EXHIBIT 10.4
CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
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THE MEDICINES COMPANY
LOAN AND SECURITY AGREEMENT
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This LOAN AND SECURITY AGREEMENT is entered into as of March 26, 2002, by
and between COMERICA BANK - CALIFORNIA ("Bank") and THE MEDICINES COMPANY
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance or cash advances
under the Revolving Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees (subject to Section 4.3); and Bank's
reasonable attorneys' fees and expenses incurred in amending, enforcing or
defending the Loan Documents (including fees and expenses of appeal), incurred
before, during and after an Insolvency Proceeding, whether or not suit is
brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California or the Commonwealth of
Massachusetts are authorized or required to close.
"Change in Control" shall mean a transaction in which any
"person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of a sufficient number of shares of all classes of stock then outstanding of
Borrower ordinarily entitled to vote in the election of directors, empowering
such "person" or "group" to elect a majority of the Board of Directors of
Borrower, who did not have such power before such transaction.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
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"Collateral" means the property described on Exhibit A
attached hereto.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit, corporate credit cards, or merchant services issued or
provided for the account of that Person; and (iii) all obligations arising under
any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designed to protect such Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Credit Extension" means each Advance, Letter of Credit, or
any other extension of credit by Bank for the benefit of Borrower hereunder.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.
"Daily Balance" means the amount of the Obligations owed at
the end of a given day.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services (excluding trade
obligations incurred in the ordinary course of business), including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any
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accounts or other proceeds, including insurance proceeds, resulting from the
sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower's Books relating to any of the
foregoing.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Letter of Credit" means a letter of credit issued by Bank
pursuant to this Agreement.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations, condition (financial or otherwise) or prospects of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents or (iii) the value or priority of Bank's security interest in the
Collateral.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness secured by a lien described in clause (c) of
the defined term "Permitted Liens," provided such Indebtedness does not exceed
$500,000 in the aggregate at any given time; and
(d) Subordinated Debt.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of
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acquisition thereof, (ii) commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having rating of at least A-2 or
P-2 from either Standard & Poor's Corporation or Xxxxx'x Investors Service,
(iii) certificates of deposit maturing no more than one (1) year from the date
of investment therein issued by Bank and (iv) Bank's money market accounts.
(c) Investments made in accordance with Borrower's investment
policy approved from time to time by Borrower's board of directors and provided
to Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same are adequately reserved for in
accordance with GAAP;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Banker's liens and rights of setoff, in each case arising
by operation of law;
(e) Liens arising in the ordinary course of Borrower's
business by operation of law or regulation, but only if payment in respect of
such Lien is not at the time past due and such Liens do not, in the aggregate,
materially detract from the value of Borrower's property or materially impair
the use thereof in the operation of Borrower's business; and
(f) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the unrestricted cash and cash-equivalents,
accounts receivable and investments with maturities not to exceed 90 days, of
Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Executive Chairman,
Chief Executive Officer, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Facility" means the facility under which Borrower
may request Bank to issue Advances, as specified in Section 2.1(a) hereof.
"Revolving Line" means a credit extension of up to Ten Million
Dollars ($10,000,000).
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"Revolving Maturity Date" means the day before the first
anniversary of the Closing Date.
"Schedule" means the schedule of exceptions attached hereto,
if any.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation, company or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock or
other units of ownership which by the terms thereof has the ordinary voting
power to elect the Board of Directors, managers or trustees of the entity, at
the time as of which any determination is being made, is owned by Borrower,
either directly or through an Affiliate.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
Subject to the terms set forth herein, Bank agrees to make
Credit Extensions up to $10,000,000, and Borrower promises to repay to the order
of Bank, in lawful money of the United States of America, the aggregate unpaid
principal amount of all Credit Extensions made by Bank to Borrower hereunder.
Borrower shall also pay interest on the unpaid principal amount of such Credit
Extensions at rates in accordance with the terms hereof.
(a) Revolving Advances.
(i) Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the Revolving Line minus the aggregate face amount of all outstanding
Letters of Credit, including any drawn but unreimbursed amounts. Subject to the
terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1(a) may be repaid and reborrowed at any time prior to the Revolving
Maturity Date, at which time all Advances under this Section 2.1(a) shall be
immediately due and payable. Borrower may prepay any Advances without penalty or
premium.
