February 14, 1997
Progenitor, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attn: Xxxxxxxx Given, M.D., President
Re: $6,600,000 BRIDGE LINE OF CREDIT
Ladies and Gentlemen:
This letter agreement ("AGREEMENT") sets forth the terms and
conditions of the bridge line of credit (the "LINE") that Interneuron
Pharmaceuticals, Inc., a Delaware corporation ("LENDER") hereby establishes in
favor of Progenitor, Inc., a Delaware corporation ("BORROWER"), and to which
Borrower hereby agrees as evidenced by Borrower's signing and returning to
Lender the enclosed copy of this Agreement:
1. This Agreement is being entered into in order to fund Borrower's
obligation to lend to Mercator Genetics, Inc. ("MERCATOR") pursuant to that
certain Bridge Line of Credit of even date herewith between Borrower, as lender,
and Mercator, as borrower (the "MERCATOR LINE LETTER"), entered into in
connection with that certain Agreement and Plan of Reorganization of even date
herewith among the Borrower, Mercator and MG Merger Sub Corp. (the
"REORGANIZATION AGREEMENT"). Capitalized terms not otherwise defined herein
shall have the meanings as defined in the Reorganization Agreement. Capitalized
terms defined in any Schedule shall have the same meaning in each other Schedule
unless otherwise defined therein. "MERCATOR LOAN DOCUMENTS" means the documents
and instruments described on Annex I hereto, as the same may hereafter be
amended, modified, renewed, refinanced or extended. "MERCATOR DEBT" means all
indebtedness and other obligations of Mercator to Borrower pursuant to the
Mercator Loan Documents.
2. Subject to the terms and conditions of this Agreement, Lender
agrees to make advances prior to the Maturity Date in accordance with the terms
of the Funding Schedule set forth on SCHEDULE A hereto (collectively, the
"ADVANCES" and, individually, an "ADVANCE") under the Line to Borrower;
provided, however, that the aggregate amount of Advances outstanding to Borrower
under the Line shall not exceed $5,000,000 at any time (the
Progenitor, Inc.
February 14, 1997
"COMMITMENT AMOUNT") except to the extent that the Commitment Amount under the
Mercator Loan Documents is increased pursuant to Schedule A hereto, up to an
additional $1,100,000 for an aggregate maximum commitment of $6,600,000 (the
"INCREASED COMMITMENT AMOUNT").
3. (a) All Advances made to Borrower hereunder shall be payable in
full on the date (the "MATURITY DATE") that is the earliest to occur of (i) any
acceleration of the obligation to repay the Advances under Paragraph 11 of this
Agreement, (ii) the consummation by Borrower of an initial public offering of
its capital stock, (iii) a "Change of Control" of Borrower as defined in
SCHEDULE B, (iv) the closing of the Reorganization (as defined in the
Reorganization Agreement) and (v) January 15, 1999.
"NET PROCEEDS" means (i) with respect to an asset disposition, the
excess of (a) the gross cash proceeds received by the Borrower from such
disposition OVER (b) the sum of (1) all fees and expenses with respect to
legal, investment banking and accounting fees and disbursements and governmental
fees incurred (or reasonably expected to be incurred) in connection with such
disposition which are not payable to any affiliate of the Borrower PLUS (2) all
taxes paid (or payable) in connection with such sale PLUS (3) to the extent the
proceeds described in CLAUSE (a) are applied in payment thereof, all
indebtedness secured, directly or indirectly, by such assets, (ii) with respect
to the sale by the Borrower of any capital stock of the Borrower, the excess of
(a) the gross cash proceeds received by the Borrower from such sale OVER (b) all
fees and expenses with respect to underwriting commissions, legal, investment
banking and accounting fees and disbursements, printing expense and any
governmental fees incurred (or reasonably expected to be incurred) in connection
with such sale which are not payable to any affiliate of the Borrower and (iii)
with respect to a debt financing, the excess of (a) the principal amount of such
financing OVER (b) all fees and expenses with respect to legal, investment
banking and accounting fees and disbursements and governmental fees incurred (or
reasonably expected to be incurred) in connection with such financing which are
not payable to any affiliate of the Borrower.
(b) Within one business day following the date of the closing of a
debt or equity financing resulting in the receipt by Borrower of Net Proceeds of
at least $1,000,000, Borrower shall make a mandatory prepayment of the Advances
in an amount equal to 1/3 of the amount so received. At any time when no Event
of Default exists, such prepayment shall be applied to reduce the principal
amount of the Advances payable on the Maturity Date. At any time when an Event
of Default exists, such prepayment shall be applied in accordance with Section 9
of the Intercompany Security Agreement.
(c) Amounts prepaid may not be reborrowed.
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Progenitor, Inc.
February 14, 1997
4. Advances under the Line will be evidenced by a Promissory Note of
even date herewith (as described on Annex II hereto) in an original principal
amount equal to the Increased Commitment Amount made by the Borrower and payable
to the order of the Lender.
