Turning to the liability side of the calculation, MPM fails in its letter to address significant obligations and liabilities that VaxGen would be required to resolve, beyond the repayment of the outstanding $31.5 million convertible debt. For example, VaxGen has a lease obligation totaling over $25 million through 2016. A negotiated lease termination or securing a sub-lease agreement would likely involve significant cost to VaxGen under a liquidation scenario. Severance and other legal and wind-down expenses associated with liquidation would also result in costs to the company easily in excess of $5 million.
On the topic of the bridge loan, VaxGen's agreement with Raven provides that, prior to stockholder vote and close of the merger, Raven will be funded by a combination of Raven Series D stockholder investment and VaxGen, in the form of a bridge loan. VaxGen felt that extending such funding would ensure that Raven's critical clinical and non-clinical development activities could proceed prior to close. The provisions and terms of the bridge loan were heavily negotiated in the context of the overall deal. MPM has incorrectly characterized the bridge as "a non-recourse loan." The loan is forgiven if the merger is approved by the stockholders, and VaxGen and its stockholders stand to benefit by the advancement of Raven's portfolio. If the merger is not approved, the loan, in its entirety, is repayable with interest and is secured by Raven's significant intellectual property assets.
MPM has requested that VaxGen violate its merger agreement by
withholding funding of the bridge loan. This is not feasible without
significant consequences. Should Vaxgen seek to terminate, or willful
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