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EXHIBIT 4.5
GELTEX PHARMACEUTICALS, INC.
000 Xxxx Xxxx Xxxx
Xxxxxxx, XX 00000
May 21, 0000
Xxxxx Xxxxxxxx Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Gentlemen:
This letter agreement will set forth certain understandings between
GelTex Pharmaceuticals, Inc., a Delaware corporation (the "Borrower") and Fleet
National Bank (the "Bank") with respect to Term Loans (hereinafter defined) to
be made by the Bank to the Borrower. In consideration of the mutual promises
contained herein and in the other documents referred to below, and for other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank agree as follows:
I. AMOUNTS AND TERMS
1.1. REFERENCES TO DOCUMENTS. Reference is made to (i) that certain
$5,000,000 face principal amount promissory note (the "Term Note") of even date
herewith made by the Borrower and payable to the order of the Bank, and (ii)
that certain Security Agreement (Equipment) of even date herewith from the
Borrower to the Bank (the "Security Agreement").
1.2. THE BORROWING; TERM NOTE. Subject to the terms and conditions
hereinafter set forth, the Bank will make one or more loans (the "Term Loans")
to the Borrower, as the Borrower may request, on any Business Day prior to the
first to occur of (i) December 31, 1997 or (ii) the earlier termination of the
within-described term loan facility pursuant to ss. 5.2 or ss.6.5. A Term Loan
shall be made, not more than once per calendar quarter (except that more than
one Term Loan may be made in any calendar quarter provided that each additional
Term Loan in any one calendar quarter is in an amount of at least $500,000), in
order to finance Qualifying Costs incurred by the Borrower within the 90 days
preceding the request for such Term Loan, each such Term Loan to be in such
amount as may be requested by the Borrower; provided that (i) no Term Loan will
be made after December 31, 1997; (ii) the aggregate original principal amounts
of all Term Loans will not exceed $5,000,000; and (iii) no Term Loan will be in
an amount more than 100% of the invoiced actual amount of the Qualifying Costs
with respect to which such Term Loan is made (excluding taxes, shipping,
software, training fees and other "soft costs" not expressly included within the
definition of "Qualifying Costs" below). Prior to the making of each Term Loan,
and as a precondition thereto, the Borrower will provide the Bank with: (i)
invoices supporting the relevant Qualifying Costs; (ii) such evidence as the
Bank may reasonably require showing that any equipment the purchase price of
which is included in the Qualifying Costs has been delivered to the Borrower's
New Premises (hereinafter defined), has been paid for by the Borrower and is
owned by the Borrower free of all liens and interests of any
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other Person (other than the security interest of the Bank pursuant to the
Security Agreement and other than the interest of the Borrower's landlord in
Leasehold Improvements); (iii) Uniform Commercial Code financing statements
coveting any equipment (other than Leasehold Improvements) the purchase price of
which is included in the relevant Qualifying Costs with respect to which such
Term Loan is being made and an appropriate supplement to the Security Agreement
adding any equipment (other than Leasehold Improvements) the purchase price of
which is included in the relevant Qualifying Costs to the description of
Collateral; and (iv) evidence satisfactory to the Bank that any equipment the
purchase price of which is included in the Qualifying Costs is fully insured
against casualty loss, with insurance naming the Bank as secured party and first
loss payee (except as to Leasehold Improvements). The Term Loans will be
evidenced by the Term Note. The Borrower hereby irrevocably authorizes the Bank
to make or cause to be made, on a schedule attached to the Term Note or on the
books of the Bank, at or following the time of making each Term Loan and of
receiving any payment of principal, an appropriate notation reflecting such
transaction and the then aggregate unpaid principal balance of the Term Loans.
The amount so noted shall constitute presumptive evidence as to the amount owed
by the Borrower with respect to principal of the Term Loans. Failure of the Bank
to make any such notation shall not, however, affect any obligation of the
Borrower or any right of the Bank hereunder or under the Term Note.
1.3. PRINCIPAL REPAYMENT OF TERM LOANS. The Borrower shall repay
principal of the Term Loans in 48 equal consecutive monthly installments,
commencing on January 31, 1998 and continuing on the last day of each month
thereafter. Each such monthly installment of principal shall be in an amount
equal to 1/48th of the aggregate principal amounts of the Term Loans outstanding
on January 2, 1998. In any event, the then outstanding principal balance of all
Term Loans and all interest then accrued but unpaid thereon shall be due and
payable in full on December 31, 2001. Except as set forth in ss. 1.7, the
Borrower may prepay, at any time or from time to time, without premium or
penalty, the whole or any portion of the Term Loans; provided that each such
principal prepayment shall be accompanied by payment of all interest under the
Term Note accrued but unpaid to the date of payment. Any partial prepayment of
principal of the Term Loans will be applied to installments of principal of the
Term Loans thereafter coming due in inverse order of normal maturity. Amounts
repaid or prepaid with respect to the Term Loans are not available for
reborrowing.
1.4. INTEREST RATE. Except as otherwise provided below in this
ss.1.4, interest on the Term Loans will be payable at a fluctuating rate per
annum (the "Floating Rate") which shall at all times be equal to the Prime Rate
as in effect from time to time (but in no event in excess of the maximum rate
permitted by then applicable law), with a change in such rate of interest to
become effective on each day when a change in the Prime Rate becomes effective.
Subject to the conditions set forth herein, the Borrower may elect that all or
any portion of any Term Loan to be made under ss. 1.2 will be made as a LIBOR
Loan, that all or any portion of any Floating Rate Loan (but not all or any
portion of the COF Loan, if any) will be converted to a LIBOR Loan and/or that
any LIBOR Loan will be continued at the expiration of the Interest Period
applicable thereto as a new LIBOR Loan. Such election shall be made by the
Borrower giving to the Bank a written or telephonic notice received by the Bank
within the time period and containing the
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information described in the next following sentence (a "Fixed Rate Borrowing
Notice"). The Fixed Rate Borrowing Notice must be received by the Bank no later
than 10:00 a.m. (Boston time) on that day which is two Business Days prior to
the date of the proposed borrowing, conversion or continuation, as the case may
be, and must specify the amount of the LIBOR Loan requested (which shall be
$500,000 or an integral multiple thereof), must identify the particular Term
Loan or Loans so to be made, converted or continued, as the case may be, and
must specify the proposed commencement date of the relevant Interest Period.
Notwithstanding anything provided elsewhere in this letter agreement, the
Borrower may not elect to have any installment of a Term Loan included in a
LIBOR Loan if the Interest Period applicable thereto would continue after the
due date of such installment. Any Fixed Rate Borrowing Notice shall, upon
receipt by the Bank, become irrevocable and binding on the Borrower, and the
Borrower shall, upon demand and receipt of a Bank Certificate with respect
thereto, forthwith indemnify the Bank against any loss or expense incurred by
the Bank as a result of any failure by the Borrower to borrow any requested
LIBOR Loan, including, without limitation, any loss or expense incurred by
reason of the liquidation or redeployment of deposits or other funds acquired by
the Bank to fund or maintain such LIBOR Loan. At the expiration of each Interest
Period applicable to a LIBOR Loan, the principal amount of such LIBOR Loan may
be continued as a new LIBOR Loan to the extent and on the terms and conditions
contained in this letter agreement by delivery to the Bank of a new Fixed Rate
Borrowing Notice conforming to the requirements set forth above in this ss. 1.4
(and any LIBOR Loan not repaid and not so continued as a new LIBOR Loan will be
deemed (subject to the provisions of the next following paragraph) to have been
converted into a Floating Rate Loan). Notwithstanding any other provision of
this letter agreement, the Bank need not make any LIBOR Loan or allow any
conversion of a Floating Rate Loan to a LIBOR Loan at any time when there exists
any Default or Event of Default.
On December 31, 1997, the Borrower may convert to a COF Loan all (but
not less than all) of the Terms Loans then outstanding. If the Borrower desires
such conversion to a COF Loan, it will notify the Bank of same not less than two
Business Days prior to the proposed conversion and will request that the Bank
offer with respect to such Term Loans a rate of interest which shall be fixed
(subject to adjustment as provided in this letter agreement) for the period
commencing on the date of such conversion and ending on the final maturity date
applicable to such Term Loans (the "Fixed Rate Period"). Following such request
for a fixed rate, the Bank will endeavor to offer a proposed COF Interest Rate
at a rate determined as provided below and under conditions determined by the
Bank in its sole discretion. The Borrower may elect to accept such offer in the
manner and within the time period specified in such offer. Any such election
shall be irrevocable on the part of the Borrower. Upon such election, the
interest rate payable with respect to the outstanding Term Loans shall be fixed
(subject to adjustment as provided in this letter agreement) for the Fixed Rate
Period and at the rate communicated by the Bank as its proposed COF Interest
Rate. Any proposed COF Interest Rate offered under this Section will be a rate
per annum equal to the sum of (i) 1.75% per annum plus (ii) the COF Rate for the
applicable Fixed Rate Period (expressed as a per annum rate); provided, however,
that the COF Interest Rate shall in no event exceed the maximum rate permitted
by applicable law. The COF Rate shall be determined by the Bank in its
discretion for the purposes of any proposed COF Interest Rate offered under this
Section. The Bank may base the COF Rate for the purpose
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of computing the proposed COF Interest Rate on any (or any combination of)
recognized sources of available funding for transactions of this type,
including, but not limited to, the interbank market, the domestic and European
certificate of deposit market and sales of commercial paper. The COF Rate for
purposes of this computation shall in any event include adjustments for the
costs of maintaining reserves, insurance (including, without limitation,
assessments by the FDIC), taxes, hedging and other costs which may be incurred
by the Bank with respect to the applicable source or sources of funding, all as
determined by the Bank in its discretion. The source or sources of funding
utilized for the computation of the proposed rate shall be selected by the Bank
at its sole discretion for offering to the Borrower, and the Borrower shall not
have any claim against the Bank with respect to computation of any proposed COF
Interest Rate. If the Borrower is dissatisfied with any proposed COF Interest
Rate, the Borrower's sole remedy with respect thereto shall be not to accept
such proposed COF Interest Rate within the applicable time period, and thus to
cause interest on the Term Loans to be payable at the Floating Rate (subject to
the Borrower's ability set forth elsewhere herein to obtain LIBOR Loans).
