of grant on the primary stock exchange on which our common stock is traded. Changes in these subjective assumptions can materially affect the estimated value of equity grants and the share-based compensation that we record in our financial statements.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-2, Leases (Topic 842). This ASU intends to make accounting for leasing activities more transparent and comparable, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. In addition to other related amendments, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which offers an additional transition method whereby entities may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings rather than application of the new leases standard at the beginning of the earliest period presented in the financial statements. The Company elected this transition method and adopted ASC 842 on January 1, 2022 and as a result, recorded operating lease right-of-use (ROU) assets of $1.3 million, including offsetting deferred rent of $0.1 million, along with the associated operating lease liabilities of $1.3 million. On January 1, 2022, the Company did not have any finance leases. Additional
35
information and disclosures required by this new standard are contained in Note 3 and Note 7 to our condensed financial statements in Part 1 of this Quarterly Report on Form 10-Q.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (ASC Topic 326). This ASU requires measurement and recognition of expected credit losses for financial assets. This guidance will become effective for the Company beginning January 1, 2023 with early adoption permitted. The Company is currently evaluating this guidance and assessing the overall impact on its financial statements.
Implications of Being an Emerging Growth Company and Smaller Reporting Company
We are an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act (JOBS Act). As an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an emerging growth company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies, which may make comparison of our financials to those of other public companies more difficult.
We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) until December 31, 2025 (the year ended December 31st following the fifth anniversary of our initial public offering).
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which: (i) the market value of our common shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common shares held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
Interest rate risk
We are exposed to market risk for changes in interest rates related primarily to our cash and cash equivalents, marketable securities and our indebtedness, including our outstanding 2021 Term Loan. As of March 31, 2022, we had $10 million outstanding on the 2021 Term Loan subject to a floating per annum rate equal to the greater of (i) 2.00% above the prime rate, or (ii) 5.25%. Historically, we have not entered into derivative agreements such as interest rate caps and swaps to manage our floating interest rate exposure.
Periodically throughout the year, we have maintained balances in various operating accounts in excess of federally insured limits. Our cash and cash equivalents are funds held in checking and bank savings accounts, primarily at two U.S. financial institutions. We consider all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. We continually monitor our positions with, and the credit quality of, the financial institutions with which we invest.
As of March 31, 2022, a hypothetical 100 basis point increase in interest rates would not have a material impact on our investment portfolio, financial position or results of operations.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief
36
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
There were no changes to our internal control over financial reporting during the three months ended March 31, 2022, that have materially affected, or are reasonable likely to materially effect, our internal controls over financial reporting.
37
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in legal proceedings or investigations which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows.
Item 1A. Risk Factors.
“Item 1A. Risk Factors” of our Annual Report on Form 10-K as of and for the year ended December 31, 2021, filed March 14, 2022, and subsequent quarterly reports on Form 10-Q, if applicable, include a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information we previously disclosed and, except as presented below, there have been no material changes from the risk factors described in our Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q. These risks could materially and adversely affect our business, financial condition and results of operations.
The sale or issuance of our common stock to Lincoln Park may cause dilution and the sale of the shares of common stock acquired by Lincoln Park, or the perception that such sales may occur, could cause the price of our common stock to fall.
On March 7, 2022 (the Effective Date), the Company entered into a purchase agreement, dated as of March 7, 2022 with Lincoln Park Capital Fund, LLC, an Illinois limited liability company (Lincoln Park), pursuant to which Lincoln Park has committed to purchase up to $50.0 million of the Company's common stock (the Purchase Agreement). Upon the execution of the Purchase Agreement, we issued 184,275 shares of common stock to Lincoln Park as a fee for its commitment to purchase shares of our common stock under the Purchase Agreement. The remaining shares of our common stock that may be issued under the purchase agreement may be sold by us to Lincoln Park at our discretion from time to time over a 36-month period commencing on the Effective Date of the Purchase Agreement. The purchase price for the shares that we may sell to Lincoln Park under the Purchase Agreement will fluctuate based on the price of our common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall.
We generally have the right to control the timing and amount of any future sales of our shares to Lincoln Park. Additional sales of our common stock, if any, to Lincoln Park will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Lincoln Park all, some or none of the additional shares of our common stock that may be available for us to sell pursuant to the Purchase Agreement. If and when we do sell shares to Lincoln Park, after Lincoln Park has acquired the shares, Lincoln Park may resell all, some or none of those shares at any time or from time to time in its discretion. Therefore, sales to Lincoln Park by us could result in substantial dilution to the interests of other holders of our common stock. Additionally, the sale of a substantial number of shares of our common stock to Lincoln Park, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On April 7, 2022, the Company entered into subscription agreements (the Subscription Agreements) with a consortium of investors (the Investors), including three members of our Board of Directors and other existing shareholders of the Company, for the issuance and sale by the Company of an aggregate of 6,508,376 shares of the Company’s common stock (the Shares) in an offering (the Private Placement). The three members of our Board of Directors acquired an aggregate of 3,631,284 shares pursuant to the form of a Subscription Agreement that did not include any registration rights as they are exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act), and Rule 506 promulgated thereunder. The remaining 2,877,092 shares were acquired by others pursuant to the form of a Subscription Agreement whereby we agreed to file, subject to certain exceptions, a shelf registration statement with respect to resales of such shares with the Securities and Exchange Commission no later than 60 days from April 7, 2022.
Pursuant to the Subscription Agreements, the Investors purchased shares at a purchase price (determined in accordance with Nasdaq rules relating to the “Minimum Value” of the Company’s common stock) of $1.79 per share, which is equal to the closing price of the Company's common stock on April 7, 2022, for an aggregate purchase price of approximately $11.7 million, in order to, among other things, fund the partial repayment of the 2021 Term Loan and for general corporate purposes.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
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10.1* |
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10.2* |
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10.3† |
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10.4† |
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10.5† |
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10.6* |
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Amendment No. 3 to Asset Purchase Agreement and Plan of Reorganization. |
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10.7* |
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10.8* |
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31.1* |
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31.2* |
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32.1* |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Filed herewith.
† Previously filed.
+ Management contract or compensatory plan.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Biodesix, Inc. |
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Date: May 11, 2022 |
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By: |
/s/ RYAN H. SIUREK |
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Ryan H. Siurek |
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Chief Accounting Officer |
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40
Exhibit 10.1
LEASE AGREEMENT (SINGLE TENANT – NNN)
by and between
Centennial Valley Properties I, LLC “Landlord”
and
Biodesix, Inc.
“Tenant”
TABLE OF CONTENTS
|
PAGE |
1 |
|
3 |
|
ARTICLE III ACCEPTANCE AND DELIVERY OF PREMISES; SUBDIVISION OF PREMISES |
4 |
5 |
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6 |
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ARTICLE VI TENANT'S RESPONSIBILITY FOR TAXES, OTHER REAL ESTATE CHARGE |
12 |
14 |
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15 |
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17 |
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18 |
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19 |
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19 |
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20 |
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21 |
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ARTICLE XV WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBROGATION |
23 |
24 |
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25 |
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25 |
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27 |
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ARTICLE XX SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES |
28 |
30 |
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33 |
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34 |
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34 |
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36 |
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36 |
|
37 |
List of Exhibits |
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Exhibit A |
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Site Plan of the Premises and Building |
Exhibit B |
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Legal Description of the Premises |
Exhibit C |
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[intentionally omitted] |
Exhibit D |
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Depiction of Subdivision Boundaries |
Exhibit E |
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Form of Hazardous Materials Disclosure Certificate |
i
Exhibit F |
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Commencement Date Certificate |
Exhibit G |
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Form Memorandum of Lease |
Exhibit H |
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Option to Extend Addendum |
Exhibit I |
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Work Letter |
ii
LEASE AGREEMENT (SINGLE TENANT – NNN)
This Lease Agreement (Single Tenant – NNN) (“Lease”) is entered into as of 3/11/2022, (the “Effective Date”), by and between Landlord and Tenant as defined in Article I below
ARTICLE I
BASIC PROVISIONS AND CERTAIN DEFINITIONS
1.1 Definitions. The following list sets out certain defined terms and certain financial and other information pertaining to this Lease:
c/o Koelbel and Company 5291 E. Yale Avenue Denver CO 80222
Attn:
and
c/o Koelbel and Company 5291 E. Yale Avenue Denver CO 80222
Attn:
With a copy to:
Brownstein Hyatt Farber Schreck, LLP 410 Seventeenth Street, Suite 2200
Denver, CO 80202 Attn:
2970 Wilderness Place, Suite 100
Boulder, CO 80301
Attn: Legal Affairs
Exhibit B.
1
For purposes of determining the Commencement Date, to “conduct business” means to conduct revenue generating business, rather than activities in preparation for revenue generating business, such as verification and validation of equipment.
Period |
Annualized Base Rent Rate per square foot of Building |
Base Rent/Year |
Base Rent/Month |
1-12 |
*$34.00 |
$2,719,320.00 |
$226,610.00 |
13-24 |
⸶$34.00 |
$2,719,320.00 |
$226,610.00 |
25-36 |
$35.02 |
$2,800,899.60 |
$233,408.30 |
37-48 |
$36.07 |
$2,884,878.60 |
$240,406.55 |
49-60 |
$37.15 |
$2,971,257.00 |
$247,604.75 |
61-72 |
$38.27 |
$3,060,834.60 |
$255,069.55 |
73-84 |
$39.42 |
$3,152,811.60 |
$262,734.30 |
85-96 |
$40.60 |
$3,247,188.00 |
$270,599.00 |
97-108 |
$41.82 |
$3,344,763.60 |
$278,730.30 |
109-120 |
$43.07 |
$3,444,738.60 |
$287,061.55 |
121-132 |
$44.36 |
$3,547,912.80 |
$295,659.40 |
133-144 |
$45.69 |
$3,654,286.20 |
$304,523.85 |
* Subject to Abated Rent pursuant to Section 8.7(a).
⸶ Subject to Partial Abated Rent pursuant to Section 8.7(b).
2
1.2 Address for Rent Payments: All amounts payable by Tenant to Landlord shall, until further notice from Landlord, be paid to Landlord by ACH or Wire Transfer pursuant to the following instructions:
[information has been omitted]
1.3 Net Lease. Except as otherwise provided herein, all Rent shall be absolutely net to Landlord so that this Lease shall yield net to Landlord the Rent to be paid each month during the Term of this Lease and Tenant shall pay either directly or as reimbursement to Landlord for all costs, expenses and obligations of every kind or nature whatsoever relating to the Premises which may arise or become due during the Term of this Lease including, without limitation, all costs and expenses of operation, maintenance and repairs, utilities, insurance and taxes relating to the Premises.
ARTICLE II
GRANTING CLAUSE
2.1 Grant and Acceptance. Landlord leases the Premises to Tenant and Tenant accepts the Premises from Landlord for the Lease Term, upon and subject to the terms and conditions set forth in this Lease.
2.2 Title Matters; REA. Landlord and Tenant acknowledge and agree the Premises and this Lease are subject to the Permitted Encumbrances, and Tenant (for itself, and any permitted assignee or subtenant) hereby covenants and agrees not to violate any provision of the Permitted Encumbrances including the REA.
2.3 Quiet Enjoyment. Upon payment by Tenant of the Rents herein provided, and upon the observance and performance of all terms, provisions, covenants and conditions on Tenant's part to be observed and performed, Tenant shall, subject to all of the terms, provisions, covenants and conditions of this Lease and the Permitted Exceptions, peaceably and quietly hold and enjoy the Premises for the entire Lease Term without hindrance or molestation from all persons claiming by, through or under Landlord.
3
2.4 Financing Contingency. Landlord’s obligations under this Lease are expressly contingent upon Landlord obtaining financing for the Premises, Landlord’s obligations for the Landlord Work and the Allowance on such terms as Landlord deems acceptable in its sole discretion (“Landlord’s Financing Contingency”). If, for any reason, Landlord’s Financing Contingency is not satisfied or waived on or before the April 1, 2022 (the “Landlord Financing Deadline”), Landlord may elect to terminate this Lease upon written notice to Tenant delivered on or before the date that is five (5) business days after the Landlord Financing Deadline in which event the Security Deposit or the Letter of Credit, as applicable, shall be returned to Tenant and each party shall be relieved of all further obligations and liabilities under this Lease other than any indemnification obligations and Tenant’s obligation to surrender the Premises as provided for under this Lease. Landlord may waive the Landlord’s Financing Continency prior to the Landlord Financing Deadline only upon written notice to Tenant.
ARTICLE III
ACCEPTANCE AND DELIVERY OF PREMISES; SUBDIVISION OF PREMISES
3.1 Acceptance of Premises. Except for Landlord's express assumption of construction obligations for the Landlord Work under the Work Letter attached as Exhibit I to this Lease, or as otherwise provided for under this Lease, the Premises are leased “AS IS,” with Tenant accepting all defects, if any; and Landlord makes no warranty of any kind, express or implied, with respect to the Premises (without limitation, Landlord makes no warranty as to the habitability, fitness or suitability of the Premises for a particular purpose, nor as to compliance with any laws, rules or regulations). Notwithstanding the foregoing, Landlord represents and warrants that, to Landlord’s actual knowledge, as of the Effective Date, the Premises does not contain any asbestos containing materials or Hazardous Materials in excess of amounts permitted under Environmental Laws. This Section 3.1 is subject to any contrary requirements under Applicable Laws; however, in this regard, Tenant acknowledges that it has been given the opportunity to inspect the Premises and to have qualified experts inspect the Premises prior to the execution of this Lease.
3.2 Delivery; Construction Period. Landlord shall deliver the Premises to Tenant on or before the date that is three (3) business days after the Effective Date and the date of Landlord’s delivery shall be the “Delivery Date.” Tenant may enter and occupy the Premises from and after the Delivery Date even though the Delivery Date is prior to the Commencement Date (“Construction Period”) solely for the purpose of performing Tenant Work (as defined in the Work Letter) and any tests, inspections, and investigations in connection therewith, and to commence preparing the Premises for its operations. Tenant agrees (a) any such early entry into the Premises by Tenant shall be at Tenant’s sole risk, (b) Tenant shall not unreasonably interfere with Landlord or Landlord’s agents in the performance and completion of the Landlord Work (as defined in the Work Letter), (c) Tenant shall comply with and be bound by all provisions of this Lease during the period of any such early entry except (i) for the payment of Base Rent and Pass-Through Costs and the costs for electricity and water to the Premises, (ii) for carrying property insurance as set forth in Section 14.214.2(b), provided that Tenant’s property insurance requirements otherwise being satisfied by its Contractor in accordance with insurance standards required under the Work Letter and (iii) for carrying business interruption service as set forth in Section 11.2(b), (d) prior to entry upon the Premises by Tenant, Tenant shall pay for and provide to Landlord certificates evidencing the existence and amounts of liability insurance carried by Tenant, which coverage must comply with the provisions of this Lease relating to insurance, and (e) Tenant shall, and shall require Tenant’s Construction Agents (as defined in the Work Letter) to, comply with the Work Letter and all Laws required to perform its work during the early entry on the Premises.
3.3 Remeasurement of Premises. Notwithstanding the Rentable Area set forth in Section 1.1(h) above, Tenant is entitled to verify the area of the Building and establish a modified Rentable Area pursuant to the terms of this Section 3.3. Tenant’s option to remeasure the Building is subject to (a) such remeasurement being performed and certified by a licensed architect using the BOMA 2017 (ANSI Z65.1-2017) standard; and (b) delivery of a copy of the certified measurement to Landlord on or before the date that is sixty (60) days following the Effective Date. If the certified remeasurement is different from the Rentable Area set forth above, the parties shall enter into an amendment modifying the Lease to reflect the new Rentable Area and adjusting the Base Rent and the Allowance. Landlord agrees that notwithstanding the methodology of measurement cited above, the mezzanine space existing as of the Effective Date shall not be included in Tenant’s remeasurement.
3.4 Subdivision of Premises. As of the Effective Date, the Land is a single subdivided parcel and tax
4
parcel. Landlord reserves the right, from time to time, to subdivide the Land and create one or more separate legal and tax parcels generally in the area depicted on Exhibit D attached hereto (each, a “Subdivision”) without Tenant’s consent; provided, however, that such Subdivision (a) shall not materially and adversely impact Tenant’s Permitted Use; (b) shall not adversely impact access to Tenant’s loading docks by delivery trucks, (c) shall not result in a parking ratio of less than 2.5 spaces per 1,000 square feet of Rentable Area; and (d) shall otherwise be in compliance with the terms and conditions of this Section 3.4 Upon Landlord’s election to affect a Subdivision the area of the Land comprising the Premises shall be deemed reduced to exclude the area or areas so subdivided. For each Subdivision, if any, Tenant agrees to execute an amendment to this Lease so reducing the area of the Land. In the event of a Subdivision, from and after the date of such Subdivision: (i) any Pass-Through Costs attributable to the subdivided area or areas shall be excluded from Tenant’s Pass-Through Costs; (ii) any Pass-Through Costs attributable to the Premises and one or more subdivided areas shall be allocated between the Premises and such other areas in proportion to the relative area of the Premises and such subdivided areas as relates to the area of the Land; (iii) the Premises and any such subdivided parcels shall be considered part of the “Center” in which case, the term Center as used in this Lease shall apply and (iv) Landlord shall be entitled to designate portions of the Center, from time to time, for use in common by, inter alia, Landlord, Tenant and any other occupants of the Center and such other parties as provided for under the REA.
ARTICLE IV
PERMITTED USE
4.1 Permitted Use of Premises. The Premises shall be used only for contemporary office, light assembly, distribution, laboratory research and laboratory testing lab use including, but not limited to:, laboratory machines, fume hoods, associated laboratory support, light assembly and distribution equipment, offices, open furniture systems, meeting space, computer and communications network room, collaborative open environments, food and beverage areas with minimal food preparation, catering preparation and layout consistent with the Environmental Questionnaire (as defined in Section 5.1(a) below) and for such other lawful purposes as are incidental thereto and subject to all other provisions hereof. Tenant covenants and warrants that Tenant will not operate a Vivarium at the Premises. Tenant acknowledges that the specification of a “permitted use” means only that Landlord has no objection to the specified use and does not include any representation or warranty by Landlord as to whether or not such specified use complies with Applicable Laws and/or requires special governmental permits. Use of the Premises shall be subject to such rules, regulations and restrictions which Landlord may make from time to time; provided such rules and regulations do not materially increase Tenant’s obligations or materially decrease Tenant’s rights under the Lease is and provided further that Tenant has received a written copy of all such rules and regulations and no less than sixty (60) days to comply with such new or modified Rules and Regulations (collectively, “Rules and Regulations”).
4.2 Prohibited Uses. Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose in violation of Applicable Laws. Tenant shall not do or permit anything to be done in or about the Premises from and after the Delivery Date which will in any way (a) damage the reputation of the Premises or, if applicable, the Center (provided, however, the use of the Premises for the Permitted Use shall not be deemed in and of itself to damage such reputation), (b) impair, interfere with or otherwise diminish the use of any of the Premises or, if applicable, the Center, (c) obstruct or interfere with the rights of other tenants or occupants of the Center, if applicable, (d) use or allow the Premises to be used for any improper, unlawful or objectionable purpose, (e) void Tenant's or Landlord's insurance, increase the cost of insurance or cause the disallowance of sprinkler credits, provided that if Tenant causes any increase in the cost of Landlord’s insurance, then Tenant shall pay to Landlord the amount of such increase as Additional Rent, or (f) cause or permit the storage of trucks, trailers boats, recreational vehicles or storage containers in the parking area of the Premises other than those owned or used by Tenant for standard business operations which may include up to five (5) vans owned and operated by Tenant and trailer trucks located in or adjacent to the Building’s loading docks.
4.3 Care of Premises by Tenant. Tenant shall take good care of the Premises and shall operate in the Premises in a safe, careful and proper manner; shall not commit or suffer waste in or about the Premises, nor to any facility or equipment for which Tenant is responsible pursuant to Section 9.2 of this Lease; shall not cause damage or permit any trucks or vehicles visiting the Premises to cause any damage to the Premises or the Building
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(and, if any such damage should occur, which shall not include normal wear and tear to the roads or parking lots, shall immediately repair same or, if Landlord so elects, reimburse Landlord for Landlord's reasonable cost in repairing same); and shall keep the Premises free of insects, rodents, vermin and other pests. Tenant shall keep the Premises secure, Tenant hereby acknowledging that security is Tenant's responsibility, and that Tenant is not relying on any representation or warranty by Landlord in this regard. Tenant shall not overload the floors in the Premises, nor deface or injure the Premises. Tenant shall store all trash and garbage within the Premises, or in a trash dumpster or similar container approved by Landlord in Landlord's reasonable discretion; and Tenant shall arrange for the regular pick-up of such trash and garbage at Tenant's expense. Receiving and delivery of goods and merchandise and removal of garbage and trash shall be made only in the manner and areas prescribed by Landlord. Outside storage, including, without limitation, storage of containers, trailers, trucks and other vehicles (except as permitted in Section 4.2 above), is prohibited without Landlord's prior written consent which may be withheld in Landlord's sole and absolute discretion. Tenant shall be responsible for janitorial services within the Building.
ARTICLE V
HAZARDOUS MATERIALS
5.1 Tenant’s Obligations.
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5.2 Chemical Safety Program.
5.3 Biohazard and Hazardous Waste Removal. Tenant shall be responsible, at its sole cost and expense, for Hazardous Material and other biohazard disposal services for the Premises. Such services shall be performed on a sufficient basis to ensure that the Premises are at all times kept neat, clean and free of Hazardous Materials and biohazards except in appropriate, specially marked containers. In addition, if any Applicable Laws or the trash removal company requires that any substances be disposed of separately from ordinary trash, Tenant shall make arrangements at Tenant’s expense for such disposal directly with a qualified and licensed disposal company at a lawful disposal site.
5.4 Landlord’s Obligations. Within sixty (60) days after the Effective Date, Landlord will deliver to Tenant a Phase I Environmental Site Assessment (“Phase I”) with respect to the Land. Such Phase one shall have been completed no earlier than six (6) months prior to the Effective Date. Tenant shall have no responsibility for the remediation of (i) any Hazardous Materials existing on the Land prior to the Delivery Date, or (ii) any Hazardous Materials brought onto the Land during the Lease Term by Landlord or any third party, the remediation of which shall be the responsibility of Landlord.
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ARTICLE VI
TENANT'S RESPONSIBILITY FOR TAXES,
OTHER REAL ESTATE CHARGES, INSURANCE EXPENSES AND OPERATING EXPENSES
6.1 Personal Property. Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Premises. If any such taxes are levied against Landlord or Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is increased by inclusion of personal property and trade fixtures placed by Tenant in the Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is liable under this Section 6.1.
6.2 Real Estate Charges; Insurance Expenses and Operating Expenses. Tenant shall also be liable for all Real Estate Charges (as defined below) and Insurance Expenses (as defined below) and Operating Expenses (as defined below) related to the Premises or Landlord's ownership of the Premises. All payments for which Tenant is liable pursuant to this Section 6.2 shall be considered for all purposes to be Additional Rent (as defined in Section 8.1 below) under this Lease and shall be payable as provided for under Article VIII.
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6.3 Separate Tax Assessments. To the extent the Premises constitute a separate tax parcel, Landlord may require Tenant to pay Real Estate Charges directly to the tax assessor, and if Landlord imposes such requirement, Tenant agrees to pay such assessment before it becomes delinquent and to keep the Premises free from any lien or attachment; moreover, as to all periods of time during the Lease Term, this covenant of Tenant shall survive the termination of this Lease.