(ii) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:30 p.m.
Eastern time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance,
except for damages or loss arising from Bank's own willful misconduct or gross
negligence. Bank will credit the amount of Advances made under this Section
2.1(a) to Borrower's deposit account identified in the Payment/Advance form.
(b) Letters of Credit.
(i) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters of Credit for the
account of Borrower in an aggregate outstanding face amount (including any drawn
but unreimbursed amounts) not to exceed the Revolving Line minus the aggregate
amount of the outstanding Advances at any time. All Letters of Credit shall be,
in form and substance, reasonably acceptable
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to Bank and shall be subject to the terms and conditions of Bank's form of
standard application and letter of credit agreement (the "Application"), which
Borrower hereby agrees to execute, including Bank's standard fee equal to two
percent (2.00%) per annum of the face amount of each Letter of Credit. In the
event of inconsistency between the Letter of Credit and this Agreement, this
Agreement shall govern. On any drawn but unreimbursed Letter of Credit, the
unreimbursed amount shall be deemed an Advance under Section 2.1(a). On the
Revolving Maturity Date, Borrower shall secure in cash all obligations under any
outstanding Letters of Credit on terms reasonably acceptable to Bank.
(ii) The obligation of Borrower to reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, the Application and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend, protect, and hold
Bank harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit, except for expenses caused by Bank's gross negligence or
willful misconduct.
2.2 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.2(b), the
Advances shall bear interest, on the outstanding Daily Balance thereof, at a
rate per annum equal to one percent (1.00%) above the Prime Rate.
(b) Late Fee; Default Rate. All Obligations shall bear
interest, from and after the occurrence and during the continuance of an Event
of Default, at a rate equal to five (5) percentage points above the interest
rate applicable immediately prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on
the first calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, and all Periodic Payments (and, after the
occurrence and during the continuance of an Event of Default, all Bank Expenses)
against any of Borrower's deposit accounts or against the Revolving Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder. All payments shall be free and
clear of any taxes, withholdings, duties, impositions or other charges, to the
end that Bank will receive the entire amount of any Obligations payable
hereunder, regardless of source of payment.
(d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased, effective as of the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.3 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence and during the continuance of an Event of Default, the receipt by
Bank of any wire transfer of funds, check, or other item of payment shall be
immediately applied to conditionally reduce Obligations, but shall not be
considered a payment on account unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 3:30 p.m. Eastern
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
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2.4 Fees. Borrower shall pay to Bank the following:
(a) Arrangement Fee. On the Closing Date, a facility fee equal
to One Hundred Thousand Dollars ($100,000), Ten Thousand Dollars ($10,000) of
which Bank hereby acknowledges receipt, and all of which shall be nonrefundable;
and
(b) Unused Facility Fee. A fee equal to one fourth of one
percent (0.25%) of the difference between the Revolving Line and the average
Daily Balance during each calendar quarter, which fee shall be paid within ten
(10) days of the last day of each such quarter and on the Revolving Maturity
Date.
(c) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses and, after the Closing Date, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.5 Additional Costs. In case any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
the Obligations and such increase, reduction or imposition is not included in
the Prime Rate, Bank shall notify Borrower thereof. Borrower agrees to pay to
Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or determined,
upon presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
prima facie true and correct. Bank agrees that it shall allocate any increased
costs among its customers similarly affected in good faith and in a manner
consistent with Bank's customary practice.