Notwithstanding the foregoing provisions hereof, the Bank need not offer a
proposed COF Interest Rate for any period of time with respect to which the
Bank, in its sole discretion, determines that there are no recognized sources of
funding available to it for such time period or principal amount or that the
cost of funds with respect thereto would be unreasonably high or if there then
exists any Default or Event of Default. Further, the Borrower may not convert
into a COF Loan any LIBOR Loan prior to the end of the Interest Period
applicable to such LIBOR Loan.
Any request for a Fixed Rate Loan and any election to convert all or any
portion of the Term Loans to a Fixed Rate Loan may be made on behalf of the
Borrower only by a duly authorized officer; provided, however, that the Bank may
conclusively rely upon any written or facsimile communication received from any
individual whom the Bank believes in good faith to be such a duly authorized
officer.
1.5. INTEREST PAYMENTS. The Borrower will pay interest on the
principal amount of the Term Loans outstanding from time to time, from the date
hereof until payment of the Term Loans and the Term Note in full and the
termination of this letter agreement. Interest on Floating Rate Loans and the
COF Loan (if any) will be payable monthly in arrears on the first day of each
month. Interest on each LIBOR Loan will be payable in arrears on the applicable
Interest Payment Date. In any event, interest shall also be payable on the date
of payment of the Term Loans in full. Interest on Floating Rate Loans shall be
payable at the Floating Rate. The rate of interest payable on any LIBOR Loan
will be the Eurodollar Interest Rate applicable thereto. Interest on the COF
Loan will be payable at the applicable COF Interest Rate. In any event, overdue
principal of any Term Loan and, to the extent permitted by law, overdue interest
on any Term Loan shall bear interest at a rate per annum which at all times
shall be equal to the sum of (i) two (2%) percent per annum plus (ii) the rate
otherwise applicable to such overdue principal (or to the principal amount: as
to which such interest is overdue) pursuant to the Term Note and this letter
agreement, payable on demand. All interest payable hereunder and/or under the
Term Note will be calculated on the basis of a 360-day year for the actual
number of days elapsed.
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1.6. RATE DETERMINATION PROTECTION. In the event that:
(i) the Bank shall reasonably determine that, by reason of
circumstances affecting the London interbank market or
otherwise, adequate and reasonable methods do not exist for
ascertaining the Eurodollar Interest Rate which would otherwise
be applicable during any Interest Period, or
(ii) the Bank shall reasonably determine that:
(A) the making or continuation of any LIBOR Loan has
been made impracticable or unlawful by (1) the
occurrence of any contingency that materially and
adversely affects the London interbank market or (2)
compliance by the Bank with any applicable law or
governmental regulation, guideline or order or
interpretation or change thereof by any governmental
authority charged with the interpretation or
administration thereof or with any request or directive
of any such governmental authority (whether or not
having the force of law); or
(B) LIBOR will not, in the reasonable determination
of the Bank, adequately and fairly reflect the cost to
the Bank of funding the LIBOR Loans for such Interest
Period
then the Bank shall forthwith give notice of such determination
(which shall be conclusive and binding on the Borrower) to the
Borrower. In such event the obligations of the Bank to make
LIBOR Loans shall be suspended until the Bank determines that
the circumstances giving rise to such suspension no longer
exist, whereupon the Bank shall notify the Borrower.
1.7. PREPAYMENT OF FIXED RATE LOANS. The following provisions of this
ss. 1.7 shall be effective only with respect to Fixed Rate Loans: If, due to
acceleration of the Term Note or due to voluntary prepayment or due to any other
reason, the Bank receives payment of any principal of a LIBOR Loan on any date
prior to the last day of the relevant Interest Period or receives payment of all
or any portion of any installment of the COF Loan prior to the regularly
scheduled due date for such installment, the Borrower shall, upon demand and
receipt of a Bank Certificate from the Bank with respect thereto, pay forthwith
to the Bank all amounts required to compensate the Bank for losses, costs or
expenses which it may have incurred and may reasonably incur as a result of such
payment, including, without limitation, any loss or expense incurred by reason
of the liquidation or redeployment of funds acquired by the Bank to fund or
maintain the relevant Fixed Rate Loan.
1.8 INCREASED COSTS; CAPITAL ADEQUACY.
(i) If the adoption, effectiveness or phase-in, after the
date hereof, of any applicable law, rule or regulation, or any
change therein, or any change in the
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interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Bank with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable
agency:
(A) shall subject the Bank to any Imposition or
other charge with respect to any Fixed Rate Loan, the
Term Note or the Bank's agreement to make Fixed Rate
Loans, or shall change the basis of taxation of payments
to the Bank of the principal of or interest on any Fixed
Rate Loan or any other amounts due under this letter
agreement in respect of the Fixed Rate Loans or the
Bank's agreement to make Fixed Rate Loans (except for
changes in the rate of tax on the over-all net income of
the Bank); or
(B) shall impose, modify or deem applicable any
reserve, special deposit, deposit insurance or similar
requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding, with respect to
any LIBOR Loan, any such requirement already included in
the applicable Reserve Rate) against assets of, deposits
with or for the account of, or credit extended by, the
Bank or shall impose on the Bank or on the London
interbank market any other condition affecting any Fixed
Rate Loans, the Term Note or the Bank's agreement to
make Fixed Rate Loans
and the result of any of the foregoing is to increase the cost
to the Bank of making or maintaining any Fixed Rate Loan or to
reduce the amount of any sum received or receivable by the Bank
under this letter agreement or under the Term Note with respect
to any Fixed Rate Loan by an amount deemed by the Bank to be
material, then, upon demand by the Bank and receipt of a Bank
Certificate from the Bank with respect thereto, the Borrower
shall pay to the Bank such additional amount or amounts as the
Bank certifies to be necessary to compensate the Bank for such
increased cost or reduction in amount received or receivable.
(ii) If the Bank shall have determined that the adoption,
effectiveness or phase-in after the date hereof of any
applicable law, rule or regulation regarding capital
requirements for banks or bank holding companies, or any change
therein after the date hereof, or any change after the date
hereof in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive of such
entity regarding capital adequacy (whether or not having the
force of law) has or would have the effect of reducing the
return on the Bank's capital with respect to its agreement
hereunder to make Term Loans or with respect to any Term Loan
(whether or not then subject to any Eurodollar Interest Rate or
COF Interest Rate) to a level below that which the Bank could
have achieved (taking into consideration the Bank's policies
with
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respect to capital adequacy immediately before such adoption,
effectiveness, phase-in, change or compliance and assuming that
the Bank's capital was then fully utilized) by any amount deemed
by the Bank to be material: (A) the Bank shall promptly after
its determination of such occurrence give notice thereof to the
Borrower; and (B) the Borrower shall either (1) within 60 days
after receipt of such notice repay all Term Loans then
outstanding, together with the interest accrued thereon to the
date of payment and such amounts as may be required to be paid
under ss. 1.7, and terminate the facility for Term Loans
described in this letter agreement or (2) pay to the Bank as an
additional fee from time to time on demand such amount as the
Bank certifies to be the amount that will compensate it for such
reduction.
(iii) A Bank Certificate of the Bank claiming compensation
under this ss. 1.8 shall be conclusive in the absence of
manifest error Such certificate shall set forth the nature of
the occurrence giving rise to such compensation, the additional
amount or amounts to be paid to the Bank hereunder and the
method by which such amounts are determined. In determining any
such amount, the Bank may use any reasonable averaging and
attribution methods.
(iv) No failure on the part of the Bank to demand
compensation on any one occasion shall constitute a waiver of
its right to demand such compensation on any other occasion and
no failure on the part of the Bank to deliver any Bank
Certificate in a timely manner shall in any way reduce any
obligation of the Borrower to the Bank under this ss. 1.8.
1.9. ILLEGALITY OR IMPOSSIBILITY. Notwithstanding any other provision
of this letter agreement, if the introduction of or any change in or in the
interpretation or administration of any law or regulation applicable to the Bank
or the Bank's activities in the London interbank market shall make it unlawful,
or any central bank or other governmental authority having jurisdiction over the
Bank or the Bank's activities in the London interbank market shall assert that
it is unlawful, or otherwise make it impossible, for the Bank to perform its
obligations hereunder to make LIBOR Loans or to continue to fund or maintain
LIBOR Loans, then on notice thereof and demand therefor by the Bank to the
Borrower, (i) the obligation of the Bank to fund LIBOR Loans shall terminate and
(ii) all affected LIBOR Loans shall be deemed to have been repaid and reborrowed
as Floating Rate Loans (with the Borrower to be responsible for any amount
payable under ss. 1.7 as a consequence of such repayment) at the last day on
which such LIBOR Loans may legally remain outstanding.
1.10. ADVANCES AND PAYMENTS. The proceeds of all Term Loans shall be
credited by the Bank to a general deposit account maintained by the Borrower
with the Bank. The proceeds of each Term Loan will be used by the Borrower
solely to fund Qualifying Costs.
The Bank may charge any general deposit account of the Borrower at the
Bank with the amount of all payments of interest, principal and other sums due,
from time to time, under this
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letter agreement and/or the: Term Note; and will thereafter notify the Borrower
of the amount so charged. The failure of the Bank so to charge any account or to
give any such notice shall not affect the obligation of the, Borrower to pay
interest, principal or other sums as provided herein or in the Term Note.