6.4 Right to Contest. Tenant shall have the right to contest or review by legal proceedings, as permitted under Applicable Laws, taxes levied against the Premises (other than taxes levied directly against Tenant's personal property within the Premises); provided that, unless Tenant has paid such tax or assessment under protest, Tenant shall furnish to Landlord (i) proof reasonably satisfactory to Landlord that such protest or contest may be maintained without payment under protest, and (ii) a surety bond or other security reasonably satisfactory to Landlord securing the payment of such contested item or items and all interest, penalty, and cost in connection therewith upon the final determination of such contest or review. Landlord shall, if it determines it is reasonable to
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do so, and if so requested by Tenant, join in any proceeding for contest or review of such taxes or assessments, but the entire cost of such joinder in the proceedings (including all costs, expenses, and attorneys’ fees reasonably sustained by Landlord in connection therewith) shall be borne by Tenant. Any amount already paid by Tenant and subsequently recovered as the result of such contest or review shall be for the account of Tenant.
ARTICLE VII
PARKING; GENERATOR; OTHER AREAS
7.1 Parking. During the Lease Term, Tenant shall be entitled to use all parking spaces on the Premises. Tenant's parking rights are the personal rights of Tenant and its employees and visitors, and Tenant shall not transfer, assign or otherwise convey its parking rights separate and apart from this Lease. Landlord shall not be responsible for enforcing Tenant's parking rights against any third parties.
7.2 Back-Up Generator.
7.3 Solar Panels. Subject to the terms and conditions of this Section 7.2 and the REA, Landlord grants to Tenant the exclusive right, for the Lease Term, to install, operate, maintain and repair solar electrical panels on the roof of the Building. If Tenant elects to install Solar Panels, the panels and related infrastructure shall be subject
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to all terms and conditions applicable to Tenant’s Generator under this Lease. Notwithstanding the foregoing, Landlord shall not be entitled to require Tenant to remove such solar panels at the end of the Lease Term or earlier termination unless such solar panels are owned by a third party and Landlord has not agreed, in its sole discretion, to assume the lease or other use agreement with such third-party with respect to the solar panels.
7.4 Other Areas. Landlord shall have the exclusive rights to use, possess, lease, convey interests in, alter, transfer, construct on, or otherwise manage the portions of the Premises other than the Building and the parking areas provided the same does not materially and unreasonably interfere with Tenant's use of the Premises for the Permitted Use.
ARTICLE VIII
RENT
8.1 Rent. For purposes of this Lease, the terms “Rent,” “Rents,” “Rental” or “Rentals” shall be deemed to include Base Rent, Tenant's required payments for Real Estate Charges and Insurance Expenses, Operating Expenses and any other Additional Rent. Landlord and Tenant agree that each provision of this Lease for determining Rent adequately and sufficiently describes to Tenant the method by which such Rent is to be computed. Any and all other sums of money or charges to be paid by Tenant pursuant to the provisions of this Lease other than Base Rent are hereby designated as and included in the term “Additional Rent.” A failure to pay Additional Rent shall be treated in all events as a failure to pay Rent.
8.2 Payment of Rent. Rent shall accrue from the Commencement Date and shall be payable to Landlord at Landlord's address specified in Section 1.2 of this Lease, or at any other address which Landlord may subsequently designate in a written notice to Tenant.
8.3 Base Rent. Subject to Abated Rent and Partial Abated Rent, Tenant shall pay to Landlord Base Rent in monthly installments in the amount(s) specified in Section 1.1(m) of this Lease. Installments shall be due and payable on or before the first day of each calendar month during the Lease Term.
8.4 Pass-Through Costs.
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8.5 Survival of Pass-Through Costs. Tenant's obligation with respect to the Pass-Through Costs shall survive the expiration or early termination of this Lease and Landlord shall have the right to retain the Security Deposit (if any), or so much thereof as is necessary, to secure payment of the actual Pass-Through Costs for the portion of the final calendar year of the Lease Term during which Tenant was obligated to pay such expenses, with any portion of the Security Deposit due back to Tenant to be paid to Tenant within one hundred eighty (180) days after the final assessment of the Pass-Through Costs. If Tenant occupies the Premises for less than a full calendar year during the first or last calendar years of the Lease Term, the Pass-Through Costs for such partial year shall be calculated by proportionately reducing the Pass-Through Costs to reflect the number of months in such year during which Tenant occupied the Premises. Tenant shall pay the Pass-Through Costs within thirty (30) days following receipt of notice thereof.
8.6 Due Dates for Rent; Late Charge. The parties agree that each monthly installment of Base Rent and, unless otherwise elected by Landlord, Tenant's monthly payments for the Pass-Through Costs are payable on or before the first day of each calendar month. Any such payment of Rent which is not received on or before the first day of a particular calendar month shall be deemed past-due. The parties further agree that each annual adjustment payment from Tenant (such as the payments prescribed in Article VI and Section 8.3) is payable within thirty (30) days after receipt of Landlord's written statement requesting such payment from Tenant; and any such prescribed payment which is not so received shall be deemed past-due. All Rent shall be due and payable in advance, without demand, offset or deduction of any nature. In the event any Rent which is payable pursuant to this Lease is not actually received by Landlord within five (5) business days after notice from Landlord to Tenant that such payment is delinquent Tenant shall pay to Landlord a late charge in an amount equal to five percent (5%) of the past due Rent. Any such late charge shall be payable as Additional Rent under this Lease and shall be payable immediately upon written demand. .
8.7 Rent Abatement.
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ARTICLE IX
MAINTENANCE AND REPAIR OF PREMISES
9.1 Maintenance by Landlord. Except to the extent that (i) latent defects in the Premises (excluding defects related to the Tenant Work and excluding wear and tear) are discovered by Tenant and reported in writing to Landlord within the first thirty-six (36) months following the Commencement Date that were not capable of being identified prior to the Commencement Date, (ii) latent defects in the Premises (excluding defects related to the Tenant Work and excluding wear and tear) are discovered at any time during the Lease Term which materially and adversely impact Tenant’s business operations or materially and adversely impact safety at the Premises, Landlord shall have no obligation whatsoever to maintain or repair the Building or any portion thereof throughout the Term of this Lease. Tenant waives the right to make repairs at Landlord's expense under any Applicable Laws except as specifically provided for under Section 21.9 below. Landlord shall keep all portions of the Premises excluding the Building in good, clean and habitable condition and in accordance with the requirements set forth in this Lease and shall make all needed repairs and replacements, to the portions of the Premises excluding the Building, including all parking areas, landscaping and landscaping equipment and exterior lighting and irrigation, subject to reimbursement through Operating Expenses.
9.2 Maintenance by Tenant. Tenant shall keep all portions of the Building in good, clean and habitable condition and in accordance with the requirements set forth in this Lease and shall at its sole cost and expense make all needed repairs and replacements to the Premises but specifically excluding those items Landlord has agreed to maintain under this Lease. Without limiting the coverage of the previous sentence, it is understood that Tenant's responsibilities therein include maintenance, repair and replacement of all of the following facilities and equipment, to the extent located within or upon the Premises: the non-structural elements of the Building including the roof membrane and all exterior walls and plate glass; all windows, doors and other exterior openings; dock bumpers, dock plates or levelers; office entries or store fronts; window and door frames, closure devices, locks and hardware; lighting, heating, air-conditioning, plumbing and other electrical, mechanical and electromotive equipment and fixtures; signs, placards and other advertising media of any type; and exterior and interior painting and other treatment of interior walls, all exterior areas of the Premises including, but not limited to, roof leaks resulting from any cause including, without limitation, from Tenant's installation, replacement or maintenance of air-conditioning equipment or any other roof penetration or placement); all lighting, heat air-conditioning and ventilation equipment, fire-protection and sprinkler systems, plumbing, exhaust systems, and other electrical, mechanical and electromotive installations, equipment and fixtures. In addition, Tenant's responsibilities shall also include all repairs of all ducts, conduits, pipes and wiring, and any sewer stoppage located in, under and above the Premises, regardless of when or how the defect or other cause for repair or replacement occurred or became apparent. If any repairs required to be made by Tenant hereunder are not made within thirty (30) days after written notice delivered to Tenant by Landlord (or less time, in the case of a situation which by its nature requires an immediate response or a response within less time), Landlord may at its option make such repairs without liability to Tenant for any loss or damage which may result to its stock or business by reason of such repairs. Promptly following completion of any work undertaken by Landlord pursuant to the terms of this Section 9.2, Landlord shall deliver a detailed invoice of the work completed, the materials used, and the costs relating thereto. Tenant shall reimburse Tenant for the reasonable out-of-pocket costs of such cure within thirty (30) days after receipt of such invoice and other supporting documentation as Additional Rent hereunder.
9.3 HVAC Maintenance; Roof Maintenance. Without limiting Tenant’s obligations under this Article IX, Tenant shall be responsible for the cost of performing adequate monthly preventive maintenance on the hot water, heating, ventilation and air-conditioning equipment (“HVAC”) for the Premises pursuant to maintenance
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service contracts entered into by Tenant with a licensed or qualified HVAC contractor reasonably approved by Landlord in advance (the “HVAC Contractor”) and a scope of services reasonably approved by Landlord. Executed copies of such service contracts must be delivered to Landlord within thirty (30) days after the Delivery Date. Without limiting the generality of the immediately preceding sentence, the following maintenance shall be performed at Tenant's expense: (a) the replacement of all filters in the HVAC system at least quarterly; (b) inspection of the entire heating, ventilation and air-conditioning equipment by the HVAC Contractor at least quarterly; and (c) cleaning and inspection of valves, belts, and safety controls by the HVAC Contractor at least quarterly.
ARTICLE X
ALTERATIONS
10.1 Tenant's Alterations. Tenant shall not make any alterations, additions or improvements to the Premises other than the Tenant Work (“Alterations”) in excess of $50,000.00 at any one time or of a structural nature without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed. Whenever Tenant proposes to make any Alterations within the Premises, Tenant shall first furnish to Landlord plans and specifications in such detail as Landlord may request covering all such work, together with an identification of the contractor(s) whom Tenant plans to employ for the work. All such work shall be completed promptly, in a good and workmanlike manner and using only good grades of materials. Landlord may, at its election, monitor or engage a third party to monitor such work. Tenant shall reimburse Landlord for all reasonable documented out-of-pocket expenses incurred by Landlord (including, without limitation, any construction management or similar fees and related costs payable by Landlord to a third party engaged by Landlord to monitor such work) in connection with Landlord's review of Tenant's plans and other submissions as requested by Landlord and for monitoring such construction in connection with Alterations, provided that such costs shall not exceed $2,500.00 for each Alteration. Notwithstanding the rights accorded to Landlord pursuant to the immediately preceding sentences, Tenant acknowledges and agrees that Landlord's permission for Tenant to commence construction or monitoring of such work shall in no way constitute any representation or warranty by Landlord as to the adequacy or sufficiency of such plans and specifications, the improvements to which they relate, the capabilities of such contractors or the compliance of any such work with any Applicable Laws, codes or other requirements; instead, any such permission or monitoring shall merely be the consent of Landlord as required hereunder. Without limiting the generality of the preceding sentences in this Section 10.1, Tenant acknowledges and agrees that any installation or replacement of Tenant's HVAC equipment must be subject to such preceding sentences and must be effected in accordance with Landlord's reasonable instructions regarding same.
10.2 Quality of Work by Tenant. All Alterations made by Tenant within the Premises shall be performed in a good and workmanlike manner, lien-free and in compliance with all governmental, legal, and insurance requirements. Without limiting the generality of the foregoing, Tenant agrees to indemnify Landlord and hold Landlord harmless against any loss, liability or damage resulting from such Alterations, and Tenant shall, if requested by Landlord, furnish a bond or other security reasonably satisfactory to Landlord against any such loss, liability or damage.
10.3 Lien Waivers; Insurance; Plans. In the event Tenant uses a general contractor or other third party to perform Alterations within the Premises, Tenant shall, prior to the commencement of such work, require said general contractor or other third party to execute and deliver to Landlord a waiver and release of any and all claims against Landlord and liens against the Building and the Premises to which such contractor or other third party might at any time be entitled to assert a mechanic's lien claim in accordance with applicable law. The delivery of the applicable waiver and release of lien shall be a condition precedent to Tenant's ability to enter on and begin its Alterations at the Premises and if applicable, to any reimbursement from Landlord for such Alterations. Upon completion of the Alterations, Tenant shall deliver to Landlord final lien waivers from all contractors and suppliers. Landlord may post at the Premises such notices of non-responsibility as may be provided for under applicable law. With respect to the Tenant Work, Tenant shall provide to Landlord certificates of insurance for workers' compensation and other coverage as required under the Work Letter or in such amounts as Landlord may reasonably require to protect Landlord from liability for personal injury and property damage in connection with the Tenant Work. Tenant shall provide Landlord with as-built plans and specifications for all Alterations performed by Tenant.
10.4 Removal of Alterations. Landlord may impose, as a condition of its consent to any and all Alterations to the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may
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deem desirable, including, but not limited to, the requirement that upon Landlord’s request, Tenant shall, at Tenant’s expense, remove such Alterations upon the expiration or any early termination of the Lease Term. If Tenant does not agree with Landlord’s requirements, including any requirement to remove the Alterations, then Tenant shall have the right to modify or withdraw its request to make such Alterations.
10.5 Trade Fixtures. Tenant may, without Landlord's consent, at Tenant's sole cost, and in compliance with all Applicable Laws and codes, install equipment, racking and other trade fixtures in the ordinary course of its business, so long as such trade fixtures do not alter, overload or damage the Building and may be removed without causing any material damage to the Building. At the end of the Lease Term all such trade fixtures shall be removed at Tenant's cost and the Premises restored to its original condition at Tenant's expense, ordinary wear and tear excepted.
ARTICLE XI
LANDLORD'S RIGHT OF ACCESS
11.1 Right of Entry. Landlord shall have the right to enter upon the Premises upon at least twenty-four
(24) hours' notice (unless in the event of an emergency, in which case prior notice is not required) for the purpose of inspecting the same, or of making repairs to the Premises, or of showing the Premises to prospective purchasers, lenders, (or tenants, within the last twelve (12) months of the Lease Term only) all without being deemed guilty of or liable for any breach of any covenant of quiet enjoyment or eviction of Tenant and without abatement of Rent. This Section 11.1, however, shall not be deemed to impose any obligation upon Landlord to enter the Premises, except if and to the extent that any such obligation may be specifically required pursuant to another express provision of this Lease. Tenant shall reasonably cooperate with Landlord in connection with any and all showings of the Premises to prospective tenants during the last twelve (12) months of the Lease Term. Provided such actions are consistent with applicable law, any entry to the Premises obtained by Landlord by any of said means or otherwise shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof, or grounds for any abatement or reduction of Rent. Notwithstanding anything to the contrary, Landlord acknowledges that all individuals accessing the Premises must comply with Tenant’s security policies for visitors, including but not limited to Tenant’s COVID protocols.
ARTICLE XII
SIGNS; EXTERIOR OF PREMISES
12.1 Signs.
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12.2 Exterior. Tenant shall not, without Landlord's prior written consent, which consent may be withheld in Landlord's sole and absolute discretion, (a) make any changes to the exterior of the Building or (b) except for the Exterior Signage, (i) install any exterior lighting, decorations, banners, placards, balloons, flags, awnings, canopies or the like or (ii) erect or install any signs, lettering, decorations or advertising media of any type which can be viewed from the exterior of the Building. All signs, lettering, placards, decorations and advertising media shall conform in all respects to any rules and regulations established under the Permitted Exceptions as well as all Applicable Laws, codes and regulations and any covenants affecting the Premises or the Building and shall be subject to Landlord's reasonable requirements as to construction, method of attachment, size, shape, height, lighting, color and general appearance. Any signs, window treatment, bars or other installations visible from outside the Building shall be removed by Tenant at the end of the Lease Term, at Tenant's sole cost, and Tenant shall restore the Premises to its original condition, ordinary wear and tear excepted.
ARTICLE XIII
UTILITIES
13.1 Service to Premises. From and after the Delivery Date, Tenant shall contract with all utility providers to arrange service to the Premises and shall provide to such utility providers access to the electric lines, feeders, risers, wiring and any other facilities within or servicing the Premises. Tenant shall promptly pay all charges and maintenance costs for electricity, water, gas (but only if provided by Landlord), telephone service, sewerage service, sprinkler service and other utilities or services furnished to the Premises plus all applicable deposits, surcharges, taxes, penalties or other costs related to such services. Tenant acknowledges and agrees that (a) the electrical power for lighting the parking areas within the Premises and illuminated signage within the Premises (but excluding such lighting and signage attached to the Building) will be powered by electricity from the Building’s electrical service and paid for by Tenant; and (b) water for irrigation landscaping within the Premises will be provided through the water service to the Premises paid for by Tenant.
13.2 Interruption of Service. Landlord shall not be liable for any interruption whatsoever in utility services, whether or not furnished by Landlord, for any reason, including, without limitation, due to fire, accident,
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strike, acts of God or other causes beyond the control of Landlord or which are necessary or useful in connection with making any alterations, repairs or improvements. None of such interruptions shall constitute an actual or constructive eviction, in whole or in part, nor shall any such interruption entitle Tenant to any abatement or diminution of Rent. Without limiting the generality of the foregoing, Landlord shall in no way be liable or responsible for any loss, damage, or expense that Tenant may sustain or incur by reason of any failure, interference, disruption, or defect in the supply or character of the electric energy furnished to the Premises, or if the quantity or character of the electric energy supplied by any utility or service provider is no longer available or suitable for Tenant's requirement, and no such failure, defect, unavailability or unsuitability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Rent. Notwithstanding the foregoing, if such service interruption is the result of alterations made to the Land by Landlord or otherwise caused by the gross negligence or willful misconduct of Landlord and if such interruption renders the Premises unusable for Tenant’s operations and if Landlord fails to cure such interruption within three (3) business days after notice from Tenant, then Tenant may abate Base Rent payable under this Lease on a per diem basis until the date Landlord cures such interruption of services.
ARTICLE XIV
INSURANCE COVERAGES
14.1 Insurance by Landlord. Landlord shall procure and maintain throughout the Lease Term, at a minimum, a policy or policies of insurance, at its sole cost and expense (but subject to Article VI above) (a) property insurance on the Premises (exclusive of foundations) including the Tenant Work but excluding Tenant’s Property and any Alterations in an amount equal to the full replacement value of such property covering fire, vandalism, malicious mischief, extended coverage and so-called “special form” or special cause of loss property insurance; and (b) commercial general liability insurance against claims of bodily injury, personal injury and property damage arising out of Landlord’s operation of the Premises in such amount as a prudent owner of similar property would carry or as otherwise required by any Superior Rights Holder. The foregoing insurance may be maintained in the form of a blanket policy covering the Building as well as other properties owned by Landlord and Landlord’s affiliates.
14.2 Insurance by Tenant. Tenant shall maintain the following coverages in the following amounts. Landlord makes no representation or warranty to Tenant that the amount of insurance required to be carried by Tenant under the terms of this Lease is adequate to fully protect Tenant’s interests. Tenant is encouraged to evaluate its insurance needs and obtain whatever additional types or amounts of insurance that it may deem desirable or appropriate.
Bodily Injury and |
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$5,000,000 each occurrence |
Property Damage Liability |
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$5,000,000 annual aggregate |
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Personal Injury Liability |
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$5,000,000 each occurrence |
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$5,000,000 annual aggregate |
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0% Insured's participation |
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$1,000,000 per accident limit for bodily injury and property damage;
If the operations of Tenant should change in a material manner from those conducted on the Commencement Date and in the opinion of Landlord or Landlord's insurance advisor, the amount or scope of such coverage is reasonably deemed inadequate at any time during the Lease Term, Tenant shall increase such coverage to such reasonable amounts or scope as Landlord or Landlord's advisor deems adequate. All insurance procured and maintained by Tenant shall be written by insurance companies satisfactory to Landlord which are licensed to do business in the state in which the Premises is located with a general policyholder's rating of not less than A and a financial rating of not less than Class VIII, as rated in the most current edition of Best's Key Rating Guide. With respect to the insurance prescribed in subsections (a), (e) and (f) above, Landlord, any Superior Rights Holders and property manager and any other parties identified by Landlord in writing together with their respective agents, members, partners, employees, offices, directors, and shareholders shall be named as additional insureds under all insurance maintained by Tenant, and Tenant shall obtain waivers of subrogation in favor of Landlord as its interests may appear, as specified in Section 15.3 below; moreover, Tenant shall notify Landlord at least thirty (30) days prior to cancellation of such insurance. Tenant shall provide Landlord with an original Certificate of Insurance demonstrating that the insurance required by this Lease was purchased and is in effect. Tenant shall also provide Landlord with a copy of the Additional Insured, Waiver of Subrogation and Primary and Noncontributory endorsements or such other policy language demonstrating that the insurance policies comply with this Lease. If Tenant should fail to comply with the foregoing requirements relating to insurance, Landlord may obtain such insurance and Tenant shall pay to Landlord on demand as Additional Rent hereunder the premium cost thereof plus interest as provided in Section 21.2(a). Tenant hereby acknowledges and agrees that any such payment and interest shall be payable immediately on demand as Additional Rent and that the same are cumulative with, and do not supersede or reduce in any way, Landlord's rights as specified in Article XXI of this Lease. Landlord makes no representation or warranty to Tenant that the amount of insurance required to be carried by Tenant under this Lease is adequate to fully protect Tenant’s interests or cover Tenant’s obligations.
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ARTICLE XV
WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBROGATION
15.1 Non-Liability of Landlord. Landlord and Landlord's agents and employees shall not be liable to Tenant or to Tenant's employees, subtenants, concessionaires, agents, invitees, or visitors, or to any other person whomsoever, for any injury to person or damage to property caused by the Premises becoming out of repair, or by defect or failure of any structural element of the Premises or of any equipment, pipes or wiring, or broken glass, or by the backing up of drains, or by gas, water, steam, electricity or oil leaking, escaping or flowing into the Premises, nor shall Landlord be liable to Tenant, or to Tenant's employees, subtenants, concessionaires, agents, invitees, or visitors, or to any other person whomsoever, for any loss or damage that may be occasioned by or through the acts or omissions of any other persons whomsoever unless same were (i) a result of the Landlord Work, or (ii) caused by Landlord's gross negligence or intentional misconduct. Landlord shall not be held responsible in any way on account of any construction, repair or reconstruction (including widening) of any private or public roadways, walkways or utility lines. This Section 15.1 shall survive the expiration or earlier termination of this Lease.
15.2 Indemnity by Tenant. Landlord shall not be liable to Tenant or to Tenant's employees, agents, or visitors, or to any other person whomsoever, for any injury to person or damage to property on or about the Premises caused by the negligence or misconduct of Tenant, its employees, subtenants, licensees or concessionaires, or of any other person entering the Premises under express or implied invitation of Tenant, or arising out of the use of the Premises by Tenant and the conduct of its business therein, or arising out of any breach or default by Tenant in the performance of its obligations under this Lease; and Tenant hereby agrees to indemnify Landlord and its partners, members, affiliates and subsidiaries, and all of their respective officers, trustees, directors, employees, stockholders, partners, representatives, servants, insurers, and agents and Landlord's designated property management company (collectively, the “Landlord Indemnitees”) and hold each of the Landlord Indemnitees harmless from any loss, expense, cost, damage, or claim arising out of such damage or injury. Except for the gross negligence or willful misconduct of Landlord, its agents, employees or contractors, and to the extent permitted by Applicable Laws, Tenant agrees to indemnify, defend and hold harmless the Landlord Indemnitees from and against any and all losses, liabilities, damages, costs and expenses (including reasonable attorneys' fees and costs) resulting from claims by third parties for injuries to any person and damage to or theft or misappropriation or loss of property occurring in or about the Premises and arising from the use and occupancy of the Premises or from any activity, work, or thing done, permitted or suffered by Tenant in or about the Premises or due to any other act or omission of Tenant, its subtenants, assignees, invitees, employees, contractors or agents. Landlord shall in no event be liable to Tenant or any other person for any consequential damages, special or punitive damages, or for loss of business, revenue, income or profits and Tenant hereby waives any and all claims for any such damages. Notwithstanding anything to the contrary contained in this Section 15.2, all property of Tenant and its contractors, employees, customers and invitees, kept or stored on the Premises, whether leased or owned by any such parties, shall be so kept or stored at the sole risk of Tenant and Tenant shall hold Landlord harmless from any claims arising out of damage to the same, including subrogation claims by Tenant's insurance carriers. Landlord or its agents shall not be liable for interference with light or other intangible rights. The furnishing by Tenant of the insurance required under this Lease shall not be deemed to limit Tenant's obligations under this Section 15.2. This Section 15.2 shall survive the expiration or earlier termination of this Lease.