2.6 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for so
long as any Obligations remain outstanding or Bank has any obligation to make
Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding. Borrower may terminate this Agreement upon notice to Bank at any
time that any Obligations are not outstanding, in which case any commitment by
Bank to make Credit Extensions shall terminate, and Bank shall terminate any
security interest it may have in the Collateral.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
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(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) a UCC financing statement;
(d) guaranties from Borrower's Subsidiaries: The Medicines
Securities Corporation, The Medicines Company UK Limited, a corporation
incorporated under the laws of England and Wales, and The Medicines Company
Limited, a corporation incorporated under the laws of New Zealand;
(e) third party security agreements from Borrower's
Subsidiaries;
(f) an agreement to provide insurance;
(g) payment of the fees and Bank Expenses then due specified
in Section 2.4 hereof;
(h) an opinion of Borrower's counsel; and
(i) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The
obligation of Bank to make each Credit Extension, including the initial Credit
Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1;
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would exist after giving effect to such Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date). The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the material accuracy of the facts referred to in this
Section 3.2.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule or with respect to Permitted Liens, such security interest constitutes
a valid, first priority security interest in the presently existing Collateral,
and will constitute a valid, first priority security interest in Collateral
acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form reasonably satisfactory to Bank, to perfect and
continue the perfection of Bank's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated under the Loan
Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than twice a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make
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copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
4.4 Securities Account Control Agreements. Within forty-five (45)
days of the Closing Date, Borrower shall deliver to Bank securities account
control agreements in form and substance reasonably satisfactory to Bank with
respect to any securities accounts maintained by Borrower.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
is a corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any material agreement to which it is a party or by which it is bound.
5.3 No Prior Encumbrances. Borrower has good and marketable title
to, or valid, subsisting and enforceable leasehold interests in, or valid
licenses or right to use, all its property, free and clear of Liens, except for
Permitted Liens (provided that certain license agreements contain provisions
that restrict an encumbrance on, or assignment of, Borrower's rights as licensee
thereunder).
5.4 Bona Fide Accounts. The Accounts are bona fide existing
obligations. The property and services giving rise to such Accounts has been
delivered or rendered to the account debtor or to the account debtor's agent for
immediate and unconditional acceptance by the account debtor.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects, except
for Inventory for which adequate reserves have been made.
5.6 Intellectual Property. Except as set forth in the Schedule,
Borrower is the sole owner of its patents, trademarks, copyrights, and other
intellectual property, except for non-exclusive licenses granted by Borrower in
the ordinary course of business. Each of Borrower's patents is valid and
enforceable, and no part of its intellectual property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
its intellectual property violates the rights of any third party.
5.7 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at 0 Xxxxxx Xxx, Xxxxx 000, Xxxxxxxxxx, XX 00000. Except as disclosed
in the Schedule, all Borrower's Inventory and Equipment is located only at the
location set forth in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect.
5.9 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
Bank has received from Borrower fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
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5.10 Solvency, Payment of Debts. Borrower is solvent and able to pay
its debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary have met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA, and no event has occurred resulting from Borrower's
failure to comply with ERISA that could result in Borrower's incurring any
material liability. Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of the
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T and U
of the Board of Governors of the Federal Reserve System). Borrower has complied
with all the provisions of the Federal Fair Labor Standards Act. Borrower has
not violated any statutes, laws, ordinances or rules applicable to it, violation
of which could have a Material Adverse Effect.
5.12 Environmental Condition. Except as disclosed in the Schedule,
none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a hazardous
waste or hazardous substance disposal site, or a candidate for closure pursuant
to any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary have filed or caused to be
filed all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein, except taxes (a)
being contested in good faith, or (b) to the extent failure to do so could not
reasonably be expected to have a Material Adverse Effect.
5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 Government Consents. Borrower and each Subsidiary have obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which could have a Material Adverse Effect.
5.16 Investment Accounts. Except as disclosed in the Schedule or as
permitted by Section 6.7 hereof, none of Borrower's nor any Subsidiary's
property is maintained or invested with a Person other than Bank or an Affiliate
of Bank.
5.17 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
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6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which it is
required under applicable law. Borrower shall maintain, and shall cause each of
its Subsidiaries to maintain, in force all licenses, approvals and agreements,
the loss of which could have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect, or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver the following to Bank in each case at both the San Xxxx and Boston
addresses referenced in Section 10: (a) as soon as available, but in any event
within thirty (30) days after the end of each calendar month, a company prepared
consolidated balance sheet, income and cash flow statement covering Borrower's
consolidated operations during such period, prepared in accordance with GAAP,
consistently applied, in a form reasonably acceptable to Bank and certified by a
Responsible Officer; (b) as soon as available, but in any event within ninety
(90) days after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank,
including a Management Letter from such approved accounting firm, when and if
issued, and a budget for the fiscal year beginning following the period reviewed
by such financial statements; (c) if applicable, copies of all statements,
reports and notices sent or made available generally by Borrower to its security
holders or to any holders of Subordinated Debt and all reports on Forms 10-K and
10-Q filed with the Securities and Exchange Commission; (d) promptly upon
receipt of notice thereof, a report of any legal actions pending or threatened
in writing against Borrower or any Subsidiary that could reasonably be expected
to result in damages or costs to Borrower or any Subsidiary of Two Hundred
Thousand Dollars ($200,000) or more; and (e) such additional annual budgets,
operating plans or other financial information as Bank may reasonably request
which are from time to time generally prepared by Borrower in the ordinary
course of business.