Whenever any payment to be made to the Bank hereunder or under the Term
Note shall be stated to be due on a day which is not a Business Day, such
payment may be made on the next succeeding Business Day, and interest payable on
each such date shall include the amount thereof which shall accrue during the
period of such extension of time. All payments by the Borrower hereunder and/or
in respect of the Term Note shall be made net of any Impositions or taxes and
without deduction, set-off or counterclaim, notwithstanding any claim which the
Borrower may now or at any time hereafter have against the Bank. All payments of
interest, principal and any other sum payable hereunder and/or under the Term
Note shall be made to the Bank, in immediately available funds, at its office at
00 Xxxxx Xxxxxx, Xxxxxx, XX 00000 or to such other address as the Bank may from
time to time direct. All payments received by the Bank after 2:00 p.m. on any
day shall be deemed received as of the next succeeding Business Day. All monies
received by the Bank shall be applied first to fees, charges, costs and
expenses payable to the Bank under this letter agreement, the Term Note and/or
any of the other Loan Documents, next to interest then accrued on account of any
Term Loans and only thereafter to principal of the Term Loans.
1.11. CONDITIONS TO ADVANCE. Prior to the making of the initial Term
Loan, the Borrower shall deliver to the Bank duly executed copies of this letter
agreement, the Security Agreement, the Term Note and the documents and other
items listed on the Closing Agenda delivered herewith by the Bank to the
Borrower, all of which, as well as all legal matters incident to the
transactions contemplated hereby, shall be satisfactory in form and substance to
the Bank and its counsel.
Without limiting the foregoing, any Term Loan (including the initial
Term Loan) is subject to the further conditions precedent that on the date on
which Term Loan is made (and after giving effect thereto):
(a) All statements, representations and warranties of the Borrower
made in this letter and/or in the Security Agreement shall continue to be
correct in all material respects as of the date of such Term Loan.
(b) All covenants and agreements of the Borrower contained herein
and/or in any of the other Loan Documents shall have been complied with in all
material respects on and as of the Term Loan.
(c) No event which constitutes, or which with notice or lapse of
time or both could constitute, an Event of Default shall have occurred and be
continuing.
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(d) No other material adverse change shall have occurred in the
financial condition of the Borrower from that disclosed in the financial
statements then most recently furnished to the Bank, except continuing losses
from operations theretofore disclosed to the Bank in writing.
Each request by the Borrower for any Term Loan, and each acceptance by
the Borrower of the proceeds of any Term Loan, will be deemed a representation
and warranty by the Borrower that at the date of such Term Loan and after giving
effect thereto all of the conditions set forth in the foregoing clauses (a)-(d)
of this ss. 1.11 will be satisfied.
II. REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to
enter into this letter agreement and to make Term Loans hereunder, the Borrower
warrants and represents to the Bank as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. The Borrower has full corporate
power to own its property and conduct its business as now conducted and as
proposed to be conducted, to grant the security interests contemplated by the
Security Agreement and to enter into and perform this letter agreement and the
other Loan Documents. The Borrower is duly qualified to do business and in good
standing in Massachusetts and in each other jurisdiction in which the Borrower
maintains any plant, office, warehouse or other facility and in each other
jurisdiction where the failure so to qualify could (singly or in the aggregate
with all other such failures) have a material adverse effect on the financial
condition, business or prospects of the Borrower, all such jurisdictions being
listed on item 2.1(a) of the attached Disclosure Schedule. At the date hereof,
the Borrower has no Subsidiaries. The Borrower is not a member of any
partnership or joint venture.
(b) At the date of this letter agreement, no Person is known
(without investigation) by the Borrower to own, of record and/or beneficially,
more than 5% of the outstanding shares of any class of the Borrower's capital
stock, except as set forth on item 2.l(b) of the attached Disclosure Schedule.
(c) The execution, delivery and performance by the Borrower of this
letter agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate and other action and do not and will not:
(i) violate any provision of, or require as a prerequisite
to effectiveness any filing (other than filings under the Uniform
Commercial Code), registration, consent or approval under, any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to the
Borrower;
(ii) violate any provision of the charter or by-laws of the
Borrower, or result in a breach of or constitute a default or require
any waiver or consent (other than any such consent which has been
obtained prior to the date of this letter agreement) under any
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indenture or loan or credit agreement or any other material agreement,
lease or instrument to which the Borrower is a party or by which the
Borrower or any of its properties may be bound or affected or require
any other consent (other than any such consent which has been obtained
prior to the date of this letter agreement) of any Person; or
(iii) result in, or require, the creation or imposition of any
lien, security interest or other encumbrance (other than in favor of the
Bank), upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
(d) This letter agreement and each of the other Loan Documents
delivered herewith has been duly executed and delivered by the Borrower and
each is a legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its respective terms.
(e) There are no actions, suits or proceedings filed against the
Borrower, nor (to the knowledge of the Borrower) any investigations pending
against the Borrower, nor (to the knowledge of the Borrower) any actions, suits,
proceedings or investigations threatened by or against the Borrower, before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which could hinder or prevent the
consummation of the transactions contemplated hereby or call into question the
validity of this letter agreement or any of the other Loan Documents or any
action taken or to be taken in connection with the transactions contemplated
hereby or thereby or which in any single case or in the aggregate may result in
any material adverse change in the business, prospects, condition, affairs or
operations of the Borrower.
(f) The Borrower is not in violation of any term of its charter or
by-laws as now in effect. To the best knowledge of the Borrower, the Borrower is
not in material violation of any term of any mortgage, indenture or judgment,
decree or order, or any other material instrument, contract or agreement to
which it is a party or by which any of its property is bound.
(g) The Borrower has filed all federal, foreign, state and local tax
returns, reports and estimates required to be filed by the Borrower. To the best
knowledge of the Borrower, all such filed returns, reports and estimates are
proper and accurate and the Borrower has paid all taxes, assessments,
impositions, fees and other governmental charges required to be paid in respect
of the periods covered by such returns, reports or estimates. No deficiencies
for any tax, assessment or governmental charge have been asserted or assessed,
and the Borrower knows of no material tax liability or basis therefor.
(h) To the best knowledge of the Borrower, the Borrower is in
compliance with all requirements of law, federal, foreign, state and local, and
all requirements of all governmental bodies or agencies having jurisdiction over
it, the conduct of its business, the use of its properties and assets, and all
premises occupied by it, failure to comply with any of which could (singly or in
the aggregate with all other such failures) have a material adverse effect upon
the assets, business, financial condition or prospects of the Borrower. Without
limiting the foregoing, the
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Borrower has all the material franchises, licenses, leases, permits,
certificates and authorizations needed for the conduct of its business and the
use of its properties and all premises occupied by it, as now conducted, owned
and used and as proposed to be conducted, owned and used.
(i) The audited financial statements of the Borrower as at December
31, 1996, heretofore delivered to the Bank, are complete and fairly present the
financial condition of the Borrower as at the date thereof and for the period
covered thereby. To the best of the Borrower's knowledge, except as described on
item 2.1(i) of the attached Disclosure Schedule, the Borrower does not have any
liability, contingent or otherwise, not disclosed in the aforesaid financial
statements or in any notes thereto that could materially affect the financial
condition of the Borrower. Since December 31, 1996, here has been no material
adverse development in the business, condition or prospects of the Borrower
(except for continuing losses from operations as heretofore disclosed in writing
to the Bank), and the Borrower has not entered into any material transaction
other than in the ordinary course.
(j) As of the date of this letter agreement, the principal place of
business and chief executive offices of the Borrower are located at 000 Xxxx
Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "Existing Premises"). All of the
books and records of the Borrower are located at the Existing Premises as of the
date of this letter agreement. Upon Completion of the contemplated Leasehold
Improvements, the principal place of business and chief executive offices of the
Borrower will be located at 0 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the
"New Premises") and Borrower's; books and records will be located at the New
Premises. Except as described on item 2.10) of the attached Disclosure Schedule,
no assets of the Borrower are located at any address other than the Existing
Premises and the New Premises. Said item 2.1 (j) of the attached Disclosure
Schedule sets forth the names and addresses of all record owners of the New
Premises.
(k) The Borrower owns or has a valid right to use all of the
material patents, licenses, copyrights, trademarks and trade names now being
used to conduct its business. To the best of the Borrower's knowledge (after
conducting reasonable investigation), the conduct of the Borrower's business as
now operated does not conflict with valid patents, copyrights, trademarks or
trade names of others in any manner that could materially adversely affect the
business, prospects, assets or condition, financial or otherwise, of the
Borrower.
(l) None of the executive officers or key employees of the Borrower
is subject to any agreement in favor of anyone other than the Borrower which
materially limits or restricts that person's right to engage in the type of
business activity conducted or proposed to be conducted by the Borrower Or which
grants to anyone other than the Borrower any rights in any inventions or other
ideas susceptible to legal protection developed or conceived by any such officer
or key employee.
(m) The Borrower is not a party to any contract or agreement which
now has or, as far as can be foreseen by the Borrower at the date hereof, may
have a material adverse effect on the financial condition, business, prospects
or properties of the Borrower.
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III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any other covenants and agreements contained
herein or elsewhere, the Borrower agrees that so long as the financing
arrangements contemplated hereby are in effect or all or any portion of any Term
Loan or any of the other Obligations shall be outstanding:
3.1. LEGAL EXISTENCE; QUALIFICATION; COMPLIANCE. The Borrower will
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will remain qualified to do business in Massachusetts. The Borrower
will qualify to do business and will remain qualified and in good standing (and
the Borrower will cause each Subsidiary of the Borrower to qualify and remain
qualified and in good standing) in each other jurisdiction where the Borrower
or such Subsidiary, as the case may be, maintains any plant, office, warehouse
or other facility and in each other jurisdiction where the failure so to
qualify could (singly or in the aggregate with all other such failures) have a
material adverse effect on the financial condition, business or prospects of the
Borrower or any such Subsidiary. The Borrower will comply (and will cause each
Subsidiary of the Borrower to comply) with its charter documents and by-laws.
The Borrower will comply with (and will cause each Subsidiary of the Borrower to
comply with) all applicable laws, rules and regulations (including, without
limitation, ERISA and those relating to environmental protection) other than (i)
laws, rules or regulations the validity or applicability of which the Borrower
or such Subsidiary shall be contesting in good faith by proceedings which serve
as a matter of law to stay the enforcement thereof and (ii) those laws, rules
and regulations the failure to comply with any of which could not (singly or in
the aggregate) have a material adverse effect on the financial condition,
business or prospects of the Borrower or any such Subsidiary.