15.3 Waiver of Claims; Waiver of Subrogation. Landlord and Tenant intend that their respective property loss risks shall be borne by reasonable insurance carriers to the extent above provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property or business interruption loss to the extent that such coverage is agreed to be provided hereunder. The parties each hereby waive all rights and claims against each other for such losses and waive all rights of subrogation of their respective insurers, provided such waiver of subrogation shall not affect the right to the insured to recover thereunder. The parties agree that their respective insurance policies are now, or shall be, endorsed such that the waiver of subrogation shall not affect the right of the insured to recover thereunder, so long as no material additional premium is charged therefor. The release and waiver specified in this Section 15.3 is cumulative with any releases or exculpations which may be contained in other provisions of this Lease.
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ARTICLE XVI
DAMAGES BY CASUALTY
16.1 Repair of Damage to Premises by Landlord.
16.2 Landlord’s Option to Repair. Notwithstanding the terms of Section 16.1 above, Landlord may elect not to rebuild and/or restore the Premises and instead terminate this Lease, by notifying Tenant in writing of such termination such notice to include a termination date giving Tenant sixty (60) days to vacate the Premises, but Landlord may so elect only if the Building shall be damaged by Casualty and one or more of the following conditions is present: (a) in Landlord’s reasonable judgment, repairs cannot reasonably be completed within twelve (12) months after the date of discovery of the damage (when such repairs are made without the payment of overtime or other premiums); (ii) a Superior Rights Holder shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground lease, as the case may be; (iii) the damage is not fully covered by the insurance policies required to be maintained by Landlord hereunder; or (iv) the damage occurs during the last twelve (12) months of the Lease Term (and Tenant does not, within thirty (30) days after such Casualty, elect to exercise its option to extend the Lease Term pursuant to its Renewal Option, if any such option then remains); provided, however, that if Landlord does not elect to terminate this Lease pursuant to Landlord’s termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within twelve (12) months after being commenced and as a result of the damage, Tenant cannot reasonably, and does not, conduct business from the Premises, Tenant may elect, no earlier than sixty (60) days after the date of the damage and not later than ninety (90) days after the date of such damage, to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant.
16.3 Abatement. In the event of any Casualty affecting the Premises, Base Rent and Tenant’s regular monthly payments of Additional Rent shall be equitably abated for the period from the date of such Casualty until the earlier of (a) the date Tenant reoccupies any portion of the Premises for the conduct of its business (in which case the Base Rent and Additional Rent allocable to such reoccupied portion shall be payable by Tenant from the date of such occupancy), and (b) the date that Landlord provides written notice to Tenant that Landlord has substantially completed Landlord’s restoration of the Premises excluding Tenant’s Scope.
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ARTICLE XVII
EMINENT DOMAIN
17.1 Termination for Taking of Premises. In the event that the whole or any part of the Premises is taken or condemned by any competent authority for any public use or purpose (including a deed given in lieu of condemnation) (“Taken” and each occurrence, a “Taking”) and the Building is thereby rendered untenantable, this Lease shall terminate as of the date title vests in such authority, and Base Rent and Additional Rent shall be apportioned as of such date. Notwithstanding anything to the contrary herein set forth, in the event the Taking is temporary (for less than the remaining Lease Term), Landlord may elect to either (a) terminate this Lease or (ii) permit Tenant to receive the entire award attributable to the Premises in which case Tenant shall continue to pay Rent and this Lease shall not terminate.
17.2 Adjustment for Partial Taking of Premises In the event a part of the Premises is Taken, and this Lease is not terminated, this Lease shall be amended to reduce the Base Rent to reflect any reduction in the Rentable Area of the Building as a result of such Taking. Landlord, upon receipt and to the extent of the award in condemnation (or proceeds of sale) shall make necessary repairs and restorations to the Building to the extent necessary to cause the remaining portions of the Building to be an architectural whole.
17.3 Condemnation Awards. All compensation awarded for any Taking (or the proceeds of sale) of the Premises shall be the sole property of Landlord, and Tenant hereby assigns its interest in any such award to Landlord; provided, however, Landlord shall have no interest in any award made to Tenant for Tenant's moving and relocation expenses or for the loss of Tenant's fixtures and other tangible personal property if a separate award for such items is made to Tenant, as long as such separate award does not reduce the amount of the award that would otherwise be awarded to Landlord.
ARTICLE XVIII
ASSIGNMENT AND SUBLETTING
18.1 Prohibition.
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18.2 Recapture Right. Notwithstanding anything to the contrary contained in this Article XVIII, in the event Tenant contemplates a Transfer of the entire Building for substantially the remainder of the Lease Term (excluding an assignment pursuant to a Permitted Transfer as defined in Section 18.3 below), Landlord shall have the option, by giving written notice to Tenant within ten (10) days after receipt of any Transfer Notice, to recapture the entirety of the Premises; provided, however, if Landlord elects to recapture the Premises, Tenant may elect to withdraw its Transfer Notice by written notice to Landlord within ten (10) days of Landlord’s election. Such recapture, if not withdrawn by Tenant pursuant to the immediately preceding sentence, shall cancel and terminate this Lease with respect to such space as of the proposed effective date of the Transfer.
18.3 Permitted Transfer. Notwithstanding anything to the contrary contained in this Article XVIII, Tenant shall have the right, without the prior written consent of Landlord, to (a) assign this Lease to an Affiliate (as defined below), to an entity created by merger, reorganization or recapitalization of or with Tenant, or to a purchaser of all or substantially all of Tenant’s assets or (b) to sublease the Premises or any part thereof to an Affiliate (each, a “Permitted Transfer”); provided, however, that (i) such Permitted Transfer is for a valid business purpose and not to avoid any obligations under this Lease, (ii) the Transferee is publicly traded and shall have, immediately after giving effect to such assignment, a Comparable Financial Status (as defined below), (iii) no later than twenty (20) days prior to the effective date of the Permitted Transfer, Tenant shall give notice to Landlord, which notice shall include the full name and address of the Transferee, and a copy of all agreements executed between Tenant and the Transferee with respect to the Premises or part thereof, as may be the case, (iv) no later than fifteen (15) days after the effective date of the Permitted Transfer, the assignee or sublessee shall provide the documentation required pursuant to Section 18.1(b) above, and (v) within ten (10) days after Landlord’s written request, provide such reasonable documents or information which Landlord reasonably requests for the purpose of substantiating whether or not the Permitted Transfer is to an Affiliate or is otherwise in accordance with the terms and conditions of this Section. As used herein, “Affiliate” shall mean any Person (as defined below) which is currently owned or Controlled by, owns or Controls, or is under common ownership or Control with Tenant. For purposes of this definition, the word “Control,” as used above means, with respect to a Person that is a corporation, the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the
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shares of the Controlled corporation and, with respect to a Person that is not a corporation, the possession, directly or indirectly, of the power at all times to direct or cause the direction of the management and policies of the Controlled Person. The term “Comparable Financial Status” shall mean a market capitalization equal to 90% of the initial Tenant’s market capitalization as of the Effective Date. The word “Person” means an individual, partnership, trust, corporation, firm or other entity. Tenant shall not have the right to perform a Permitted Transfer, if, as of the date of the effective date of the Permitted Transfer, an Event of Default is then continuing.
18.4 Assumption by Assignee. Any assignee or sublessee of an interest in and to this Lease shall be deemed, by acceptance of such assignment or sublease or by taking actual or constructive possession of all or any portion of the Premises, to have assumed all of the obligations set forth in or arising under this Lease. Such assumption shall be effective as of the earlier of the date of such assignment or sublease or the date on which the assignee or sublessee obtains possession of all or any portion of the Premises; however, with specific regard to any assignment, the assignee shall be responsible for all unsatisfied obligations of Tenant under this Lease, regardless of when such obligations arose and when such assumption became effective.
18.5 Tenant Remains Liable; Excess Rent. Notwithstanding any assignment or subletting, Tenant shall at all times remain fully responsible and liable for the payment of the Rent herein specified and for compliance with all of Tenant's other obligations under this Lease (even if future assignments and sublettings occur subsequent to the assignment or subletting by Tenant, and regardless of whether or not Landlord's approval has been obtained for such future assignments and sublettings). Moreover, in the event that the Rental due and payable by a sublessee (or a combination of the rental payable under such sublease plus any bonus or other consideration therefor or incident thereto) exceeds the Rent payable under this Lease, or if with respect to a permitted assignment or sublease, permitted license or other transfer by Tenant permitted by Landlord, the consideration payable to Tenant by the assignee, sublessee, licensee or other transferee exceeds the rental payable under this Lease, then Tenant shall be bound and obligated to pay Landlord fifty percent (50%) of such excess rental and other excess consideration (after deduction of all customary transaction costs, including but not limited to, brokerage fees, legal fees, free rent and any subtenant improvement expenses) within ten (10) days following receipt thereof by Tenant from such sublessee, assignee, licensee or other transferee, as the case may be.
18.6 No Encumbrances. Tenant shall not mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise encumber its interest in this Lease or in the Premises.
18.7 Transfer by Landlord. In the event of the transfer and assignment by Landlord of its interest in this Lease and in the Building to a person expressly assuming Landlord's obligations under this Lease, Landlord shall thereby be released from any further obligations hereunder, and Tenant agrees to look solely to such successor-in- interest of the Landlord for performance of such obligations. In addition, as described more fully in Section 24.3 of this Lease, any Security Deposit given by Tenant to secure performance of Tenant's obligations hereunder shall be assigned and transferred by Landlord to such successor-in-interest, and Landlord shall thereby be discharged of any further obligation relating thereto.
ARTICLE XIX
SUBORDINATION; ATTORNMENT; ESTOPPELS
19.1 Subordination. Tenant accepts this Lease subject and subordinate to any mortgage, deed of trust, ground lease or other lien presently existing or hereafter placed upon the Building or any portion of the Premises, and to any renewals and extensions thereof (collectively, “Superior Rights” and the holder of any such rights a “Superior Rights Holder”). Tenant agrees that any Superior Rights Holder shall have no duty, liability or obligation to perform any of the obligations of Landlord under this Lease and shall have the right at any time to subordinate its mortgage, deed of trust, ground lease or other lien to this Lease; provided, however, notwithstanding that this Lease may be (or may become) superior to a Superior Rights Holder, the Superior Rights Holder shall not be liable for prepaid rentals, security deposits and claims accruing during Landlord's ownership; and further provided that the provisions of a mortgage, deed of trust, ground lease or other lien relative to the rights of the mortgagee with respect to proceeds arising from an eminent domain taking (including a voluntary conveyance by Landlord) and provisions relative to proceeds arising from insurance payable by reason of damage to or destruction of the Premises shall be prior and superior to any contrary provisions contained in this Lease with respect to the payment or usage thereof. Landlord is hereby irrevocably vested with full power and authority to subordinate this Lease to any Superior Rights hereafter placed upon the Premises. The foregoing agreements shall be effective without the execution of any further documents, provided, however, that Tenant hereby agrees upon demand to execute such
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further instruments subordinating this Lease as Landlord or a Superior Rights Holder may request, including, without limitation, such Superior Rights Holder's standard form of subordination, non-disturbance and attornment agreement. Landlord shall use commercially reasonable efforts to obtain from any such Superior Rights Holder a written agreement that after a foreclosure (or a deed in lieu of foreclosure) the rights of Tenant shall remain in full force and effect during the term of this Lease so long as Tenant shall continue to recognize and timely perform all of the covenants and conditions of this Lease. Tenant shall recognize as its landlord and attorn to any person succeeding to Landlord under this Lease upon any foreclosure or deed in lieu of foreclosure by Landlord's mortgagee at the election of such mortgagee or successor-in-interest. Upon request of such mortgagee or successor-in-interest, Tenant shall execute and deliver an instrument or instruments confirming its attornment; provided, however, that any successor-in-interest will not be (i) bound by payment of rent for more than one month in advance (except as otherwise required under this Lease), (ii) bound by any amendment or modification to this Lease which was subject to approval by such mortgagee or successor- in-interest pursuant to such mortgagee's agreements with Landlord, if such amendment or modification to this Lease was in fact made without the consent of the mortgagee, (iii) liable for any security deposit not actually received by such mortgagee or successor-in-interest (provided, that if Landlord has not transferred the Security Deposit to such successor-in-interest, then Tenant may look to Landlord for return of the Security Deposit even if Landlord is no longer the landlord under this Lease), or (iv) liable for or subject to claims or offsets accruing during Landlord's ownership or previous acts or omissions of Landlord.
19.2 Notice to Holder. At any time when the holder of an outstanding Superior Right (or Landlord) has given Tenant written notice of such Superior Rights Holder’s interest in this Lease and the contact information for such Superior Rights Holder, Tenant may not exercise any remedies for default by Landlord hereunder unless and until such Superior Rights Holder shall have received written notice of such default and a reasonable time (not less than thirty (30) days) shall thereafter have elapsed without the default having been cured.
19.3 Estoppel Certificate. Landlord and Tenant agree that they will, within ten (10) business days following request by the other party, execute and deliver to the other party a written statement (an “Estoppel Certificate”) addressed to the other party, (and/or parties designated by the other party), which statement shall identify Landlord, Tenant and this Lease, shall certify that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), shall confirm that Landlord or Tenant, as applicable, is not in default as to any obligations under this Lease (or if there is a default, specifying any default), shall state the dates to which the rent and other changes have been paid in advance, if any, and shall contain such other information or confirmations as Landlord or Tenant, as applicable, may reasonably require. If a party fails to do so within thirty (30) business days after the delivery of a written request from the other party, then such failure shall be a default under the Lease and the non-defaulting party will have all rights and remedies accorded to it pursuant to Article XIXI of this Lease.
19.4 Financial Information. If Landlord desires to finance, refinance, or sell the Building, the Premises, or any part thereof, Tenant shall deliver to any potential lender or purchaser designated by Landlord such financial statements as may be reasonably required by such lender or purchaser. The forgoing shall not apply to Tenant if Tenant is a publicly held entity.
ARTICLE XX
SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES
20.1 Surrender of Premises. No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger.
20.2 Removal of Tenant Property by Tenant. Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article XX, peaceably quit and surrender possession of the Premises to Landlord broom clean and otherwise in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear, repairs which are specifically made the responsibility of Landlord hereunder, and damage due to a Casualty
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excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and all items of furniture, equipment, free-standing cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, and all Alterations designated by Landlord for removal in accordance with Section 10.4 above, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from the installation thereof and/or from such removal. Notwithstanding anything to the contrary contained herein, Tenant shall, at its sole cost and expense, remove from the Premises, prior to the end of the Term, any item installed by or for Tenant and which, pursuant to Applicable Laws, must be removed therefrom before the Premises may be used by a subsequent tenant. If Tenant fails to remove any property from the Building or the Premises which Tenant is obligated by the terms of this Lease to remove within ten (10) days after written notice from Landlord, all or any of such property (the “Abandoned Property”) shall, at Landlord’s option be conclusively deemed to have been abandoned and may either be retained by Landlord as its property or sold or otherwise disposed of in such manner as Landlord may see fit. If any item of Abandoned Property shall be sold, Tenant hereby agrees that Landlord may receive and retain the proceeds of such sale and apply the same, at its option, to the expenses of the sale, the cost of moving and storage, any damages to which Landlord may be entitled hereunder or pursuant to law, and to any arrears of Rent.
20.3 Decommissioning; Surrender Plan.
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20.4 Condition of the Building and Premises Upon Surrender. In addition to the above requirements of this Article XX, upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall surrender the Premises and Building such that the same are in compliance with all Applicable Laws and with Tenant having complied with all of Tenant’s obligations under this Lease, including those relating to improvement, repair, maintenance, compliance with law, testing and other related obligations of Tenant hereunder. In the event that the Building and Premises shall be surrendered in a condition which does not comply with the terms of this Article XX because Tenant failed to comply with its obligations set forth in Lease, then Landlord shall be entitled to expend all reasonable costs in order to cause the same to comply with the required condition upon surrender and Tenant shall immediately reimburse Landlord for all such costs upon notice.
ARTICLE XXI
DEFAULT BY TENANT AND REMEDIES
21.1 Events of Default. The following events shall be deemed to be events of default (each, a “default” or “Event of Default”) by Tenant under this Lease:
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21.2 Landlord's Remedies. Upon the occurrence of any such Events of Default, then in addition to the remedies available to Landlord under the other provisions of this Lease and all Applicable Laws, Landlord shall also have the option to pursue any one or more of the following remedies. Landlord's election of any one remedy under this Section 21.2 shall in no way prejudice Landlord's right at any time thereafter to exercise any other remedy.
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The term “rent” as used in this Section 21.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others, and shall be calculated on the assumption that all Additional Rent would have increased at the rate of three percent (3%) per annum. As used in Sections 21.2(d)(i) and (ii) above, the “worth at the time of award” shall be computed by allowing interest at the rate set forth in Section 8.6 of this Lease, but in no case greater than the maximum amount of such interest permitted by law. As used in Section 21.2(d)(iii) the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
Suit or suits for the recovery of such damages, or any installments thereof, may be brought by Landlord from time to time at its election, and nothing contained herein shall be deemed to require Landlord to postpone suit until the date when the Lease Term would have expired if it had not been terminated hereunder.
21.3 Monthly Rent. It is expressly agreed that in determining “the monthly Rent and other charges provided in this Lease,” as that term is used throughout Section 21.2 above, the term “Rent” includes, without limitation, all payments prescribed in Section 8.1 of this Lease.
21.4 Landlord Expenses. It is further agreed that, in addition to all payments required pursuant to Section 21.2 above, and solely for expenses relating to actions taken under 21.2 above, Tenant shall compensate Landlord for expenses incurred by Landlord in repossession (including, among other expenses, any increase in insurance premiums caused by the vacancy of the Premises), expenses incurred by Landlord in reletting (including repairs, replacements, advertisements and brokerage fees), and all actual losses incurred by Landlord as a direct result of Tenant's default (including, among other losses, any claims asserted by Landlord's mortgagee which result in any loss, cost or expense to Landlord).
21.5 Injunctive Remedies. Landlord may restrain or enjoin any breach or threatened breach of any covenant, duty or obligation of Tenant herein contained without the necessity of proving the inadequacy of any legal remedy or irreparable harm. The remedies of Landlord hereunder shall be deemed cumulative and not exclusive of each other.
21.6 Attorneys' Fees and Costs. If either Landlord or Tenant shall commence any action or other proceeding against the other arising out of, or relating to, this Lease or the Premises, the prevailing party shall be entitled to recover from the losing party, in addition to any other relief, its actual attorneys’ fees. In addition, Tenant shall reimburse Landlord, upon demand, for all reasonable attorneys’ fees incurred in collecting Rent or otherwise seeking enforcement against Tenant, its sublessees and assigns, of Tenant’s obligations under this Lease.
21.7 Use of Security Deposit. Tenant acknowledges its obligation to deposit with Landlord the sum stated in Section 1.1(n) above, to be held by Landlord for the performance by Tenant of Tenant's covenants and obligations under this Lease. Upon the occurrence of any Event of Default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make
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good any arrears of Rent and any other documentable damage, injury, expense or liability caused to Landlord by such event of default; and in such event, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount.
21.8 Remedies Not Exclusive. No agreement to accept a surrender of the Premises and no act or omission by Landlord or Landlord's agent during the Lease Term shall constitute an acceptance or surrender of the Premises unless made in writing and signed by Landlord. No reentry or taking possession of the Premises by Landlord permitted hereunder or under Applicable Law shall constitute an election by Landlord to terminate this Lease unless a written notice of such intention is given to Tenant. Pursuit of any of the above remedies shall not preclude pursuit of any other remedies prescribed in other sections of this Lease and any other remedies provided by law. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or any remedy therefor.
21.9 Landlord Default; Tenant Self-Help.
(a) Landlord Default. Landlord’s failure to perform or observe any of its obligations under this Lease shall constitute a default by Landlord under this Lease only if such failure shall continue for a period of thirty (30) days (or the additional time, if any, that is reasonably necessary to promptly and diligently cure the failure) (“Landlord Cure Period”) after Landlord receives written notice from Tenant specifying the default, which notice shall describe in reasonable detail the nature and extent of the failure and shall identify the Lease provision(s) containing the obligation(s) in question. Subject to the remaining provisions of this Lease, following the occurrence of any such default, Tenant shall have the right to pursue any remedy available under Applicable Laws for such default by Landlord; provided, however, that in no case shall Tenant have any right to terminate this Lease on account of any such default, or to setoff, abate or reduce Rent before entry of a non-appealable final judgment in Tenant’s favor against Landlord. Tenant will have no claim against Landlord or defense to a claim by Landlord unless Tenant gives Landlord written notice of the circumstances giving rise to the claim or defense within one hundred eighty (180) days after the circumstances arise.
ARTICLE XXII
HOLDING OVER
22.1 Holdover. Tenant is not permitted to hold over possession of the Premises after the expiration or earlier termination of the Lease Term without the express prior written consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. If Tenant holds over after the expiration or earlier termination of the Lease Term without the express written consent of Landlord, then, in addition to all other remedies available to Landlord at law or at equity or under this Lease, Tenant shall become a tenant at sufferance only, upon the terms and conditions set forth in this Lease so far as applicable. During such holdover period, Tenant shall pay to Landlord a monthly Base Rent equivalent to (i) one hundred ten percent (110%) of Base Rent payable by Tenant to Landlord during the last month of the Lease Term for the first two (2) months of such holdover, and (ii) thereafter, one hundred fifty percent (150%) of Base Rent payable by Tenant to Landlord during the last month
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of the Lease Term. Acceptance by Landlord of Rent after such expiration or earlier termination shall not constitute consent to a holdover hereunder or result in an extension of this Lease. This Section 22.1 shall not be construed to create any express or implied right to hold over beyond the expiration of the Lease Term or any extension thereof. Tenant shall be liable, and shall pay to Landlord for all actual losses incurred by Landlord as a result of such holdover, and shall, subject to at least thirty (30) days’ prior notice that Landlord requires the Premises for a third party, indemnify, defend and hold Landlord and the Landlord Indemnitees harmless from and against all liabilities, damages, losses, claims, suits, costs and expenses (including reasonable attorneys' fees and costs) arising from or relating to any such holdover tenancy, including without limitation, any claim for damages made by a proposed succeeding tenant. Tenant's indemnification obligation hereunder shall survive the expiration or earlier termination of this Lease.