Borrower shall deliver to Bank with the monthly and annual financial
statements and other required documents described above a Compliance Certificate
signed by a Responsible Officer in substantially the form of Exhibit C hereto.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects except for Inventory
for which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement. Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Fifty Thousand Dollars
($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily
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insured against by other owners in similar businesses conducted in the locations
where Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's business and ownership and use of the
Collateral in amounts and of a type that are customary to businesses similar to
Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof, and all liability insurance policies shall show the Bank as an
additional insured and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason, with the
exception of ten (10) days notice for non-payment of premium. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. As long as an
Event of Default has not occurred and is continuing, Borrower may use all
proceeds payable under any such policy to the repair or replacement of property
that is lost or damaged, and Borrower shall pay any excess to Bank on account of
outstanding Obligations. After the occurrence and during the continuance of an
Event of Default, all such insurance proceeds shall, at the option of Bank, be
payable to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Within sixty (60) days of the Closing
Date, Borrower shall maintain and shall cause each of its Subsidiaries located
in the United States to maintain its primary depository (other than the lockbox
account maintained with X.X. Xxxxxx Chase), operating and investment accounts
with Bank and/or Comerica Securities, Inc, except that Borrower may keep up to
$2,000,000 (and any amounts in excess of $40,000,000) in one or more accounts
with one or more financial institutions disclosed to Bank in writing.
6.8 Liquidity. Borrower shall maintain at all times and shall report
to Bank monthly a balance of unrestricted cash and cash equivalents at Bank that
is at least equal to the greater of (i) $20,000,000 or (ii) the amount of
Borrower's preceding six (6) months Cash Burn (such Cash Burn to be calculated
based on the average trailing three (3) month Cash Burn). "Cash Burn" means the
change in Borrower's cash during the applicable period of measurement, net of
changes in financial debt, new issuances of stock, paid-in capital and minority
interests.
6.9 Adjusted Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to Current Liabilities of
more than 1.15 to 1.00.
6.10 Minimum Revenue. Borrower shall have revenue for each month
measured on a trailing three month basis that is at least equal to eighty
percent (80%) of the revenue projected for such period in the projections
attached hereto as Exhibit D.
6.11 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Credit Extensions,
Borrower will not do any of the following without Bank's prior written consent
(which, as to Sections 7.1, 7.2 and 7.8, shall not be unreasonably withheld):
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property without the Bank's prior written
consent, other than: (i) Transfers of Inventory in the ordinary course of
business; (ii) Transfers of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; (iii) Transfers of worn-out or obsolete Equipment which was not
financed by Bank; (iv) Transfers in the form of sublicenses of Borrower's
products in the ordinary course of business; and (v) Transfers made in
accordance with distribution agreements entered into in the ordinary course of
business.
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7.2 Change in Business; Change in Control or Executive Office.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto); or
cease to conduct business in the manner conducted by Borrower; or suffer or
permit a Change in Control; or relocate its chief executive office or state of
incorporation without thirty (30) days prior written notification to Bank.
Borrower will not change the date on which its fiscal year ends without Bank's
prior written consent.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens (provided that Borrower may
enter into license agreements that contain provisions that restrict an
encumbrance on, or assignment of, Borrower's rights as licensee thereunder).
7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock, or permit any of its Subsidiaries to do so, except that Borrower may
repurchase the stock of former employees pursuant to stock repurchase agreements
as long as an Event of Default does not exist prior to such repurchase or would
not exist after giving effect to such repurchase, or suffer or permit any
Subsidiary to be a party to, or be bound by, an agreement that restricts such
Subsidiary from paying dividends or otherwise distributing property to Borrower.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments; or maintain or except as permitted by Section
6.7 invest any of its property with a Person other than Bank or permit any of
its Subsidiaries to do so, unless such Person has entered into an account
control agreement with Bank, in form and substance satisfactory to Bank.