3.2. MAINTENANCE OF PROPERTY; INSURANCE. The Borrower will maintain
and preserve (and will cause each Subsidiary of the Borrower to maintain and
preserve) all of its fixed assets used in its business in good working order
and condition, making all necessary repairs thereto and replacements thereof.
The Borrower will maintain all such insurance as may be required under the
Security Agreement and will also maintain, with financially sound and reputable
insurers, insurance with respect to its property and business against such
liabilities, casualties and contingencies and of such types and in such amounts
as shall be reasonably satisfactory to the Bank from time to time and in any
event all such insurance as may from time to time be customary for companies
conducting a business similar to that of the Borrower in similar locales.
3.3. PAYMENT OF TAXES AND CHARGES. The Borrower will pay and
discharge (and will cause each Subsidiary of the Borrower to pay and discharge)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or property, including, without limitation, taxes, assessments,
charges or levies relating to real and personal property, franchises, income,
unemployment, old age benefits, withholding, or sales or use, prior to the date
on which penalties would attach thereto, and all lawful claims (whether for any
of the foregoing or otherwise) which, if unpaid, might give rise to a lien upon
any property of the
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Borrower or any such Subsidiary, except any of the foregoing which is being
contested in good faith and by appropriate proceedings which serve as a matter
of law to stay the enforcement thereof and for which the Borrower has
established and is maintaining adequate reserves. The Borrower will pay, and
will cause each of its Subsidiaries to pay, in a timely manner, all material
lease obligations, material trade debt, material purchase money obligations and
material equipment lease obligations. The Borrower will perform and fulfill all
material covenants and agreements under any material leases of real estate,
material agreements relating to purchase money debt, material equipment leases
and other material contracts. The Borrower will maintain in full force and
effect, and comply with the terms and conditions of, all permits, permissions
and licenses necessary or desirable for its business.
3.4. ACCOUNTS. The Borrower will maintain an operating account with
the Bank.
3.5. CONDUCT OF BUSINESS. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged, being that business which
is customarily undertaken by companies engaged in the biomedical, biotechnology
or pharmaceutical industries. The Borrower will not, without the prior written
consent of the Bank, directly or indirectly (itself or through any Subsidiary)
enter into any other unrelated lines of business, businesses or ventures.
3.6. REPORTING REQUIREMENTS. The Borrower will furnish to the Bank
(or cause to be furnished to the Bank):
(i) Within 90 days after the end of each fiscal year of the
Borrower, a copy of the Borrower's Annual Report on Form 10-K for such
fiscal year, as filed with the SEC. Such Annual Report will contain or
will be accompanied by the annual audit report for such fiscal year for
the Borrower, including therein consolidated (and, if the Borrower then
has any Subsidiaries, consolidating) balance sheets of the Borrower and
Subsidiaries as at the end of such fiscal year and related consolidated
(and, if the Borrower then has any Subsidiaries, consolidating)
statements of income, stockholders' equity and cash flow for the fiscal
year then ended. The annual consolidated financial statements shall be
audited by the Borrower's independent public accountants, such audit
report to be in such form as is generally recognized as "unqualified".
The Borrower will also deliver to the Bank, within 90 days after the
commencement of each fiscal year, projections of sales, income and
expenses of the Borrower for such fiscal year, prepared by the
Borrower's management and approved by the Borrower's Board of Directors,
such projections to be in such detail as is reasonably satisfactory to
the Bank.
(ii) Within 45 days after the end of each fiscal quarter of
the Borrower, a copy of the Borrower's Quarterly Report on Form 10-Q for
such fiscal quarter, as filed with the SEC. Such Quarterly Report will
contain or will be accompanied by consolidated and consolidating balance
sheets of the Borrower and Subsidiaries and related consolidated (and,
if the Borrower then has any Subsidiaries, consolidating) statements of
income and cash flow, unaudited but prepared in accordance with
generally accepted accounting principles consistently applied fairly
presenting the financial
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condition of the Borrower and Subsidiaries as at the dates thereof and
for the periods covered thereby (except that such quarterly statements
need not contain notes to the financial statements) and certified as
complete by the chief financial officer of the Borrower, such balance
sheets to be as at the end of such fiscal quarter and such statements of
income and cash flow to be for such fiscal quarter and for the year to
date, in each case together with a comparison to the results for the
corresponding fiscal period of the immediately prior fiscal year.
(iii) At the time of delivery of each annual or quarterly
report or financial statement of the Borrower, a certificate executed by
the chief financial officer of the Borrower stating that he or she has
reviewed this letter agreement and the other Loan Documents and has no
knowledge of any default by the Borrower in the performance or
observance of any of the provisions of this letter agreement or of any
of the other Loan Documents or, if he or she has such knowledge,
specifying each such default and the nature thereof. Each financial
statement given as at the end of any fiscal quarter of the Borrower will
also set forth the calculations necessary to evidence compliance with
secs.3.7-3.9.
(iv) Promptly after receipt, a copy of all audits or reports
submitted to the Borrower by independent public accountants in
connection with any annual, special or interim audits of the books of
the Borrower and any letter of comments directed by such accountants to
the management of the Borrower.
(v) As soon as possible and in any event within five days
after the occurrence of any Default or Event of Default, the statement
of the Borrower setting forth details of each such Default or Event of
Default and the action which the Borrower proposes to take with respect
thereto.
(vi) Promptly after the commencement thereof, notice of ALL
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, to which the Borrower or any Subsidiary of the
Borrower is a party; provided, however, that the Borrower will not be
required by this clause (vi) to notify the Bank of any proceedings with
governmental departments that are ordinary and customary for companies
in the biotechnology industry and which would not reasonably be expected
to have a material adverse effect on the Borrower.
(vii) Promptly upon filing any registration statement or
listing application, a copy of same.
(viii) As long as the Borrower has a class of securities which
is publicly traded, a copy of each periodic or current report of the
Borrower filed with the SEC or any successor agency and each annual
report, proxy statement and other communication sent by the Borrower to
shareholders or other securityholders generally, such copy to be
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provided to the Bank promptly upon such filing with the SEC or such
communication with shareholders or securityholders, as the case may be.
(ix) Promptly after the Borrower has knowledge thereof,
written notice of any development or circumstance which may reasonably
be expected to have a material adverse effect on the Borrower or its
business, properties, assets, Subsidiaries or condition, financial or
otherwise.
(x) Promptly upon request, such other information respecting
the financial condition, operations, receivables, inventory, machinery
or equipment of the Borrower or any Subsidiary as the Bank may from time
to time reasonably request.
3.7. CAPITAL BASE. The Borrower will maintain, as at the end of each
fiscal quarter (commencing with March 31, 1997), a consolidated Capital Base of
not less than $40,000,000.
3.8. LIQUIDITY. The Borrower will maintain as at the end of each
fiscal quarter of Borrower (commencing with March 31, 1997), a ratio of Net
Quick Assets to Total Liabilities, which ratio shall be not less than 1.5 to 1.
3.9. DEBT SERVICE COVERAGE. As used herein, "Determination Date"
means the last day of each fiscal quarter of the Borrower. The Borrower will
maintain on a consolidated basis, as at each Determination Date (commencing with
March 31, 1997), a Debt Service Coverage Ratio of not less than 2.0 to 1. As
used herein, the "Debt Service Coverage Ratio", as determined as at any
Determination Date, means the ratio of (x) Earnings Available of the Borrower
and Subsidiaries for the 12-month period ending on such Determination Date to
(y) the total of (1) all interest on any Indebtedness (whether senior or
subordinated, long-term or current), which interest was paid or payable or
accrued by the Borrower or any Subsidiary of the Borrower during such 12-month
period ending on such Determination Date, PLUS (2) the aggregate current
maturities of long-term debt of the Borrower and Subsidiaries outstanding at
such Determination Date. Notwithstanding the foregoing, the Borrower need not
comply with the foregoing provisions of this ss.3.9 as at any Determination Date
if the Borrower's Unencumbered Cash Balance as at such Determination Date
exceeds $20,000,000.
3.10. BOOKS AND RECORDS. The Borrower will maintain (and will cause
each of its Subsidiaries to maintain) complete and accurate books, records and
accounts which will at all times accurately and fairly reflect all of its
transactions in accordance with generally accepted accounting principles
consistently applied. The Borrower will, at any reasonable time and from time to
time upon reasonable notice and during normal business hours (and at any time
and without any necessity for notice following the occurrence of an Event of
Default), permit the Bank, and any agents or representatives thereof, to examine
and make copies of and take abstracts from the records and books of account of,
and visit the properties of the Borrower and any of it's Subsidiaries, and to
discuss its affairs, finances and accounts with its officers, directors and/or
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this ss.3.10.
Notwithstanding the foregoing, (i) unless
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an Event of Default has occurred, the Bank shall not exercise the rights of
access and inspection described in the immediately preceding sentence more than
once in any calendar year and (ii) such rights of access and inspection are
subject to the execution by the Bank of such confidentiality agreement as may be
reasonably requested by the Borrower and is reasonably satisfactory to the Bank.
3.11. LANDLORD'S WAIVER. Prior to the making of the first Term Loan,
the Borrower will obtain, and will thereafter maintain in effect at all times,
waivers from the owners of all premises in which any Collateral is located, such
waivers to be in form and substance satisfactory to the Bank.