ARTICLE XXIII
NOTICES
23.1 Method and Addresses. Wherever any notice is required or permitted under this Lease, such notice shall be in writing. Any notice or document required or permitted to be delivered under this Lease shall be deemed to be delivered when it is actually received by the designated addressee or, if earlier and regardless of whether actually received or not, when it is either (i) deposited in the United States mail, postage prepaid, certified mail, return receipt requested, or (ii) delivered to the custody of a reputable messenger service or overnight courier service, addressed to the applicable party to whom it is being delivered at the respective address for such party as is set out in Section 1.1 above, or at such other address as such applicable party may have theretofore specified to the delivering party by written notice.
23.2 Multiple Parties. If and when included within the term “Landlord'' as used in this Lease there be more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such notice specifying some individual at some specific address for the receipt of notices and payments to the Landlord; if and when included within the term “Tenant” as used in this Lease there be more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Tenant. All parties included within the terms “Landlord” and “Tenant,” respectively, shall be bound by notices and payments given in accordance with the provisions of this Article to the same effect as if each had received such notice or payment. In addition, Tenant agrees that notices to Tenant may be given by Landlord's attorney, property manager or other agent.
ARTICLE XXIV
SECURITY DEPOSIT
24.1 Comingling; Restoration. The Security Deposit prescribed in Section 1.1(n) of this Lease shall be held by Landlord without liability for interest and as security for the performance by Tenant of Tenant's covenants and obligations under this Lease, it being expressly understood that the Security Deposit shall not be considered an advance payment of Rent or a measure of Landlord's damages in case of default by Tenant. Landlord may commingle the Security Deposit with Landlord's other business funds. As prescribed in Section 21.7 of this Lease, Landlord may, without prejudice to any other remedy, use the Security Deposit to the extent necessary to make good any Rent delinquencies or to satisfy any other covenant or obligation of Tenant hereunder; and following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. No part of the Security Deposit shall be considered to be held in trust, to bear interest, or to be prepayment for any monies to be paid by Tenant under this Lease.
24.2 Return of Deposit. Subject to Section 8.5 above, within sixty (60) days after Tenant (i) has surrendered the Premises to Landlord as required under Article XX, and (ii) has provided Landlord with a forwarding address, Landlord shall return to Tenant the portion of the Security Deposit remaining after deducting all documented damages (which have been itemized and delivered to Tenant no later than thirty (30) days from Landlord’s accepting surrender of the Premises or termination of this Lease), charges and other amounts permitted by the terms of this Lease and applicable law. Tenant acknowledges and agrees that if Tenant has breached this Lease before or during Tenant's surrendering the Premises to Landlord, then Landlord shall be entitled to deduct from the Security Deposit being returned to Tenant (if any) all documentable damages and losses that Landlord has suffered as a result of such breach of this Lease by Tenant.
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24.3 Assignment of Deposit. If Landlord transfers its interest in the Premises during the term of this Lease, Landlord shall assign the Security Deposit to the transferee; and upon such transfer and the transferee's acknowledgement of responsibility to Tenant for the Security Deposit, Landlord shall thereafter have no further liability for the return of the Security Deposit.
24.4 Letter of Credit as Security Deposit.
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24.5 Reduction of Security Deposit / Letter of Credit Amount. Provided (i) as of Reduction Effective Date (as defined below) no Event of Default is continuing and (ii) no Monetary Default has occurred within the twelve (12)-month period prior to any Reduction Effective Date, Tenant shall be entitled to reduce the amount of the Security Deposit as follows (each, an “Incremental Reduction”): (i) to an amount equal to $4,000,000.00 effective as of the last day of the thirty-sixth (36th) calendar month following the Commencement Date; (ii) to an amount equal to $3,000,000.00 effective as of the last day of the sixtieth (60th) full calendar month following the Commencement Date; (ii) to an amount equal to $2,000,000.00 effective as of the last day of the eighty-fourth (84th) full calendar month following the Commencement Date; and (iv) to an amount equal to the sum of the monthly Base Rent applicable to the last month of the Lease Term and the Pass-Through Costs applicable to the one hundred seventh (107th ) month, effective as of the last day of the one hundred eighth (108th) full calendar month following the Commencement Date. If Tenant is not entitled to reduce the Letter of Credit Amount as of any of the reduction effective dates set forth above (each a “Reduction Effective Date”) due to the occurrence of an Event of Default or a Monetary Default during the twelve (12) months prior to such Reduction Effective Date, then such Reduction Effective Date and, if applicable, the subsequent Reduction Effective Dates shall be postponed for a period equal to twelve (12) months from the date that Tenant cures such Event of Default or Monetary Default. Any reduction in the Letter of Credit Amount shall be accomplished by Tenant providing Landlord with a substitute letter of credit in the applicable reduced Letter of Credit Amount or an amendment so reducing the Letter of Credit Amount.
ARTICLE XXV
COMMISSIONS
25.1 Brokers. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only (a) Erik Abrahamson of CBRE (for Landlord) and (b) Steven Billigmeier of Cushman & Wakefield (for Tenant) (the “Brokers”), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Landlord shall pay a commission to the Brokers pursuant to a separate agreement. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Brokers, occurring by, through, or under the indemnifying party. The terms of this Section 25.1 shall survive the expiration or earlier termination of the Lease Term.
ARTICLE XXVI
LAWS AND REGULATIONS
26.1 Applicable Laws. Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other rule, directive, order, regulation, guideline or requirement of any local, state or federal governmental entity or governmental agency (the “Applicable Laws”) now in force or which may hereafter be enacted or promulgated relating to or affecting the Premises and Tenant’s Permitted Use. Applicable laws shall include all Environmental Laws. At its sole cost and expense, Tenant shall promptly comply with all Applicable Laws. Should any standard or regulation now or hereafter be imposed on
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Landlord or Tenant by a state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, landlords or tenants, then Tenant agrees, at its sole cost and expense, to comply promptly with such standards or regulations. Tenant shall be responsible, at its sole cost and expense, to make all alterations to the Building as are required by Tenant to comply with the governmental rules, regulations, requirements or standards described in this Article XXVI.
26.2 Permits. Tenant shall, at Tenant’s sole cost and expense, apply for, seek and obtain prior to the date on which Tenant commences occupancy of all or any portion of the Premises all necessary federal, state, county and municipal licenses, permits and approvals needed for the operation of Tenant’s business in the Premises, including any and all necessary permits and approvals directly or indirectly relating or incident to the conduct of its activities on the Premises, its scientific experimentation, transportation, storage, handling, use and disposal of any Hazardous Materials or animals or laboratory specimens (collectively, the “Required Permits”). Tenant shall thereafter maintain all Required Permits. Tenant, at Tenant’s expense, shall at all times comply with the terms and conditions of each Required Permit. Within ten (10) days of request by Landlord, Tenant shall furnish Landlord with copies of all Required Permits that Tenant has obtained together with a certificate certifying that such permits are all of the permits that Tenant has obtained with respect to the Premises. At Landlord's request, Tenant shall deliver to Landlord copies of all Required Permits to Landlord.
26.3 OFAC Compliance. Each of Landlord and Tenant certifies, represents, warrants and covenants that: (a) it is not acting and will not act, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person”, or other banned or blocked person, entity, nation or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by the Office of Foreign Assets Control; and (ii) it is not engaged in this transaction, directly or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity or nation.
ARTICLE XXVII
MISCELLANEOUS
27.1 Relationship of Parties. Nothing in this Lease shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant.
27.2 No Offset; Independent Covenants. Tenant shall not for any reason withhold or reduce Tenant's required payments of Rent and other charges provided in this Lease, it being agreed (i) that the obligations of Landlord under this Lease are independent of Tenant's obligations except as may be otherwise expressly provided in this Lease and (ii) that to the maximum extent permitted under Applicable Laws, Tenant hereby waives all rights which it might otherwise have to withhold Rent. The immediately preceding sentence shall not be deemed to deny Tenant the ability of pursuing all rights granted it under this Lease or at law (with the exception of any right of Tenant to offset or withhold the payment of Rent, which right is hereby waived to the maximum extent permitted by applicable law); however, at the direction of Landlord, Tenant's claims in this regard shall be litigated in proceedings different from any litigation involving Rent claims or other claims by Landlord against Tenant (i.e., each party may proceed to a separate judgment without consolidation, counterclaim or offset as to the claims asserted by the other party).
27.3 Limitation on Liability. The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited solely to Landlord's proceeds in the Premises and the rents derived therefrom, and Landlord shall not be personally liable for any deficiency, except that Landlord shall, subject to the provisions of Sections 18.7 and 24.3 of this Lease, remain liable to account to Tenant for any security deposit under this Lease. This Section 27.3 shall not be deemed to limit or deny any remedies which Tenant may have in the event of default by Landlord hereunder which do not involve the personal liability of Landlord. Notwithstanding anything contained in this Lease to the contrary, the obligations of Landlord under this Lease (including as to any actual or alleged breach or default by Landlord) do not constitute personal obligations of the individual members, managers, investors, partners, directors, officers, or shareholders of Landlord or Landlord's members, affiliates, or partners, and Tenant shall not seek recourse against the individual members, managers, investors, partners, directors, officers, or shareholders of Landlord or Landlord's members, affiliates or partners or any other persons or entities
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having any interest in Landlord, or any of their personal assets for satisfaction of any liability with respect to this Lease. In addition, in consideration of the benefits accruing hereunder to Tenant and notwithstanding anything contained in this Lease to the contrary, Tenant hereby covenants and agrees for itself and all of its successors and assigns that the liability of Landlord for any default by Landlord under the terms of this Lease shall be limited solely to the Landlord's interest in the Building and no other assets of Landlord, and Landlord shall not be personally liable for any deficiency. The term “Landlord” as used in this Lease, so far as covenants or obligations on the part of the Landlord are concerned, shall be limited to mean and include only the owner or owners, at the time in question, of the fee title to, or a lessee's interest in a ground lease of, the Premises. In the event of any transfer or conveyance of any such title or interest (other than a transfer for security purposes only), the transferor shall be automatically relieved of all covenants and obligations on the part of Landlord contained in this Lease. Landlord and Landlord's transferees and assignees shall have the absolute right to transfer all or any portion of their respective title and interest in the Premises, the Building, and/or this Lease without the consent of Tenant, and such transfer or subsequent transfer shall not be deemed a violation on Landlord's part of any of the terms and conditions of this Lease.
27.4 No Continuing Waiver. One or more waivers of any covenant, term or condition of this Lease by either party shall not be construed as a waiver of a subsequent breach of the same covenant, term or condition. The consent or approval by either party to or of any act by the other party requiring such consent or approval shall not be deemed to waive or render unnecessary consent to or approval of any subsequent similar act.
27.5 Force Majeure. Notwithstanding anything to the contrary contained in this Lease, any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, acts of war, terrorist acts, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, Casualty, actual or threatened public health emergency (including epidemic, pandemic, famine, disease, plague, quarantine, and other significant public health risk), governmental edicts, actions, declarations or quarantines by a governmental entity or health organization (including any shelter-in-place orders, stay at home orders or any restrictions on travel related thereto that preclude either party, its agents, contractors or its employees from accessing the Premises, national or regional emergency), breaches in cybersecurity, and other causes beyond the reasonable control of the party obligated to perform, regardless of whether such other causes are (i) foreseeable or unforeseeable or (ii) related to the specifically enumerated events in this paragraph (collectively, a “Force Majeure”), shall excuse the non-monetary performance of such party for a period equal to any such prevention, delay or stoppage. If this Lease specifies a time period for performance of a non-monetary obligation of either party, that time period shall be extended by the period of any delay in such party’s performance caused by a Force Majeure. Notwithstanding anything to the contrary in this Lease, in no event shall financial inability be deemed to be, or be a cause of, an event of Force Majeure, and no event of Force Majeure shall (i) excuse Tenant’s obligations to pay Rent and other charges due pursuant to this Lease, (ii) be grounds for Tenant to abate any portion of Rent due pursuant to this Lease, or entitle either party to terminate this Lease, except as allowed pursuant to Article XVI or Article XVII of this Lease, or (iii) excuse Tenant’s obligations under Article IV and Section 14.2 and Article XXVI of this Lease.
27.6 Tenant Financial Statements. Landlord acknowledges that Tenant is a publicly traded company and Tenant’s financial information is publicly available. If Tenant should cease to be a publicly traded company, then Tenant agrees, within ten (10) days after a request from Landlord, to deliver to Landlord such financial statements as are reasonably required by Landlord to verify the net worth of Tenant, or an affiliate or parent company of Tenant as Landlord may request. Tenant represents and warrants to Landlord that all such financial statements provided in connection with this Lease including, without limitation, any that have been provided prior to the Effective Date, are true, complete and correct as of the date thereof.
27.7 Landlord's Manager. Tenant is hereby notified that Landlord may, from time to time, appoint a manager for the Premises (each a “Landlord's Manager”) to whom Landlord may delegate some or all of Landlord's obligations under this Lease. Upon appointment of a Landlord's Manager and notice to Tenant of the same; (a) Tenant shall be required and authorized to take direction from Landlord's Manager with respect to Tenant's obligations under this Lease and (b) any release or indemnification of Landlord under this Lease shall also apply to Landlord's Manager.
27.8 Severability. In the event that any provision or part of this Lease should be held to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be reformed and enforced to the maximum extent permitted by law. If such provision cannot be reformed, then it shall be severed from this Lease and the validity
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and enforceability of the remaining provisions of this Lease shall not be affected thereby.
27.9 Intentionally Omitted.
27.10 Governing Law; Venue. The laws of the state of Colorado shall govern the interpretation, validity, performance and enforcement of this Lease. Except to the extent required otherwise by applicable law, the venue for any action relating to this Lease shall be brought solely and exclusively in the state and the county in which the Premises are located.
27.11 Headings. The captions and headings used herein are for convenience only and do not limit or amplify the provisions hereof.
27.12 Number; Gender. Whenever herein the singular number is used, the same shall include the plural, and words of any gender shall include each other gender.
27.13 Inurement. The terms, provisions and covenants contained in this Lease shall apply to, inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors-in-interest and legal representatives except as otherwise herein expressly provided.
27.14 Entire Agreement; Amendments. This Lease contains the entire agreement between the parties, and no rights are created in favor of either party on account of any condition or event other than as specified or expressly contemplated in this Lease. No brochure, rendering, information or correspondence shall be deemed to be a part of this agreement unless specifically incorporated herein by reference. In addition, no agreement shall be effective to change, modify or terminate this Lease in whole or in part unless such is in writing and duly signed by the party against whom enforcement of such change, modification or termination is sought.
27.15 Intentionally Omitted.
27.16 No Offer. The submission by Landlord of this instrument to Tenant for examination, negotiation or signature does not constitute an offer of, an option for, or a representation by Landlord regarding, a prospective lease. This Lease shall be effective if and when (and only if and when) it has been executed and delivered by both Landlord and Tenant.
27.17 Waiver of Trial by Jury. It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall, and each hereby does, waive trial by jury (unless such waiver would preclude a right to counterclaim) in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, and any emergency statutory or other statutory remedy. It is further mutually agreed that in the event Landlord commences any summary proceedings for non-payment of Rent or other sums due hereunder, Tenant will not interpose any non-mandatory counterclaim of whatever nature or description in any such proceedings.
27.18 Memorandum of Lease. Landlord and Tenant will, at the request of the other, promptly execute a Memorandum of Lease substantially in the form of Exhibit G attached hereto, which shall be filed for record in the real property records of the county in which the Premises is located but in no event earlier than the date that is two (2) business days after the Landlord Financing Deadline or Landlord’s earlier waiver of the Landlord’s Financing Contingency.
27.19 Counterparts; Signatures. This Lease may be executed in two (2)or more duplicate originals. Each duplicate original shall be deemed to be an original hereof. Landlord and Tenant consent and agree that this Lease may be signed and/or transmitted by e-mail of a .pdf document and that such signed electronic record shall be valid and as effective to bind the party so signing as a paper copy bearing such party’s handwritten signature.
[Landlord and Tenant signatures, next page.]
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EXECUTED to be effective as of the later of the dates accompanying a signature by Landlord or Tenant below; provided, however, that if the later of the dates accompanying a signature by Landlord or Tenant below is different from the date specified as the “Effective Date” on the first page of this Lease, then the date so specified on the first page of this Lease shall be deemed to be the “Effective Date “ for all purposes.
LANDLORD:
Centennial Valley Properties I, LLC, a Colorado limited liability company
By: Koelbel and Company,
a Colorado corporation, its manager
By: |
/s/ WALTER A. KOELBEL, JR. |
Name printed: |
Walter A. Koelbel, Jr. |
Title: |
Koelbel and Company |
Date of Signature: |
3/11/2022 |
TENANT:
Biodesix, Inc., a Delaware corporation
By: |
/s/ ROBIN HARPER COWIE |
Name printed: |
Robin Harper Cowie |
Title: |
CFO |
Date of Signature: |
3/11/2022 |
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EXHIBIT A
Site Plan of the Premises and Building
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EXHIBIT B
Legal Description of the Premises
B-1
EXHIBIT C
[intentionally omitted]
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EXHIBIT D
Approximate Depiction of Subdivision Boundaries
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EXHIBIT E
ENVIRONMENTAL QUESTIONNAIRE
FOR COMMERCIAL AND INDUSTRIAL PROPERTIES
Tenant Name:
Lease Address:
Lease Type (check correct box – right click to properties): ☐ Primary Lease/Lessee
Instructions: The following questionnaire is to be completed by the Lessee representative with knowledge of the planned operations for the specified building/location. Please print clearly and attach additional sheets as necessary.
1.0 PROCESS INFORMATION
Describe planned site use, including a brief description of manufacturing processes and/or pilot plants planned for this site, if any.
2.0 HAZARDOUS MATERIALS – OTHER THAN WASTE
Will (or are) non-waste hazardous materials be/being used or stored at this site? If so, continue with the next question. If not, go to Section 3.0.
2.1 Are any of the following materials handled on the Project? ☐ Yes ☐ No
[A material is handled if it is used, generated, processed, produced, packaged, treated, stored, emitted, discharged, or disposed.] If YES, check (right click to properties) the applicable correct Fire Code hazard categories below.
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Combustible dusts/fibers |
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Explosives |
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Flammable liquids |
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Combustible liquids (e.g., oils) |
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Compressed gas - inert |
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Flammable solids/pyrophorics |
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Cryogenic liquids - inert |
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Compressed gas - flammable/pyrophoric |
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Organic peroxides |
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Cryogenic liquids - flammable |
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Compressed gas - oxidizing |
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Oxidizers - solid or liquid |
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Cryogenic liquids - oxidizing |
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Compressed gas - toxic |
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Reactives - unstable or water reactive |
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Corrosives - solid or liquid |
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Compressed gas - corrosive |
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Toxics - solid or liquid |
2-2. For all materials checked in Section 2.1 above, please list the specific material(s), use(s), and quantities of each used or stored on the site in the table below; or attach a separate inventory. NOTE: If proprietary, the constituents need not be named but the hazard information and volumes are required.
E-1
Material/ Chemical |
Physical State (Solid, Liquid, or Gas) |
Container Size |
Number of Containers Used & Stored |
Total Quantity |
Units (pounds for solids, gallons or liters for liquids, & cubic feet for gases) |
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2-3. Describe the planned storage area location(s) for the materials in Section 2-2 above. Include site maps and drawings as appropriate.
2-4. Other hazardous materials. Check below (right click to properties) if applicable. NOTE: If either of the latter two are checked (BSL-3 and/or radioisotope/radiation), be advised that not all lease locations/cities or lease agreements allow these hazards; and if either of these hazards are planned, additional information will be required with copies of oversight agency authorizations/licenses as they become available.
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3.0 HAZARDOUS WASTE (i.e., REGULATED CHEMICAL WASTE)
Are (or will) hazardous wastes (be) generated? ☐ Yes ☐ No
If YES, continue with the next question. If not, skip this section and go to section 4.0.
3.1 Are or will any of the following hazardous (CHEMICAL) wastes generated, handled, or disposed of (where applicable and allowed) on the Project?
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Liquids |
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PCBs |
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3-2. List and estimate the quantities of hazardous waste identified in Question 3-1 above.
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HAZRDOUS (CHEMICAL) WASTE GENERATED |
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APPROX. MONTHLY QUANTITY with units |
off-site landfill, incineration, fuel blending scrap metal; wastewater neutralization (onsite or off-site)] |
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3-3. Waste characterization by: Process knowledge ☐ EPA lab analysis ☐ Both ☐
3-4. Please include name, location, and permit number (e.g. EPA ID No.) for transporter and disposal facility if applicable. Attach separate pages as necessary. If not yet known, write “TBD.”
Hazardous Waste Transporter/Disposal Facility Name |
Facility Location |
Transporter (T) or Disposal (D) Facility |
Permit Number |
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3-5. Are pollution controls or monitoring employed in the process to prevent or minimize the release of wastes into the environment? NOTE: This does NOT mean fume hoods; examples include air scrubbers, cyclones, carbon or HEPA filters at building exhaust fans, sedimentation tanks, pH neutralization systems for wastewater, etc.
If YES, please list/describe:
4.0 OTHER REGULATED WASTE (i.e., REGULATED BIOLOGICAL OR MEDICAL WASTE referred to as “Medical Waste” in California)
4-1. Will (or do) you generate medical waste? ☐ Yes ☐ No If NO, skip to Section 5.0.
4-2. Check the types of waste that will be generated, all of which fall under the California Medical Waste Act:
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Contaminated sharps (i.e., if contaminated with ≥ Risk Group 2 materials) |
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Animal carcasses |
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Pathology waste known or suspected to be contaminated with ≥ Risk Group 2 pathogens) |
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Red bag biohazardous waste (i.e., with ≥ Risk Group 2 materials) for autoclaving |
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Human or non-human primate blood, tissues, etc. (e.g., clinical specimens) |
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Trace Chemotherapeutic Waste and/or Pharmaceutical waste NOT otherwise regulated as RCRA chemical waste |
4-3. What vendor will be used for off-site autoclaving and/or incineration?
E-3
4-5. Do you have a Medical Waste Permit for this site? ☐ Yes ☐ No, not required.
5.0 UNDERGROUND STORAGE TANKS (USTS) & ABOVEGROUND STORAGE TANKS (ASTS)
5-1. Are underground storage tanks (USTs), aboveground storage tanks (ASTs), or associated pipelines used for the storage of petroleum products, chemicals, or liquid wastes present on site (lease renewals) or required for planned operations (new tenants)? ☐ Yes ☐ No
NOTE: If you will have your own diesel emergency power generator, then you will have at least one AST! [NOTE: If a backup generator services multiple tenants, then the landlord usually handles the permits.]
If NO, skip to section 6.0. If YES, please describe capacity, contents, age, type of the USTs or ASTs, as well any associated leak detection/spill prevention measures. Please attach additional pages if necessary.
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Contents |
Year Installed |
Type (Steel, Fiberglass, etc.) |
Associated Leak Detection / Spill Prevention Measures* |
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*NOTE: The following are examples of leak detection / spill prevention measures: integrity testing, inventory reconciliation, leak detection system, overfill spill protection, secondary containment, cathodic protection.
5-2. Please provide copies of written tank integrity test results and/or monitoring documentation, if available. 5-3. Is the UST/AST registered and permitted with the appropriate regulatory agencies? ☐ Yes ☐ No, not
yet
If YES, please attach a copy of the required permit(s) See Section 7-1 for the oversight agencies that issue permits, with the exception of those for diesel emergency power generators which are permitted by the local Air Quality District (Bay Area Air Quality Management District = BAAQMD; or San Diego Air Pollution Control District = San Diego APCD).
5-4. If this Questionnaire is being completed for a lease renewal, and if any of the USTs/ASTs have leaked, please state the substance released, the media(s) impacted (e.g., soil, water, asphalt, etc.), the actions taken, and all remedial responses to the incident.