7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory and Equipment. At any time sixty (60) days after the
Closing Date, store Inventory or Equipment (other than portable computers and
related Equipment) with a value of more than $100,000 (i) at a location other
than the location set forth in Section 10 of this Agreement, or at Borrower's
principal place of business, or as disclosed in the Schedule or (ii) with a
bailee, warehouseman, or other third party (with the exception of landlords of
office space) unless the third party has been notified of Bank's security
interest and Bank (a) has received an acknowledgment from the third party that
it is holding or will hold the Inventory or Equipment for Bank's benefit or (b)
is in pledge possession of the warehouse receipt, where negotiable, covering
such Inventory or Equipment.
7.11 Compliance. Become an "investment company" or be controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
13
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect, or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
7.12 Negative Pledge Agreements. Permit the inclusion in any
contract to which it or a Subsidiary becomes a party of any provisions that
could restrict or invalidate the creation of a security interest in any of
Borrower's or such Subsidiary's property (provided that Borrower may enter into
license agreements that contain provisions that restrict an encumbrance on, or
assignment of, Borrower's rights as licensee thereunder).
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, within two (2) days
of when due, any of the Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within fifteen (15) days after Borrower receives notice
thereof or any officer of Borrower becomes aware thereof; provided, however,
that if the default cannot by its nature be cured within the fifteen (15) day
period or cannot after diligent attempts by Borrower be cured within such
fifteen (15) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) additional days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Credit
Extensions will be required to be made during such cure period);
8.3 Material Adverse Effect. If there occurs any circumstance or
circumstances are reasonably likely to have a Material Adverse Effect;
8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding with respect to Borrower is commenced by Borrower, or if an
Insolvency Proceeding is commenced against Borrower and is not dismissed or
stayed within sixty (60) days (provided that no Credit Extensions will be made
prior to the dismissal of such Insolvency Proceeding);
8.6 Other Agreements. If there is a default or other failure to
perform in any agreement to which Borrower is a party or by which it is bound
resulting in a right by a third party or parties, whether or not
14
exercised, to accelerate the maturity of any Indebtedness in an amount in excess
of Two Hundred Thousand Dollars ($200,000); or which could reasonably be
expected to have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of twenty (20) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or
8.9 Misrepresentations. If Borrower makes any material
misrepresentation or material misstatement now or hereafter in any warranty or
representation or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
8.10 Guaranty. If any guaranty of all or a portion of the
Obligations (a "Guaranty) ceases for any reason to be in full force and effect,
or any guarantor fails to perform any obligation under any Guaranty or a
security agreement securing any Guaranty (collectively, the "Guaranty
Documents"), or any event of default occurs under any Guaranty Document or any
guarantor revokes or purports to revoke a Guaranty, or any material
misrepresentation or material misstatement exists now or hereafter in any
warranty or representation set forth in any Guaranty Document or in any
certificate delivered to Bank in connection with any Guaranty Document, or if
any of the circumstances described in Sections 8.3 through 8.8 occur with
respect to any guarantor or any guarantor dies or becomes subject to any
criminal prosecution, or any circumstances arise causing Bank, in good faith, to
become insecure as to the satisfaction of any of any guarantor's obligations
under the Guaranty Documents
8.11 Right to Cure. Notwithstanding the other provisions of this
Article 8, an Event of Default will not exist (and covenant non-compliance shall
be deemed not to exist) for Borrower's failure to comply with any of Sections
6.8, 6.9 or 6.10 as long as no Credit Extensions are then outstanding or if
Borrower pays Bank all amounts owing hereunder within five days of the date of
such noncompliance, provided no Credit Extensions may be requested until
Borrower is in compliance with such sections.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5, all Obligations shall become immediately due and payable without
any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect
15
to any of Borrower's owned premises, Borrower hereby grants Bank a license to
enter into possession of such premises and to occupy the same, without charge,
in order to exercise any of Bank's rights or remedies provided herein, at law,
in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time
owing to or for the credit or the account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a non-exclusive license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Exercise its rights as a secured creditor under the
applicable Uniform Commercial Code to dispose of the Collateral by way of one or
more contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as is commercially reasonable, and apply
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; and
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Borrower where permitted by law; provided Bank may exercise such
power of attorney to sign the name of Borrower on any of the documents described
in Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide Credit Extensions hereunder is terminated.