IV. NEGATIVE COVENANTS
Without limitation of any other covenants and agreements contained
herein or elsewhere, the Borrower agrees that so long as the financing
arrangements contemplated hereby are in effect or all or any portion of any Term
Loan or any of the other Obligations shall be outstanding:
4.1. INDEBTEDNESS. Without the prior written consent of the Bank, the
Borrower will not create, incur, assume or suffer to exist any Indebtedness (nor
allow any of its Subsidiaries to create, incur, assume or suffer to exist any
Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without
limitation, the Indebtedness represented by the Term Note;
(ii) Indebtedness of the Borrower or any Subsidiary for
taxes, assessments and governmental charges or levies not yet due and
payable;
(iii) unsecured current liabilities of the Borrower or any
Subsidiary (other than for money borrowed or for purchase money
Indebtedness with respect to fixed assets) incurred upon customary terms
in the ordinary course of business;
(iv) purchase money Indebtedness (including, without
limitation, Indebtedness in respect of capitalized equipment leases)
owed to equipment vendors, equipment lessors and other Persons providing
purchase money financing to the Borrower for equipment purchased or
leased by the Borrower for use in the Borrower's business, provided that
the total of Indebtedness permitted under this clause (iv) plus
presently-existing equipment financing permitted under clause (v) of
this ss.4.1 will not exceed $9,000,000 in the aggregate outstanding at
any one time, and further provided that if the terms of any financing
permitted under this clause (iv) contain financial covenants in addition
to, or with requirements more stringent than, the financial covenants
set forth in secs.3.7-3.9 above, the Borrower will, forthwith upon the
Bank's request, enter into such amendments to this letter agreement as
the Bank may request in order to give the Bank the benefit of such
additional or more stringent covenants;
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(v) other Indebtedness (not described in any of clauses
(i)-(iv) above) existing at the date hereof (including, without
limitation, any existing Indebtedness to Silicon Valley Bank), but only
to the extent set forth on item 4.1 of the attached Disclosure Schedule;
and
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to ss.4.3.
4.2. LIENS. The Borrower will not create, incur, assume or suffer to
exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to
exist) any mortgage, deed of trust, pledge, lien, security interest, or other
charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any nature (collectively, "Liens"), upon or with respect
to any of its property or assets, now owned or hereafter acquired, except that
the foregoing restrictions shall not apply to:
(i) Liens for taxes, assessments or governmental charges or
levies on property of the Borrower or any of its Subsidiaries if the
same shall not at the time be delinquent or thereafter can be paid
without interest or penalty or are being contested in good faith and by
appropriate proceedings which serve as a matter of law to stay any
enforcement thereof and as to which adequate reserves are maintained;
(ii) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar Liens arising in the ordinary
course of business for sums not yet due or which are being contested in
good faith and by appropriate proceedings which serve as a matter of law
to stay the enforcement thereof and as to which adequate reserves are
maintained;
(iii) pledges or deposits under workmen's compensation laws,
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) Liens in favor of the Bank;
(v) Liens in favor of equipment vendors, equipment lessors
and other Persons securing purchase money Indebtedness to the extent
permitted by clause (iv) of ss.4.1; provided that no such Lien will
extend to any property of the Borrower other than the specific items of
equipment financed; or
(vi) other Liens existing at the date hereof (including,
without limitation, any existing Liens in favor of Silicon Valley Bank
to the extent, but only to the extent, that same encumber specific items
of equipment financed by Silicon Valley Bank), but only to the extent
and with the relative priorities set forth on item 4.2 of the attached
Disclosure Schedule.
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Without limitation of the foregoing, the Borrower covenants and agrees
that it will not enter into (and represents and warrants that it is not now a
party to or subject to) any agreement or understanding with any Person other
than the Bank which could prohibit or restrict in any manner the right of the
Borrower to grant Liens on its assets to the Bank, except an existing agreement
with Silicon Valley Bank heretofore disclosed to the Bank.
4.3. GUARANTIES. The Borrower will not, without the prior written
consent of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) (and will not permit any of its Subsidiaries so to assume,
guaranty or become directly or contingently liable) in connection with any
indebtedness of any other Person, except (i) guaranties by endorsement for
deposit or collection in the ordinary course of business, and (ii) guaranties
existing at the date hereof and described on item 4.3 of the attached Disclosure
Schedule.
4.4. DIVIDENDS. The Borrower will not, without the prior written
consent of the Bank, make any distributions to its shareholders, pay any
dividends (other than dividends payable solely in capital stock of the Borrower)
or redeem, purchase or otherwise acquire, directly or indirectly any of its
capital stock. Notwithstanding the foregoing, the Borrower may repurchase
unvested shares of the capital stock of former employees of the Borrower,
provided that (1) at the time of each such repurchase there shall be no Default
or Event of Default and no Default or Event of Default shall result from such
repurchase and (2) the aggregate expenditure for such repurchase in any fiscal
year shall not exceed $9,000.
4.5. LOANS AND ADVANCES. The Borrower will not make (and will not
permit any Subsidiary to make) any loans or advances to any Person, including,
without limitation, the Borrower's directors, officers and employees, except
advances to such directors, officers or employees with respect to expenses
incurred by them in the ordinary course of their duties and advances against
salary, all of which loans and advances will not exceed, in the aggregate,
$250,000 outstanding at any one time.
4.6. INVESTMENTS. The Borrower will not, without the Bank's prior
written consent, invest in, hold or purchase any stock or securities of any
Person (nor will the Borrower permit any of its Subsidiaries to invest in,
purchase or hold any such stock or securities) except: (i) readily marketable
direct obligations of, or obligations guarantied by, the United States of
America or any agency thereof; (ii) other investment grade debt securities;
(iii) mutual funds, the assets of which are primarily invested in items of the
kind described in the foregoing clauses (i) and (ii) of this ss.4.6; (iv)
deposits with or certificates of deposit issued by the Bank and any other
obligations of the Bank or the Bank's parent; (v) deposits in any other bank
organized in the United States having capital in excess of $100,000,000; (vi)
any other Guideline Investments (hereinafter defined); (vii) investments in any
Subsidiaries now existing or hereafter created by the Borrower pursuant to
ss.4.7 below and any DE MINIMIS Investment (hereinafter defined); provided that
in any event the Tangible Net Worth of the Borrower alone (exclusive of its
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investment in Subsidiaries and any debt owed by any Subsidiary to the Borrower
and exclusive of any DE MINIMIS Investments) will not be less than 90% of the
consolidated Tangible Net Worth of the Borrower and Subsidiaries; and (viii) the
Borrower's investment in any "R&D Entity" (hereinafter defined).
4.7. SUBSIDIARIES; ACQUISITIONS. The Borrower will not, without the
prior written consent of the Bank, make any acquisition of all or substantially
all of the stock of any other Person or of all or substantially all of the
assets of any other Person. The Borrower will not become a partner in any
partnership. The Borrower will promptly inform the Bank if it forms any
Subsidiaries.
4.8. MERGER. The Borrower will not, without the prior written consent
of the Bank, merge or consolidate with any Person, or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course; except that
the Borrower may, without being deemed to be in violation of this ss.4.8, (i)
license any of its intellectual property to another Person on commercially
reasonable terms or (ii) transfer any of its intellectual property to a R&D
Entity for reasonable consideration.
4.9. AFFILIATE TRANSACTIONS. The Borrower will not, without prior
written consent of the Bank, enter into any transaction, including, without
limitation, the purchase, sate or exchange of any property or the rendering of
any service, with any affiliate of the Borrower, except pursuant to the
reasonable requirements of the Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than would be obtained in a comparable
arms'-length transaction with any Person not an affiliate; provided that nothing
in this ss.4.9 shall be deemed to restrict the payment of salary, other similar
payments or the granting of stock options to any officer or director of the
Borrower at a level consistent with the salary, other payments and stock option
grants being paid and made at the date of this letter agreement, nor to prevent
the hiring of additional officers at a salary level and with stock option grants
consistent with industry practice, nor to prevent reasonable periodic increases
in salary and additional stock option grants. For the purposes of this letter
agreement, "affiliate" means any Person which, directly or indirectly, controls
or is controlled by or is under common control with the Borrower; any officer or
director of the Borrower; any Person owning of record or beneficially, directly
or indirectly, 5% or more of any class of capital stock of the Borrower or 5% or
more of any class of capital stock or other equity interest having voting power
(under ordinary circumstances) of any of the other Persons described above; and
any member of the immediate family of any of the foregoing. "Control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of any Person, whether through ownership
of voting equity, by contract or otherwise.
4.10. CHANGE OF ADDRESS, ETC. The Borrower will not change its
corporate name or legal structure, nor will the Borrower change its chief
executive offices or principal place of business from the Existing Premises
described in ss.2.1 (j) above except for the contemplated move to the New
Premises, nor will the Borrower keep any Collateral at any location other than
the New Premises without, in each instance, giving the Bank at least 30 days'
prior written notice
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and providing all such financing statements, certificates and other
documentation as the Bank may request in order to maintain the perfection and
priority of the security interests granted or intended to be granted pursuant to
the Security Agreement. The Borrower xxxx not change its fiscal year or
materially change its methods of financial reporting unless, in each instance,
prior written notice of such change is given to the Bank and prior to such
change the Borrower enters into amendments to this letter agreement in form and
substance reasonably satisfactory to the Bank in order to preserve unimpaired
the fights of the Bank and the obligations of the Borrower hereunder.
4.11. HAZARDOUS WASTE. Except as provided below, the Borrower will not
dispose of or suffer or permit to exist any hazardous material or oil on any
site or vessel owned, occupied or operated by the Borrower or any Subsidiary of
the Borrower, nor shall the Borrower store (or permit any Subsidiary to store)
on any site or vessel owned, occupied or operated by the Borrower or any such
Subsidiary, or transport or arrange the transport of, any hazardous material or
oil (the terms "hazardous material", "oil", "site" and "vessel", respectively,
being used herein with the meanings given those terms in Mass. Gen. Laws, Ch.