5-5. If this Questionnaire is being completed for a lease renewal, have USTs/ASTs been removed from the Project?
If YES, please provide any official closure letters or reports and supporting documentation (e.g., analytical test results, remediation report results, etc.).
5-6. For Lease renewals, are there any above or below ground pipelines on site used to transfer chemicals or wastes?
For new tenants, are installations of this type required for the planned operations? ☐ Yes ☐ No
If YES to either question in this section 5-6, please describe.
6.0 ASBESTOS CONTAINING BUILDING MATERIALS
E-4
Please be advised that an asbestos survey may have been performed at the Project. If provided, please review the information that identifies the locations of known asbestos containing material or presumed asbestos containing material. All personnel and appropriate subcontractors should be notified of the presence of these materials, and informed not to disturb these materials. Any activity that involves the disturbance or removal of these materials must be done by an appropriately trained individual/contractor.
7.0 OTHER REGULATORY PERMITS/REQUIREMENTS
7-1. Does the operation have or require an industrial wastewater permit to discharge into the local National Pollutant Discharge Elimination System (NPDES)? [Example: This applies when wastewater from equipment cleaning is routed through a pH neutralization system prior to discharge into the sanitary or lab sewer for certain pharmaceutical manufacturing wastewater; etc.] Permits are obtained from the regional sanitation district that is treating wastewater.
If so, please attach a copy of this permit or provide it later when it has been prepared.
7-2. [intentionally omitted]
7-3. NOTE: Please be advised that if you are involved in any tenant improvements that require a construction permit, you will be asked to provide the local city with a Hazardous Materials Inventory Statement (HMIS) to ensure that your hazardous chemicals fall within the applicable Fire Code fire control area limits for the applicable construction occupancy of the particular building. The HMIS will include much of the information listed in Section 2-2. Neither the landlord nor the landlord’s property management company expressly warrants that the inventory provided in Section 2-2 will necessarily meet the applicable fire code fire control area limits for building occupancy, especially in shared tenant occupancy situations. It is the responsibility of the tenant to ensure that a facility and site can legally handle the intended operations and hazardous materials desired/ needed for its operations, but the landlord is happy to assist in this determination when possible.
E-5
CERTIFICATION
I am familiar with the real property described in this questionnaire. By signing below, I represent and warrant that the answers to the above questions are complete and accurate to the best of my knowledge. I also understand that Lessor will rely on the completeness and accuracy of my answers in assessing any environmental liability risks associated with the Project.
Signature:
Name:
Title:
Date:
Telephone:
E-6
EXHIBIT F
Commencement Date Certificate
[SAMPLE ONLY – FORM TO BE COMPLETED BY LANDLORD AND EXECUTED BY TENANT ON OR AFTER COMMENCEMENT DATE]
LANDLORD:
TENANT:
LEASE DATE: ,
PREMISES:
Tenant hereby accepts the Premises as being in the condition required under the Lease.
Landlord: |
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[DO NOT SIGN] |
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F-1
EXHIBIT G
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this “Memorandum”) is made as of the day of (the “Effective Date”), by and between Centennial Valley Properties I, LLC, a Colorado limited liability company (“Landlord”) and Biodesix, Inc., a Delaware corporation (“Tenant”).
[Remainder of Page Left Intentionally Blank]
G-1
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum as of the date set forth above.
LANDLORD: |
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Dated:__________ |
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Centennial Valley Properties I, LLC, a Colorado limited liability company. |
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By: Koelbel and Company, a Colorado corporation, its manager |
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By:_____________ |
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Name printed:_____________ |
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Title:____________ |
STATE OF COLORADO )
)
COUNTY OF )
The foregoing instrument was acknowledged before me the day of ______, 20__ by ________________________ as ___________ for Centennial Valley Properties I, LLC, a Colorado limited liability company.
Witness my hand and official seal.
My commission expires: _______
[S E A L] |
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Notary Public |
TENANT: |
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Dated:__________ |
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Biodesix, Inc., a Delaware corporation |
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By:_____________ |
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Title:____________ |
STATE OF COLORADO )
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COUNTY OF )
The foregoing instrument was acknowledged before me the day of ______, 20__ by ________________________ as ___________ for Centennial Valley Properties I, LLC, a Colorado limited liability company.
Witness my hand and official seal.
My commission expires: _______
[S E A L] |
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Notary Public |
G-2
EXHIBIT H
Option to Extend Addendum
H-1
(10) days after the expiration of such twenty (20) day period, the two (2) appraisers shall select a third appraiser meeting the aforementioned criteria. Once the third appraiser (i.e. arbitrator) has been selected as provided for above, then, as soon thereafter as practicable but in any case, within fourteen (14) days, the arbitrator shall make his determination of which of the two (2) Estimates most closely reflects the Prevailing Market Rate and such Estimate shall be binding on both Landlord and Tenant as the Base Rent rate for the Premises, and the parties shall enter into the Renewal Amendment as described and defined above. If the arbitrator believes that expert advice would materially assist him, he may retain one or more qualified persons to provide such expert advice. The parties shall share equally in the costs of the arbitrator and of any experts retained by the arbitrator. Any fees of any appraiser, counsel or experts engaged directly by Landlord or Tenant, however, shall be borne by the party retaining such appraiser, counsel or expert.
H-2
EXHIBIT I
WORK LETTER
This “Work Letter” is attached to and made a part of the Lease Agreement (Single Tenant – NNN) (the “Lease”) by and between Centennial Valley Properties I, LLC, a Colorado limited liability company (“Landlord”), and Biodesix, Inc., a Delaware corporation (“Tenant”) for the Premises as defined in the Lease. Capitalized terms not otherwise defined in this Work Letter shall have the meanings given to such terms in the Lease.
This Work Letter sets forth the rights and obligations of Landlord and Tenant with respect to the improvements to be performed in and at the Premises for Tenant’s use. It is agreed that construction of the Tenant Work (as defined in Section 4.1) shall be completed in accordance with the Approved Construction Drawings (as defined in Section 3.3) at Tenant’s sole cost and expense, subject to the Allowance as defined in Section 2.1) and disbursed by Landlord pursuant to the terms of this Work Letter.
SECTION 1
LANDLORD WORK; ALLOWANCE
1.1 Landlord’s Delivery. Except as otherwise specified in Section 1.2 below, Landlord shall have no obligation for construction work or improvements in the Premises. Landlord’s contribution to the construction and improvements consists only of (a) delivery of possession of the Premises to Tenant in the condition provided for under the Lease, and (b) disbursement to Tenant of the Allowance in accordance with the terms and conditions of this Work Letter.
1.2 Landlord Work. Simultaneously with the construction of the Tenant Work, Landlord shall, at Landlord’s sole cost and expense, perform the work substantially in accordance with permittable construction drawings based on the pricing plans set described on Schedule 1 attached hereto (collectively, the “Landlord Work”). As provided for in the above-referenced pricing plan, the Landlord Work does not include exterior signage shown on the pricing plan. Landlord shall perform the construction of the Landlord Work in a good and workmanlike manner consistent with first class standards and in accordance with all Applicable Laws. Landlord shall use commercially reasonable efforts to achieve substantial completion of the Landlord Work on or before the Commencement Date. Landlord shall assign to Tenant any guarantees or warrantees procured by Landlord from contractors, subcontractors, or materialmen relating to any Landlord Work on items that Tenant is required to maintain under the Lease. By execution of the Lease, Tenant acknowledges receipt of a copy of the pricing plans described in Schedule 1.
1.3 Punchlist. Upon Substantial Completion of the Landlord Work, Landlord and Tenant shall jointly inspect the Landlord Work to develop a list of items under Section 1.2 that are not complete (the “Punchlist Items”). The existence of the punchlist (and completion of the Punchlist Items thereon) shall not delay the Commencement Date and shall not affect Tenant’s obligation pay Rent in accordance with the provisions of the Lease. Landlord shall complete the Punchlist Items with reasonable diligence. Notwithstanding Landlord’s obligation to complete the Punchlist Items, Tenant shall be responsible, at Tenant’s sole cost and expense, for repairing or replacing any portion of the Landlord Work damaged by Tenant or Tenant's Construction Agents before or after Landlord has completed the Landlord Work, and such items may not be included as Punchlist Items.
1.4 Landlord’s Rights. Landlord shall have the right to approve any contractors, subcontractors, and engineers used by Tenant in connection with the Tenant Work as provided for herein. Further, Landlord shall have the right to post and maintain any notices of non-responsibility in or about the Premises during the performance of the Tenant Work.
1.5 Coordination of Work. Landlord retains the right to access the Premises during the Construction Period in order to complete the Landlord Work. Landlord and Tenant hereby agree to fairly allocate the usage of the Premises during the concurrent performance of Landlord Work and Tenant Work and to cooperate with such overlapping work in the Premises and the Building. Furthermore, Landlord and Tenant shall, and shall cause all of their respective Construction Agents (as defined in Section 4.1(b)) to, coordinate their respective construction activities in connection with the Landlord Work and the Tenant Work, including the introduction and storage of their materials and equipment and the execution of their work and shall coordinate such work as the circumstances may require to effect timely completion of the Landlord Work and Tenant Work.
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SECTION 2
ALLOWANCE ITEMS; DISBURSEMENT
2.1 Allowance.
2.2 Disbursement of the Allowance.
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SECTION 3
CONSTRUCTION DRAWINGS
3.1 Selection of Architect, Contractor and Engineer/Construction Drawings. Tenant shall retain DLR Group (the “Architect”) to prepare the Construction Drawings. Tenant shall retain Swinerton Construction (the “Contractor”) as Tenant’s general contractor. Tenant shall retain the engineering consultants designated by Landlord (the “Engineer”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, life safety, and sprinkler work in the Premises, which work is not part of the Base Building. Tenant may retain a project manager to oversee the Tenant Work (the “Project Manager”), the cost of which shall be included in the Allowance, subject to Section 2 above. Landlord may, at its sole cost and expense, retain a project manager to oversee
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the Tenant Work to ensure that the Tenant Work is performed in compliance with Laws, and the terms and conditions of the Lease and this Work Letter (including, without limitation, compliance with the Approved Construction Drawings and all Schedules attached hereto). The plans and drawings to be prepared by Architect and the Engineers hereunder in connection with the Tenant Work (which plans and drawings may also include some portion of the Landlord Work) shall be known collectively as the “Construction Drawings”. All Construction Drawings shall be subject to Landlord's approval, which approval shall not be unreasonably withheld, conditioned, or delayed. Landlord shall advise Tenant, in writing, within ten (10) business days after Landlord’s receipt of the Construction Drawings if the same is unsatisfactory or incomplete in any respect (and specify in such written notice the unsatisfactory items). Landlord's failure to respond within ten (10) business days after its receipt of the Construction Drawings shall be deemed as Landlord's approval. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the Base Building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord's review of the Construction Drawings shall be for its sole purpose and shall not imply Landlord's review of the same, or obligate Landlord to review the same, for quality, design, compliance with Laws, or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers, and consultants and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord's space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, and Tenant’s waiver and indemnity set forth in the Lease shall specifically apply to the Construction Drawings. Tenant shall be fully responsible and liable for the sufficiently of the design to conform to all Applicable Laws and as necessary to accommodate the use and storage of Tenant’s Hazardous Materials.
3.2 Final Construction Drawings. Tenant shall supply the Architect and the Engineer with a complete listing of standard and non-standard equipment and specifications, including, without limitation, HVAC requirements, electrical requirements, and special electrical receptacle requirements for the Premises to enable the Architect and the Engineer to complete the Final Construction Drawings in the manner as set forth below. Tenant shall promptly cause the Architect and the Engineer to complete the architectural and engineering drawings for the Tenant Work, and Architect shall compile a fully-coordinated set of architectural, structural (if required), mechanical, electrical, and plumbing working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Final Construction Drawings”) and shall submit the same to Landlord for Landlord's approval, which approval shall not be unreasonably withheld, conditioned, or delayed. Tenant shall supply Landlord with two (2) copies signed by Tenant of such Final Construction Drawings. Landlord shall advise Tenant, in writing, within ten (10) business days after Landlord's receipt of the Final Construction Drawings for the Tenant Work if the same is unsatisfactory or incomplete in any respect (and specify in such written notice the unsatisfactory items). If Landlord so advises Tenant, Tenant shall promptly revise the Final Construction Drawings in accordance with such review and any disapproval of Landlord in connection therewith. Landlord's failure to respond within ten
(10) business days after its receipt of the Final Construction Drawings shall be deemed as Landlord's approval.
3.3 Approved Construction Drawings. The Final Construction Drawings with the changes required by Landlord pursuant to Section 3.2 above, if any, (the “Approved Construction Drawings”) shall be submitted by Tenant to the appropriate municipal authorities for all applicable building permits. Tenant hereby agrees that neither Landlord nor Landlord's consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Premises and that obtaining the same shall be Tenant's sole responsibility; provided, however, that Landlord shall cooperate, at no cost to Landlord, with Tenant in executing permit applications and performing other ministerial acts necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications, or alterations in the Approved Construction Drawings may be made without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned, or delayed.
3.4 Plan Review Costs. Tenant shall reimburse Landlord for all actual third-party costs and expenses (“Plan Review Costs”) incurred by Landlord for the review and approval of any structural work included in the Construction Drawings, Final Construction Drawings, and any other proposed plans and specifications relating to structural aspects of the Tenant Work. Tenant shall pay such Plan Review Costs to Landlord within ten (10) business days after receipt of Landlord's invoices therefor.
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SECTION 4
CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1 Tenant’s Selection of Contractors.
4.2 Construction of the Tenant Work by Tenant’s Construction Agents.
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SECTION 5
CONSTRUCTION PERIOD
5.1 Construction Period. During the Construction Period, Landlord shall adopt a construction schedule consistent with Tenant's construction schedule, and Tenant and Landlord and their contractors shall work in harmony and not interfere with or delay the performance of Tenant Work or Landlord Work, or with the work of any other tenant or occupant of the Building. All work performed by Tenant or Tenant's contractors shall be performed in a good and workmanlike manner consistent with first class standards and in accordance with all Laws, and subject to such rules and regulations as Landlord shall reasonably prescribe.
5.2 Tenant Responsibility. Tenant assumes full responsibility for all acts of Tenant, the Tenant Related Parties, and Tenant’s Construction Agents and for all property, equipment, materials, tools, or machinery placed or stored in the Premises by Tenant, Tenant Related Parties, or Tenant's Construction Agents, except as relates Losses arising from the negligence or willful misconduct of Landlord or Landlord's contractors, subcontractors, or materialmen. Tenant shall promptly repair or cause to be repaired, at its sole cost and expense, all damage caused to the Premises or the Property by Tenant or any of the Tenant Related Parties or Tenant's Construction Agents. Tenant shall indemnify and hold Landlord and Landlord Indemnified Parties harmless from and against any and all Losses of any nature occurring during the Construction Period, including damage or delays to completion of the Landlord Work as a result of the actions or omissions of Tenant, Tenant Related Parties, or Tenant’s Construction Agents.
SECTION 6
GENERAL PROVISIONS
6.1 Tenant Representative. Tenant has designated Eric Stenner as its sole representative with respect to the matters set forth in this Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter, until further written notice to Landlord.
6.2 Landlord Representative. Landlord has designated Walter Koelbel and/or Jeff Sheets as its representatives with respect to the matters set forth in this Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Work Letter.
6.3 “As-Built” Drawings and Specifications. Within thirty (30) days after the completion of the Tenant Work, Tenant shall deliver to Landlord, at Tenant's sole cost and expense, a CADD file in a format reasonably acceptable to Landlord and a set of mylar reproducibles of all "as-built" drawings and specifications of the Premises (reflecting all field changes and including, without limitation, architectural, structural, mechanical, and electrical drawings and specifications) prepared by all of Tenant’s Construction Agents.
6.4 Force and Effect. The terms and conditions of this Work Letter supplement the Lease and shall be construed to be a part of the Lease and are incorporated in the Lease. Without limiting the generality of the foregoing, any default by any party hereunder shall have the same force and effect as a default under the Lease. Should any inconsistency arise between this Work Letter and the Lease as to the specific matters which are the subject of this Work Letter, the terms and conditions of this Work Letter shall control.
6.5 Applicability. This Exhibit shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premises or any additions to the Premises in the event of a renewal or extension of the original Term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or
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supplement to the Lease.
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SCHEDULE 1 TO EXHIBIT C (WORK LETTER) LANDLORD WORK
919 W Dillon Rd Renovation Pricing Set – 01/27/2022 prepared by DLR Group reference No. 37-22209-00 Pricing Set Sheet List
0.1 |
|
Cover Sheet |
1.1 |
|
Demolition Plan |
1.2 |
|
Demolition Roof Plan |
1.3 |
|
Demolition Elevations |
1.4 |
|
New Plan |
1.6 |
|
New Elevations |
1.7 |
|
New Elevations – Rendered |
1.8 |
|
Perspective Views & Materials |
S1.1 |
|
Structural Foundation Demo Plan |
S1.2 |
|
Structural Framing Plan |
SD 1.1 |
|
Structural Foundation Plan |
SD 1.2 |
|
Structural Framing Plan |
Schedule 1 – I-1
SCHEDULE 2 TO EXHIBIT C (WORK LETTER) INSURANCE REQUIREMENTS
SECTION 1. General. The Contractor shall procure and maintain in effect until final completion of the Tenant Work, or such longer periods as may be required as set forth in the Work Letter, the Lease or in any other agreements or contracts governing the construction of the Tenant Work (collectively, the “Contract Documents”), the insurance coverages described below.
Parties; and
Schedule 2 I-1
SECTION 2. Subcontractors.
SECTION 3. Design. The Architect, Engineer, Contractor, or any subcontractor who performs professional design services shall procure and maintain Professional Liability Errors and Omissions Insurance which shall be provided in accordance with the following:
SECTION 4. Terms and Conditions.
Schedule 2 I-2
Schedule 2 I-3
Exhibit 10.2
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (SINGLE TENANT – NNN) (this "First Amendment") is made and entered into this 11th day of March, 2022 (the "First Amendment Date"), by and between Centennial Valley Properties I, LLC, a Colorado limited liability company ("Landlord"), and Biodesix, Inc., a Delaware corporation ("Tenant").
RECITALS
NOW, THEREFORE, for good and valuable consideration the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant agree as follows:
AGREEMENT
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Period |
Annualized Base Rent Rate per square foot of Building |
Base Rent/Year |
Base Rent/Month |
1-12 |
*$34.00 |
$2,719,320.00 |
$226,610.00 |
13-24 |
⸶$36.33 |
$2,905,926.62 |
$242,160.55 |
25-36 |
$38.19 |
$3,054,051.91 |
$254,504.33 |
37-48 |
$39.24 |
$3,138,030.91 |
$261,502.58 |
49-60 |
$40.32 |
$3,224,409.31 |
$268,700.78 |
61-72 |
$41.44 |
$3,313,986.91 |
$276,165.58 |
73-84 |
$42.59 |
$3,405,963.91 |
$283,830.33 |
25-96 |
$43.77 |
$3,500,340.31 |
$291,695.03 |
97-108 |
$44.99 |
$3,597,915.91 |
$299,826.33 |
109-120 |
$46.24 |
$3,697,890.91 |
$308,157.58 |
121-132 |
$47.53 |
$3,801,065.11 |
$316,755.43 |
133-144 |
$48.86 |
$3,907,438.51 |
$325,619.88 |
* Subject to Abated Rent pursuant to Section 8.7(a).
□ Subject to Partial Abated Rent pursuant to Section 8.7(b).
[signature page follows]
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IN WITNESS WHEREOF, Landlord and Tenant have caused this First Amendment to be executed as of the First Amendment Date.
LANDLORD:
Centennial Valley Properties I, LLC, a Colorado limited liability company
By: Koelbel and Company,
a Colorado corporation, its manager
By: |
/s/ WALTER A. KOELBEL, JR. |
Name printed: |
Walter A. Koelbel, Jr. |
Title: |
Koelbel and Company |
Date of Signature: |
3/11/2022 |
TENANT:
Biodesix, Inc., a Delaware corporation
By: |
/s/ ROBIN HARPER COWIE |
Name printed: |
Robin Harper Cowie |
Title: |
CFO |
Date of Signature: |
3/11/2022 |
SIGNATURE PAGE
FIRST AMENDMENT TO LEASE AGREEMENT (SINGLE TENANT – NNN)
Exhibit 10.6
AMENDMENT NO. 3 TO ASSET PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
This Amendment No. 3 to Asset Purchase Agreement and Plan of Reorganization (this “Amendment”), is made and entered into as of April 7, 2022, and amends that certain Asset Purchase Agreement and Plan of Reorganization, dated June 30, 2018 (the “Original Agreement”), by and among Biodesix, Inc. (the “Company”); Integrated Diagnostics, Inc. (“Seller”); and IND Funding LLC (“Stockholder”), as amended by that certain Amendment No. 1 to Asset Purchase Agreement and Plan of Reorganization dated as of July 29, 2021 and that certain Amendment No. 2 to Asset Purchase Agreement and Plan of Reorganization dated as of August 9, 2021 (as amended, the “Agreement”). Capitalized terms used but not defined in this Amendment have the meanings specified for such capitalized terms in the Agreement.
WHEREAS, pursuant to Section 8.11 of the Agreement, the Agreement may be amended, modified, altered or supplemented by means of a written instrument duly executed and delivered on behalf of the Company, Seller and Stockholder; and
WHEREAS, the Company, Seller and Stockholder desire to amend the Amendment as set forth below pursuant to its terms.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual promises, representations, warranties and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
“Milestone Payment
[signature pages follow]
IN WITNESS WHEREOF, the parties have executed this Amendment to be duly executed and delivered as of the day and year first written above.
BIODESIX, INC. |
|
By: |
/s/ RYAN SIUREK |
Name: |
Ryan Siurek |
Title: |
Chief Accounting Officer |
IND Funding LLC |
|
By: |
/s/ STEPHEN J. DENELSKY |
Name: |
Stephen J. Denelsky |
Title: |
Managing Partner |
Integrated Diagnostics, Inc. |
|
By: |
/s/ STEPHEN J. DENELSKY |
Name: |
Stephen J. Denelsky |
Title: |
Managing Partner |
Signature Page to
Amendment No. 3 to Asset Purchase Agreement and Plan of Reorganization
Exhibit 10.7
Securities Purchase Agreement
This Securities Purchase Agreement (this “Agreement”), dated as of May 9, 2022, is entered into by and between Biodesix, Inc., a Delaware corporation (“Company”), and Streeterville Capital, LLC, a Utah limited liability company, its successors and/or assigns (“Investor”).
A. Company and Investor are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder by the United States Securities and Exchange Commission (the “SEC”).
B. Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, (a) that certain Secured Convertible Promissory Note #1, in the form attached hereto as Exhibit A, in the original principal amount of $16,025,000.00 (“Note #1”), and (b) subject to the satisfaction of the Note #2 Purchase Conditions (as defined below), that certain Secured Convertible Promissory Note #2 in the form attached hereto as Exhibit B, in the original principal amount of $10,250,000.00 (“Note #2,” and together with Note #1, the “Notes”). Each of the Notes shall be convertible into shares of common stock, $0.001 par value per share, of Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
C. This Agreement, the Notes, the Security Agreement (as defined below) and all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction Documents”.
D. For purposes of this Agreement: “Conversion Shares” means all shares of Common Stock issuable upon conversion of all or any portion of the Notes; and “Securities” means the Notes and the Conversion Shares.
NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Investor hereby agree as follows:
If to Company:
Biodesix, Inc. |
2970 Wilderness Place, Suite 100 |
Boulder, Colorado 80301 |
If to Investor:
Streeterville Capital, LLC |
303 East Wacker Drive, Suite 1040 |
Chicago, Illinois 60601 |
With a copy to (which copy shall not constitute notice):
Hansen Black Anderson Ashcraft PLLC |
3051 West Maple Loop Drive, Suite 325 |
Lehi, Utah 84043 |
[Remainder of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above written.
INVESTOR:
Streeterville Capital, LLC
By: /s/ John M. Fife
John M. Fife, President
COMPANY:
Biodesix, Inc.
By: /s/ Scott Hutton
Scott Hutton, Chief Executive Officer
ATTACHED EXHIBITS:
EXHIBIT A
SECURED CONVERTIBLE PROMISSORY NOTE #1
For purposes of sections 1272, 1273, and 1275 of the Internal Revenue Code of 1986, as amended, this note is being issued with an original issue discount. Borrower agrees to provide promptly to the holder of this Note, upon written request, the issue price, amount of original issue discount, issue date, and yield to maturity. Any such written request should be made pursuant to Section 8.9 of the Purchase Agreement (as defined below) pursuant to which this Note was issued.
SECURED CONVERTIBLE PROMISSORY NOTE #1
Effective Date: May 9, 2022 U.S. $16,025,000.00
Notwithstanding the foregoing, for purposes of this Note, if a Trigger Event has been cured by Borrower or waived by Lender or an Event of Default has been waived by Lender, then, unless otherwise agreed to by Lender and Borrower, Lender shall no longer have any rights or remedies granted to it upon the occurrence of a Trigger Event or an Event of Default hereunder (except for any Trigger Effect that has already been applied and will remain in effect).
[Remainder of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
ACKNOWLEDGED, ACCEPTED AND AGREED:
LENDER:
Streeterville Capital, LLC
By:
John M. Fife, President
BORROWER:
Biodesix, Inc.
By:
Scott Hutton, Chief Executive Officer
ATTACHMENT 1
DEFINITIONS
Capitalized terms used but not defined in this Note shall have the meanings given to them in the Purchase Agreement or the Security Agreement, as applicable. In addition, for purposes of this Note, the following terms shall have the following meanings:
“Closing Bid Price” and “Closing Trade Price” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Lender and Borrower. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
“DTC” means the Depository Trust Company or any successor thereto.
“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.
“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.
“DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.
“Equity Conditions Failure” means that any of the following conditions has not been satisfied on any given Redemption Date: (a) with respect to the applicable date of determination all of the Conversion Shares would be (i) registered for trading under applicable federal and state securities laws, (ii) freely tradable under Rule 144, or (iii) otherwise freely tradable without the need for registration under any applicable federal or state securities laws; (b) there are no restrictions in place that would prevent Lender from selling the Conversion Shares; (c) no Trigger Event shall have occurred and be continuing; (d) the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) and two hundred (200) Trading Days shall be greater than $500,000.00; (e) the five (5) day VWAP of the Common Stock is greater than or equal to $1.00; and (f) the Common Stock is trading on Nasdaq or NYSE.
“Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower. Notwithstanding the foregoing or anything to the contrary contained in this Note or the other Transaction Documents, the definition of a “Fundamental Transaction” shall not include, nor shall it prohibit Borrower from undertaking, incurring or consummating, any Permitted Indebtedness, Permitted Investment, Permitted Lien, Permitted Transfer, Permitted Restricted Payments, Permitted Restricted Debt Payments, or Permitted Affiliate Transactions.
“Major Trigger Event” means any Trigger Event occurring under Sections 4.1(a) - 4.1(i).
“Mandatory Default Amount” means the Outstanding Balance following the application of the Trigger Effect.
“Maximum Monthly Redemption Amount” means $1,425,000.00 per calendar month.
“Minor Trigger Event” means any Trigger Event that is not a Major Trigger Event.
“Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, the Transaction Expense Amount, the OID, accrued but unpaid interest, collection and enforcements costs (including reasonable and documented out-of-pocket attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions, and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note.
“Permitted Affiliate Transaction” means (a) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than could reasonably be obtained in an arm’s length transaction with a non-affiliated Person, (b) customary compensation and indemnification of, and other employment arrangements approved by Borrower’s board of directors with, directors, officers and employees of Borrower or any of its Subsidiaries in the ordinary course of business, (c) subject to limitations set forth in this Agreement regarding the payment of directors fees, reasonable and customary director, officer and employee compensation (including bonuses and stock option programs) and benefits arrangements, in each case, in the ordinary course of business and approved by the board of directors (or equivalent managing body) (or a committee thereof) of Borrower; and (d) transactions constituting Permitted Restricted Payments, to the extent permitted thereunder
“Permitted Restricted Debt Payment” means (a) any payment on any Subordinated Debt, to the extent permitted under the terms of the subordination, intercreditor or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Secured Obligations owed to Lender.
“Permitted Restricted Payment” means, with respect to the payment of any dividends, or making of any distribution or the payment, redemption, retirement or purchase of any capital stock:
(i) Borrower may convert any of its convertible securities or Subordinated Debt into other securities pursuant to the terms of such convertible securities or Subordinated Debt or otherwise in exchange thereof;
(ii) Borrower or any Subsidiary may pay dividends solely in equity interests of Borrower or Subsidiary, and any Subsidiary may pay cash distributions to Borrower or any other Subsidiary;
(iii) Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided that the aggregate amount of all such repurchases does not exceed One Hundred Thousand Dollars ($100,000) per fiscal year;
(iv) Borrower or any Subsidiary may make cash payments in lieu of fractional shares;
(v) Borrower may purchase, redeem, retire, or otherwise acquire its equity interests with the proceeds received from a substantially concurrent issue of new equity interests, provided that no Event of Default has occurred or would result therefrom;
(vi) Borrower may additionally purchase, redeem, retire, or otherwise acquire its equity interests in an amount necessary to satisfy its obligation under the Integrated Diagnostics APA; or
(vii) Borrower may repurchase from managers, officers or employees pursuant to the terms of share purchase plans, restricted share purchase agreements or other similar agreements in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year.
“Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.
“Redemption Conversion Price” means eighty-five percent (85%) multiplied by the lowest daily VWAP during the ten (10) Trading Days immediately preceding the date the applicable Redemption Notice is delivered.
“Trading Day” means any day on which Borrower’s principal market is open for trading.
“Trigger Effect” means multiplying the Outstanding Balance as of the date the applicable Trigger Event occurred by (a) ten percent (10%) for each occurrence of any Major Trigger Event, or (b) five percent (5%) for each occurrence of any Minor Trigger Event, and then adding the resulting product to the Outstanding Balance as of the date the applicable Trigger Event occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Trigger Event occurred; provided that the Trigger Effect may only be applied three (3) times hereunder with respect to Major Trigger Events and three (3) times hereunder with respect to Minor Trigger Events; and provided further that the Trigger Effect shall not apply to any Trigger Event pursuant to Section 4.1(j) hereof. In the event Lender has applied three (3) Trigger Effects for Major Trigger Events, then any subsequent Major Trigger Events will be considered Minor Trigger Effects for purposes of the Trigger Effect.
“VWAP” means the volume weighted average price of the Common Stock on the principal market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.
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EXHIBIT A
Streeterville Capital, LLC
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
Biodesix, Inc. Date:
2970 Wilderness Place, Suite 100
Boulder, Colorado 80301
REDEMPTION NOTICE
The above-captioned Lender hereby gives notice to Biodesix, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Secured Convertible Promissory Note #1 made by Borrower in favor of Lender on May 9, 2022 (the “Note”), that Lender elects to redeem a portion of the Note in Conversion Shares or in cash as set forth below. In the event of a conflict between this Redemption Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Redemption Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
REDEMPTION INFORMATION
A. Redemption Date: ____________, 202_
B. Redemption Amount: ____________
C. Portion of Redemption Amount to be Paid in Cash: ____________
D. Portion of Redemption Amount to be Converted into Common Stock: ____________ (B minus C)
E. Redemption Conversion Price: _______________
F. Conversion Shares: _______________ (D divided by E)
G. Remaining Outstanding Balance of Note: ____________ *
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Redemption Notice and such Transaction Documents.
Please transfer the Conversion Shares, if applicable, electronically (via DWAC) to the following account:
Broker: Address:
DTC#:
Account #:
Account Name:
To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Redemption Notice (by facsimile transmission or otherwise) to:
_____________________________________
_____________________________________
_____________________________________
Sincerely,
Lender:
Streeterville Capital, LLC
By:
John M. Fife, President
EXHIBIT B
SECURED CONVERTIBLE PROMISSORY NOTE #2
For purposes of sections 1272, 1273, and 1275 of the Internal Revenue Code of 1986, as amended, this note is being issued with an original issue discount. Borrower agrees to provide promptly to the holder of this Note, upon written request, the issue price, amount of original issue discount, issue date, and yield to maturity. Any such written request should be made pursuant to Section 8.9 of the Purchase Agreement (as defined below) pursuant to which this Note was issued
SECURED CONVERTIBLE PROMISSORY NOTE #2
Effective Date: January 31, 2023 U.S. $10,250,000.00
FOR VALUE RECEIVED, Biodesix, Inc., a Delaware corporation (“Borrower”), promises to pay to Streeterville Capital, LLC, a Utah limited liability company, or its successors or assigns (“Lender”), $10,250,000.00 and any interest, fees, charges, and late fees accrued hereunder on the date that is twenty-four (24) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of six percent (6%) per annum from the Purchase Price Date until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. This Secured Convertible Promissory Note #2 (this “Note”) is issued and made effective as of the date set forth above (the “Effective Date”). This Note is issued pursuant to that certain Securities Purchase Agreement dated May 9, 2022, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
This Note carries an original issue discount (“OID”) of $250,000.00. The purchase price for this Note shall be $10,000,000.00 (the “Purchase Price”), computed as follows: $10,250,000.00 original principal balance, less the OID. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds.
Notwithstanding the foregoing, for purposes of this Note, if a Trigger Event has been cured by Borrower or waived by Lender or an Event of Default has been waived by Lender, then, unless otherwise agreed to by Lender and Borrower, Lender shall no longer have any rights or remedies granted to it upon the occurrence of a Trigger Event or an Event of Default hereunder (except for any Trigger Effect that has already been applied and will remain in effect).
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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
ACKNOWLEDGED, ACCEPTED AND AGREED:
LENDER:
Streeterville Capital, LLC
By:
John M. Fife, President
BORROWER:
Biodesix, Inc.
By:
Scott Hutton, Chief Executive Officer
ATTACHMENT 1
DEFINITIONS
Capitalized terms used but not defined in this Note shall have the meanings given to them in the Purchase Agreement, the Security Agreement, or Note #1, as applicable. In addition, for purposes of this Note, the following terms shall have the following meanings:
“Closing Bid Price” and “Closing Trade Price” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Lender and Borrower. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
“DTC” means the Depository Trust Company or any successor thereto.
“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.
“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.
“DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.
“Equity Conditions Failure” means that any of the following conditions has not been satisfied on any given Redemption Date: (a) with respect to the applicable date of determination all of the Conversion Shares would be (i) registered for trading under applicable federal and state securities laws, (ii) freely tradable under Rule 144, or (iii) otherwise freely tradable without the need for registration under any applicable federal or state securities laws; (b) there are no restrictions in place that would prevent Lender from selling the Conversion Shares; (c) no Trigger Event shall have occurred and be continuing; (d) the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) and two hundred (200) Trading Days shall be greater than $500,000.00; (e) the five (5) day VWAP of the Common Stock is greater than or equal to $1.00; and (f) the Common Stock is trading on Nasdaq or NYSE.
“Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity
whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower. Notwithstanding the foregoing or anything to the contrary contained in this Note or the other Transaction Documents, the definition of a “Fundamental Transaction” shall not include, nor shall it prohibit Borrower from undertaking, incurring or consummating, any Permitted Indebtedness, Permitted Investment, Permitted Lien, Permitted Transfer, Permitted Restricted Payments, Permitted Restricted Debt Payments, or Permitted Affiliate Transactions.
“Major Trigger Event” means any Trigger Event occurring under Sections 4.1(a) - 4.1(i).
“Mandatory Default Amount” means the Outstanding Balance following the application of the Trigger Effect.
“Maximum Monthly Redemption Amount” means $950,000.00 per calendar month.
“Minor Trigger Event” means any Trigger Event that is not a Major Trigger Event.
“Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, the OID, accrued but unpaid interest, collection and enforcements costs (including reasonable and documented out-of-pocket attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions, and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note.
“Permitted Affiliate Transaction” means (a) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than could reasonably be obtained in an arm’s length transaction with a non-affiliated Person, (b) customary compensation and indemnification of, and other employment arrangements approved by Borrower’s board of directors with, directors, officers and employees of Borrower or any of its Subsidiaries in the ordinary course of business, (c) subject to limitations set forth in this Agreement regarding the payment of directors fees, reasonable and customary director, officer and employee compensation (including bonuses and stock option programs) and benefits arrangements, in each case, in the ordinary course of business and approved by the board of directors (or equivalent managing body) (or a committee thereof) of Borrower; and (d) transactions constituting Permitted Restricted Payments, to the extent permitted thereunder
“Permitted Restricted Debt Payment” means (a) any payment on any Subordinated Debt, to the extent permitted under the terms of the subordination, intercreditor or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Secured Obligations owed to Lender.
“Permitted Restricted Payment” means, with respect to the payment of any dividends, or making of any distribution or the payment, redemption, retirement or purchase of any capital stock:
(i) Borrower may convert any of its convertible securities or Subordinated Debt into other securities pursuant to the terms of such convertible securities or Subordinated Debt or otherwise in exchange thereof;
(ii) Borrower or any Subsidiary may pay dividends solely in equity interests of Borrower or Subsidiary, and any Subsidiary may pay cash distributions to Borrower or any other Subsidiary;
(iii) Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided that the aggregate amount of all such repurchases does not exceed One Hundred Thousand Dollars ($100,000) per fiscal year;
(iv) Borrower or any Subsidiary may make cash payments in lieu of fractional shares;
(v) Borrower may purchase, redeem, retire, or otherwise acquire its equity interests with the proceeds received from a substantially concurrent issue of new equity interests, provided that no Event of Default has occurred or would result therefrom;
(vi) Borrower may additionally purchase, redeem, retire, or otherwise acquire its equity interests in an amount necessary to satisfy its obligation under the Integrated Diagnostics APA; or
(vii) Borrower may repurchase from managers, officers or employees pursuant to the terms of share purchase plans, restricted share purchase agreements or other similar agreements in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year.
“Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.
“Redemption Conversion Price” means eighty-five percent (85%) multiplied by the lowest daily VWAP during the ten (10) Trading Days immediately preceding the date the applicable Redemption Notice is delivered.
“Trading Day” means any day on which Borrower’s principal market is open for trading.
“Trigger Effect” means multiplying the Outstanding Balance as of the date the applicable Trigger Event occurred by (a) ten percent (10%) for each occurrence of any Major Trigger Event, or (b) five percent (5%) for each occurrence of any Minor Trigger Event, and then adding the resulting product to the Outstanding Balance as of the date the applicable Trigger Event occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Trigger Event occurred; provided that the Trigger Effect may only be applied three (3) times hereunder with respect to Major Trigger Events and three (3) times hereunder with respect to Minor Trigger Events; and provided further that the Trigger Effect shall not apply to any Trigger Event pursuant to Section 4.1(j) hereof. In the event Lender has applied three (3) Trigger Effects for Major Trigger Events, then any subsequent Major Trigger Events will be considered Minor Trigger Effects for purposes of the Trigger Effect.
“VWAP” means the volume weighted average price of the Common Stock on the principal market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.
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EXHIBIT A
Streeterville Capital, LLC
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
Biodesix, Inc. Date:
2970 Wilderness Place, Suite 100
Boulder, Colorado 80301
REDEMPTION NOTICE
The above-captioned Lender hereby gives notice to Biodesix, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Secured Convertible Promissory Note #2 made by Borrower in favor of Lender on January 31, 2023 (the “Note”), that Lender elects to redeem a portion of the Note in Conversion Shares or in cash as set forth below. In the event of a conflict between this Redemption Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Redemption Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
REDEMPTION INFORMATION
A. Redemption Date: ____________, 202_
B. Redemption Amount: ____________
C. Portion of Redemption Amount to be Paid in Cash: ____________
D. Portion of Redemption Amount to be Converted into Common Stock: ____________ (B minus C)
E. Redemption Conversion Price: _______________
F. Conversion Shares: _______________ (D divided by E)
G. Remaining Outstanding Balance of Note: ____________ *
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Redemption Notice and such Transaction Documents.
Please transfer the Conversion Shares, if applicable, electronically (via DWAC) to the following account:
Broker: Address:
DTC#:
Account #:
Account Name:
To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Redemption Notice (by facsimile transmission or otherwise) to:
_____________________________________
_____________________________________
_____________________________________
Sincerely,
Lender:
Streeterville Capital, LLC
By:
John M. Fife, President
EXHIBIT C
SECURITY AGREEMENT
Security Agreement
This Security Agreement (this “Agreement”), dated as of April __, 2022, is executed by Biodesix, Inc., a Delaware corporation (“Debtor”), in favor of Streeterville Capital, LLC, a Utah limited liability company (“Secured Party”).
A. Debtor has issued to Secured Party (a) that certain Secured Convertible Promissory Note #1 in the original principal amount of $16,025,000.00 (“Note #1”), and (b) subject to the satisfaction of certain purchase conditions, that certain Secured Convertible Promissory Note #2 in the original principal amount of $10,250,000.00 (“Note #2,” and together with Note #1, the “Notes”).
B. In order to induce Secured Party to extend the credit evidenced by the Notes, Debtor has agreed to enter into this Agreement and to grant Secured Party a security interest in the Collateral (as defined below).
NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor hereby agrees with Secured Party as follows:
Definitions and Interpretation. When used in this Agreement, the following terms have the following respective meanings:
“Collateral” has the meaning given to that term in Section 2 hereof.
“Intellectual Property” means all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, know-how, inventions, discoveries, studies, data, experimental results, published and unpublished works of authorship, processes, any and all other proprietary rights, and all rights corresponding to all of the foregoing throughout the world, now owned and existing or hereafter arising, created or acquired.
“Lien” shall mean, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the foregoing, and the filing of any financing statement or similar instrument under the UCC or comparable law of any jurisdiction.
“Obligations” means (a) all loans, advances, future advances, debts, liabilities and obligations, howsoever arising, owed by Debtor or any of its affiliates and/or subsidiaries to Secured Party or any affiliate of Secured Party of every kind and description, now existing or hereafter arising, created by the Notes, this Agreement, that certain Securities Purchase Agreement of even date herewith, entered into by and between Debtor and Secured Party (the “Purchase Agreement”), any other Transaction Documents (as defined in the Purchase Agreement), any other agreement between Debtor or any affiliate or subsidiary of Secured Party) and Secured Party (or any affiliate of Secured Party) or any other promissory note issued by Debtor (or any affiliate or subsidiary of Debtor) in favor of Secured Party (or any affiliate of Secured Party), any modification or amendment to any of the foregoing, guaranty of payment or other contract or
by a quasi-contract, tort, statute or other operation of law, whether incurred or owed directly to Secured Party or as an affiliate of Secured Party or acquired by Secured Party or an affiliate of Secured Party by purchase, pledge or otherwise, (b) all costs and expenses, including attorneys’ fees, reasonably incurred by Secured Party or any affiliate of Secured Party in connection with the Notes or in connection with the collection or enforcement of any portion of the indebtedness, liabilities or obligations described in the foregoing clause (a), (c) the payment of all other sums, with interest thereon, advanced in accordance herewith to protect the security of this Agreement, and (d) the performance of the covenants and agreements of Debtor (or any of its affiliates or subsidiaries) contained in this Agreement and all other Transaction Documents.
“Permitted Liens” means (a) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established, (b) purchase money Liens incurred in connection with the acquisition of any Collateral in the ordinary course of business, (c) licenses of intellectual property in connection with joint ventures and other strategic transactions, (d) leases entered into in the ordinary course of business, (e) Liens in favor of Secured Party, and (f) Liens in favor of Silicon Valley Bank.
“UCC” means the Uniform Commercial Code as in effect in the state whose laws would govern the security interest in, including without limitation the perfection thereof, and foreclosure of the applicable Collateral.
Unless otherwise defined herein, all terms defined in the UCC have the respective meanings given to those terms in the UCC.
Grant of Security Interest. As security for the Obligations, Debtor hereby pledges to Secured Party and grants to Secured Party a security interest in all right, title, interest, claims and demands of Debtor in and to the property described in Schedule A hereto, and all replacements, proceeds, products, and accessions thereof (collectively, the “Collateral”).
Authorization to File Financing Statements. Debtor hereby irrevocably authorizes Secured Party at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction or other jurisdiction of Debtor or its subsidiaries any financing statements or documents having a similar effect and amendments thereto that provide any other information required by the Uniform Commercial Code (or similar law of any non-United States jurisdiction, if applicable) of such state or jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including whether Debtor is an organization, the type of organization and any organization identification number issued to Debtor. Debtor agrees to furnish any such information to Secured Party promptly upon Secured Party’s request.
General Representations and Warranties. Debtor represents and warrants to Secured Party that (a) Debtor is the owner of the Collateral and that no other person has any right, title, claim or interest (by way of Lien or otherwise) in, against or to the Collateral, other than Permitted Liens, (b) upon the filing of UCC-1 financing statements with the appropriate state office (or an equivalent in the appropriate foreign office), Secured Party shall have a perfected second-position security interest in the Collateral to the extent that a security interest in the Collateral can be perfected by such filing, except for Permitted Liens, (c) Debtor has received at least a reasonably equivalent value in exchange for entering into this Agreement, (d) Debtor is not insolvent, as defined in any applicable state or federal statute, nor will Debtor be rendered insolvent by the execution and delivery of this Agreement to Secured Party; and (e) as such, this Agreement is a valid and binding obligation of Debtor.
Additional Covenants. Debtor hereby agrees:
to perform all acts that may be necessary to maintain, preserve, protect and perfect in the Collateral, the Lien granted to Secured Party therein, and the perfection and priority of such Lien;
to procure, execute (including endorse, as applicable), and deliver from time to time any endorsements, assignments, financing statements, certificates of title, and all other instruments, documents and/or writings reasonably deemed necessary or appropriate by Secured Party to perfect, maintain and protect Secured Party’s Lien hereunder and the priority thereof;
to provide at least fifteen (15) calendar days prior written notice to Secured Party of any of the following events: (a) any changes or alterations of Debtor’s name, (b) any changes with respect to Debtor’s address or principal place of business, (c) the formation of any subsidiaries of Debtor; or (d) any changes in the location of the Collateral;
upon the occurrence of an Event of Default (as defined in the Notes) under the Notes and, thereafter, at Secured Party’s request, to endorse (up to the outstanding amount under such promissory notes at the time of Secured Party’s request), assign and deliver any promissory notes and all other instruments, documents, or writings included in the Collateral to Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as Secured Party may from time to time specify;
to the extent the Collateral is not delivered to Secured Party pursuant to this Agreement, to keep the Collateral at the principal office of Debtor (unless otherwise agreed to by Secured Party in writing), and not to relocate the Collateral to any other locations without the prior written consent of Secured Party;
not to sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein (other than inventory in the ordinary course of business);
not to, directly or indirectly, allow, grant or suffer to exist any Lien upon any of the Collateral, other than Permitted Liens; and
at any time amounts paid by Secured Party under the Transaction Documents are used to purchase Collateral, Debtor shall perform all acts that may be necessary, and otherwise fully cooperate with Secured Party, to cause (a) any such amounts paid by Secured Party to be disbursed directly to the sellers of any such Collateral, (b) all certificates of title pertaining to such Collateral (as applicable) to be properly filed and reissued to reflect Secured Party’s Lien on such Collateral, and (c) all such reissued certificates of title to be delivered to and held by Secured Party.