9.3 Accounts Collection. After and during the continuation of an
Event of Default, Bank may notify any Person owing funds to Borrower of Bank's
security interest in such funds and verify the amount of such Account. Borrower
shall collect all amounts owing to Borrower for Bank, receive in trust all
payments as Bank's trustee, and immediately deliver such payments to Bank in
their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under a loan facility in Section 2.1 as Bank
deems necessary to protect Bank from the exposure created by such failure; or
(c) obtain and maintain insurance policies of the type discussed in Section 6.6
of this Agreement, and take any action with respect to such policies as Bank
deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at
16
the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. Subject to
the foregoing, all risk of loss, damage or destruction of the Collateral shall
be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: The Medicines Company
Xxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx,
Chief Financial Officer
FAX: (000) 000-0000
with a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx, Esq.
FAX: (000) 000-0000
If to Bank: Comerica Bank-California
000 X. Xxxxx Xxxxx Xx.
Xxx Xxxx, XX 00000
Attn: Corporate Banking Center
17
with a copy to: Comerica Bank-California
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx,
Vice President-Life Sciences Practice
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. Failure to deliver a copy of a notice or demand to any Person who is not
a party to this Agreement shall not invalidate a notice or demand otherwise
delivered to a party in accordance with this Agreement.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Xxxxx, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder but not to competitors of Borrower.
12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys' fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. Neither this Agreement nor
the Loan Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and
18
negotiations between the parties hereto with respect to the subject matter of
this Agreement and the Loan Documents, if any, are merged into this Agreement
and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make Credit
Extensions to Borrower. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 12.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank
and all employees and agents of Bank, including but not limited to accountants,
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower, (ii) to prospective transferees
or purchasers of any interest in the Loans, provided that they have entered into
a comparable confidentiality agreement in favor of Borrower, (iii) as required
by law, regulations, rule or order, subpoena, judicial order or similar order,
(iv) as may be required in connection with the examination, audit or similar
investigation of Bank and (v) as Bank may determine in connection with the
enforcement of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE MEDICINES COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Title: Xxxxxx X. Xxxxxxxx, Chief Financial Officer
COMERICA BANK - CALIFORNIA
By: /s/ Xxx Xxxx
-------------------------------------
Title: Vice President
19
DEBTOR THE MEDICINES COMPANY
SECURED PARTY: COMERICA BANK - CALIFORNIA
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower"
or "Debtor") whether presently existing or hereafter created or acquired, and
wherever located, including, but not limited to:
(a) all accounts (including health-care-insurance receivables),
chattel paper (including tangible and electronic chattel paper), deposit
accounts, documents (including negotiable documents), equipment (including all
accessions and additions thereto), general intangibles, goods (including
fixtures), instruments (including promissory notes), inventory (including all
goods held for sale or lease or to be furnished under a contract of service, and
including returns and repossessions), financial assets, investment property
(including securities and securities entitlements), letter of credit rights,
money, and all of Debtor's books and records with respect to any of the
foregoing, and the computers and equipment containing said books and records;
and
(b) any and all cash proceeds and/or noncash proceeds of any of the
foregoing, including, without limitation, insurance proceeds, and all supporting
obligations and the security therefor or for any right to payment. All terms
above have the meanings given to them in the California Uniform Commercial Code,
as amended or supplemented from time to time, including revised Division 9 of
the Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991
(S.B. 45), Section 35, operative July 1, 2001.
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:30 P.M., EASTERN TIME
TO: TECHNOLOGY AND LIFE SCIENCES DIVISION DATE: _____________
FAX #: 000-000-0000 Attn: Compliance TIME: _____________
FROM: THE MEDICINES COMPANY
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
----------------------- --------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
$____________________________________
PRINCIPAL INCREASE (ADVANCE) $____________________________________
PRINCIPAL PAYMENT (ONLY) $____________________________________
INTEREST PAYMENT (ONLY) $____________________________________
PRINCIPAL AND INTEREST (PAYMENT) $____________________________________
OTHER INSTRUCTIONS:
-------------------------------------------------------------
--------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for an Advance confirmed by this
Payment/Advance form; provided, however, that those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
--------------------------------------------------- -----------------------
Authorized Requester Phone #
--------------------------------------------------- -----------------------
Received By (Bank) Phone #
---------------------------------------------
Authorized Signature (Bank)
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: COMERICA BANK - CALIFORNIA
FROM: THE MEDICINES COMPANY
The undersigned authorized officer of THE MEDICINES COMPANY hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct as of the date hereof.