21E or any comparable terms in any comparable statute in effect in any other
relevant jurisdiction). The Borrower shall provide the Bank. with written notice
of (i) the intended storage or transport of any hazardous material or oil by the
Borrower or any Subsidiary of the Borrower, (ii) any potential or known release
or threat of release of any hazardous material or oil at or from any site or
vessel owned, occupied or operated by the Borrower or any Subsidiary of the
Borrower, and (iii) any incurrence of any expense or loss by any government or
governmental authority in connection with the assessment, containment or removal
of any hazardous material or oil for which expense or loss the Borrower or any
Subsidiary of the Borrower may be liable. Notwithstanding the foregoing, the
Borrower and its Subsidiaries may use, store and transport, and need not notify
the Bank of the use, storage or transportation of, (x) oil in reasonable
quantities, as fuel for heating of their respective facilities or for vehicles
or machinery used in the ordinary course of their respective businesses and (y)
hazardous materials that are solvents, cleaning agents or other materials used
in the ordinary course of the respective business operations of the Borrower and
its Subsidiaries, as long as in any case the Borrower or the Subsidiary
concerned (as the case may be) has obtained and maintains in effect any
necessary governmental permits, licenses and approvals, complies with all
requirements of applicable federal, state and local law relating to such use,
storage or transportation, follows the protective and safety procedures that a
prudent businessperson conducting a business the same as or similar to that of
the Borrower or such Subsidiary (as the case may be) would follow, and disposes
of such materials (not consumed in the ordinary course) only through licensed
providers of hazardous waste removal services.
4.12. NO MARGIN STOCK. No proceeds of any Term Loan shall be used
directly or indirectly to purchase or carry any margin security.
4.13. SUBORDINATED DEBT. The Borrower will not directly or indirectly
make any optional or voluntary prepayment or purchase of Subordinated Debt or
modify, alter or add any provisions with respect to payment of Subordinated
Debt. In any event, the Borrower will not
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make any payment of any principal of or interest on any Subordinated Debt at any
time when there exists, or if there would result therefrom, any Default or Event
of Default hereunder.
V. DEFAULT AND REMEDIES
5.1. EVENTS OF DEFAULT. The occurrence of any one of the following
events shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or
interest on the Term Note on or before the date when due and such failure to pay
shall continue uncured for 5 days after the relevant due date; or
(b) Any representation or warranty of the Borrower contained herein
shall at any time prove to have been incorrect in any material respect when made
or any representation or warranty made by the Borrower in connection with any
Term Loan shall at any time prove to have been incorrect in any material respect
when made; or
(c) The Borrower shall default in the performance or observance of
any agreement or obligation under any of ss.3.1, 3.3 (first sentence only),
3.6, 3.7, 3.8 or 3.9 or any provision of Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after written notice thereof shall have been
given to the Borrower; or
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract,
agreement or undertaking now existing or hereafter entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or
(f) Any default shall exist and remain unwaived or uncured beyond
the expiration of any applicable notice and/or grace period, if any, with
respect to any Subordinated Debt of the Borrower or with respect to any
instrument evidencing, guaranteeing or otherwise relating to any such
Subordinated Debt, or any such Subordinated Debt shall have been declared to be
due and payable prior to its stated maturity; or
(g) Any default shall exist and remain unwaived or uncured beyond
the expiration of any applicable notice and/or grace period, if any, with
respect to (i) any Indebtedness now or hereafter owed by the Borrower to Silicon
Valley Bank in any amount or (ii) any other Indebtedness of the Borrower or any
Subsidiary of the Borrower in excess of $500,000 in aggregate principal amount,
or with respect to any instrument evidencing, guaranteeing, securing or
otherwise relating to any such Indebtedness now or hereafter owed to Silicon
Valley Bank in any amount or any such other Indebtedness in excess of $500,000
in aggregate principal amount shall have been declared to be due and payable
prior to its stated maturity; or
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(h) The Borrower shall be dissolved, or the Borrower or any
Subsidiary of the Borrower shall become insolvent or bankrupt or shall cease
paying its debts as they mature or shall make an assignment for the benefit of
creditors, or a trustee, receiver or liquidator shall be appointed for the
Borrower or any Subsidiary of the Borrower or for a substantial part of the
property of the Borrower or any such Subsidiary, or bankruptcy, reorganization,
arrangement, insolvency or similar proceedings shall be instituted by or against
the Borrower or any such Subsidiary under the laws of any jurisdiction (except
for an involuntary proceeding filed against the Borrower or any Subsidiary of
the Borrower which is dismissed within 60 days following the institution
thereof); or
(i) Any attachment, execution or similar process for an amount in
excess of $100,000 shall be issued or levied against any property of the
Borrower or any Subsidiary and such attachment, execution or similar process
shall not be paid, stayed, released, vacated or fully bonded within 10 days
after its issue or levy; or
(j) Any final uninsured judgment in excess of $100,000 shall be
entered against the Borrower or any Subsidiary of the Borrower by any court of
competent jurisdiction and shall not be paid or stayed within 30 days after
entry thereof; or
(k) The Borrower or any Subsidiary of the Borrower shall fail to
meet its minimum funding requirements under ERISA with respect to any employee
benefit plan (or other class of benefit which the PBGC has elected to insure) or
any such plan shall be the subject of termination proceedings (whether voluntary
or involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any Subsidiary of the Borrower to the PBGC which,
in each case, in the reasonable opinion of the Bank may have a material adverse
effect upon the financial condition of the Borrower or any such Subsidiary; or
(l) The Security Agreement or any other Loan Document shall for any
reason (other than due to payment in full of all amounts secured or evidenced
thereby or due to discharge in writing by the Bank) not remain in full force and
effect; or
(m) The security interest and liens of the Bank in and on any of the
Collateral covered or intended to be covered by the Security Agreement shall for
any reason (other than written release by the Bank) not be fully perfected liens
and security interests; or
(n) If, at any time, more than 50% of any class of voting stock of
the Borrower shall be held, of record and/or beneficially, by any Person or by
any "group" (as defined in the Securities Exchange Act of 1934, as amended, and
the regulations thereunder); or
(o) If, for any reason, Xxxx Xxxxxxxxx is not serving as an
executive officer of the Borrower actively involved in the Borrower's
management, unless replaced as such executive officer by another individual
reasonably satisfactory to the Bank.
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5.2. RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event
of Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amount of the Term Note then
outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of the Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the arrangements for Term Loans provided for by this
letter agreement.
(c) Exercise all rights and remedies hereunder, under the Security
Agreement, under the Term Note and under each and any other agreement with the
Bank; and exercise all other rights and remedies which the Bank may have under
applicable law.
5.3. SET-OFF. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As security for the
Obligations, the Borrower grants to the Bank a security interest with respect to
all its deposits and all securities or other property in the possession of the
Bank or any affiliate of the Bank from time to time, and, upon the occurrence of
any Event of Default, the Bank may exercise all rights and remedies of a secured
party under the Uniform Commercial Code.
VI. MISCELLANEOUS
6.1. COSTS AND EXPENSES. The Borrower agrees to pay, on demand and
delivery of a Bank Certificate therefor, all costs and expenses (including,
without limitation, reasonable legal fees) of the Bank in connection with the
preparation, execution and delivery of this letter agreement, the Security
Agreement, the Term Note and all other instruments and documents to be delivered
in connection with any Term Loan and any amendments or modifications of any of
the foregoing, as well as the costs and expenses (including, without limitation,
the reasonable fees and expenses of legal counsel) incurred by the Bank in
connection with preserving, enforcing or exercising, upon default, any rights or
remedies under this letter agreement, the
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Security Agreement, the Term Note and all other instruments and documents
delivered or to be delivered hereunder or in connection herewith, all whether or
not legal action is instituted. In addition, the Borrower shall be obligated to
pay any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this letter agreement, the
Security Agreement, the Term Note and all other instruments and documents to be
delivered in connection with any Obligation. Any fees, expenses or other charges
which the Bank is entitled to receive from the Borrower under this Section shall
bear interest from that date which is 30 days after the date of any demand
therefor until the date when paid at a rate per annum equal to 2% per annum the
highest per annum rate otherwise payable under the Term Note (but in no event in
excess of the maximum rate permitted by then applicable law).
6.2. OTHER AGREEMENTS. The provisions of this letter agreement are
not in derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between this
letter agreement and any of the other Loan Documents or any such other agreement
will be deemed to create any additional grace period or otherwise derogate from
the express terms of each such default provision. No covenant, agreement or
obligation of the Borrower contained herein, nor any right or remedy of the Bank
contained herein, shall in any respect be limited by or be deemed in limitation
of any inconsistent or additional provisions contained in any of the other Loan
Documents or any such other agreement.
6.3. FEES. In respect of the facility for Term Loans established
herein, the Borrower is this day paying to the Bank a non-refundable commitment
fee of $25,000. This fee is in addition to any and all other fees and charges
which may now or hereafter become payable with respect to any other credit
facilities or services which may now or hereafter be provided by the Bank to or
on behalf of the Borrower and/or any of its Subsidiaries.
6.4. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and
other communications provided for hereunder shall be in writing and shall be
mailed or delivered to the applicable party at the address indicated below:
If to the Borrower:
GelTex Pharmaceuticals, Inc.
000 Xxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx, President
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If to the Bank:
Fleet National Bank
High Technology Group
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be deemed delivered on the earlier of (i) the date received
or (ii) the date of delivery, refusal or non-delivery indicated on the return
receipt if deposited in the United States mails, sent postage prepaid, certified
or registered mail, return receipt requested, addressed as aforesaid.
6.5. BINDING EFFECT; ASSIGNMENT; TERMINATION. This letter agreement
shall be binding upon the Borrower, its successors and assigns and shall inure
to the benefit of the Borrower and the Bank and their respective permitted
successors and assigns. The Borrower may not assign this letter agreement or any
rights hereunder without the express written consent of the Bank. The Bank may,
in accordance with applicable law, from time to time assign or grant
participations in this letter agreement, the Term Loans and/or the Term Note.
The Borrower may terminate this letter agreement and the financing arrangements
made herein by giving written notice of such termination to the Bank provided
that no such termination will release or waive any of the Bank's rights or
remedies or any of the Borrower's obligations under this letter agreement or any
of the other Loan Documents unless and until the Borrower has paid in full the
Term Loans and all interest thereon and all fees and charges payable in
connection therewith.