Authorized Action by Secured Party. Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact (which appointment is coupled with an interest) and agrees that Secured Party may perform (but Secured Party shall not be obligated to and shall incur no liability to Debtor or any third party for failure so to do) any act which Debtor is obligated by this Agreement to perform, and to exercise such rights and powers as Debtor might exercise with respect to the Collateral, including the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) make any compromise or settlement, and take any action Secured Party deems advisable, with respect to the Collateral; (d) file a copy of this Agreement with any governmental agency, body or authority, at the sole cost and expense of Debtor; (e) insure, process and preserve the Collateral; (f) pay any indebtedness of Debtor relating to the Collateral; (g) execute and file UCC financing statements and other documents, certificates, instruments and
agreements with respect to the Collateral or as otherwise required or permitted hereunder; and (h) take any and all appropriate action and execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement; provided, however, that Secured Party shall not exercise any such powers granted pursuant to clauses (a) through (c) above prior to the occurrence of an Event of Default. The powers conferred on Secured Party under this Section 6 are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Secured Party shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither Secured Party nor any of its stockholders, directors, officers, managers, employees or agents shall be responsible to Debtor for any act or failure to act, except with respect to Secured Party’s own gross negligence or willful misconduct. Nothing in this Section 6 shall be deemed an authorization for Debtor to take any action that it is otherwise expressly prohibited from undertaking by way of other provision of this Agreement.
Default and Remedies.
Default. Debtor shall be deemed in default under this Agreement upon the occurrence of an Event of Default.
Remedies. Upon the occurrence of any such Event of Default, Secured Party shall have the rights of a secured creditor under the UCC, all rights granted by this Agreement and by law, including, without limiting the foregoing, (a) the right to require Debtor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party, and (b) the right to take possession of the Collateral, and for that purpose Secured Party may enter upon premises on which the Collateral may be situated and remove the Collateral therefrom. Debtor hereby agrees that fifteen (15) days’ notice of a public sale of any Collateral or notice of the date after which a private sale of any Collateral may take place is reasonable. In addition, Debtor waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of Secured Party’s rights and remedies hereunder, including, without limitation, Secured Party’s right following an Event of Default to take immediate possession of Collateral and to exercise Secured Party’s rights and remedies with respect thereto. Secured Party may also have a receiver appointed to take charge of all or any portion of the Collateral and to exercise all rights of Secured Party under this Agreement. Secured Party may exercise any of its rights under this Section 7.2 without demand or notice of any kind. The remedies in this Agreement, including without limitation this Section 7.2, are in addition to, not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which Secured Party may be entitled. No failure or delay on the part of Secured Party in exercising any right, power, or remedy will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. All of Secured Party’s rights and remedies, whether evidenced by this Agreement or by any other agreement, instrument or document shall be cumulative and may be exercised singularly or concurrently.
Standards for Exercising Rights and Remedies. To the extent that applicable law imposes duties on Secured Party to exercise remedies in a commercially reasonable manner, Debtor acknowledges and agrees that it is not commercially unreasonable for Secured Party (a) to fail to incur expenses reasonably deemed significant by Secured Party to prepare Collateral for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other persons obligated on Collateral or to fail to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other persons, whether or not in the same business as Debtor, for
expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure Secured Party against risks of loss, collection or disposition of Collateral or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Secured Party in the collection or disposition of any of the Collateral. Debtor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Secured Party would fulfill Secured Party’s duties under the UCC in Secured Party’s exercise of remedies against the Collateral and that other actions or omissions by Secured Party shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this Section. Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any rights to Debtor or to impose any duties on Secured Party that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.
Marshalling. Secured Party shall not be required to marshal any present or future Collateral for, or other assurances of payment of, the Obligations or to resort to such Collateral or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such Collateral and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, Debtor hereby agrees that it will not invoke any law relating to the marshalling of Collateral which might cause delay in or impede the enforcement of Secured Party’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Debtor hereby irrevocably waives the benefits of all such laws.
Application of Collateral Proceeds. The proceeds and/or avails of the Collateral, or any part thereof, and the proceeds and the avails of any remedy hereunder (as well as any other amounts of any kind held by Secured Party at the time of, or received by Secured Party after, the occurrence of an Event of Default) shall be paid to and applied as follows:
First, to the payment of reasonable costs and expenses, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by Secured Party;
Second, to the payment to Secured Party of the amount then owing or unpaid on the Notes (to be applied first to accrued interest and fees and second to outstanding principal) and all amounts owed under any of the other Transaction Documents or other documents included within the Obligations; and
Third, to the payment of the surplus, if any, to Debtor, its successors and assigns, or to whosoever may be lawfully entitled to receive the same.
In the absence of final payment and satisfaction in full of all of the Obligations, Debtor shall remain liable for any deficiency.
Miscellaneous.
Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled “Notices” in the Purchase Agreement, the terms of which are incorporated herein by this reference.
Non-waiver. No failure or delay on Secured Party’s part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right.
Amendments and Waivers. This Agreement may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by Debtor and Secured Party. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given.
Assignment. This Agreement shall be binding upon and inure to the benefit of Secured Party and Debtor and their respective successors and assigns; provided, however, that Debtor may not sell, assign or delegate rights and obligations hereunder without the prior written consent of Secured Party.
Cumulative Rights, etc. The rights, powers and remedies of Secured Party under this Agreement shall be in addition to all rights, powers and remedies given to Secured Party by virtue of any applicable law, rule or regulation of any governmental authority, or the Notes, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party’s rights hereunder. Debtor waives any right to require Secured Party to proceed against any person or entity or to exhaust any Collateral or to pursue any remedy in Secured Party’s power.
Partial Invalidity. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.
Expenses. Debtor shall pay on demand all reasonable fees and expenses, including reasonable attorneys’ fees and expenses, incurred by Secured Party in connection with the custody, preservation or sale of, or other realization on, any of the Collateral or the enforcement or attempt to enforce any of the Obligations which are not performed as and when required by this Agreement.
Entire Agreement. This Agreement, the Notes, and the other Transaction Documents, taken together, constitute and contain the entire agreement of Debtor and Secured Party with respect to this particular matter and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, respecting the subject matter hereof.
Governing Law; Venue. Except as otherwise specifically set forth herein, the parties expressly agree that this Agreement shall be governed solely by the laws of the State of Utah, without giving effect to the principles thereof regarding the conflict of laws; provided, however, that enforcement of Secured Party’s rights and remedies against the Collateral as provided herein will be subject to the UCC. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.
Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS
WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.
Purchase Agreement; Arbitration of Disputes. By executing this Agreement, each party agrees to be bound by the terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.
Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument. Any electronic copy of a party’s executed counterpart will be deemed to be an executed original.
Further Assurances. Debtor shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as Secured Party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
Time of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement.
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IN WITNESS WHEREOF, Secured Party and Debtor have caused this Agreement to be executed as of the day and year first above written.
SECURED PARTY:
Streeterville Capital, LLC
By:
John M. Fife, President
DEBTOR:
Biodesix, Inc.
By:
Scott Hutton, Chief Executive Officer
SCHEDULE A
TO SECURITY AGREEMENT
All right, title, interest, claims and demands of Debtor in and to all of Debtor’s assets owned as of the date hereof and/or acquired by Debtor at any time while the Obligations are still outstanding, including without limitation, the following property:
Notwithstanding the foregoing, and for the avoidance of doubt, the foregoing shall expressly exclude all Intellectual Property of Debtor.
EXHIBIT D
SVB SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT
This Subordination Agreement (the “Agreement”) is made as of May 9, 2022, by and between each of the undersigned creditors (each a “Creditor” and collectively “Creditors”), and SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 (“Bank”).
Recitals
A. BIODESIX, INC., a Delaware corporation (“Borrower”), has requested and/or obtained certain loans or other credit accommodations from Streeterville which are or may be from time to time secured by assets and property of Borrower.
B. Creditor has extended loans or other credit accommodations to Borrower or is otherwise entitled to receive certain payments from Borrower, and/or may extend loans or other credit accommodations to Borrower from time to time.
C. To induce Streeterville to extend credit to Borrower and, at any time or from time to time, at Streeterville’s option, to make such further loans, extensions of credit, or other accommodations to or for the account of Borrower, or to purchase or extend credit upon any instrument or writing in respect of which Borrower may be liable in any capacity, or to grant such renewals or extension of any such loan, extension of credit, purchase, or other accommodation as Streeterville may deem advisable, Creditor is willing to subordinate, subject to the terms of this Agreement: (i) all of Borrower’s indebtedness and obligations to Creditor (including, without limitation, principal, premium (if any), interest, fees, charges, expenses, costs, professional fees and expenses, and reimbursement obligations), plus any dividends and/or distributions or other payments pursuant to call, put, or conversion features in connection with equity securities of Borrower issued to or held by Creditor, whether presently existing or arising in the future (the “Subordinated Debt”) to all of Borrower’s indebtedness and obligations to Streeterville; and (ii) all of Creditor’s security interests, if any, to all of Streeterville’s security interests in Borrower’s property.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Each Creditor subordinates to Bank any security interest or lien that such Creditor may have in any property of Borrower. Notwithstanding the respective dates of attachment or perfection of the security interests of such Creditor and the security interests of Bank, all now existing and hereafter arising security interests of Bank in any property of Borrower and all proceeds thereof (the “Collateral”), including, without limitation, the “Collateral”, as defined in that certain Loan and Security Agreement dated as of March 19, 2021 (as the same may from time to time be amended, modified, supplemented or restated, including, without limitation, by that certain First Amendment to Loan and Security Agreement dated as of September 30, 2021, by that certain Consent and Second Amendment to Loan and Security Agreement dated as of December 31, 2021, that certain letter agreement re “Loan and Security Agreement dated as of March 19, 2021” dated as of April 1, 2022 and that certain Consent and Third Amendment to Loan and Security Agreement dated as of April 7, 2022, collectively, the “Loan Agreement”) shall at all times be senior to the security interests of such Creditor. Each Creditor hereby (a) acknowledges and consents to (i) Borrower granting to Bank a security interest in the Collateral, (ii) Bank filing any and all financing statements and
other documents as deemed necessary by Bank in order to perfect Bank’s security interest in the Collateral, and (iii) the entering into of the Loan Agreement and all documents in connection therewith by Borrower, (b) acknowledges and agrees that the Senior Debt, the entering into of the Loan Agreement and all documents in connection therewith by Borrower, and the security interest granted by Borrower to Bank in the Collateral shall be permitted under the provisions of the Subordinated Debt documents (notwithstanding any provision of the Subordinated Debt documents to the contrary), (c) acknowledges, agrees and covenants that no Creditor shall contest, challenge or dispute the validity, attachment, perfection, priority or enforceability of Bank’s security interest in the Collateral, or the validity, priority or enforceability of the Senior Debt, and (d) acknowledges and agrees that the provisions of this Agreement will apply fully and unconditionally even in the event that Bank’s security interest in the Collateral (or any portion thereof) shall be unperfected.
2. All Subordinated Debt is subordinated in right of payment to all obligations of Borrower to Bank now existing or hereafter arising, including, without limitation, the Obligations (as defined in the Loan Agreement), together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all obligations under any agreement in connection with the provision by Bank to Borrower of products and/or credit services facilities, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services, all interest accruing after the commencement by or against Borrower of any bankruptcy, reorganization or similar proceeding (such obligations, collectively, the “Senior Debt”).
3. No Creditor will demand or receive from Borrower (and Borrower will not pay to any Creditor) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will any Creditor exercise any remedy with respect to any property of Borrower, nor will any Creditor accelerate the Subordinated Debt, or commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Borrower, until such time as (a) the Senior Debt has been fully paid in cash, (b) Bank has no commitment or obligation to lend any further funds to Borrower, and (c) all financing agreements between Bank and Borrower are terminated. Nothing in the foregoing paragraph shall prohibit: (w) Borrower from making any payments in equity securities of Borrower to a Creditor when and as required by the Subordinated Debt, (x) the exchange at any time by a Creditor and Borrower of all or any portion of the Subordinated Debt for equity securities of Borrower pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended, (y) Creditor, following an event of default under the Subordinated Debt, from seeking and receiving injunctive relief from a court prohibiting Borrower from issuing any of its common or preferred stock to any party unless all proceeds from the sale of such common or preferred stock are paid first to Bank until all outstanding obligations owing from Borrower to Bank are satisfied in full in cash and then any remaining proceeds may be distributed to Creditor, and/or (z) a Creditor from converting all or any part of the Subordinated Debt into equity securities of Borrower, provided that, if such securities have any call, put or other conversion features that would obligate Borrower to declare or pay dividends, make distributions, or otherwise pay any money or deliver any other securities or consideration to the holder, each Creditor hereby agrees that Borrower may not declare, pay or make such dividends, distributions or other payments to such Creditor, and such Creditor shall not accept any such dividends, distributions or other payments.
4. Each Creditor shall promptly deliver to Bank in the form received (except for endorsement or assignment by such Creditor where required by Bank) for application to the Senior Debt any payment, distribution, security or proceeds received by such Creditor with respect to the Subordinated Debt other than in accordance with this Agreement.
5. In the event of Borrower’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, including, without limitation, any
voluntary or involuntary bankruptcy, insolvency, receivership or other similar statutory or common law proceeding or arrangement involving Borrower, the readjustment of its liabilities, any assignment for the benefit of its creditors or any marshalling of its assets or liabilities (each, an “Insolvency Proceeding”), (a) this Agreement shall remain in full force and effect in accordance with Section 510(a) of the United States Bankruptcy Code, (b) the Collateral shall include, without limitation, all Collateral arising during or after any such Insolvency Proceeding, and (c) Bank’s claims against Borrower and the estate of Borrower shall be paid in full before any payment is made to any Creditor.
6. Each Creditor shall give Bank prompt written notice of the occurrence of any default or event of default under any document, instrument or agreement evidencing or relating to the Subordinated Debt, and shall, simultaneously with giving any notice of default to Borrower, provide Bank with a copy of any notice of default given to Borrower. Each Creditor acknowledges and agrees that any default or event of default under the Subordinated Debt documents shall be deemed to be a default and an event of default under the Senior Debt documents.
7. Until the Senior Debt has been fully paid in cash and Bank’s agreements to lend any funds to Borrower have been terminated, Each Creditor irrevocably appoints Bank as such Creditor’s attorney-in-fact, and grants to Bank a power of attorney with full power of substitution, in the name of such Creditor or in the name of Bank, for the use and benefit of Bank, without notice to such Creditor, to perform at Bank’s option the following acts in any Insolvency Proceeding involving Borrower:
a) To file the appropriate claim or claims in respect of the Subordinated Debt on behalf of such Creditor if such Creditor does not do so prior to 30 days before the expiration of the time to file claims in such Insolvency Proceeding and if Bank elects, in its sole discretion, to file such claim or claims; and
b) To accept or reject any plan of reorganization or arrangement on behalf of such Creditor and to otherwise vote such Creditor’s claims in respect of any Subordinated Debt in any manner that Bank deems appropriate for the enforcement of its rights hereunder.
In addition to and without limiting the foregoing: (x) until the Senior Debt has been fully paid in cash and Bank’s agreements to lend any funds to Borrower have been terminated, no Creditor shall commence or join in any involuntary bankruptcy petition or similar judicial proceeding against Borrower, and (y) if an Insolvency Proceeding occurs: (i) no Creditor shall assert, without the prior written consent of Bank, any claim, motion, objection or argument in respect of the Collateral in connection with any Insolvency Proceeding which could otherwise be asserted or raised in connection with such Insolvency Proceeding, including, without limitation, any claim, motion, objection or argument seeking adequate protection or relief from the automatic stay in respect of the Collateral, (ii) Bank may consent to the use of cash collateral on such terms and conditions and in such amounts as it shall in good faith determine without seeking or obtaining the consent of any Creditor as (if applicable) holder of an interest in the Collateral, (iii) if use of cash collateral by Borrower is consented to by Bank, no Creditor shall oppose such use of cash collateral on the basis that such Creditor’s interest in the Collateral (if any) is impaired by such use or inadequately protected by such use, or on any other ground, and (iv) no Creditor shall object to, or oppose, any sale or other disposition of any assets comprising all or part of the Collateral, free and clear of security interests, liens and claims of any party, including such Creditor, under Section 363 of the United States Bankruptcy Code or otherwise, on the basis that the interest of such Creditor in the Collateral (if any) is impaired by such sale or inadequately protected as a result of such sale, or on any other ground (and, if requested by Bank, such Creditor shall affirmatively and promptly consent to such sale or disposition of such assets), if Bank has consented to, or supports, such sale or disposition of such assets.
8. Each Creditor represents and warrants that such Creditor has provided Bank with true and correct copies of all of the documents evidencing or relating to the Subordinated Debt. Each Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement. By the execution of this Agreement, each Creditor hereby authorizes Bank to amend any financing statements filed by such Creditor against Borrower as follows: “In accordance with a certain Subordination Agreement by and among the Secured Party, the Debtor and Silicon Valley Bank, the Secured Party has subordinated any security interest or lien that Secured Party may have in any property of the Debtor to the security interest of Silicon Valley Bank in all assets of the Debtor, notwithstanding the respective dates of attachment or perfection of the security interest of the Secured Party and Silicon Valley Bank.”
9. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interests or liens that Creditors may have in any property of Borrower. By way of example, such instruments shall not be amended to (a) increase the rate of interest with respect to the Subordinated Debt, or (b) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt. Bank shall have the sole and exclusive right to restrict or permit, or approve or disapprove, the sale, transfer or other disposition of property of Borrower except in accordance with the terms of the Senior Debt. Upon written notice from Bank to Creditors of Bank's agreement to release its lien on all or any portion of the Collateral in connection with the sale, transfer or other disposition thereof by Bank (or by Borrower with consent of Bank), each Creditor shall be deemed to have also, automatically and simultaneously, released its lien on the Collateral, and each Creditor shall upon written request by Bank, immediately take such action as shall be necessary or appropriate to evidence and confirm such release. All proceeds resulting from any such sale, transfer or other disposition shall be applied first to the Senior Debt until payment in full thereof, with the balance, if any, to the Subordinated Debt, or to any other entitled party. If any Creditor fails to release its lien as required hereunder, such Creditor hereby appoints Bank as attorney in fact for such Creditor with full power of substitution to release such Creditor's liens as provided hereunder. Such power of attorney being coupled with an interest shall be irrevocable.
10. All necessary action on the part of each Creditor, its officers, directors, partners, members and shareholders, as applicable, necessary for the authorization of this Agreement and the performance of all obligations of such Creditor hereunder has been taken. This Agreement constitutes the legal, valid and binding obligation of each Creditor, enforceable against each Creditor in accordance with its terms. The execution, delivery and performance of and compliance with this Agreement by each Creditor will not (a) result in any material violation or default of any term of any of such Creditor’s charter, formation or other organizational documents (such as Articles or Certificate of Incorporation, bylaws, partnership agreement, operating agreement, etc.) or (b) violate any material applicable law, rule or regulation.
11. If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by Bank for any reason (including, without limitation, any Insolvency Proceeding), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and each Creditor shall immediately pay over to Bank all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder. At any time and from time to time, without notice to any Creditor, Bank may take such actions with respect to the Senior Debt as Bank, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to Borrower, increasing the principal amount, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against Borrower or any other person. No such action or inaction
shall impair or otherwise affect Bank’s rights hereunder. Each Creditor waives any benefits of California Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433.
12. This Agreement shall bind any successors or assignees of Creditors and shall benefit any successors or assigns of Bank, provided, however, each Creditor agrees that, prior and as conditions precedent to each Creditor assigning all or any portion of the Subordinated Debt: (a) each Creditor shall give Bank prior written notice of such assignment, and (b) such successor or assignee, as applicable, shall execute a written agreement whereby such successor or assignee expressly agrees to assume and be bound by all terms and conditions of this Agreement with respect to such Creditor. This Agreement shall remain effective until terminated in writing by Bank. This Agreement is solely for the benefit of Creditors and Bank and not for the benefit of Borrower or any other party. Each Creditor further agrees that if Borrower is in the process of refinancing any portion of the Senior Debt with a new lender, and if Bank makes a request of Creditors, Creditors shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.
13. Each Creditor hereby agrees to execute such documents and/or take such further action as Bank may at any time or times reasonably request in order to carry out the provisions and intent of this Agreement, including, without limitation, ratifications and confirmations of this Agreement from time to time hereafter, as and when requested by Bank.
14. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
15. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth/State of California, without giving effect to conflicts of laws principles. Creditors and Bank submit to the exclusive jurisdiction of the state and federal courts located in Santa Clara County, California in any action, suit, or proceeding of any kind, against it which arises out of or by reason of this Agreement. CREDITORS AND BANK WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in
the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
16. This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. No Creditor is relying on any representations by Bank or Borrower in entering into this Agreement, and each Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower. This Agreement may be amended only by written instrument signed by Creditors and Bank.
17. In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.
[Balance of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first above written.
“Bank”
SILICON VALLEY BANK
By:___________________________________
Name:_________________________________
Title:__________________________________
“Creditor”
STREETERVILLE CAPITAL, LLC, a Utah limited liability company
By: ___________________________________
John M. Fife, President
The undersigned approves of the terms of this Agreement.
“Borrower”
BIODESIX, INC.
By:___________________________________
Name:_________________________________
Title:__________________________________
JOINDER TO SUBORDINATION AGREEMENT
The undersigned hereby agrees to become a party in the capacity of a “Creditor” to that certain Subordination Agreement dated as of __________________, 2022, by and among SILICON VALLEY BANK, a California corporation (“Bank”), and the parties identified on the signature pages thereto as Creditors with respect to debt owing to Bank and Creditors by BIODESIX, INC., a Delaware corporation (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Subordination Agreement”), and to be bound by the terms and conditions thereof in such capacity effective as of the date thereof. The undersigned hereby makes all representations and warranties contained in the Subordination Agreement to Bank as of the date hereof. The undersigned hereby authorizes this Joinder to be attached as a counterpart signature page to the Subordination Agreement and hereby designates the address below as the undersigned’s notice for address under the Subordination Agreement.
“Creditor” |
By: Address: Attention: Phone: Fax: Email: Date of Signature: |
EXHIBIT E
INDI SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT
This Subordination Agreement (the “Agreement”) is made as of May 9, 2022, by and between Integrated Diagnostics, Inc., a Delaware corporation (the “Creditor”), and Streeterville Capital, LLC, a Utah limited liability company, with its principal place of business at 303 East Wacker Drive, Suite 1040, Chicago, Illinois 60601 (“Streeterville”).
Recitals
B. Creditor has extended loans or other credit accommodations to Borrower or is otherwise entitled to receive certain payments from Borrower, and/or may extend loans or other credit accommodations to Borrower from time to time.