5. In order to induce Lender to enter into this Agreement, to engage
in the transactions contemplated herein and in the other Intercompany Loan
Documents and to make the Advances hereunder, (i) Borrower represents and
warrants unto Lender as set forth in SCHEDULE C hereto and (ii) Borrower makes
the covenants and agreements set forth on SCHEDULE D hereto.
6. Borrower shall pay interest on Advances outstanding under the
Line at a fixed rate per annum equal to 10%. Interest shall accrue from the
date of each Advance and shall be payable on the Maturity Date. Interest
payable hereunder shall be computed for the actual number of days elapsed on the
basis of a year consisting of 365 or, where appropriate, 366 days.
7. Each Advance shall be made to Borrower by wire transfer of
immediately available funds to such account as designated by Borrower in the
Request for Advance described in Section (b) of SCHEDULE E of this Agreement.
All payments by Borrower to Lender hereunder shall be made by wire transfer of
immediately available funds to such account as is designated in writing by
Lender to Borrower.
8. Lender's obligation to make Advances to Borrower shall terminate
on the earlier of (i) the Maturity Date and (ii) the date on which it is
terminated pursuant to Paragraph 11 hereof. Lender's obligation to make
Advances shall be conditioned upon Borrower's fulfillment to the reasonable
satisfaction of Lender of the conditions set forth on SCHEDULE E.
9. All Advances under this Agreement shall be advanced by Borrower
to Mercator pursuant to and in accordance with the Mercator Loan Documents for
use by Mercator in accordance with the Mercator Budget set forth in SCHEDULE F
and the Reorganization Agreement.
10. All Advances under this Agreement shall be secured pursuant to
(i) that certain Security Agreement between Borrower and Lender of even date
herewith pursuant to which Borrower has granted to Lender a security interest in
all of its right, title and interest in and to its personal property and (ii)
that certain Assignment and Security Agreement between Borrower and Lender of
even date herewith pursuant to which Borrower has collaterally assigned
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Progenitor, Inc.
February 14, 1997
to Lender all of its right, title and interest in and to the Mercator Debt and
the Mercator Loan Documents.
11. The occurrence of any Event of Default referred to in SCHEDULE G
shall terminate any obligation on the part of Lender to make Advances under this
Agreement. If any Event of Default described in clauses (a) through (d) of
paragraph (v) or in paragraph (x) of the Definition of "Event of Default" shall
occur with respect to Borrower, the outstanding principal amount of all
outstanding Advances and all other obligations of Borrower under the Progenitor
Loan Documents shall automatically be and become immediately due and payable,
without notice or demand. If any Event of Default (other than any Event of
Default described in clauses (a) through (d) of paragraph (v) or in paragraph
(x) of the Definition of "Event of Default" with respect to Borrower) shall
occur for any reason, whether voluntary or involuntary, and be continuing, the
Lender may, upon notice to the Borrower, declare all or any portion of the
outstanding principal amount of the Advances to be due and payable and any or
all other obligations of Borrower under the Progenitor Loan Documents to be due
and payable, whereupon the full unpaid amount of such Advances and any and all
other such obligations which shall be so declared due and payable shall be and
become immediately due and payable, without further notice, demand, or
presentment.
12. The rights, powers and remedies of Lender hereunder are
cumulative and in addition to all rights, powers and remedies provided under any
and all agreements between Borrower and Lender relating hereto, at law, in
equity or otherwise. Any delay or failure by Lender to exercise any right,
power or remedy shall not constitute a waiver thereof by Lender, and no single
or partial exercise by Lender of any right, power or remedy shall preclude other
or further exercise thereof or any exercise of any other rights, powers or
remedies. No consent or waiver under this Agreement shall be effective unless
in writing. No waiver of any breach or default shall be deemed a waiver of any
other breach or default or of any breach or default thereafter occurring. Any
waiver shall be effective only with respect to the subject matter thereof and
shall neither imply nor constitute nor obligate Lender to grant a further or
continuing waiver with respect to the subject matter so waived or any other
subject matter.
13. Borrower shall pay all costs and expenses of Lender (including,
without limitation, reasonable fees and expenses of Lender's counsel) incurred
by Lender in connection with the enforcement of Lender's rights, powers and
remedies hereunder and any instruments or agreements executed in connection with
this Agreement.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
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Progenitor, Inc.
February 14, 1997
15. This Agreement may be executed in one or more counterparts each
of which shall be an original and all of which together shall be but one
agreement.
If the above provisions accurately and completely reflect Borrower's
understanding of the arrangements described, please so indicate by executing and
returning to Lender the enclosed copy of this Agreement.
Very truly yours,
INTERNEURON PHARMACEUTICALS, INC.
By: /s/ Xxxxxx X. Xxxx
----------------------------------
Name: Xxxxxx X. Xxxx
Title: Executive Vice President and
Treasurer
Address: One Ledgemont Center
00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
The foregoing is agreed to and
accepted this 14th day of February 1997.
PROGENITOR, INC.
By: /s/ Xxxx X.X. Xxxxxxx
-----------------------------
Name: Xxxx Xxxxxxx
Title: Vice President and Chief Financial Officer
Address: 0000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
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