6.6. CONSENT TO JURISDICTION. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or the Term
Note. The Borrower irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of venue of any
such suit, action or proceeding brought in such a court and any claim that any
such suit, action or proceeding has been brought in an inconvenient forum. The
Borrower agrees that final judgment in any such suit, action or proceeding
brought in such a court shall be enforced in any court of proper jurisdiction by
a suit upon such judgment, provided that service of process in such action, suit
or proceeding shall have been effected upon the Borrower in one of the manners
specified in the following paragraph of this ss.6.6 or as otherwise permitted by
law.
The Borrower hereby consents to process being served in any suit, action
or proceeding of the nature referred to in the preceding paragraph of this
ss.6.6 either (i) by mailing a copy thereof by registered or certified mail,
postage prepaid, return receipt requested, to it at its address set forth in
ss.6.4 (as such address may be changed from time to time pursuant to said
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ss.6.4) or (ii) by serving a copy thereof upon it at its address set forth in
ss.6.4 (as such address may be changed from time to time pursuant to said
ss.6.4).
6.7. SEVERABILITY. In the event that any provision of this letter
agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be invalid or unenforceable, the remainder of
this letter agreement, and the application of such provision to Persons,
properties or circumstances other than those as to which it has been held
invalid and unenforceable, shall not be affected thereby, and each provision of
this letter agreement shall be valid and enforced to the fullest extent
permitted by law.
6.8. GOVERNING LAW. This letter agreement and the Term Note shall be
governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
VII. DEFINED TERMS
7.1. DEFINITIONS. In addition to terms defined elsewhere in this
letter agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Bank Certificate" - A certificate signed by an officer of the Bank
setting forth any additional amount required to be paid by the Borrower to the
Bank pursuant to ss. 1.4, ss. 1.7, ss. 1.8 or ss.6.1 of this letter agreement,
which certificate shall be submitted by the Bank to the Borrower in connection
with each demand made at any time by the Bank upon the Borrower with respect to
any such additional amount, and each such certificate shall, save for manifest
error, constitute presumptive evidence of the additional amount required to be
paid by the Borrower to the Bank upon each demand. A claim by the Bank for all
or any part of any additional amount required to be paid by the Borrower may be
made before and/or after the end of the Interest Period to which such claim
relates or during which such claim has arisen and before and/or after any
payment hereunder to which such claim relates. Each Bank Certificate shall set
forth in reasonable detail the basis for and the calculation of the claim to
which it relates.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a
public holiday under the laws of the United States of America or The
Commonwealth of Massachusetts applicable to a national bank; provided however
that if the applicable provision relates to a LIBOR Loan, then the term
"Business Day" shall not include any day on which dealings are not carried on in
the London interbank market or on which banks are not open for business in
London.
"Capital Base" - At any time, the sum of (i) the consolidated Tangible
Net Worth of the Borrower and Subsidiaries then existing, PLUS (ii) the
principal amount of Subordinated Debt of the Borrower then outstanding (nothing
contained herein being deemed to authorize the incurrence of any such
Subordinated Debt).
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"Cash-Equivalents" - Each of the following: (i) readily marketable
direct obligations of, or obligations guarantied by, the United States of
America or any agency thereof and entitled to the full faith and credit of the
United States of America, (ii) demand deposits with the Bank or with any other
commercial bank chartered by the United States or by any state and having
undivided capital and surplus of not less than $1,000,000,000, or (iii)
interests in mutual funds, substantially all of the assets of which shall be
governmental obligations of the type described in clause (i) of this sentence.
"COF Interest Rate" - A rate of interest per annum which is offered to
the Borrower with respect to its outstanding Term Loans pursuant to the second
paragraph of ss. 1.4 and which is accepted by the Borrower as described therein.
"COF Loan" - The aggregate principal amounts of all Term Loans which
bear interest at a COF Interest Rate.
"COF Rate" - A fixed rate of interest per annum determined by the Bank
as described in the second paragraph of ss. 1.4.
"Collateral" - All property now or hereafter owned by the Borrower or in
which the Borrower now or hereafter has any interest which is now or hereafter
described as "Collateral" in the Security Agreement. The "Collateral" shall not
be deemed to include any Leasehold Improvements.
"DE MINIMIS Investment" - Any investment by the Borrower in the capital
stock or other equity interest of another Person made for strategic reasons
relating to the Borrower's biotechnology business; provided that (i) the
Borrower will in no event own more than 25% of the outstanding capital stock or
other equity interest of such Person, (ii) the total amount so invested by the
Borrower in any one such other Person will not exceed $50,000; and (iii) the
aggregate of all DE MINIMIS Investments will not exceed $250,000.
"Default" - Any event or circumstance which, with the passage of time or
the giving of notice or both, could become an Event of Default.
"Earnings Available" - The consolidated Net Income (or consolidated Net
Loss) of the Borrower and Subsidiaries for any period, PLUS, without
duplication of any item, (i) all federal and state income taxes (but not taxes
in the nature of an AD VALOREM property tax or a sales or excise tax) paid or
accrued with respect to such period, (ii) all interest on any Indebtedness
(whether senior debt or subordinated debt) paid or accrued by the Borrower
and/or any of its Subsidiaries for such period and actually deducted on the
consolidated books of the Borrower for the purposes of computation of
consolidated Net Income (or consolidated Net Loss) for the period involved, and
(iii) the amount of the provision for depreciation and/or amortization actually
deducted on the consolidated books of the Borrower for the purposes of
computation of consolidated Net Income (or consolidated Net Loss) for the period
involved, but MINUS all cash taxes paid during such period by the Borrower
and/or any of its Subsidiaries.
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"ERISA" - The Employee Retirement Income Security Act of 1974, as
amended.
"Eurocurrency Liabilities"- Has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System (or any
successor), as in effect from time to time, or in any successor regulation
relating to the liabilities described in said Regulation D.
"Eurodollar Interest Rate" - For any Interest Period, an interest rate
per annum, expressed as a percentage, determined by the Bank pursuant to the
following formula:
LIBOR
*EIR = ----------- + 1.75
[1.00 - RR]
Where EIR = Eurodollar Interest Rate
LIBOR = See definition of LIBOR
RR = Reserve Rate
*EIR and each component thereof to be rounded upwards to the
next higher 1/8th of 1%
"Event of Default" - As defined in ss.5.1.
"Existing Premises" - As defined in Subsection 2.1(j).
"FDIC" - The Federal Deposit Insurance Corporation or any successor
thereto.
"Fixed Interest Rate" - As to any LIBOR Loan, the applicable Eurodollar
Interest Rate; and as to the COF Loan, the applicable COF Interest Rate.
"Fixed Rate Loan" - All or any portion of any Term Loan which bears
interest at a Fixed Interest Rate.
"Floating Rate" - As defined in ss. 1.4.
"Floating Rate Loan" - All or any portion of any Term Loan which bears
interest at a rate calculated with reference to the Prime Rate.
"Guideline Investments" - Investments made by the Borrower which are
"Eligible Investments" as described in the Borrower's investment guidelines set
forth in item 7.1 of the attached Disclosure Schedule and which meet the
maturity requirements set forth in said investment guidelines.
"Impositions" - All present and future taxes, levies, duties,
impositions, deductions, charges and withholdings applicable to the Bank with
respect to any Fixed Rate Loan, excluding,
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however, any taxes imposed directly on the Bank's income and any franchise taxes
imposed on it by the jurisdiction under the laws of which the Bank is organized
or any political subdivision thereof.
"Indebtedness" - All obligations of a Person, whether current or
long-term, senior or subordinated, which in accordance with generally accepted
accounting principles would be included as liabilities upon such Person's
balance sheet at the date as of which Indebtedness, is to be determined, and
shall also include guaranties, endorsements (other than for collection in the
ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Interest Payment Date" - As to each LIBOR Loan, the last day of
Interest Period applicable to such LIBOR Loan.
"Interest Period" - As to each LIBOR Loan, the period commencing with
the date of the making of such LIBOR Loan and ending three months thereafter;
provided that (A) any such Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day occurs in a new calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day, (B) any
such Interest Period which begins on a day for which there is no numerically
corresponding day in the calendar month during which such Interest Period is to
end shall end on the last Business Day of such calendar month, and (c) no
Interest Period may be selected as to any principal amount of any Term Loan if
such Interest Period would end after the regularly-scheduled due date of such
principal amount.
"Leasehold Improvements" - All fixtures, equipment, improvements and
appurtenances so attached to or built into the New Premises such that same are
integrated with and incorporated into the real estate and cannot readily be
removed, including, without limitation, heating, ventilation and air
conditioning systems, laboratory hoods and laboratory benches.
"LIBOR" - With respect to each Interest Period for a LIBOR Loan, that
rate per annum (rounded upward, if necessary, to the nearest 1/8th of 1%) at
which deposits in United States Dollars are offered to the Bank, for delivery on
the first day of the applicable Interest Period, in the London interbank market
at 10:00 a.m. London time two Business Days prior to the first day of the
applicable Interest Period for a term equal to the term of the LIBOR Loan
requested for such Interest Period and in an amount substantially equal to the
principal amount of the relevant LIBOR Loan. The Bank shall give prompt notice
to the Borrower of LIBOR as determined for each LIBOR Loan and such notice shall
be conclusive and binding, absent manifest error.
"LIBOR Loan" - All or any portion of a Term Loan which bears interest at
a Eurodollar Interest Rate.
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"Loan Documents" - Each of this letter agreement, the Term Note, the
Security Agreement and each other instrument, document or agreement evidencing,
securing, guaranteeing or relating in any way to any of the Term Loans, all
whether now existing or hereafter arising or entered into.
"London" - The City of London in England.
"Net Income" (or "Net Loss") - The book net income (or book net loss, as
the case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, Cash-Equivalents, readily-marketable securities and Receivables (less an
allowance for bad debt consistent with the Borrower's prior experience).
"New Premises" - As defined in Subsection 2.1(j).
"Obligations" - All Indebtedness, covenants, agreements, liabilities and
obligations, now existing or hereafter arising, made by the Borrower with or for
the benefit of the Bank or owed by the Borrower to the Bank in any capacity.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" - An individual, corporation, partnership, limited liability
company, joint venture, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Prime Rate" - That rate of interest per annum announced by the Bank,
from time to time, as being its prime rate, it being understood that such rate
is merely a reference rate, not necessarily the lowest, which serves as the
basis upon which effective rates of interest are calculated for obligations
making reference thereto.