C. To induce Streeterville to extend credit to Borrower and, at any time or from time to time, at Streeterville’s option, to make such further loans, extensions of credit, or other accommodations to or for the account of Borrower, or to purchase or extend credit upon any instrument or writing in respect of which Borrower may be liable in any capacity, or to grant such renewals or extension of any such loan, extension of credit, purchase, or other accommodation as Streeterville may deem advisable, Creditor is willing to subordinate, subject to the terms of this Agreement: (i) all of Borrower’s indebtedness and obligations to Creditor (including, without limitation, principal, premium (if any), interest, fees, charges, expenses, costs, professional fees and expenses, and reimbursement obligations), plus any dividends and/or distributions or other payments pursuant to call, put, or conversion features in connection with equity securities of Borrower issued to or held by Creditor, whether presently existing or arising in the future (the “Subordinated Debt”) to all of Borrower’s indebtedness and obligations to Streeterville; and (ii) all of Creditor’s security interests, if any, to all of Streeterville’s security interests in Borrower’s property.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Creditor subordinates to Streeterville any security interest or lien that Creditor may have in any property of Borrower. Notwithstanding the respective dates of attachment or perfection of the security interests of Creditor and the security interests of Streeterville, all now existing and hereafter arising security interests of Streeterville in any property of Borrower and all proceeds thereof (the “Collateral”), including, without limitation, the “Collateral”, as defined in that certain Security Agreement by and between Streeterville and Borrower, entered into in connection with that certain Securities Purchase Agreement, a Secured Convertible Promissory Note #1 in the original principal amount of $16,025,000.00, subject to the satisfaction of certain purchase conditions, a Secured Convertible Promissory Note #2 in the original principal amount of $10,250,000.00, a Subordination Agreement by and between Silicon Valley Bank and Streeterville, this Agreement, all dated as of April __, 2022, and all other agreements, certificates, instruments and documents being or to be executed and delivered under or in connection therewith (collectively, the “Transaction Documents”) shall at all times be senior to the security interests of Creditor. Creditor hereby (a) acknowledges and consents to (i) Borrower granting to Streeterville a security interest
in the Collateral, (ii) Streeterville filing any and all financing statements and other documents as deemed necessary by Streeterville in order to perfect Streeterville’s first position security interest in the Collateral, and (iii) the entering into of the Transaction Documents and all documents in connection therewith by Borrower, (b) acknowledges and agrees that the Senior Debt (defined below), the entering into of the Transaction Documents and all documents in connection therewith by Borrower, and the security interest granted by Borrower to Streeterville in the Collateral shall be permitted under the provisions of the Subordinated Debt documents (notwithstanding any provision of the Subordinated Debt documents to the contrary), (c) acknowledges, agrees and covenants that Creditor shall not contest, challenge or dispute the validity, attachment, perfection, priority or enforceability of Streeterville’s security interest in the Collateral, or the validity, priority or enforceability of the Senior Debt, and (d) acknowledges and agrees that the provisions of this Agreement will apply fully and unconditionally even in the event that Streeterville’s security interest in the Collateral (or any portion thereof) shall be unperfected. For the avoidance of doubt, nothing in this Agreement shall prohibit Borrower from granting to Creditor a security interest in the Collateral, provided that such security interest is subject to the terms of this Agreement, and Streeterville hereby (a) acknowledges and consents to (i) Borrower granting to Creditor a security interest in the Collateral, (ii) Creditor filing any and all financing statements and other documents as deemed necessary by Creditor in order to perfect Creditor’s security interest in the Collateral, and (iii) the entering into of any documents in connection therewith by Borrower, (b) acknowledges and agrees that the Subordinated Debt and the security interest granted by Borrower to Creditor in the Collateral shall be permitted under the provisions of the Senior Debt documents (notwithstanding any provision of the Senior Debt documents to the contrary), and (c) acknowledges, agrees and covenants that Streeterville shall not contest, challenge or dispute the validity, attachment, perfection or enforceability of Creditor’s security interest in the Collateral, or the validity or enforceability of the Subordinated Debt.
2. All Subordinated Debt is subordinated in right of payment to all obligations of Borrower to Streeterville now existing or hereafter arising, including without limitation under the Transaction Documents, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all obligations under any agreement in connection with the provision by Streeterville to Borrower of products and/or credit services facilities, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services, all interest accruing after the commencement by or against Borrower of any bankruptcy, reorganization or similar proceeding (such obligations, collectively, the “Senior Debt”). Notwithstanding any provision in this Agreement or any of the Senior Debt documents to the contrary, Creditor is permitted to receive the Installment Payments (under and as defined in Amendment No. 3 to Asset Purchase Agreement and Plan of Reorganization, entered into as of April 7, 2022, amending that certain Asset Purchase Agreement and Plan of Reorganization, dated June 30, 2018, by and among Borrower, Creditor, and IND Funding LLC (“Amendment No. 3”)), the schedule of which is set forth on Exhibit A hereto (the “Indi Payment Schedule”), provided that Borrower is not in default under any of the Transaction Documents and any payments made to Creditor by Borrower do not exceed the amounts set forth in the Indi Payment Schedule. Neither Borrower nor Creditor may make any changes to the Indi Payment Schedule without the prior written consent of Streeterville.
3. With the exception of payments set forth on the Indi Payment Schedule, Creditor will not demand or receive from Borrower (and Borrower will not pay to any Creditor) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will any Creditor exercise any remedy with respect to any property of Borrower, nor will any Creditor accelerate the Subordinated Debt, or commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Borrower, until such time as (a) the Senior Debt has been fully paid in cash, (b) Streeterville has no commitment or obligation to lend any further funds to Borrower, and (c) all financing agreements between Streeterville and Borrower are terminated. Nothing in the foregoing
paragraph shall prohibit filing any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any person objecting to or otherwise seeking the disallowance of the claims of Creditor, including any claims secured by the Collateral, if any, in each case in accordance with the terms of this Agreement.
4. Creditor shall promptly deliver to Streeterville in the form received (except for endorsement or assignment by Creditor where required by Streeterville) for application to the Senior Debt any payment, distribution, security or proceeds received by Creditor with respect to the Subordinated Debt other than in accordance with this Agreement. For the avoidance of doubt, the preceding sentence shall not apply to payments set forth on the Indi Payment Schedule.
5. In the event of Borrower’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, including, without limitation, any voluntary or involuntary bankruptcy, insolvency, receivership or other similar statutory or common law proceeding or arrangement involving Borrower, the readjustment of its liabilities, any assignment for the benefit of its creditors or any marshalling of its assets or liabilities (each, an “Insolvency Proceeding”), (a) this Agreement shall remain in full force and effect in accordance with Section 510(a) of the United States Bankruptcy Code, (b) the Collateral shall include, without limitation, all Collateral arising during or after any such Insolvency Proceeding, and (c) Streeterville’s claims against Borrower and the estate of Borrower shall be paid in full before any payment is made to any Creditor.
6. Creditor shall give Streeterville prompt written notice of the occurrence of any default or event of default under any document, instrument or agreement evidencing or relating to the Subordinated Debt, and shall, simultaneously with giving any notice of default to Borrower, provide Streeterville with a copy of any notice of default given to Borrower. Creditor acknowledges and agrees that any default or event of default under the Subordinated Debt documents shall be deemed to be a default and an event of default under the Senior Debt documents.
7. Until the Senior Debt has been fully paid and Streeterville’s agreements to lend any funds to Borrower have been terminated, Creditor irrevocably appoints Streeterville as Creditor’s attorney-in-fact, and grants to Streeterville a power of attorney with full power of substitution, in the name of Creditor or in the name of Streeterville, for the use and benefit of Streeterville, to file the appropriate claim or claims in any Insolvency Proceeding in respect of the Subordinated Debt on behalf of Creditor if Creditor does not do so prior to 15 days before the expiration of the time to file claims in such Insolvency Proceeding and if Streeterville elects, in its sole discretion, to file such claim or claims. In addition to and without limiting the foregoing, until the Senior Debt has been fully paid in cash and Streeterville’s agreements to lend any funds to Borrower have been terminated: (x) Creditor shall not commence or join in any involuntary bankruptcy petition or similar judicial proceeding against Borrower, and (y) if an Insolvency Proceeding occurs: (i) Creditor shall not assert, without the prior written consent of Streeterville, any claim, motion, objection or argument in respect of the Collateral in connection with any Insolvency Proceeding which could otherwise be asserted or raised in connection with such Insolvency Proceeding, including, without limitation, any claim, motion, objection or argument seeking adequate protection or relief from the automatic stay in respect of the Collateral, (ii) Streeterville may consent to the use of cash collateral on such terms and conditions and in such amounts as it shall in good faith determine without seeking or obtaining the consent of any Creditor as (if applicable) holder of an interest in the Collateral, (iii) if use of cash collateral by Borrower is consented to by Streeterville, Creditor shall not oppose such use of cash collateral on the basis that Creditor’s interest in the Collateral (if any) is impaired by such use or inadequately protected by such use, or on any other ground, and (iv) Creditor shall not object to, or oppose, any sale or other disposition of any assets comprising all or part of the Collateral, free and clear of security interests, liens and claims of any party, including Creditor, under Section 363 of the United States Bankruptcy Code or otherwise, on the basis that the interest of Creditor in the Collateral (if any) is impaired
by such sale or inadequately protected as a result of such sale, or on any other ground (and, if requested by Streeterville, Creditor shall affirmatively and promptly consent to such sale or disposition of such assets), if Streeterville has consented to, or supports, such sale or disposition of such assets. Notwithstanding anything to the contrary herein, in any Insolvency Proceeding, (w) if Streeterville is granted adequate protection consisting of additional collateral (with replacement liens on such collateral) and/or superpriority claims in connection with any financing or use of cash collateral, then in connection with such financing or use of cash collateral Creditor may seek or accept adequate protection consisting solely of (i) a replacement lien on the same additional collateral, subordinated to Streeterville’s liens on the same basis as Creditor’s liens are subordinated to Streeterville’s liens under this Agreement, (ii) superpriority claims junior in all respects to the superpriority claims of Streeterville, and (iii) cash payments with respect to current fees and expenses, provided that (A) Streeterville is also granted cash payments with respect to current fees and expenses and (B) Streeterville may object to the amounts of fees and expenses sought by Creditor; (x) Streeterville agrees that Creditor shall have the right to credit bid under Section 363(k) of the Bankruptcy Code with respect to any disposition of Collateral, provided that the Senior Debt is paid in cash in full in connection with any such credit bid by Creditor; (y) Creditor retains the right to object to any provision in any financing that requires specific and material terms of a plan of reorganization other than terms for a sale, liquidation or other disposition of Collateral; and (z) Creditor may otherwise exercise rights and remedies as an unsecured creditor in accordance with the terms of the Subordinated Debt and applicable law, in each case subject to the limitations contained in this Agreement and only if consistent with the terms and the limitations on Creditor imposed hereby.
8. Creditor represents and warrants that Creditor has provided Streeterville with true and correct copies of all of the documents evidencing or relating to the Subordinated Debt. Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement. By the execution of this Agreement, Creditor hereby authorizes Streeterville to amend any financing statements filed by Creditor against Borrower as follows: “In accordance with a certain Subordination Agreement by and among the Secured Party, the Debtor and Streeterville Capital, LLC (“Streeterville”), the Secured Party has subordinated any security interest or lien that Secured Party may have in any property of the Debtor to the security interest of Streeterville in all assets of the Debtor, notwithstanding the respective dates of attachment or perfection of the security interest of the Secured Party and Streeterville.”
9. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interests or liens that Creditor may have in any property of Borrower. By way of example, such instruments shall not be amended to (a) increase the rate of interest with respect to the Subordinated Debt, or (b) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt. Streeterville shall have the sole and exclusive right to restrict or permit, or approve or disapprove, the sale, transfer or other disposition of property of Borrower except in accordance with the terms of the Senior Debt. Upon written notice from Streeterville to Creditor of Streeterville’s agreement to release its lien on all or any portion of the Collateral in connection with the sale, transfer or other disposition thereof by Streeterville (or by Borrower with consent of Streeterville), Creditor shall be deemed to have also, automatically and simultaneously, released its lien on the Collateral, and Creditor shall upon written request by Streeterville, immediately take such action as shall be necessary or appropriate to evidence and confirm such release. All proceeds resulting from any sale, transfer or other disposition shall be applied first to the Senior Debt until payment in full thereof, with the balance, if any, to the Subordinated Debt, or to any other entitled party. If Creditor fails to release its lien as required hereunder, Creditor hereby appoints Streeterville as attorney in fact for Creditor with full power of substitution to release Creditor's liens as provided hereunder. Such power of attorney being coupled with an interest shall be irrevocable.
11. If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by Streeterville for any reason (including, without limitation, any Insolvency Proceeding), this Agreement and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and Creditor shall immediately pay over to Streeterville all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder. At any time and from time to time, without notice to any Creditor, Streeterville may take such actions with respect to the Senior Debt as Streeterville, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to Borrower, increasing the principal amount, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against Borrower or any other person. No such action or inaction shall impair or otherwise affect Streeterville’s rights hereunder. Creditor waives any benefits of California Civil Code Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433 or any other similar sections under Utah law.
12. This Agreement shall bind any successors or assignees of Creditor and shall benefit any successors or assigns of Streeterville, provided, however, Creditor agrees that, prior and as conditions precedent to Creditor assigning all or any portion of the Subordinated Debt: (a) Creditor shall give Streeterville prior written notice of such assignment, and (b) such successor or assignee, as applicable, shall execute a written agreement whereby such successor or assignee expressly agrees to assume and be bound by all terms and conditions of this Agreement with respect to Creditor. This Agreement shall remain effective until terminated in writing by Streeterville. This Agreement is solely for the benefit of Creditor and Streeterville and not for the benefit of Borrower or any other party. Creditor further agrees that if Borrower is in the process of refinancing any portion of the Senior Debt with a new lender, and if Streeterville makes a request of Creditor, Creditor shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Agreement.
13. Creditor hereby agrees to execute such documents and/or take such further action as Streeterville may at any time or times reasonably request in order to carry out the provisions and intent of this Agreement, including, without limitation, ratifications and confirmations of this Agreement from time to time hereafter, as and when requested by Streeterville.
14. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
15. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah, without giving effect to conflicts of laws principles. Creditor and Streeterville submit to the exclusive jurisdiction of the state and federal courts located in Salt Lake County, Utah in any action, suit, or proceeding of any kind, against it which arises out of or by reason of this Agreement. CREDITOR AND STREETERVILLE WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
16. This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. No Creditor is relying on any representations by Streeterville or Borrower in entering into this Agreement, and Creditor has kept and will continue to keep itself fully apprised of the financial and other condition of Borrower. This Agreement may be amended only by written instrument signed by Creditor and Streeterville.
17. In the event of any legal action to enforce the rights of a party under this Agreement, the party prevailing in such action shall be entitled, in addition to such other relief as may be granted, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in such action.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first above written.
“Streeterville”
STREETERVILLE CAPITAL, LLC
By: ___________________________________
John M. Fife, President
“Creditor”
INTEGRATED DIAGNOSTICS, INC.
By:___________________________________
Name:_________________________________
Title:__________________________________
The undersigned approves of the terms of this Agreement.
“Borrower”
BIODESIX, INC.
By:___________________________________
Name:_________________________________
Title:__________________________________
EXHIBIT A
[Indi Payment Schedule]
All payments shall accrue interest at a stated rate of 10% on the unpaid balance of each payment, as set forth in Amendment No. 3.
EXHIBIT F
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
On file with Investor.
EXHIBIT G
OFFICER’S CERTIFICATE
On file with Investor.
EXHIBIT H
SHARE ISSUANCE RESOLUTION
On file with Investor.
Exhibit 10.8
For purposes of sections 1272, 1273, and 1275 of the Internal Revenue Code of 1986, as amended, this note is being issued with an original issue discount. Borrower agrees to provide promptly to the holder of this Note, upon written request, the issue price, amount of original issue discount, issue date, and yield to maturity. Any such written request should be made pursuant to Section 8.9 of the Purchase Agreement (as defined below) pursuant to which this Note was issued.
SECURED CONVERTIBLE PROMISSORY NOTE #1
Effective Date: May 9, 2022 U.S. $16,025,000.00
FOR VALUE RECEIVED, BIODESIX, INC., a Delaware corporation (“Borrower”), promises to pay to STREETERVILLE CAPITAL, LLC, a Utah limited liability company, or its successors or assigns (“Lender”), $16,025,000.00 and any interest, fees, charges, and late fees accrued hereunder on the date that is twenty-four (24) months after the Purchase Price Date (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of six percent (6%) per annum from the Purchase Price Date until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. This Secured Convertible Promissory Note #1 (this “Note”) is issued and made effective as of the date set forth above (the “Effective Date”). This Note is issued pursuant to that certain Securities Purchase Agreement dated May 9, 2022, as the same may be amended from time to time, by and between Borrower and Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.
This Note carries an original issue discount (“OID”) of $1,000,000.00. In addition, Borrower agrees to pay $25,000.00 to Lender to cover Lender’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the “Transaction Expense Amount”), in an amount equal to $250,000.00, all of which amount is fully earned and included in the initial principal balance of this Note. The purchase price for this Note shall be $15,000,000.00 (the “Purchase Price”), computed as follows: $16,025,000.00 original principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds.
Notwithstanding the foregoing, for purposes of this Note, if a Trigger Event has been cured by Borrower or waived by Lender or an Event of Default has been waived by Lender, then, unless otherwise agreed to by Lender and Borrower, Lender shall no longer have any rights or remedies granted to it upon the occurrence of a Trigger Event or an Event of Default hereunder (except for any Trigger Effect that has already been applied and will remain in effect).
[Remainder of page intentionally left blank; signature page follows]
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.
BORROWER: |
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BIODESIX, INC. |
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By: |
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/s/ SCOTT HUTTON |
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Scott Hutton, Chief Executive Officer |
ACKNOWLEDGED, ACCEPTED AND AGREED: |
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LENDER: |
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STREETERVILLE CAPITAL, LLC |
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By: |
/s/ JOHN FIFE |
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John M. Fife, President |
[Signature Page to Secured Convertible Promissory Note #1]
ATTACHMENT 1 DEFINITIONS
Capitalized terms used but not defined in this Note shall have the meanings given to them in the Purchase Agreement or the Security Agreement, as applicable. In addition, for purposes of this Note, the following terms shall have the following meanings:
A1. “Closing Bid Price” and “Closing Trade Price” means the last closing bid price and last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined by Lender and Borrower. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
A2. “DTC” means the Depository Trust Company or any successor thereto.
A3. “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program. A4. “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.
A5. “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; and (e) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.
A6. “Equity Conditions Failure” means that any of the following conditions has not been satisfied on any given Redemption Date: (a) with respect to the applicable date of determination all of the Conversion Shares would be (i) registered for trading under applicable federal and state securities laws, (ii) freely tradable under Rule 144, or (iii) otherwise freely tradable without the need for registration under any applicable federal or state securities laws; (b) there are no restrictions in place that would prevent Lender from selling the Conversion Shares; (c) no Trigger Event shall have occurred and be continuing; (d) the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) and two hundred (200) Trading Days shall be greater than $500,000.00; (e) the five (5) day VWAP of the Common Stock is greater than or equal to $1.00; and (f) the Common Stock is trading on Nasdaq or NYSE.
A7. “Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of
authorized shares of Borrower’s Common Stock, or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower. Notwithstanding the foregoing or anything to the contrary contained in this Note or the other Transaction Documents, the definition of a “Fundamental Transaction” shall not include, nor shall it prohibit Borrower from undertaking, incurring or consummating, any Permitted Indebtedness, Permitted Investment, Permitted Lien, Permitted Transfer, Permitted Restricted Payments, Permitted Restricted Debt Payments, or Permitted Affiliate Transactions.
A8. “Major Trigger Event” means any Trigger Event occurring under Sections 4.1(a) - 4.1(i).
A9. “Mandatory Default Amount” means the Outstanding Balance following the application of the Trigger Effect.
A10. “Maximum Monthly Redemption Amount” means $1,425,000.00 per calendar month. A11. “Minor Trigger Event” means any Trigger Event that is not a Major Trigger Event.
A12. “Outstanding Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant to the terms hereof for payment, Conversion, offset, or otherwise, the Transaction Expense Amount, the OID, accrued but unpaid interest, collection and enforcements costs (including reasonable and documented out-of-pocket attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions, and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note.
A13. “Permitted Affiliate Transaction” means (a) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than could reasonably be obtained in an arm’s length transaction with a non-affiliated Person, (b) customary compensation and indemnification of, and other employment arrangements approved by Borrower’s board of directors with, directors, officers and employees of Borrower or any of its Subsidiaries in the ordinary course of business, (c) subject to limitations set forth in this Agreement regarding the payment of directors fees, reasonable and customary director, officer and employee compensation (including bonuses and stock option programs) and benefits arrangements, in each case, in the ordinary course of business and approved by the board of directors (or equivalent managing body) (or a committee thereof) of Borrower; and (d) transactions constituting Permitted Restricted Payments, to the extent permitted thereunder
A14. “Permitted Restricted Debt Payment” means (a) any payment on any Subordinated Debt, to the extent permitted under the terms of the subordination, intercreditor or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Secured Obligations owed to Lender.
A15. “Permitted Restricted Payment” means, with respect to the payment of any dividends, or making of any distribution or the payment, redemption, retirement or purchase of any capital stock:
A16. “Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.
A17. “Redemption Conversion Price” means eighty-five percent (85%) multiplied by the lowest daily VWAP during the ten (10) Trading Days immediately preceding the date the applicable Redemption Notice is delivered.
A18. “Trading Day” means any day on which Borrower’s principal market is open for trading.
A19. “Trigger Effect” means multiplying the Outstanding Balance as of the date the applicable Trigger Event occurred by (a) ten percent (10%) for each occurrence of any Major Trigger Event, or (b) five percent (5%) for each occurrence of any Minor Trigger Event, and then adding the resulting product to the Outstanding Balance as of the date the applicable Trigger Event occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Trigger Event occurred; provided that the Trigger Effect may only be applied three (3) times hereunder with respect to Major Trigger Events and three (3) times hereunder with respect to Minor Trigger Events; and provided further that the Trigger Effect shall not apply to any Trigger Event pursuant to Section 4.1(j) hereof. In the event Lender has applied three (3) Trigger Effects for Major Trigger Events, then any subsequent Major Trigger Events will be considered Minor Trigger Effects for purposes of the Trigger Effect.
A20. “VWAP” means the volume weighted average price of the Common Stock on the principal market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.
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EXHIBIT A
Streeterville Capital, LLC
303 East Wacker Drive, Suite 1040
Chicago, Illinois 60601
Biodesix, Inc. Date:
2970 Wilderness Place, Suite 100
Boulder, Colorado 80301
REDEMPTION NOTICE
The above-captioned Lender hereby gives notice to Biodesix, Inc., a Delaware corporation (the “Borrower”), pursuant to that certain Secured Convertible Promissory Note #1 made by Borrower in favor of Lender on May 9, 2022 (the “Note”), that Lender elects to redeem a portion of the Note in Conversion Shares or in cash as set forth below. In the event of a conflict between this Redemption Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Redemption Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.
REDEMPTION INFORMATION
* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Redemption Notice and such Transaction Documents.
Please transfer the Conversion Shares, if applicable, electronically (via DWAC) to the following account:
Broker: |
Address: |
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DTC#: |
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Account #: |
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Account Name: |
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To the extent the Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Redemption Notice (by facsimile transmission or otherwise) to:
Sincerely, Lender: |
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STREETERVILLE CAPITAL, LLC |
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By: |
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John M. Fife, President |
Exhibit 31.1
SECTION 302 CERTIFICATION
I, Scott Hutton, certify that:
Date: May 11, 2022 |
By: |
/s/ Scott Hutton |
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Scott Hutton |
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Chief Executive Officer |
Exhibit 31.2
SECTION 302 CERTIFICATION
I, Robin Harper Cowie, certify that:
Date: May 11, 2022 |
By: |
/s/ Robin Harper Cowie |
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Robin Harper Cowie |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biodesix, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 11, 2022 |
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By: |
/s/ Scott Hutton |
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Scott Hutton |
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Biodesix, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 11, 2022 |
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By: |
/s/ Robin Harper Cowie |
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Robin Harper Cowie |
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Chief Financial Officer |