Attached herewith are the required documents supporting the above certification.
The Officer further certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) and are consistently applied
from one period to the next except as explained in an accompanying letter or
footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
Management Letter from Borrower's CPA firm FYE within 90 days Yes No
Annual Budget FYE within 90 days Yes No
10K and 10Q (as applicable) Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Liquidity (Continuous) * Yes No
Adjusted Quick Ratio (Monthly) 1.15 : 1.00 ____ : 1.00 Yes No
Revenue (Trailing 3 month period) ** Yes No
* Unrestricted cash equal to greater of (i) $20,000,000 or 6 months
Cash Burn.
** Revenue for each three month period (measured monthly on trailing
3 month basis) at least equal to 80% of revenue projected for such
period.
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
________________________________________________________________________________
SIGNATURE
________________________________________________________________________________
TITLE
________________________________________________________________________________
DATE
BANK USE ONLY
Received by:____________________________________________________________________
AUTHORIZED SIGNER
Date:___________________________________________________________________________
Verified:_______________________________________________________________________
AUTHORIZED SIGNER
Date:___________________________________________________________________________
Compliance Status Yes No
EXHIBIT D
BORROWER'S PROJECTED REVENUES
Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 June-02
------ ------ ------ ------ ------ ------ -------
Projected Monthly [**] [**] [**] [**] [**] [**] [**]
Revenues
Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02
------ ------ ------ ------ ------ ------
Projected Monthly [**] [**] [**] [**] [**] [**]
Revenues
AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This Amendment to Loan and Security Agreement is entered into as of May 1,
2002 (the "Amendment"), by and between COMERICA BANK-CALIFORNIA ("Bank") and THE
MEDICINES COMPANY ("Borrower").
RECITALS
Borrower and Bank are parties to that certain Loan and Security Agreement
dated as of March 26, 2002, as amended (the "Agreement"). The parties desire to
amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Sections 6.7 and 6.8 of the Agreement are amended to read as follows:
6.7 Principal Depository. Within sixty (60) days of the Closing
Date, Borrower shall maintain and shall cause each of its Subsidiaries
located in the United States to maintain its primary depository (other
than the lockbox account maintained with XX Xxxxxx Xxxxx), operating
and investment accounts with Munder Capital, Comerica Incorporated,
Bank and/or Comerica Securities, Inc., except that Borrower may keep
up to $2,000,000 (and any amounts in excess of $40,000,000) in one or
more accounts with one or more financial institutions disclosed to
Bank in writing.
6.8 Liquidity. Borrower shall maintain at all times and shall
report to Bank monthly a balance of unrestricted cash, cash
equivalents, available for sale securities and associated accrued
interest (such that any such investments satisfy Borrower's investment
policy approved by Borrower's audit committee and provided to Bank)
that is at least equal to the greater of (i) $20,000,000 or (ii) the
amount of Borrower's preceding six (6) months Cash Burn (such Cash
Burn to be calculated based on the average trailing three (3) month
Cash Burn). "Cash Burn" means the change in Borrower's cash during the
applicable period of measurement, net of changes in financial debt,
new issuances of stock, paid-in capital and minority interests.
2. Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in the Agreement. The Agreement, as amended
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects. Except as
expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of, or as an amendment of, any right,
power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof. Borrower ratifies and reaffirms the continuing effectiveness of all
instruments, documents and agreements entered into in connection with the
Agreement.
3. Borrower represents and warrants that the Representations and Warranties
contained in the Agreement are true and correct as of the date of this
Amendment, and that no Event of Default has occurred and is continuing.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
THE MEDICINES COMPANY COMERICA BANK-CALIFORNIA
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxx Xxxx
--------------------------------------------- -----------------------
Title: Vice President and Chief Financial Officer Title: Vice President
------------------------------------------ --------------------
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