"Qualifying Costs" - Any and all costs associated with the construction
and build-out of the Borrower's New Premises incurred by the Borrower after
December 1, 1996, including, without limitation, architectural and engineering
costs, construction costs, equipment purchase and installation costs, design
costs, furniture costs and fixture costs; provided that, as to any equipment the
cost of which is to be included within Qualifying Costs, (i) each item of such
equipment has been delivered to the New Premises, (ii) the Borrower has paid in
full for each item of such equipment and holds title to same, free of all
interests and claims of any other Person (other than the security interest of
the Bank and other than the interest of the Borrower's landlord in Leasehold
Improvements), and (iii) the Borrower has a fully perfected first security
interest in all of such equipment, other than Leasehold Improvements.
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"R&D Entity" - Any corporation or other entity created by the Borrower
(alone or with a third party) to which the Borrower contributes any of its
intellectual property in return for an equity investment in such corporation or
other entity; provided that the Borrower does not guaranty, and is not otherwise
liable as a matter of law for, any Indebtedness incurred by such corporation or
other entity.
"Readily-Marketable Securities" - Such securities as are publicly traded
on the New York Stock Exchange, the American Stock Exchange or in the NASDAQ
National Market System.
"Receivables" - As to any Person, all of such Person's present and
future accounts receivable for goods sold or for services rendered.
"Reserve Rate" - The aggregate rate, expressed as a decimal, at which
the Bank would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulation relating to such reserve requirements) against Eurocurrency
Liabilities, as well as any other reserve required of the Bank with respect to
the LIBOR Loans. The Eurodollar Interest Rate shall be adjusted automatically
on and as of the effective date of any change in the Reserve Rate.
"SEC" - The Securities and Exchange Commission or any successor thereto.
"Subordinated Debt" - Any Indebtedness of the Borrower which is
expressly subordinated, pursuant to a subordination agreement in form and
substance satisfactory to the Bank, to all Indebtedness now or hereafter owed by
the Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower
and/or any of its Subsidiaries, directly or indirectly, owns, or has the right
to control or direct the voting of, fifty (50%) percent or more of the
outstanding capital stock or other ownership interest having general voting
power (under ordinary circumstances).
"Tangible Net Worth" - An amount equal to the total assets of any Person
(excluding (i) the total intangible assets of such Person, (ii) any minority
interests in Subsidiaries and (iii) any assets representing amounts due from any
officer or employee of such Person or from any Subsidiary of such Person) minus
the total liabilities of such Person. Total intangible assets shall be deemed to
include, but shall not be limited to, the excess of cost over book value of
acquired businesses accounted for by the purchase method, formulae, trademarks,
trade names, patents, patent rights and deferred expenses (including, but not
limited to, unamortized debt discount and expense, organizational expense,
capitalized software costs and experimental and development expenses).
"Total Liabilities" - All Indebtedness of the Borrower and/or any
Subsidiary of the Borrower (secured or unsecured, senior or subordinated) which
would properly be included in
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liabilities shown on a balance sheet of the Borrower prepared in accordance with
generally accepted accounting principles.
"Unencumbered Cash Balance" - At any time, the total of all cash,
Cash-Equivalents, Readily-Marketable Securities and Guideline Investments of the
Borrower which are not subject to any pledge, lien, encumbrance or other
restriction; provided that corporate debt of the type described in paragraph III
(7) of the Borrower's investment guidelines set forth in item 7.1 of the
attached Disclosure Schedule will not be included within "Unencumbered Cash
Balance" unless the Bank, in its sole discretion, approves each item of such
corporate debt.
Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any defined term
used in the singular preceded by "any" shall be taken to indicate any number of
the members of the relevant class.
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This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
GELTEX PHARMACEUTICALS, INC.
By: /s/ Xxxx Xxxxxxxxx
-----------------------------
Name: Xxxx Xxxxxxxxx
Title: President and CEO
Accepted and agreed:
FLEET NATIONAL BANK
By: /s/ Xxxxxxxx Xxxxxxx
------------------------
Its Vice President
By: /s/ Olapeu Onipede
------------------------
Its Vice President
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DISCLOSURE SCHEDULE
Item 2.1(a) Jurisdictions in which Borrower is qualified
Item 2.1(b) 5% Stockholders
Item 2.1(i) Liabilities not shown on financial statements
Item 2.1(j) Collateral locations; record owner of each location
Item 4.1 Existing Indebtedness
Item 4.2 Existing Liens
Item 4.3 Existing Guaranties
Item 7.1 Investment Guidelines
35
DISCLOSURE SCHEDULE
SECTION 2.1(a)
No jurisdictions other than Delaware and Massachusetts
SECTION 2.1(b)
Persons known to Borrower to hold more than 5% of the outstanding shares of
Borrower's capital stock:
- The Equitable Companies Incorporated(1)
- Domain Partners II, L.P.(2)
- West Highland Capital, Inc.(3)
- Abingworth Bioventures SICAV
- Xxxxx Xxxx(2)
----------
(1) Includes shares held by The Equitable Life Assurance Society of the United
States ("ELAS") and Alliance Capital Management L.P. ("ACM"). ELAS and ACM
are subsidiaries of The Equitable Companies Incorporated. This information
is based on a Schedule 13G dated February 6, 1997 filed with the Securities
and Exchange Commission for the aforementioned entities.
(2) One Xxxxxx Square Associates II, L.P. is the General Partner of Domain
Partners II, L.P. Xxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxxxxxx and Xxxxx Xxxx
are the General Partners of One Xxxxxx Square Associates II, L.P. and share
voting and investment control over the shares, all of which are held in the
name of Domain Partners II, L.P.
(3) Includes shares held by West Highland Capital, Inc. ("WHC"), Estero
Partners, LLC ("EP"), West Highland Partners, L.P.("WHP") and Buttonwood
Partners, L.P. ("BP"). Lang X. Xxxxxxx is the sole director and executive
officer of WHC and the sole manager of EP. WHC, EP and Mr. Xxxxxxx xxx the
general partners of WHP and BP which are investment limited partnerships,
and have voting and dispositive authority over shares held by WHP and BP.
WHC has voting and dispositive authority over shares held by its various
investment advisory clients. This information is based on a Schedule 13D
dated January 9, 1997 filed with the Securities and Exchange Commission for
the aforementioned entities and person.
(4) This information is based on Schedule 13G dated February 8, 1996 filed with
the Securities and Exchange Commission.
SECTION 2.1(i)
In connection with the execution, on April 21, 1997, of a contract manufacturing
agreement for the manufacture of RenaGel(R) phosphate binder, the Borrower
became subject to the following liabilities not disclosed in the Company's
financial statements as at December 31, 1996:
- The Borrower is required to fund capital equipment costs of approximately
$6.0 million and may be obligated to pay up to $3.75 million in additional
equipment costs in the event that the Borrower requires the manufacturer to
increase capacity and implement certain manufacturing changes.
- The Borrower is obligated to make a one-time $1.5 million royalty payment to
a third party for a license to certain process development technology
developed by the third party under contract to the Borrower.
36
SECTION 2.1(j)
No assets of the Borrower are currently located at any address other than the
Existing Premises and the New Premises. Upon the purchase of certain equipment
discussed in Section 2.1(i) above, such equipment (owned by the Borrower) will
be located at the contract manufacturer's facility.
The record owner of the New Premises is as follows:
Nine Fourth Avenue LLC, a Massachusetts limited liability company with an
address c/o X.X. Xxxxx Properties, Inc., Xxxxx 000, Xxx Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000.
SECTION 4.1
As of March 31, 1997, the Borrower had the following short term obligations:
- Comdisco Equipment Lease $ 18,396.07
- H&Q Guaranty Finance Personal Property Lease $119,353.97
- Silicon Valley Bank Equipment Line $162,653.92
and a long term obligation to Silicon Valley Bank in the amount of $319,393.27.
In addition, the Borrower has approximately $755,000 available on a $1 million
line of credit with Silicon Valley Bank.
SECTION 4.2
Silicon Valley Bank has a lien on all equipment purchased with financing
provided by the bank.
SECTION 4.3
The Borrower has not issued any guaranties as of the date hereof.
2
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ITEM 7.1
III. INVESTMENT RESTRICTIONS
Investments shall be made in the context of the following investment
guidelines:
ELIGIBLE INVESTMENTS
1. Direct obligations of the U.S. Treasury, including bills, notes, and
bonds.
2. Obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government.
3. Bank obligations, including certificates of deposit, bank notes, and
bankers acceptances. Investments in these securities is limited to
banks whose long term debt is rated "A" or higher by Moody's, or
Standard & Poor's and short term obligations are rated "P1" or
higher by Moody's or "A1" or higher by Standard & Poor's.
4. Corporate obligations, including intermediate term notes rated "A"
or higher by Moody's or Standard & Poor's and Commercial Paper rated
"P1" or higher by Xxxxx'x, xx "X0" or higher by Standard & Poor's.
5. Repurchase agreements collateralized at a minimum of 102% with U.S.
Treasury securities or other securities rated "AAA" or equivalent
that would be permitted by this policy.
6. Money market funds over $1 billion in assets, with an historically
constant dollar net asset value, consisting of acceptable securities
as stated above are appropriate for investing, as long as the fund's
manager has been in business over five years, has name recognition,
and has performance that is easily tracked.
7. U.S. and dollar denominated International corporate debt of all
types is acceptable as long as the issuer meets credit rating and
marketability guidelines.
8. Derivative instruments are ineligible as investments. This would
cover all investments where the value is based on an underlying
variable causing the coupon and/or the maturity value to be unknown
for the life of the security, at the time of purchase.
IV. MATURITIES
The maximum maturity of individual securities in the portfolio may not exceed
twenty-four (24) months.
The average maturity of the portfolio may not exceed twelve (12) months.
